On Wednesday, Chesapeake Energy Corp (NYSE:CHK) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and investors.
Scott Hanold – RBC Capital Markets: So obviously, there is lot of focus on your free cash flow or the deficit that’s out there over the next 18 months excluding planned monetizations. When you step back and look at it, then obviously there is a pretty call on you guys of being successful due to the monetization – when you look at it, what is the minimum amount of spending you all think you need to do in like 2012 to hold your acreage? I mean, could you cut a little bit more? Are you basically running at bare minimum right now to hold your acreage?
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Aubrey K. McClendon – Chairman and CEO: From our perspective, it’s not really the consideration that drives us. Our goal is to get away from being this over-weighted towards gas producers and to do that we have to spend money. The good news is we can spend more money than our cash flow quite significantly, and yet still reduce our debt and not increase our share count. So, to me that should be the focus here. We can cut our rig count significantly from here, but I think that does expose some of our leasehold to potentially expiry. On the gas side, we are basically about done. I think when we get down to two rigs in the Haynesville that’s all we will need. In the Marcellus, we are actually in a lease renewal program to try and enable us to get down to that 12 rigs we talked about. So, again this is all a deliberate plan and we could today – the focus of the call could have been we are going to live within our cash flow. It’s all going to come from gas and frankly, I think that will be a pretty sad story. So, our plan instead starting over a year ago was to make this transition and we knew we had enough assets in the attic so to speak that we could sell them and yet still grow our production by 25% still pay down debt by 25% and make that transition. And of course to do so in a $2 gas world stuff but we’re up to it and that’s what we intend to do. Back to the heart of your question we have a lot of optionality with regard to rig counts. Right now we are trying to find the optimum level that minimizes leasehold problems and minimizes firm transport problems and also accelerate the transition away from assets that don’t produce much cash flow today which are gas assets to assets that produce a lot of cash flow which are oil and natural gas liquids assets.
Scott Hanold – RBC Capital Markets: The bottom line is I guess I’m not questioning your ability to execute on the monetization because you’ve got a pretty good track record. Can you sort of give us an update than where you are in with regards to I guess the next few important ones like the Permian, Mississippi and as well as the Eagle Ford VPP.
Aubrey K. McClendon – Chairman and CEO: I’ll let Nick speak to the VPP but that’s been the not too distant future I think and with regard to Permian, the data room opens next Monday our fiscal data room, I think the virtual data room has been opened a little bit we have a long line of people who want to be in its hottest basin in the world in all likelihood and from our perspective it just not a place we were ever going to be number one and number two. I think when all the dust settles here and you look at the Company what do we want to achieve and we won’t achieve the best returns in the business. And to do that I think you got to be the best at what you do and for us it’s going to be to be number one and number two in 11 of the most important plays in the nation after we sell the Permian. So the Permian will get bought either in three packages or individually in those three packages and the big companies that either once established presence in that basin or who want to solidify that. So, we hope to have an announcement there in the first part of the third quarter and to get it closed in the third quarter. In Miss Lime, data rooms have been opened now for several weeks, and I’m pleased with the interest that we see in that asset and look forward to announcing that as that will probably happen I would think before the Permian. Nick, do you want to add anything on the VPP?
Domenic J. Dell’Osso, Jr. – EVP and CFO: No. it’s what you said, relatively near term and we are working through that. Those are transactions obviously that we have lot of confidence and we completed 10 before. We have lot of confidence in this as well.
Scott Hanold – RBC Capital Markets: One last question on your Founders Well program, if I’m not mistaken, I mean, that wasn’t necessarily like in terms of well bore view hold I guess acreage when you sort of opt into the wells. Is that right to any kind of (indiscernible) downspacing opportunities would you also be involved in?
Aubrey K. McClendon – Chairman and CEO: I believe Scott, language governmental spacing unit, and so yes, and I pay for that acreage and then I receive an assignment from the government around spacing unit.
Longer Term Guidance
Doug Leggate – Bank of America Merrill Lynch: My questions is on the projected guidance net of asset sales because clearly the teams you have formed, I guess you’ve got confidence and the line of sight to give us an indication of what happens when you monetize the assets. What I’m trying to understand is the longer term guidance hasn’t changed and obviously you are knocking out a fair amount of production on liquids next year. Can you help us with the moving parts? What are you assuming from the VPP, the Permian asset sale in the Mississippi Lime and then looking longer term what are you – what’s coming in extra that’s making up the difference that allows you to stand by to determine 50,000 barrels of the target by 2015?
Aubrey K. McClendon – Chairman and CEO: I’ll take the longer term target and let Nick talk about the short term. Long-term, Doug, it’s simply that we don’t have to have all of the assets we have today to meet those targets and so while selling the Permian or selling 25% of the Mississippi Lime certainly impacts 2012 and 2013 production and that’s why we brought down our guidance. It doesn’t do anything in terms of our ability to meet our out year targets because we will simply have drilled more Eagle Ford wells and more Utica wells or more Cleveland Tonkawa wells than we otherwise would have. And of course remember Mississippi Lime JV also allows us to accelerate drilling on the assets and not only does it save us CapEx but it also drives our production higher from an asset after we do a JV. So the company has the ability through all of its liquids-rich asset plays to meet its out year goals. It’s simply the $2 gas has required us to take a little bit of a step back here and sell more deeply into the portfolio but doesn’t have anything – any impact on ’14 and ’15.
Domenic J. Dell’Osso, Jr. – EVP and CFO: Yes, from a near-term perspective, Doug, we baked all of this into our guidance now as you point out and one of the changes is that from previous, it looks as if we have moved our Eagle Ford VPP up in the year. And so that has a bigger impact on near-term cash flow as a result – near-term production as a result. VPP is of course our assets that we have transferred the rights to production but only in certain wellbores, those wellbores decline. So the impact of that VPP sale over time diminishes greatly. So that’s one of the reasons why you sell a lot of production upfront and that changes your near-term production guidance, but it doesn’t change much in the out years. And of course, we don’t sell any rights or anything around those wellbores and so we would (hang) all of that growth prospectivity around the Eagle Ford. That’s really what drives some of that difference.
Doug Leggate – Bank of America Merrill Lynch: I appreciate. My follow-up, Aubrey, is really more of a conceptual question. Clearly, the market doesn’t really seem terribly receptive to what’s been (indiscernible) given recently and looking at your share price now, you are basically laying out more than 15 billion of assets sales over the next two years. My understanding is some of your newer leases, the liquids-rich leases have longer dates of expiry. So maybe you have got a little bit more flexibility there perhaps, but my question is why not we direct some of that capital back to buying back your stock at this levels?
Aubrey K. McClendon – Chairman and CEO: We first have to get our debt down to where we want it, Doug, and then I think that’s actually a legitimate portion of – can be a legitimate portion of our strategy going forward. I mean, clearly you get half of something for free here when you buy our stock. In my opinion, you buy our gas business and you get the oil business for free. You buy the oil business and you get the gas business for free Nick mentioned PV-10 of our proved assets using just the 10-year strip is $24 billion, and those include oil field service business, our midstream business, so that means you get all the unproved for free. So, there is something free here that’s substantial no matter how you look at it, and so we are trying to get to that promise land as quickly as possible. Now maybe some people think you just sit there and be stuck in a mud of $2 gas prices, but we don’t believe that’s the way to go and so the consequence we are going to spend the capital needed to make that transition, so if we are going to decrease our debt and not increase our share count to do that. I think it’s pretty extraordinary, yes in 2013 we get to a point where our debt reduction targets have been met we are satisfied that our funding has been met and stock price still represents a compelling opportunity there is no reason why we couldn’t redirect capital towards that.
Doug Leggate – Bank of America Merrill Lynch: Aubrey I don’t want to (indiscernible) the point but let me be clear what I am asking, if you’ve got a lot of flexibility in your capital expenditure why not just to fair that and buy it by today?
Aubrey K. McClendon – Chairman and CEO: Because the Board and management’s number one goal is, twin number one goals are to reduce our debt as we’ve said we will under the 25/25 Plan and to make transition from gas to oil. That’s the best way to have a long term sustainable company. And to buyback our equity at this point, in our view it does not create the long term sustainability that we want from a balance sheet perspective and from a corporate asset productivity perspective.