Good day, and welcome to the Chesapeake Energy 2021 Fourth Quarter and Full Year Results Teleconference. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Brad Sylvester. Please go ahead. Thank you, Sarah. Good morning, everyone, and thank you for joining our call today to discuss Chesapeake's Fourth Quarter and 2021 Financial and Operating Results. Hopefully, you had a chance to review our press release and the updated investor presentation that we posted to our website yesterday. During this morning's call, we will be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance, and the assumptions underlying such statements. Please note that there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including the factors identified and discussed in our press release yesterday and in other SEC filings. Please recognize that except as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements. We may also refer to some non-GAAP financial measures which help facilitate comparisons across periods and with peers. For any non-GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found on our website. With me on the call today are Nick Dell'Osso, Mohit Singh, and Josh Viets. Nick will give a brief overview of our results, and then we will open up the teleconference to Q&A. With that, thank you again, and I will now turn the teleconference over to Nick. Good morning. Thank you for joining our call this morning. We're eager to address your questions. However, before doing so, I wanna quickly highlight a few items. First, I'd like to welcome a couple of new members of our executive management team. We have with us Mohit Singh, who's joined from BPX, and Josh Viets, who's joined from Conoco. They're both proven leaders with diverse skill sets that strengthen an already deep and strong team here at Chesapeake. Additionally, they bring an external perspective from leading organizations that we found valuable immediately as they joined. Many of you have met them already, and for the rest of you, I look forward to you being able to spend time with them in the coming weeks. I recognize that you're likely most interested to discuss our 2022 outlook. However, I think it's important to highlight how we've clarified the strategy of Chesapeake and what we believe will drive attractive returns for shareholders for several years to come. First, we've strengthened our portfolio around great assets with significant inventory of high-return drilling locations and have done so while protecting our very strong balance sheet. Second, we've established a capital allocation program with the implicit discipline of significant return to shareholders annually. Finally, we've prioritized our commitment to deliver reliable, affordable, and lower carbon energy solutions to the market through our continued focus on ESG programs. The events unfolding in Eastern Europe this morning highlight the crucial role our industry can play in the energy security of the globe. Being in a position to do so with as low a carbon footprint as we can is more important than ever. Our results and transactions pursued in 2021 are great evidence of the early success of this strategy and set us up to continue to deliver sustainable results in future periods. A couple of the most significant highlights from the full year 2021 are that we delivered on our capital program. We generated over $1.2 billion in adjusted free cash flow on a $735 million CapEx program. We established what we believe is one of the most compelling frameworks in the industry to return cash to shareholders through our aggressive dividend and buyback programs. We'll be paying out over $1.76 per share, consisting of our first variable dividend of $1.33 per common share, as well as our base dividend of $0.4375 per common share in March. We announced a $1 billion common stock repurchase program, which we expect will be executed by year-end 2023. We closed on the Vine acquisition. The integration has begun and continues to go quite well. We remain on target to close the Chief acquisition and the Powder River Basin sale later this quarter. These transactions position us to focus on operational excellence in 2022, a hallmark strength of Chesapeake. Turning to 2022, we're squarely focused on continuing to demonstrate the sustainable cash flow generating capabilities of the company and returning differential cash to our shareholders. In the year ahead, we will maintain our disciplined approach to capital allocation across our three high return assets, efficiently generate free cash flow as we anticipate $1.9 billion-$2.1 billion of cash generated in 2022, which is a 60% increase year-over-year. This illustrates what we mean by our acquisition non-negotiables. The transactions must make us better, not just bigger. We'll return significant cash to shareholders. We're projected to pay between $900 million and $1.1 billion in total cash dividends. Additionally, we expect material progress on our $1 billion authorized share repurchase. If you assume we execute on half of our repurchase program this year, our combined yield for dividends and repurchases would reach about 18%. I firmly believe the magnitude of our program to return cash to shareholders consistently over time is a critical competitive advantage for our company. We're encouraged with where we sit today, and we look forward to executing our business in the year ahead. I now welcome your questions. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Josh Silverstein with Wolfe Research. Please go ahead. Yeah. Hey, thanks. Good morning, guys. Just wanted to ask a question, Nick, on that, the yield you talked about. How flexible are you on the buyback program versus additional dividends, maybe to take advantage of some stock dislocations relative to the commodity price? Any help there would be great. Sure. We're really pleased to have that buyback authorization in place, and it's pretty large at $1 billion. You know, pro forma for the Chesapeake transaction, it's gonna be, you know, in the neighborhood of 10% of our market cap. If we find ourselves with more cash this year than we are currently expecting, I think we'd probably stick with our framework of 50% of cash flow going to the variable dividend, but that would still mean that there's more cash available. If the question is, would we contemplate increasing our buyback if we find ourselves with more cash than we anticipate? The answer is sure. We've got plenty to execute on in the near term, and we're gonna go get after it. Got it. I know there's been a lot of focus recently on the, you know, what's going on with pipelines up in Appalachia. In the fourth quarter, there was some widening differentials down in Louisiana. Can you just address what's going on there, you know, whether there's infrastructure concerns there. Now with the growing, you know, opportunity to potentially export more, you know, LNG from the U.S., if you guys are able to sign up some marketing agreements to go and get exposure to international pricing. Thanks. Good morning, Josh. This is Mohit. Thank you for that question. There are two parts of your question. Maybe I'll take the second one first about the LNG. We are pretty excited about the ability to take some of our molecules and get them on the water. We are in active dialogue with different counterparties. Nothing is quite to a stage where we are ready to make an announcement, but I think you'll be pleased to know that we are in active dialogue with several different companies and counterparties that potentially get our gas on the water such that we can get pricing, which is linked to international LNG pricing. More to come on that. On the first part of your question around the basis, yes, we did see widening of the basis in the Haynesville in December, and that's similar to what I would say our peers in Haynesville also witnessed. We weren't unique in that sense. From the pipeline perspective, yes, the CGT had some repair and maintenance going on, but in December, which led to some backup at Perryville. As that pipeline came back on, that debottlenecked and the volumes were able to move. What we have seen since then is that the basis has normalized. The last thing I would say is we actively monitor it, Josh. As we see opportunities to lock in some basis hedges, we are opportunistically doing that. Thank you for your question. Thanks. Our next question comes from Zach Parham with JPMorgan. Please go ahead. Hey, guys. Thanks for taking my question. I guess first on the buyback, you know, you've clearly got the $1 billion authorization out there. Can you just talk a little bit about how soon you plan to start buying back shares and how you'll allocate capital to the buyback in the near term? Yeah, absolutely. As you might imagine, we announced this buyback program in December. You see that we haven't bought any shares yet. Pretty much as soon as we announced the buyback program, we found ourselves in possession of material non-public information related to the transactions we announced in January. The possession of MNPI there probably happened a little faster than we anticipated, and so we didn't get to start on that before year-end. Now as we have announced those transactions, we have the quarter completed, and we are approaching a time of close of those transactions. We will soon be in position to have all the information out related to those transactions we need to so that we can be clear to act in the public markets. We got to get all that done, and as soon as we do, we'll be ready to go. You know, we just have to navigate the rules here, but we're eager to get started. As far as capital allocation goes to it, I mean, that, you know. We have $1 billion authorized. We've given you some assumptions, both in my comments this morning and in our slides around, you know, if half of it were to get done this year, what it means to our yield. There's no reason why it would need to be half or would be limited to half in this calendar year. We will be cognizant of market conditions. We will be cognizant of trading liquidity. We will try to be efficient. As you might imagine, we also won't be terribly prescriptive publicly ahead of doing what we're going to do. We need to make sure that we approach the market with the appropriate manner that doesn't position trades against us. We'll approach it, I think, appropriately, but you know, eagerly. Thanks. That's helpful color. Maybe one on basis. You know, I think there's been some fears in the market on Appalachian basis blowing out, especially with the recent delay of the MVP pipeline. Can you just talk a little bit about your outlook for basis in Appalachia? Zach, this is Mohit. Yeah, I'll try to address that. As I said before, that's something that we actively monitor. If you recall, when we announced the Chief deal in January, we had talked about some of the synergies which are coming in from increasing amount of getting our volume out of the basin such that it gets out-of-basin pricing and get it to better markets. It is overall, as we all know, a constrained market, so that's something that we actively monitor as well. What gives us most hope, and maybe I'll pivot around too, is just the quality of the asset is so good that even at the kind of prices and the net backs that we have, we are realizing some very attractive economics. The plan is to just run the asset. Obviously, we won't be growing it too much because it's constrained. The basis we keep monitoring it, and to the extent we can, try to get some physical and financial hedges in place to protect ourselves. Thanks. Just one quick follow-up. One of your peers in Appalachia guided last night that they'll be allowing their Northeast Appalachia production to fall slightly this year. You know, how do you think about filling that gap of capacity there? Hey, Zach, this is Nick. You know, we have great assets, and we consistently point out that this asset is the highest return asset in our portfolio. What you've seen us do over the last couple of years is, as there's been market capacity, we've been willing to fill it. Should that continue to play out, we would look to do the same thing. We talked about when we announced the Chief transaction that we expect to be able to deliver more volumes out of the combined base assets of Chief and Chesapeake, given the way that we will be able to manage pressure across the joint gathering system. You know, if there are other volumes declining in the basin, we welcome having access to more market. We generally believe that the market should be filled by Marcellus volumes before any others, just if you think about the supply stack. We own a lot of it, and if there's an opportunity to do so, we'll continue to do that. I think we can probably do it with the CapEx program we have in place and might just be able to accelerate how we think about those incremental volumes. You know, if there became an opportunity in the future to grow volumes in that basin, we would be eager to do so. Got it. Thank you, guys. Appreciate the color. Our next question comes from Doug Leggate with Bank of America. Please go ahead. Thank you. Good morning, everybody. Guys, post-Chief, what is the inventory depth for the portfolio? We know we're in a depleting business with a finite inventory. At your ex-growth, I guess, strategy as it stands today, what do you think that sustainable inventory depth looks like when everything's cleaned up after the deal is closed? Hey, Doug. So yeah, our inventory depth is really pretty attractive. In the Marcellus and Haynesville, we have quite a lot of acreage, tremendous rates of return, and a pretty robust, very long inventory. Obviously, it's super dependent on how many rigs you run, but at the current pace, that inventory is gonna be, you know, quite a bit far out into the model, you know, certainly in the decade range, and a little longer. On the Eagle Ford, as we think about allocating capital across what was our Brazos Valley and our South Texas positions as one broad Eagle Ford position, you know, that inventory is quite long as well. There's a number of things that we've talked about doing in the near term that we believe are gonna enhance that inventory over time, such as the Austin Chalk and proving out some of the spacing in what was the Brazos Valley area. That also is an inventory that should approach 10 years as well. We feel really good about the length of inventory we have in our portfolio. We've obviously just added quite a bit of inventory with both Vine and the Chief transactions, and think that we have a very sustainable model for a long period of time here around the cash flow-generating capabilities that we're putting out. Okay. Basically a decade-plus is how we should be thinking about it? That's correct. Okay. five years from now, you've got five years of inventory, and five years from now, you're talking about having paid out $5 billion in dividends. It's the easiest way to destroy value, Nick. Why are you doing that? I think, Doug, we've talked about this quite a bit. You know, our dividend program, we believe, is important to return cash to shareholders, particularly in times where, like right now, you have pretty robust commodity prices that are generating cash flows well above where you believe you should invest. We've shown a willingness to consolidate more inventory into the portfolio, and we've shown that we can do that in a pretty efficient manner with our capital structure. We did one with mostly equity. We did another with a lot of cash. We think that the cash flow profile that we have as a company has plenty of room for continuing to do things like that when they make sense, when they meet our non-negotiables, and after we've digested these two transactions. I don't think that our dividend approach runs counter to a strategy that results in a sustainable business over a long period of time. No, I wasn't referring to M&A opportunities, Nick. I was talking about. Look, I realize your bankruptcy sponsors wanna get some money back, but if you really believe there's a dislocation in your stock, a variable distribution very much pays the short-term holders. It does not pay new equity holders looking to exploit what you have said in the past is an undervalued stock. Yesterday, Range Resources was up 13% on a buyback announcement. How long will it take you in terms of whether the market recognizes your strategy or not in terms of cash returns? Would you consider pivoting? How long would it take you to pivot? Because if you really believe your stock is cheap, that $5 billion could buy back a heck of a lot of stock. Yeah. I think it's a fair question, Doug. I mean, we've said all along that we believed in all of the above approach here made sense. If shareholders are not benefited from what we're doing, then we would pivot in the future. Just like we said on the last call when we discussed this, the first variable dividend hasn't hit people's accounts yet. We just announced it today. We'd like to see that play out. We've had a lot of conversations with shareholders around this topic, and there is a real appetite to see cash dividends. We believe that it does help to have the all of the above approach. I mean, we do have a buyback authorized that, again, pro forma for the Chesapeake transaction is about 10% of our market cap. We certainly agree with you. The buybacks play a really important role here. If returns are not being maximized through a combination program or through the weighting we have of dividends and buybacks, would we consider changing that in the future? Sure. Of course. We feel pretty committed to the strategy we have today, so we're gonna go down that path, and then if things need to change, they'll change. All right. Thanks, Nick. Our next question comes from Nitin Kumar with Wells Fargo. Please go ahead. Hi. Good morning, guys, and thanks for taking my questions. The first one is around the hedging strategy. We noticed that you added some hedges both for oil and gas. You know, Nick or Mohit, maybe talk a little bit about how do you see hedging in your longer-term plans? Hey, Nitin. This is Nick. Yeah, we think about hedging, as I've described before, as important to underpinning the capital program. As we talk about, you know, we have a pretty large capital program in a capital-intensive business like this. The midpoint of our CapEx guidance for 2022 is $1.65 billion. We expect a pretty robust return on that capital program. We don't set our budgets with a view on only the strip. We know that there's volatility, and we plan for that volatility. It's great to be able to underpin the return profile of that capital program through a hedge, through a set of hedges that allow you to know you have some downside protection to the money you're putting out. There's always a big lag when you decide to drill a well until you actually see the benefit of that well being online generating revenue. A lot can happen during that lag time. De-risking the return profile of each of those capital decisions is absolutely how we think about our hedging program. One of the things you've seen us do over the last year that we think is evidence of our balance sheet strength in a really positive way is use a lot more collars. The skew around collars has been pretty attractive. You see that the hedges we've added have been primarily collars and we think provide, you know, certainly plenty of protection on the floor side with some nice exposure to the upside as well. That's very helpful. My other question is a little bit around service cost inflation. You know, we noticed. It's a two-part question. One, we saw some things in the Eagle Ford and Haynesville where you did raise costs compared to last year. If you can talk a little bit about what items specifically you're seeing the inflation on and whether you think those are more permanent changes to the cost structure or maybe just a little bit driven by the current economic reopening. The second part is, in the Appalachia well costs were pretty flat if not down actually. What's going on out there? Yeah. Good morning. This is Josh. I think, you know, in general, if we look at year-over-year costs, we're seeing roughly 12% inflation across the board from, you know, 2021 into 2022. Most of this cost inflation, I would say by and large, we see in pressure pumping, sand itself and then sand logistics. You know, we do feel like we have some protection within our contracting strategy, where we are able to lock in a good majority. About 85% of our capital is tied to existing contracts. We do feel like there'll be some pricing protection as we work through the year. Now, as you've seen, we have baked in some inflation into our budgets. Most of that is captured in our current estimates, and we've left a little bit in reserve as well with anticipation that we see a little bit more inflation. Specifically, we think that inflation is gonna come from OCTG, labor and trucking. To your question there about the Marcellus, you know, one of the things that I think is important to point out is that we do in fact have some of the best acreage in the Marcellus. What that affords us is to rightsize completion designs. Really there's a couple things at play there. First is we have a long-term contract with our pumping provider, which again, I think is providing us with some offsetting a little bit of inflation. Then also with this, you know, the rightsizing completions, we feel like that's gonna again afford us an opportunity to manage cost. Then maybe just the last point is our average lateral length is gonna be up by about 500 feet year-over-year, which again is helping to balance the cost per foot metric. Great. Thank you for all the color. Our next question comes from Nicholas Pope with Seaport Research. Please go ahead. Morning, everyone. Morning, Nick. I was hoping you guys could talk a little bit about the Eagle Ford. You know, you combined, you know, and how you're kind of presenting things, the Brazos and South Texas and the Eagle Ford. I was hoping you could talk a little bit about what the focus is gonna be in terms of where you're gonna be drilling. Maybe you mentioned it in response to Doug. I think the Austin Chalk is still a part of what you're looking to kind of expand and try to understand a little better. I guess, what are you gonna be looking at in 2022, and kind of maybe what are the mile markers we should be looking for there? Thanks for the question, Nick. This is Josh again. Let me maybe just provide a little bit of color on our plans for this year. I'll you know, as I talk about the Eagle Ford, I'll maybe start in South Texas with the asset there. You know, right now we have plans to drill right around 60 wells within that program. 50 of those are gonna be targeting the lower Eagle Ford. You know, that's a play we definitely understand. We very much like you know, the returns you know, well over 100% rate of return on the economics there. Then in addition to that, the other remaining 10 is gonna be targeting the Austin Chalk. Really, you know, what we're hoping to achieve there is, you know, with some targeted tests that allows us to assess spacing as well as completion designs. What that positions us to do as we look at the next year or two is really as we get into a full-scale development of the Austin Chalk, we go in optimal. That's what we're hoping to achieve, and that's why you see the overall balance of well mix there. Now as you move up into the Brazos, maybe just a little bit different story. We have, you know, 10-12 wells that we'll drill in that area. The majority of them, over 80%, are gonna be targeting lower Eagle Ford. Really, you know, the game that we're playing is, you know, we wanna enhance returns within that. We want that to be competitive with the rest of the portfolio. What that's leading us to is a little bit wider spacing. So we'll be drilling wells at about 2,000 feet inner well spacing. Again, we think that's gonna only enhance the competitiveness of that within the portfolio. We also have a couple of wells planned within the Austin Chalk within the Brazos Valley area up in the northeastern part of the play. You know, we see that, you know, that play starting to mature a little bit with some, you know, pretty interesting partner-operated wells that we actually participated in the last year. So that'll give us some more data points and even potentially expand our inventory as we think about the future Brazos Valley development. That's actually very helpful. Thank you. I'm also curious, I mean, as you look at, you know, kinda simplifying the operational structure, you got three big assets now. Two have had big acquisitions in the last, you know, eight months, or last year. I guess, what does the opportunity set look like in Eagle Ford for potential consolidation? It seems like it's been a little bit slower than the rest of the U.S., you know, basin for M&A. I'm curious how y'all view kind of the potential or opportunity set for M&A in Eagle Ford. Sure. You know, there's a fair amount being talked about in that basin, as there are in really all basins. There's a big disparity, I would say, across the basin in the maturity of what's left to develop, and that matters as we think about what could make us better, not just bigger, what meets our non-negotiables. You have to be able to think about consolidation as something where we could really improve our portfolio and improve our ability to create returns for shareholders over time. You know, I don't know that there's anything immediate for us in the Eagle Ford. There could be, and we'll pay attention to that, just like we will continue to pay attention in the Marcellus and the Haynesville. We've continued to say that we think consolidation is an important trend in this industry and will continue. We've also said that at the moment, we're focused on digesting the two acquisitions we've done, so that's where our attention is today. I think there could be potential for consolidation in the Eagle Ford as well. It would need to meet our non-negotiables and, you know, there's probably some stuff out there that could, but it may take a little bit of time still to come together. Yeah, that's really helpful. Thanks for the time. That's all I had. Thanks, Nick. Our next question comes from Charles Meade with Johnson Rice. Please go ahead. Good morning, Nick, and to the rest of the team there. I wanted to pick up on that thread that you just dropped off. You know, on your call for the Chief deal, I remember you saying that you were pushing back from the M&A table. It sounds like you're still in that mode. You know, on the other side of that, in response to Doug Leggate's question, you mentioned that, you know, M&A is gonna be part of your longer-term strategy. How long are you thinking that you are gonna be pushed back from that table? What are the conditions that would, you know, get you back on your front foot when you're looking at the M&A market? Sure. Well, it has only been three weeks since we said that, so we haven't made a whole lot of progress on how we think about it in three short weeks. I mean, you know, we said we wanted to be really focused on integration. That's gonna take, you know, some period of time, Charles. It's a little hard to predict exactly how long that takes. The integration of Vine is going extremely well. Our teams are engaged in what now we have a bit of a process around both operationally. We took over operations day one, and that went great. We are working the back office integration quickly and efficiently. Those things take a lot of time and devotion of resources, and you wanna make sure you get them right, because if you don't, they can impact how you run your business for a very long time. What's going great, and we're doing all of the planning work ahead of closing Chief, ready to hit the ground running on the integration of that business as soon as it closes. We've got a lot of resources devoted to integration at the moment, and we have some pretty big expectations about what that integration will yield to us in the way of creating value through that consolidation. That's where our attention is at the moment. The non-negotiables are real, and they matter in how you would think about future transactions. I guess one way to say it is that, you know, they create a high bar, but when you're in the middle of integrating two others, that bar probably moves even higher. You know, how long it will take us is really a function of what becomes available that would meet those non-negotiables and where we sit along the path of integration. We may never do another deal. There's no need to do another deal. All that we want to continue to communicate is that we've seen value in the consolidation that we've pursued so far, and we don't foreclose that may not be possible in future transactions. It takes a lot of very specific circumstances for that to be true. If it becomes true again, then we'll move, and if it doesn't, then we'll continue to execute on what we have. Oh, thank you for that elaboration, Nick. I'd like to ask a question about your buyback approach, but maybe from a different angle. With the Chief close, you're gonna have $2 billion go out the door as part of that consideration. Is there a debt target that you wanna get to before you know, working down some of that net debt balance before you embark on you know, a big step up or I guess a real initiation of the buyback program? Hey, Charles, this is Mohit. I'll take that. We've publicly said one of our non-negotiables is that the net debt to EBITDA target should stay below one turn. That's a pretty firm boundary condition. That's how we monitor it. Even when we did the Chief deal, you're right that $2 billion is going out the door because that's the cash part of the consideration. We stressed our financials at different price decks and looked at the liquidity situation and debt metrics, and we felt pretty comfortable paying that amount of cash because obviously we had cash on the balance sheet, and then there's cash coming in from the Powder divestment, which helps pay for some of it. Overall, the target, I think the way you should think about it is the one turn of net debt to EBITDA is our pretty firm boundary condition, and that's how we look at it. To be clear, Charles, we're on a pro forma basis at closing, we're well below, so we can start the buyback program right away. Yes. Thank you, guys. Thank you. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Nick Dell'Osso for any closing comments. Great. Thank you, Sarah, and thanks for joining our call this morning. We look forward to 2022, where we plan to have an analyst day, and we'll go into deeper dive on the technical details of each of our assets and their ability to drive returns over a long period of time. To be successful in today's market, I believe an E&P company must consistently demonstrate three things, a portfolio of high-return assets with scale to matter, an ability to generate sustainable free cash flow and return it to shareholders, and a commitment to ESG excellence. Chesapeake answers the call for what the market demands today. We have the team, portfolio, and strategy to deliver differential value in the years ahead, and I look forward to continuing to update you on our progress. Have a good morning. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.