Good day, everyone, and welcome to the Chesapeake Energy Corporation Q4 2017 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brad Sylvester. Please go ahead, sir.

Good morning and thank you for joining our call today to discuss Chesapeake's financial and operational results for the 2017 fourth quarter and full year. Hopefully, you've had a chance to review our press release and the updated Investor Presentation that we posted to our website this morning. 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 earnings release today 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 measures we use, a reconciliation to the nearest corresponding GAAP measure can be found on our website and in our earnings release. With me on the call today are Doug Lawler, Nick Dell'Osso, Frank Patterson, and Jason Pigott. Doug will begin the call and then turn the call over to Nick for a review of our financial results before we turn the teleconference over for Q&A. So, with that, thank you, and I will now turn the teleconference over to Doug.

Thank you, Brad, and good morning. 2017 was another foundational year for Chesapeake as we continued to transform all aspects of our company. We remain committed to building a strong value-generating enterprise that will be resilient to commodity price volatility and offer competitive returns for our investors. Our business strategies of: one, financial discipline; two, profitable and efficient growth; three, exploration; and four, business development, have not changed. Today, all 2,800 Chesapeake employees are focused and driven toward achieving our three top priorities, eliminating $2 billion to $3 billion of net debt from our balance sheet, enhancing our margins and achieving positive free cash flow. We made important progress toward reaching all three priorities in 2017. I'm proud of our accomplishments during this challenging pricing environment and strongly believe our transformational improvements are second to no other company. We once again demonstrated the depth of our portfolio by closing on approximately $1.3 billion in asset sales that had minimal associated cash flow. We also continued to simplify our capital structure by reducing our secured term debt by approximately $1.3 billion or 32%. We enhanced our margins, growing overall production by approximately 3% and oil production by approximately 2% year-over-year adjusting for asset sales, while importantly reducing our cost structure by more than $500 million on an annual basis, or roughly $0.58 per barrel oil equivalent. We continued to reduce our legal complexity and our employees delivered record environmental, health and safety performance in 2017. We improved on our industry-leading operating performance across all plays with record lateral lengths in all assets and significant productivity gains through enhanced completions. As a result of these achievements, four of our six major assets were cash flow positive in 2017. And at current strip prices and with the divestitures announced a few weeks ago,…

Your first question will come from Neal Dingmann with SunTrust.

Good morning, guys. Hey, Doug, could you talk about your ideal leverage situation here in the next year or two, given what you're going to potentially have in free cash flow?

Well, yeah, Neal, thanks for the question. Ideal leverage, it really is a good question when you look at Chesapeake and the progress we've made in the past few years. And we have put those targets out there that we target to be a 2x company. We believe that's the appropriate place that we need to be. And as we've highlighted the progress that we've made, we have not been able to deliver all of the proceeds and cash generation to further reduce that debt in the past few years like we'd like to, as we've cleaned up other legacy obligations. And so, if you ask, straight out, the ideal place is we'd be at 2x. Well, we're not at 2x. And we'll continue to work that direction over the next few years. We'll do it as quickly as we possibly can. Key in that is we're not going to dilute the value of the company and we're not selling high-quality assets for $0.50 on the $1. And the way that our financial team, Nick and the financial group have managed our debt obligations, the debt that we have retired, the ability to refinance, extend some maturities, and all the while reducing complexity across our business, you can expect that to continue. And so to say we have an ideal debt target, it's – we'll get to 2x. We've got $2 billion to $3 billion of targeted debt reduction from a major asset sale that we will conclude as fast as we possibly can.

Great points, Doug. And then just one last follow-up, on slide 6 where you break out the rig position you have now in each of the areas. Based on the CapEx that you have, do you anticipate that changing throughout the year or staying relatively sort of stable, meaning the Powder and the Eagle Ford still having the bulk of the rigs? Any color there would be appreciated. Thanks, Doug.

Yeah, Neal. This is Frank Patterson. And I'll let Jason also chip in here. We continually manage where we spend our capital every week. We've talked about this before. I think we have a capital allocation. We're going to move rigs where the best value is for the corporation. I would say that you're going to see us move to four rigs in the Powder, try to move to five as fast as we possibly can. We're currently running five rigs in South Texas to get in front of a relatively big ranch area with an extra rig. We'll probably drop that rig and go back to four. But that will all be evaluated as we see the year unfold. I don't see us actually adding any to the gas assets. We will be doing some appraisal work in the Mid-Con. If that were to take off, we could we could reallocate a rig there, if we had success there. Jason, do you have anything there?

Not much to add. Just it's an exciting time for us on the drilling, completions and technology world as we test new completion designs and we've seen instances where overnight we've doubled the productivity of wells. So when we do things like that, it may change where we send a rig, but it's a really exciting time for us as we look at how information can help optimize the way we drill and complete wells. And the teams are very competitive. When they lose a rig, they find a new way to make their wells better as well, so we can kind of create some competition as well. But it's a really fun and exciting time for Chesapeake and how we're approaching developing these fields.

Great. Thanks so much, guys.

From JPMorgan, Arun Jayaram.

Good morning, Doug. I wondered if you could just talk a little bit about the A&D market. You highlighted $2 billion to $3 billion of potential asset sales. It looks like you've signed on $500 million. So just maybe some thoughts around A&D and confidence in getting to your targeted range in asset sales.

My thoughts there, Arun, are probably exactly as you'd expect. It's very heavily price dependent. We still see out there for large and small asset sales that the backwardated curves, the confidence in fuller pricing is low, values associated with future development are minimal and that makes it extremely challenging. As we look at our portfolio, as we look at further opportunities to tighten and core up in areas, there will be further smaller incremental asset sales that we will pursue. We have a very large asset base. So those are options that we can always look to and always find strategics or smaller buyers private equity that are looking for – trying to build an asset position in an area where we may not get to that area for a long period of time. So accelerating that value forward makes a lot of sense. So you can expect that. On the larger side, you still in the market do not see a lot of large transactions and we do have significant interest in our asset base that that interest comes from technology, it comes from record performance and the capital efficiency that our teams have driven into this portfolio. The clear line of sight and the improving returns that have been captured in those assets are of value to others. And as we see that opportunity to divest, we'll do it, but we're going to do it at a prudent pace and at a price that is accretive to our balance sheet and to our shareholders. So I think what you can expect is we'll be watching the market and we'll be continuing to look for the opportunities and eager to act as quickly as possible, but always with the focus on returns and being accretive to our shareholders and our cash generation.

Fair enough. And just a follow-up maybe on the Powder River Basin. You guys highlighted a pretty strong Turner well in the press release. Just want to know if you could talk about future opportunities in the Turner and any plans? I know Devon talked about testing the Niobrara in the Powder. Any plans for tests in Niobrara there?

Yeah. This is Frank Patterson again. What you're going to see in 2018 is basically a Turner-focused program in the Powder. We are getting wells down faster and cheaper. Every time we go out, we're tweaking the completion and getting those costs down. So it's becoming more and more competitive every day. We have three rigs running now, and basically all of those will be focused on Turner going forward. We'll bring the fourth rig in and put that on Turner as well. When we bring the fifth rig in, we'll probably focus on Turner, but we could focus some time on the Sussex and the Nio. The Nio we already have significant number of wells in the ground historically in the play. What we know from what we've done in the last couple years, we can make those wells a lot more economic with new completion design and longer wells. That's the direction we will head. It is not as competitive today as the Turner, so we're going to focus on where the greatest value is today. I think Turner becomes very valuable to us in the not too distant future. I believe that we have a significant number of Mowry, Parkman and other formations within that footprint that will evolve over time. We will focus today, though, on the greatest value and the greatest value in that asset is going to be Turner.

Thanks, Frank.

Next we'll hear from Brian Singer with Goldman Sachs. Brian Singer - Goldman Sachs & Co. LLC: Thank you. Good morning.

Hey, Brian. Brian Singer - Goldman Sachs & Co. LLC: Can you talk a little bit more on the Eagle Ford and the Haynesville? It looks like you're, probably for disciplined reasons, reducing the number of wells being completed this year, but I wondered if you could talk to how the intensity and productivity of the 2018 wells would compare to the 2017 wells.

Brian, this is Frank again. In South Texas, as we're doing with almost every single one of our assets, we're trying to align the number of rigs and activity with how productive we are. We're actually knocking out wells faster. So we're getting a lot more productivity out of rigs trying to align those rigs with completion crews. What we found last year, logistically, if you get in front of your completion crews, you build too big a DUC inventory. If you don't have a standing DUC inventory or a working DUC inventory of sufficient size, you might have to drop a completion crew, and that's very, very inefficient. So what we're trying to do around all of our assets is align our rigs to where we can be as efficient as possible with the completion crew. So we are going to run five rigs today in South Texas and probably drop to four and try to stay pretty consistent with the three completion crew count. We may be able to drop to two at that point. The wells are highly productive. We have to align that activity pace with our ability to build out the larger facilities for the common facilities. So that's all basically running a efficient, highly effective logistics machine. In the Gulf Coast, you see the same thing. We can run three rigs and basically keep one crew, potentially up to two crews at times, full capacity. In the Powder, one of the things we've struggled with in the last few months is three rigs can drill wells, but we're being so effective on our completions now, we can't keep one crew busy. So going to four rigs I think is going to align us really well with the completion crew. So this is all about maximizing the value of every dollar we spend. Brian Singer - Goldman Sachs & Co. LLC: Okay. Got it. Yeah. I was probably focused a little bit more just on the well count coming down and the underlying productivity of each well, but certainly the rig productivity is noteworthy. In terms of my follow-up, can you talk to just a bit more on the quarterly trajectory for production? I think you mentioned in your comments, as have others, some of the weather disruptions in the first quarter. This last quarter's production was very, very strong on a sequential basis. Can you just kind of talk a little bit more about what we should see as we go through the year?

Yeah, Brian. This is Frank again. We came out of the fourth quarter off of a really big completion ramp. That has now stabilized out. We're back in the field now going into the completion mode again in mid-January. To be honest with you, we're doing well. We don't have a lot of experience with some of the completion designs that we have, how the wells are going to behave. They're behaving actually quite well both on the gas and the oil side. So what we're going to see is a little bit lower production coming into this first quarter, which was totally anticipated. We will ramp off of that and basically build just kind of a steady build through the year. And our plan is to try to keep that build going for years out.

I might just add – Brian, this is Doug – on top of that, the comments that Frank shared with you that as we pulled back our capital program in the past few years and maintained and adjusted for asset sales relatively flat production profile and also with our focus on that reduced capital program and the balance sheet, we have made up for capital dollars being expended through technology and capital efficiency. And while we have the opportunity to spend more, we have focused on trying to reach that positive free cash flow as quickly as possible in the most efficient way possible. And as a result of that, we have adjusted our capital program throughout the years, throughout 2016, throughout 2017 that resulted in some lumpiness in our quarter-by-quarter production. And our goal is to eliminate or take some of that volatility amplitude out of our production profile while we continue to improve year-over-year, but maintain a more steady approach. And we're in position in 2018 as we roll through the first quarter to do that and have a more predictable profile. And I'm encouraged by the work that's been done on the team to take out some of that volatility based on the capital investment pace and based on the capital efficiency and technology improvements we've recognized across the portfolio. Brian Singer - Goldman Sachs & Co. LLC: Great. Very helpful. Thank you very much.

And we have time for one more question and that will come from Sameer Panjwani with Tudor, Pickering, Holt. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: Hey, guys. Good morning. I wanted to ask on the asset sales without getting into specific details. But it looks like for the past several years, you guys have been prioritizing the oil assets more than the gas assets. And even earlier in the Q&A session, you guys mentioned that very unlikely to see added activity to the gas assets. And so I'm wondering should we think about the potential asset sales to continue that shift of your production mix to a more liquids-rich kind of mix over time, or is it just you're kind of looking at all different options right now. Domenic J. Dell’Osso - Chesapeake Energy Corp.: Hey, Sameer. This is Nick. I'll take that. So our asset sale approach, our portfolio redefinition, if you will, is going to continue to be all about value. As we look at how we create value in our program going forward, we are long gas today. So we have focused on some of the opportunities to sell down the gas portion of our portfolio. We also see some really attractive return opportunities in areas like the Powder River. And then as we're really redefining how we're going to create value in the Eagle Ford over the next couple years, we see just a tremendous amount of opportunity there. So as we think about what our best opportunities from a portfolio standpoint are, they have led us to gas. That being said, we are value-agnostic, return-agnostic, we want to drive for highest value, highest returns. And if opportunities arise to sell out of an oil asset or down in an oil asset, those are things that we will continue to consider. One thing that I would note for you is that there is some increasing interest around some gas assets from what I would think of as strategic and maybe nontraditional participants in the standard U.S. onshore A&D market, and it's a contrarian view. Gas is extremely out of favor in the equity markets, as you all know, and extremely out of favor in many circles. But the recognition of the fact that there is real financial return to be created in these assets and that there are some encouraging long-term supply/demand dynamics by some participants in the market, particularly those that might be connected to world markets, is real. And so we have ongoing discussions across all of our portfolio around transactions that will materially improve our balance sheet. And materially improving our balance sheet will allow us to increase the rate of return on everything else we own. And that's what our asset sale program will continue to be focused on. That's how we'll look to deliver value. Sameer Panjwani - Tudor, Pickering, Holt & Co. Securities, Inc.: Thank you.

So, in closing, thank you, everyone, for your time. We've had an outstanding year. We look forward to strong 2018. Our record share is incremental, predictable improvement each year, we'll continue upon that. Chesapeake has always been focused on returns and value. This company didn't get religion when prices went south. We're focused on returns and value. And the progress and the improvements we've made have not directly accrued to the common shareholder. We are positioned for that to take place now as those legacy obligations have been substantially improved upon and eliminated from our business. Thank you.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation and you may now disconnect.