Chesapeake Energy Corporation (NASDAQ:CHK) JP Morgan Energy, Power & Renewables Conference June 22, 2022 9:50 AM ET
Company Participants
Nick Dell’Osso – President and CEO
Conference Call Participants
Zach Parham – JP Morgan
Zach Parham
Good morning. And welcome to our seventh Annual JPMorgan Energy Conference. I’m Zach Parham from the E&P research team. Up next, we have Chesapeake Energy and E&P focused on development of assets in the Marcellus, Haynesville and Eagle Ford.
With us today, we’ve got Nick Dell’Osso, President and CEO, will be doing the presentation. Nick, I’ll turn it over to you.
Nick Dell’Osso
Great. Thanks. Thanks, Zach. Thanks for the introduction. Thanks, everybody, for being here. We’re pretty excited to be here today. As I’m sure most of you saw, we announced a doubling of our buyback authorization this morning from $1 billion to $2 billion. This is important for us. It’s a good signal to what we’ve been saying for a bit, which is that we think our stock is undervalued. And so we’re certainly putting our money where our mouth is there, and we’re pleased to highlight for investors, not just that we’re doing more in the way of buyback. But we’ve got a new presentation today goes in a lot more detail around our entire asset base.
We’re going to showcase five years of projections here in a way that we haven’t in quite a while. And we’re also going to highlight a lot of the details of our assets that support that. And so the reason for that is when you say your stock is undervalued, you’re measuring that by having a relatively high yield on the shares. That, to us, is the market telling us they don’t have enough confidence in what we’re presenting to shareholders and our ability to sustain that cash flow overtime. So really want to continue to showcase our confidence in our program and what we’re delivering for shareholders.
So we — frankly, we just believe that the Chesapeake stock today is the most compelling investment in the energy space. And when we say that, we think there’s four key themes to what investors are looking for in the energy space and that starts with superior capital returns.
So we’re projecting $14 billion of free cash flow in today’s market, and that’s over 115% of our market cap. So a really, really significant amount of cash flow. But what’s different about Chesapeake relative to a lot of other companies that are showcasing a high free cash flow number is that we are returning a lot of that cash flow to shareholders. So $9 billion of that cash flow to shareholders over the next five years, and that’s inclusive of the $2 billion buyback that we announced this morning.
So really, really pleased with that. Really, really pleased with the conversion of that free cash flow to shareholder returns, money in the bank with dividends, money in the bank of increased buybacks.
You can’t do any of this if you don’t have a really deep inventory. And we have a very long inventory. A lot of companies talk about the length of their inventory. We’ve got some detail on ours in here. And we think what’s really impressive about the length of our — that it’s length at a really high quality. And so we’ve highlighted here 2,500 locations at a greater than 100% rate of return. And again, we have more sensitivities throughout the presentation on this.
You’ve got to have a strong balance sheet. You can’t do any of this and do it sustainably if you’re subject to the cyclicality of prices in this industry, and we feel like we have a really strong balance sheet. And we’re committed to keeping that at one time or less leverage.
And then lastly, it is incredibly important in this environment to have a real commitment to ESG, have a real commitment to your environmental impact, have a real commitment to all the components of ESG, and this is cultural at Chesapeake. We firmly believe in the company’s need and ability to generate the affordable, reliable and lower carbon energy that the world needs. And in the macro today, you see that the world is short energy. This is a really important theme that’s showing up in all of the political discussions and showing up in the way that people think about the pricing of the forward curve.
And I just got back from the first shareholder marketing trip we did — we’ve done to Europe in over three years. And we heard palpable concern, palpable fear throughout Europe on where commodity prices are going and more importantly, where supply is going to come from. The U.S. plays a fundamentally important role in this. We can be a model for the rest of the world, and Chesapeake plays an incredibly important role within that. And so we know that our commitment to ESG is fundamental to that, and we’ll continue to deliver on our promises there as we go through time. And importantly, it’s cultural for the entire organization, and it is tied to our compensation.
So when you think about our shareholder return framework, it is a series of ways that we return cash to shareholders, starts with the base dividend, $2 per share annually. And then on top of that, we have a variable dividend structure with 50% of our free cash flow after that base dividend being returned to shareholders. I’ll just note that on top of that base dividend, the quarterly dividend associated with the variable is $1.84. And so the combined yield on our shares right now is north of 10% if you annualize that first quarter dividend. So really, really large dividend program that we have in place and showing up now for a couple of quarters in a row and expect it to continue.
And then on top of that, of course, we have our stock buybacks. And so we are generating as I said, a significant amount of excess cash. You see it here on the page, $13.5 billion, which is well in advance of our market cap. And when you stack that up, that’s $9.3 billion that we can return to shareholders. And we think that the incremental cash above and beyond the variable that we’ve structured should go to share repurchases, particularly given where our stock is valued today.
And so again, big believers in this, and we’ll continue to do that. Within all of that, we have to maintain our balance sheet strength. Less than one time leverage is going to continue to be an important guidepost for us. And we measure that not just at current prices but we measure that down to very low prices. We need to have a strong balance sheet that will sustain the inevitable cyclicality that we will see in this industry. And so we test that all the way down to 250 and 50. [ph].
So when you do think about the fact that commodity prices will have cyclicality, we think it’s great to showcase really what our cash flows will look like at various prices. And so I’ll point you to a couple of things on this page. First thing that jumps out to me is at 5.50 and 1.10, which is really where you see the — certainly, the front part of the strip today, we would see a massive increase in free cash flow above and beyond what we are projecting. So we still have a ton of leverage to the upside.
And then, of course, as you move throughout this slide, you can see how much cash we will generate at even lower prices as well. So we think about the adjusted strip, and I’ll just — adjusted strip is going to the strip as it sits on the curve today and then leveling out at 4.75 after the first two years. But then we test everything as well down to a stress case. And we’ve thought a lot about how to structure cases over time. And today, this is a stress case that starts off below the strip at 4.50 and it steps down to $3 and then steps down to 65 on the oil side.
Now we also, again, look at 250 and 50 knowing that, well, this is a five-year analysis, those prices are not really sustainable over a lengthier period of time. But we want to understand what our cash flow profile looks like if you dip that low. And clearly, we still generate a good bit of cash. Last thing I’ll note before we move off of this is every $0.50 move in gas prices is $700 million of unhedged cash to us. So really, really great leverage to cash flow, great leverage to the upside, and we continue to point that towards our return program shareholders.
So when you think about the entry price of our stock and why we talk about our stock as being undervalued, there’s no better picture of this to me than to think about the yield. And so this yield today on this chart is adjusted for the increased buyback that we’ve announced. It’s up to 19% on our stock today, sitting at the highest in the group by far.
And when you think about what that looks like across the peers, of course, you have gas peers that have some yield. But then when you think about the amount of cash that the gas peers can payout, we are unique in being a highly levered to gas company with a very low amount of financial leverage and a really robust inventory that allows us to payout a high percentage of our cash flow from operations.
One of the highest percentages of cash flow from operations in the industry, and you just don’t get there if you’re soaking up that cash flow with debt service or with maintenance capital or with an effort to grow your inventory. And so what we have is a really unique combination of a strong platform that can deliver a significant amount of its cash flow from operations to shareholders as well as then an entry price to our stock, which shows up as a really high yield.
So we think the opportunity is now. And we think that the time to see the yield move to the right on this page is now as well.
I can’t do any of this without our great portfolio. And so a lot of detail in this presentation today on our assets. This again is a five-year plan. And it’s anchored by the very best gas portfolio in North America. Our leading positions in the Marcellus and the Haynesville are frankly just outstanding, and they have a tremendous inventory that supports the longevity of this program. We support — we supplement that with a really strong Eagle Ford asset that generates a ton of free cash flow as well. And what you see on the right is a look at both the 2022 production capital and free cash flow as well as 2026.
We have the average production mix and D&C split and free cash flow over that five-year period in the wheels. And it’s really pretty steady. And so this is a plan that is far from heroic. This is a plan that is consistent with how we’re running our business today. We have a capital allocation that looks to the Marcellus and the Eagle Ford as essentially flat the Marcellus because it’s constrained. The Eagle Ford because we’re doing some testing on how to delineate future opportunities there.
And in the Haynesville, we’re looking to grow that asset a little bit. And that’s what drives our low single-digit growth that you see in aggregate for the company over that period of time. The capital, again, relatively steady. We have assumed that 2023 over 2022, we’ll see about 10% inflation.
And then on the free cash flow side, you see that there is a little bit of backwardation to the free cash flow, but not nearly as much backwardation as you see from commodity prices. You’ve got a $4.75 oil deck running through that and you see relatively modest decrease from 2022 free cash flow. So a really robust and sustainable program despite price backwardation knowing that we have a great inventory and great capital efficiency.
So that inventory broken down by basin here and given some sensitivity of prices. You can see we have north of 10 years of inventory in each of our assets. And we’ve given you a couple of different ways to think about the quality and the size of it. We have about 3,500 locations at greater than 50% rate of return at $4.75. And then at 100% rate of return, we have 2,500 locations.
So what you see is that not just do we have a long live inventory, it’s a really high quality inventory. And we have this because, of course, we are in the best parts of these plays. So we do talk a lot about how do you allocate capital across a diverse portfolio. When you’ve got assets that are — you’ve got a gas heavy portfolio, you have some oil assets, you have different characteristics of each of these assets. And so how do you think about drilling one area versus another. And so this chart is meant to lay that out a bit. And so I want to talk about the chart on the upper left first.
And so what we have here is a look at two different metrics that are really fundamental to the analysis we do, which is an ongoing iterative constant analysis, thinking about how we allocate capital across our portfolio. On the bottom, the X-axis, we have the PIR and you may be familiar with that or it’s really similar to any other MPV type calculation. It’s just the PV10 of a well reduced by its CapEx over that CapEx. So think about the cash you invest in the well relative to the present value of what you get back traditional return type metric.
And then on the Y-axis, we have a cash in and cash out, three-year cash return on capital invested metric. And we think it’s really important to balance these two because, again, in a cyclical industry, you need to pay attention to how long it takes you to get your cash back. You can have a really great rate of return well, but if it takes you too long to get your cash back then you may not ever see that, depending on how the environment evolves on you.
You can see our Marcellus stands out, very best asset in the portfolio, been known as the best asset in our portfolio for a long time, and it is constrained. So the capital allocation will flow as is described here in the boxes next to the asset. Marcellus is going to get every dollar of capital that can go to it to optimize the value of infrastructure.
The Haynesville is going to get some growth capital. It’s got a great opportunity to it, the return metrics are fantastic. The coke, as we call it, is awesome, returning cash pretty quickly. And then the Eagle Ford, we’re going to try to get the delineation of that and determination of how we want to allocate capital to that defined over the next year and see if it competes for more capital within our portfolio or with someone else. And so we really like this setup. This is the way the capital allocation will flow in our business, and we think it’s robust and sustainable. We think it optimizes value for shareholders.
So now we’ve got a page on each one of our assets. And so starting with the Marcellus, these pages are going to look pretty similar. And the key characteristics that we think we should pay attention to, we think investors should pay attention to when you think about the assets in our portfolio or how much cash do they generate? What’s the quality of the inventory and what’s the competitiveness of that inventory when you think about it on a capital efficiency perspective.
And so again, the key metrics here, the gross inventory at different prices, one of the things that stands out about the Marcellus is it’s flat. You take prices down very low and you don’t impact to inventory very much because the asset is just that good. The capital efficiency of this asset is pretty stunning, $2.05 of CapEx for every Mcfe of production that you bring online over a 12-month period. That’s again just the production over the first 12 months, and that’s all your CapEx. So really, really robust economics, really, really robust capital efficiency and the best rock and the best operations in the basin mean we’re number one here.
And then the takeaway is $7 billion of free cash flow out of this asset over a five-year period. Now this is total free cash flow. You’ll see free cash flow in each one of these slides add up to the $13.5 billion to $14 billion in aggregate for the company.
So this is fully allocated. All the hedges, all the taxes, everything embedded in this, and $7 billion of it comes out of the Marcellus over the next.
One thing that I do want to note here, as we think about the Marcellus, we talk about basis all the time in the Marcellus. We get a lot of questions about basins. And what’s been really neat about 2022 and the robust nature of the gas market 2022 is that basis is kind of flat, $0.55 where the last two years, it’s been $0.56. And what that means is that it’s 8% of NYMEX versus 19% over the last few years.
So you’re seeing the supply-demand dynamics of the Marcellus the supply-demand dynamics of the rest of the country. Yes, it is constrained. No, you can’t put more volumes through that system, but you are seeing because there is a discipline in the way that other producers are approaching that constrained problem, you are seeing the prices hold up really well as a total deduct and then as a percentage of NYMEX.
In the Haynesville, again, same charts inventory here really robust. You do see a little bit more slope to the inventory counts here. The Haynesville has a slightly higher breakeven than the Marcellus, but all the way down to $2.25, you have a ton of locations. And then if you go all the way up of course, you get to nearly 20 years of inventory.
And so we think the Haynesville is such an important asset for the United States and how you think about the delivery of gas to the rest of the world, proximity to and we have the highest quality inventory, the deepest inventory of remaining locations. And then when you see that chart on the bottom right, a step change improvement over the peer group and capital efficiency.
This is an asset that’s been really important to Chesapeake for a long time. It’s not always been as economic to us as it is today. We were able to reduce our cost structure here dramatically through the bankruptcy. And so this asset has become a very foundational element of our ability to manage cash flows going forward grow those cash flows, $4 billion of free cash flow out of this asset over the next five years, and that includes some growth.
Remember that we’re growing in the Haynesville this year, about 10% year-over-year. That’s fully adjusted the acquisition of Vine. We would like to be able to grow that asset a little bit more in the coming years. We have to time that with infrastructure.
And you see some of that concern around timing with infrastructure show up in the basis. So you have seen basis here, widen out this year. There’s some detail in the back on supply-demand economics in the Haynesville. And you’ll see that we map out the incoming infrastructure to the basin. And so we think this is a relatively short-term phenomenon, but it’s one that has to be very proactively managed.
In the Eagle Ford, again, just an asset that generates a tremendous amount of cash flow. One of the interesting things about the Eagle Ford is the rate of change opportunity here. You can see, again, the inventory has a really huge total amount. And today, we’re sitting at around 14 years. And if we have some success in the way that we’re allocating our capital this year and adding some inventory to the basin, which we’re optimistic about, then we’re going to see these inventory counts grow and the rate of change here is pretty interesting.
When you look at the chart on the lower right here, remember, in the gas assets, we were number one by a good margin in both. Here in the Eagle Ford, you’re talking about a really vast area and a lot of different rock quality. And so the guys to the right of this chart are generally our Karnes trough players. This is the best rock in the basin.
They’re going to sit with the highest capital efficiency. But keep in mind also that the Karnes trough is pretty mature. There’s not a whole lot left there. And so as the market looks to the Eagle Ford for where its volumes are going to come from, we think it’s pretty important to sit where we sit, which is some of the best of the non-corn trough locations to be drilled and a robust inventory there, again, $3 billion of cash flow over five years.
I do want to talk about the success we’ve had with our Vine and Chief acquisitions really, really powerful acquisitions that have added a ton of that inventory to our portfolio that I talked about on the previous pages. We’re really proud of what we’ve accomplished here. The PRB divestiture was important to us as well. It helped us really high-grade our portfolio and focus our capital allocation.
Our non-negotiables, I mean, they’re worth just reading off. These have been really important guidepost to us as we’ve thought about acquisitions over last year. You can overpay. You have to protect the balance sheet. It has to be accretive to cash flow. You have to have an environmental footprint that you can be proud of or improve upon really quickly. And if you do all of that right, it will make you better not bigger.
You have to achieve your synergies, we get there with a culture that is focused on this, that’s focused on continuous improvement, focused on incorporating the best of both companies bring together assets. And we think we’ve achieved some really great success here.
We talk a lot about — I mean, we get a lot of questions about, okay, you’ve done two, what’s next? And in an environment where prices have moved really high, really quickly, you tend to find more of a spread a bit ask. Now we’ve taken a pause from M&A that we clearly indicated when we announced the chief deal that we would do. And so we haven’t been directly involved in stuff. But just following the market, generally, you that, that bid ask has shown up and you haven’t seen as many deals get done.
We’re really happy with what we’ve accomplished. We’re happy to sit on the portfolio we sit on today. We don’t need to do anything in term, and we can be really patient. If something else comes up in the future that fits this mold, we can act. And if it doesn’t, we’re happy to be patient and prosecute what we own today.
The balance sheet we think is really important to talk about and maintain our commitments around the balance sheet. You can see here, again, the sensitivities to price. We maintain a robust strong financial capacity and really strong balance sheet down through very low prices. And it’s really important that we maintain that commitment because we know that while the market is really strong today and the dynamics are great and $2.50 gas like it is well below anybody’s breakevens for where the market is today.
We will see $2.50 on a screen at some point in the future. I can’t predict when, but it will happen. And so you got to be ready for that. We are — we’ll be opportunistic happens, we can do more things like we announced today and buy back more shares because we have the balance sheet strength, we have the cash flow to do it.
I do want to talk about that buyback a little bit more. We get a lot of questions around what our shareholder base looks like and the fact that we have some large shareholders in our capital structure as a result of our bankruptcy and the way that the shares were allocated out.
So I think it’s really important to highlight that we’ve seen that turnover begin to happen. We’ve gone from 88% at the time of exit down to about 30% today. We’ve added in a couple of larger shareholders through acquisitions. But we also know that what we do have in our shareholder base today are some shareholders that are fairly sticky that are happy to stay there. We’re paying out a lot of cash in the form of dividends, and many of these holders are income-oriented holders that can hold the stock for quite a while.
That said, the $2 billion buyback that we have has been really important to have liquidity for shareholders that are looking to take some gains. And we do have some really large gains for these holders. And so we have seen this turnover occur. We think it’s healthy. We’re seeing the trading liquidity go up quite a bit. In May, we averaged well over 2 million shares a day.
And so between the increased trading liquidity and our liquidity of a buyback, we think this catalyst for the shareholder overhang is now, and we’re eager to see that continue to happen. We’re going to see new owners of our stock come in.
I do want to spend a minute talking about ESG. I mean, our profile here is really strong. We are a gas-heavy portfolio. And so we do tend to have a pretty low carbon footprint, and we’re proud of that. But it has to be about more than just where you are today. And so we have commitments around how to improve on this. And it starts with how we think about improving upon the carbon footprint of what we produce today. Everything that we do today can be done better. We have a mindset of continuous improve. This is cultural within our company, and we care a lot about showcasing to the world that we can deliver affordable, reliable and lower carbon energy out of what we do today as an unconventional producer of oil and gas.
And so you see our emissions intensity and our methane intensity are relatively low. I would point to the methane intensity in particular, which is what gets most of the headlines. We sit at 0.06 and our gas plays are at 0.02. Keep in mind that one of the only things that came out of the COP 26 Conference in Glasgow last year was concept that methane intensity from energy creation should be about 0.2. So our gas assets are tenth of that. And I just don’t think this is all that well understood by policymakers. I don’t think it’s all that well understood by all the stakeholders that worry about where energy is going to come from in the future.
We need to continue to improve upon this. We need to continue to embrace the idea that this is a commitment that isn’t just about us as a single producer, but it’s about the industry getting better. We have a lot of monitoring in the field to support this. We’ve done responsibly sourced gas across our entire position. We’re in the process of getting our Marcellus certified. It will be completed by the end of the year. And so this isn’t just talk, this isn’t just a couple of stats. This is a real commitment and an effort towards improvement.
And then on the rest of ESG, we have great commitments around our — the social side. We have a robust all components of it that you would expect for a company that was able to remake its governance coming out of bankruptcy.
So look, I’ll go back to why we are poised for a multiple re-rating with, again, the four things that we think are most important to shareholders today. Superior capital returns, deep and really high quality inventory that continue these programs and generate this kind of cash flow for a very long time at a variety of prices, a balance sheet that will be robust and hold up through this entire environment and a commitment to that will be a needed component of how the world thinks about solving the shortage of energy that we have today.
So I think, Zach, we’ll go to Q&A.
Question-and-Answer Session
Q – Zach Parham
Sure. So we can open it up to the audience for Q&A. First, Nick, maybe I’ll ask one to get things started. This morning, you doubled the buyback authorization, the pace of the buyback going forward, how do you think about that? I think numbers implied, you bought back about $400 million in stock in 2Q? How do we think about that in the back half of the year and into ’23?
Nick Dell’Osso
Yeah. So we think our stock is pretty attractively priced today. Certainly, you’ve seen some of the peak come out of the — or maybe it wasn’t a peak, but the highest prices come out of the gas curve here on the front end.
That hasn’t changed this five-year cash flow look five-year cash flow look all that much. This cash flow has been resilient through that because the back part of the curve has stayed pretty constant. That drop in gas prices is largely around the concerns of Freeport going offline, and it’s ringing your hands about is it 90 days or 120 days. And so the long-term cash flow for this company is incredibly robust.
So we think the shares remain cheap. We’re really pleased to be here with a larger buyback as the stock price has pulled back from over 180 and we’re happy to be buying shares as quickly as we can do so. It’s hard to buy shares in huge size. You’ve got to be active in the market. You got to navigate a bunch of things, and we’ll work through that, but we made some really good progress in Q2 and expect to continue to do so.
Sure. So the question is, would we pursue international priced gas contracts through LNG? And the answer is yes. We’re very open to that. We’ve had a lot of conversations with potential buyers of LNG about it.
The way we think about that is it’s a diversity of where you sell your gas. So we sell all of our gas in the United States today at a bunch of different basis locations, and we sell none of it linked to an international index. And so right now, you would point to those international indices and say, wow, it’s a really big arbitrage opportunity. Any of these contracts that you look at are going to be 10 or 15 or maybe even 20 years.
And so you should assume that there will be a time at which that spread will come back in if you’re going to look at something that far out. But we believe that, that diversification is attractive to a portfolio of our size. We market in between 4.5 and 5 Bcf gas every day. That’s on top of the 3.6 or 3.7 of net production that we have. And so we think that with that amount of gas and every day, that significant percentage of the U.S. market, we should be diversified at the points in which we sell it.
Unidentified Analyst
And there’s a lot of plantation Haynesville inventory, how do you feel about the rest of the base and the ability to meet that demand that should be coming up?
Nick Dell’Osso
Yeah. So I think the Haynesville will ultimately grow nicely to meet that LNG infrastructure. Most of that LNG, you’ve got 1 big project coming on next year, and then most of it is kind of ’25 through ’27. And the basin the base is at an interesting point this year where the expectations for growth have been slow. We haven’t delivered on basin level growth in the Haynesville this year at the level that most analysts thought coming into the year.
And there’s a lot of constraints in the system that are causing that. We see gathering system level constraints with high line pressure. We see some of the takeaway. I’ve got a slide actually in the appendix that I welcome everybody to look at that maps out the coming infrastructure to the Haynesville and you can see the gap in 2022 relative to production.
And so I think that’s the explanation for why Haynesville growth has been lagging this year because the rock is awesome. It’s producing everything it should produce, but there is a bit of a lag. The industry has done a much better job over the last few years of trying to time how it thinks about growth relative to infrastructure. So you are seeing some basis tightening in the Haynesville, but that growth can show up.
Now the depth of inventory, I think, is something where Chesapeake has a huge advantage. We sit in the very best part of the play with a lot of undeveloped inventory. And as you start to map out where you go from there, the inventory decreases in average quality. And so we really like our position. We think we have a great spot in that growth trajectory in the future.
Ultimately, I think the Haynesville us important to that. The Permian will chip in. The Eagle Ford, you’re seeing gassier areas, the start to get developed more aggressively. All of that’s going to contribute to the LNG export story. But the Haynesville is going to be the most important component sitting just north and it’s got a good long life to it, where we sit with the very best of that position.
So the question is, will the production growth happen in the second half of to address issues going into winter. I’m not sure. I think the constraints we’re seeing could linger into ’23. The good part about the Haynesville relative to the Marcellus, which we’re intimately familiar, unfortunately, with infrastructure constraints in the Marcellus is that you can build infrastructure in the Haynesville.
And so it is happening. There are a lot of projects underway, all from the long-haul takeaway down to small compressor ads and treating facility expansions and line looping that is relatively small projects but take time. It may take a year or six months or however. This need to be planned for.
So all of that will happen, and it will happen gradually over a 12-plus month period. So I can’t say exactly when that growth is going to show up. But I would say by the end of ’23, you’re going to see the Haynesville will grow.
Unidentified Analyst
Sorry, Nick, you already gave of information [indiscernible]. So you have mentioned Northeast space is hanging in there, $0.55 back, but also that every dollar you can is going to go towards Marcellus asset, infrastructure constrained, all the LNG export is really going to come from Haynesville, Eagle Ford. Are you worried about kind of future basis blowouts in the Northeast?
Nick Dell’Osso
I’m not. Because I think others are doing — are managing their Appalachian assets very similarly to the way we are. Infrastructure constraints aren’t new there. And so no one is really trying to grow their volumes in the Northeast. We all understand that there’s just nowhere else for the volumes to go. And so you’ve seen producers generally commit to a flat profile there, and we’ve been the same.
I will note that 2017-2018. So this is before Chief. We were producing 2.5 Bcf a day gross, and we thought that was it. We thought we couldn’t go any further from there. And then just before Chief, we were 3.5 Bcf a day gross.
And so through the COVID shutdown, we saw capacity open up, and we had basically volumes behind pressure that just showed up and build that capacity. I don’t expect much of that to happen in the robust price environment we have today. But I can tell you if it does happen, Chesapeake will be the first to fill it just by virtue of having volumes that are available.
Zach Parham
I think we’re out of time here. Nick, thank you so much for your presentation and for Chesapeake’s participation in our conference.
Nick Dell’Osso
Thanks, Zach.
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