Expand Energy Corporation (EXE) Earnings Call Transcript & Summary

Good day, and welcome to the investor presentation regarding Chief acquisition conference call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I'd now like to turn the conference over to Brad Sylvester, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Rocco. Good morning, everyone, and thank you for joining our call today to discuss Chesapeake's acquisition of Chief and the sale of our Powder River Basin assets. 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 press 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 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 Tim Beard. Nick will give a brief overview of the transaction, and then we will open up the teleconference for Q&A. So with that, thank you again, and I will now turn the teleconference over to Nick.

Good morning, everyone, and thanks for taking the time on short notice for our call. This is a really big day for Chesapeake. We're very excited to have announced these transactions concurrently and know that we've simplified our portfolio and redefined the core assets of Chesapeake. With that simplification, we can allocate our people and our capital optimally across our 3 greatest assets, those assets being the Marcellus, Haynesville and Eagle Ford, all of which have the scale and quality to deliver sustainable cash flow through cycles. Focusing on the Chief transaction a little bit. This transaction, of course, meets the nonnegotiables that we've carefully defined for the market. And those nonnegotiables are focused on making the company better, not just bigger. One of the very unique things about the Marcellus asset in our portfolio and, of course, similar to Chief, which is immediately adjacent to us, is that it's a highly capital-efficient asset with minimal investment needed to maintain production levels. There's immediate synergies available in the neighborhood of $50 million to $70 million cash synergies in the first year. We'll use this to accelerate cash return to shareholders by increasing the base dividend by 14% to $2 a share. And that allows us to anticipate paying $900 million to $1.1 billion in total dividends now in 2022, even after the sale of Powder. Continuing on the nonnegotiables. We didn't overpay. We think it's an attractive price relative to recent transactions in the basin and Appalachian public trading multiples. And we're going to talk about this more in a few minutes, but it does give us incremental capacity to the constrained market, that is the Marcellus, and allows us to grow the combined production base of Chesapeake and Chief in an attractive way. We talked about protecting the balance sheet. And with this transaction, we're using about $2 billion of cash, which allows us to enhance returns for shareholders on the transaction but still keep debt below 1x. And of course, given that this transaction, along with our existing business, generates a tremendous amount of free cash flow, we'll be building cash along the year and that net debt will fall again. The deal is clearly accretive to key metrics. It's accretive to cash flow per share, free cash flow per share and free cash flow yield, and it lowers our cost structure attractively across LOE, GP&T and G&A per unit. And lastly, on the nonnegotiables, it lowers our emissions profile. This is a dry gas asset. And one of the ways that we'll point to measuring that is that the methane intensity of our business will now be 15% less than our last reported 2020 number. So again, a really important set of nonnegotiables that we think this transaction checks every box. So let's talk a little bit about what this means for Chesapeake going forward. We had highlighted coming out of bankruptcy that we wanted to refocus our portfolio, and we've achieved that here. So in short, we have a portfolio we want to succeed and create differential returns for shareholders and to deliver affordable, reliable and lower carbon energy to consumers. So going forward, we'll be able to focus on achieving the forecasted synergies associated with this transaction as well as the acquisition of Vine, and generating attractive returns with the capital deployed to buy these great assets. This means we'll be taking a pause at looking at additional acquisitions. And frankly, it's hard to imagine another deal meeting the high bar of our nonnegotiables. I'd like to turn to our slide deck now and highlight a few things across these slides. I'm going to start with Slide #3, which is a map. And this map, we think, really highlights the simplicity we've created in our portfolio. We have 3 great assets, all of which have great returns, garner capital and have the scale to compete. The next slide has a lot of data. I've touched on a number of these features in this transaction, and we'll be able to talk more about all of them in the coming weeks. But I did want to highlight that there -- the free cash flow of the company is now sitting at a projected $9 billion over the next 5 years. It's a pretty tremendous number given the size of our market cap. We'll use that increase in cash flow to increase the base dividend by 14% and anticipate total dividends of $900 million to $1.1 billion in 2022. Slide 5 highlights some key metrics for the Chief acquisition, as well as our combined Marcellus Shale position for Chesapeake. There's 1,500 total undeveloped locations in our Marcellus portfolio now with over 500 undeveloped premium locations defined with 50% rate of return at $2.50 gas. The asset produces over 800 million cubic feet a day of gas and has projected $820 million of EBITDAX in 2022 before hedges, tremendous asset that generates a lot of asset-level free cash flow, you can see that free cash flow projection of nearly $600 million in 2022 for the asset and almost $1.5 billion for Chesapeake as a whole now pro forma. The next slide, we have a map of the marketing picture. And this is really probably the most exciting part of this deal to us. This is the thing that makes this transaction really unique for what opportunities we've seen in the market and particularly for what we bring to the table in the way of synergies. The map really highlights that the Chesapeake and Chief acreage fit hand in glove right next to each other. But what may be a little bit less obvious and is really important to the deal is that we share a lot of gathering system capacity here, and we gain a lot of access to incremental delivery points in the marketing across the basin. So we gain access to delivery points on Tennessee Gas, on Transco and Atlantic Sunrise. And what that means is that we have access to better out-of-basin pricing, and we can manage our production and our pressure across these systems better to open up incremental capacity on a combined basis that wasn't available individually to have an incremental 200 million cubic feet a day gross of capacity. So we talked about how constrained the market is and how limited we were in our ability to grow our Marcellus asset, and this deal provides a solution. On Slide 7, we highlight our dividend program, and we think it's the best-in-class program across the industry. We'll sit pro forma at a 13% yield to total dividend projected with our variable program today. Now I'd love in future calls to not be at the high end of this bar chart here and have the price of the stock better reflect the dividend profile that we have today. But nonetheless, this is a tremendous value that's available. And then I'll also highlight that this doesn't impact our ability to meet the goal of having $1 billion buyback before the end of 2023. If anything, this enhances it given the incremental cash flow provided by the transaction. On Slide 8, we detail the synergies. Again, $50 million to $70 million in cash synergies from the Chief transaction immediately. That's on top of the $50 million that we announced previously from Vine. And so we thought it was important to highlight the combined synergies, as we've highlighted what we believe the value in consolidation for the industry is and what opportunities we've had by seeking to gain scale in our assets. Scale and consolidation has to be about getting better, not bigger. So not only have we highlighted these synergies, but in both cases, we've been able to highlight our confidence in those synergies with a dividend increase. Slide 9, we give you our ESG profile. We've talked about the company's desire to be net zero. This is certainly a step in that direction as we add another dry gas asset with great ESG metrics, and we continue our program of reducing our GHG profile across our business through the capital that we're spending in 2022. On Slide 10, we have our updated outlook. Just a couple of things I'd like to highlight for you here, there's obviously a lot of numbers. But our cost structure is getting better. Our cost structure continues to grind lower, and we think that's really important as we create a sustainable business and sustainable cash flow over time. That results in higher EBITDAX. And I'll just point out to you that we only have 9 months' contribution from Chief in this outlook. So on a run rate basis, the impact from the Chief acquisition is greater. And then lastly on this page, I would highlight the accretive nature of this deal with the operating cash flow per share, free cash flow per share and free cash flow yield, very attractive, very accretive. And then lastly, I'll close with going back to our nonnegotiables. We just can't reiterate enough how much these mean to us and how we think about whether or not the opportunity for consolidation is value-adding to our company and to our shareholders. We didn't overpay. We think this deal is attractive relative to the NAV, recent transactions and the public trading multiples. We protected the balance sheet. We've been able to use balance sheet capacity to enhance returns and stay under 1x leverage. It's attractive to the key metrics, as I've highlighted. It lowers our emissions profile. And again, most importantly, particularly given the capital-efficient nature of the asset, this deal makes us better, not just bigger. I'd like to go ahead and open up the call for Q&A and just remind everyone that joining us this morning is our new CFO, Mohit Singh, who some of you have had an opportunity to talk to and will be participating in Q&A and in all investor communications with us going forward. I'd also like to welcome to our team in a concurrent announcement this morning, Josh Viets, who will be joining us next week as Chief Operating Officer. Josh is coming to us from ConocoPhillips after a lengthy career there, being an integral part of turning that company into one of the better operators in the industry, and we're thrilled to have him join our team. Operator, with that, I'd like to open it up for questions.

[Operator Instructions] Today's first question comes from Charles Meade at Johnson Rice. And pardon me, it looks like we have lost his line, so we'll get on to our next question, which comes from Doug Leggate with Bank of America.

Nick, can you hear okay?

Yes. Can hear you just fine.

Okay. A couple of things, if I may. I think about this deal, I'm not -- I really couldn't care less about the multiples of beating transactions or the trading multiples of other companies because to me the value is about money in, money out. So can you kind of lay out for us what you see as the cumulative sustaining free cash flow of the deal? It looks like versus your prior guidance of $6 billion, you're now talking $9 billion. How much of that is coming from the deal through '25? And what is the sustainable inventory that you think you're acquiring on sustainable free cash flow basis?

Yes. So we love this deal for all of those reasons that you just described, Doug. And so when we think about the sustainable cash flow of this business going forward, again, the business is generating 835 million cubic feet a day of gas, which results in $850 million of EBITDA in 2022 before hedges. And so if we want to think about the sustaining cash flow over time, we certainly think you should consider it before hedges, that is about neighborhood of $200 million of negative hedge mark-to-market in 2022, but the ongoing capacity of the business is there at that $850 million. Now the capital efficiency of this asset is just really attractive. We'll run 2 rigs this year on it because that's the program that we're picking up. And then going forward, it's going to be 1 to 2 rigs to maintain that productive capacity over the next many years. And so when you think about that, that's, call it, 100 -- just over $100 million to just over $200 million of annual CapEx, depending on whether you're at 1 or 2 rigs, to generate over $800 million in EBITDA at the current deck. So this is an incredibly capital-efficient asset, and it obviously bumped our total free cash flow of the company by a large amount. The 5-year free cash flow contribution from this asset alone is greater than $1.5 billion.

Okay. That's a 5-year or through 2025?

That's a 5-year.

Okay. So '26, okay. My follow-up is -- and I'm sorry, I'm going to challenge both you and Mohit on this a little bit. It's a bit of a provocative question, but do you think your stock is undervalued?

We do think our stock is undervalued.

Okay. So why then with the depleting asset base with the finite inventory would you give all the money [ away in ] variable dividends rather than buy back your stock? My point is I don't really see the variable dividends get capitalized, Nick. So why would you talk about a variable dividend yield when you could essentially buy in all the shares that you just issued without breaking a clip if you believe your stock is undervalued?

Sure. We kind of like this debate. This is a debate that we hear a lot of different opinions about on both sides of. And we have gone with a bit of an all-of-the-above approach in the way that we think about returning cash to shareholders. And the reason that I think it's important to include a variable dividend in that all of the above approach as opposed to going all with the buyback is that there is cyclicality in the way that our stocks trade. And there is value in the predictability of knowing that the dividends can be estimated with a formula. You have to have a model for the company. But if you have that model, then you can have a predictable amount of cash returned to shareholders with that formula. And we think there's real value in that, particularly for an industry that has struggled to create free cash and be able to deliver it to shareholders over time. Now that said, as we rolled that out last summer, we also noted that we were generating incremental cash flow beyond what that variable would deliver back to shareholders. We did feel that our stock was undervalued, and so we instituted a buyback program on top of it.

Yes. We can take the debate offline, but I just don't think that in an E&P business, you're going to get any recognition beyond attracting the wrong type of shareholder for a variable distribution. But you're right, the value is a DCF on the forward cash flow, but variables to me are backward looking. But we can take it off-line, but I take your point.

Next question today comes from Lloyd Byrne at UBS.

Nick, you used the words hard to imagine and nonnegotiable give-ups going forward on future deals. And so I don't want to put words in your mouth, but it sounds like it's about executing now. I think the market's been waiting for you guys to reposition and move forward. And so with $9 billion of free cash, is that kind of the strategy now is figure out how to generate that cash and then return it to the shareholders?

Yes. Now I mean, to Doug's point a few minutes ago, when you say generate that cash and return to shareholders, we intend to be an ongoing operating business. We don't intend to be a blowdown business. But yes, to, I think answer the underlying question here, we like our portfolio. We don't believe we need to be out seeking incremental adds to the portfolio. We are comfortable with the assets we own today. And we're pausing from M&A as a result of that. So it is about execution. The whole purpose in getting our portfolio rightsized and centered around assets that we want to own is that we believe we can more efficiently deploy resources across our business to enhance value for shareholders relative to what we would do with a more diverse portfolio than as we've had in the past. And so we've got work to go do to achieve that. We need to reallocate those resources. We need to deliver on the synergies that we've projected here and then go out and create incremental synergies. So we think we have the portfolio to do that now. We're satisfied with what we own, and we plan to turn our focus towards execution.

Perfect. And then as a follow-up, you mentioned in the beginning, Marcellus, Haynesville and Eagle Ford. Brazos, are you still in the we're going to test it, see what we get and then make a decision?

We have a fair amount of confidence in what we're seeing in Brazos Valley, particularly at wider spacing. We will always maintain the notion that if an asset isn't performing, we can think differently about it. But right now, we're very comfortable with what we're doing in the Brazos. We're going to talk about and operate our Eagle Ford asset as one broader basin of Eagle Ford, similar geology, similar allocation of capital. We think we can optimize our capital allocation by managing that capital across those 2 parts of our company together. And so we're going to go down the path of seeing exactly what the development in Brazos Valley presents to us this year, just like we've talked about over the last several months. And that will determine how much of that capital gets allocated into the northern part of the asset. And ultimately, if we chose to trim part of that off, we could do it. But we're pretty confident in what we expect to have happen.

The next question comes from Josh Silverstein at Wolfe Research.

Two questions for you. I guess, first, just following up on Doug's thing. From the $9 billion of free cash flow, I guess you outlined, $5 billion of total dividend, it's leaving about $4 billion left in free cash flow over the next 5 years or so. Do you see a step up in the $1 billion buyback that you guys have over time? Could you get more aggressive than that? Or do you actually want to have that split kind of half to the buyback and then half to debt reduction?

Yes. Thanks for that question, Josh. This is Mohit Singh, glad to be on the call on an exciting day today. To address your question, the way, as Nick said before, we are very focused on shareholder yield and trying to do it through the base dividend and the variable dividend is obviously that makes a ton of sense. But at the same time, we are complementing it with the share buyback. So as we -- as the business generates more cash, we clearly are not seeking to sit on that cash. We would love to return it back to the shareholders. That's something that we actively discuss with the Board and internally. So more details to come, but again the focus is on returning it back to the investors.

Okay. And then second thing was you mentioned before about kind of a sustaining number of, call it, the 800 to 900 Mcf a day. But you also suggested that the midstream footprint will allow you to grow. If you think about the combined net base is around 2 Bcf a day, you add the 200 Mcf a day of additional flexibility. Do you see yourself actually growing into that additional capacity? Or is that just there for added flexibility at some point?

No, we see us growing into that. In fact, the first part of it is pretty exciting. We think we'll be able to increase volumes delivered just by managing pressures across the assets more efficiently and managing delivery across those incremental delivery points that we'll have access to. So some of that is going to -- some of that 200 million a day of gross delivery is going to come just from flowing more gas that sits behind pressure today. And then we'll be able to drill incremental wells over the next year plus to fill the rest of that capacity. It will take us a little bit of time to get all the way to use all of it. But we think certainly by the end of '23, if not before, we would be able to use up that capacity and deliver the full amount to the market.

And the next question today comes from Neal Dingmann at Truist Securities.

Nick, just a question. Can you talk about was there any [ FT ] around the Chief assets? And can you talk about that maybe firstly?

I'm sorry, Neal, you asked if there's any what?

[ Firm ] transportation, what kind of sort of [ FT ] they had in plan?

Yes, sorry, yes. So they have access to Atlantic Sunrise. And so we're pleased about that. We have the ability to get obviously better pricing off of that than we get through a lot of our in-basin prices. They also deliver more volumes to Leidy, where we deliver more volumes to the TGP Marcellus Zone 4 Index. And so again, we can optimize the flow towards Leidy and have incremental flow across the entire asset, which we feel great about. So yes, they have a nice marketing portfolio. Some of it is through actual FTE, some of it is through firm sales, but it's a good portfolio. And the weighted average increase of our volumes that get out of basin pricing is going up pretty nicely to about 45%.

And housekeep, there was no -- you weren't adding any infrastructure on this deal? I didn't really see any on this.

That's correct.

Okay. And then lastly, just on hedges, what's your thought on -- I didn't see anything, maybe I missed this, just your thought now on you add hedges around this, your thought -- what over -- just sort of overall hedging on the portfolio post this deal?

Neal, I'll take that. Thanks for the question. We've talked to you previously about our existing hedge book. As part of the transaction, we will be taking on the hedges that Chief has currently in place. And then in addition to that, we are actively looking at opportunistically layering in some incremental hedges to just protect our PDP.

Next question comes from Charles Meade of Johnson Rice.

Nick, I'm sorry for not showing up earlier when you called my name. I went to pick up my receiver and hung up instead. You can laugh for me after we hang up. But I wondered -- I may have missed this, but I wondered if you could give us maybe a few more parameters about how to think about the PDP value of the Chief assets either at strip or at a flat price or however you guys may have evaluated it.

Sure. So the PDP value here is pretty significant. But obviously, the development has a lot of value as well. PDP value on this asset we estimate at about $1.7 billion, Charles.

Got it. Okay. And that is usually like a strip from a couple of weeks ago or is that a flat price? Or what's the -- or should we just think of it kind of generically like $350,000 or something like that?

It's a strip for 5 years and then flat, that's kind of pretty typical about how we would evaluate that. So look, the NAV of this asset, as we think about it, and we think about what we're buying, we believe is well above the purchase price, obviously. And so PDP is an important component of that. But then when we think about development and where we have confidence in how we achieve value from development, this is an asset we know extremely well. We operate some of the locations in this undeveloped acreage. And the rest is immediately adjacent to us. We understand the geology, we understand the drilling, we know the cost structure. And we think there's just a tremendous amount of value here.

Yes. On the face of it, it really seems like an obvious fit. But if I can go back into maybe another facet of that, something you've talked about a couple of times already, this $200 million gross that's available just from kind of optimization or the combination of your midstream reference, so am I thinking about this right, is this $200 million gross, that's about probably $75 million net to you guys? And I know in your slide presentation, you said '23, but it sounds like that's kind of a something that you'll probably achieve over the course of '22 as you kind of identify what those points of flexibility are and not just physically, but also within your contract structures?

Yes. So it's a little bit more than $75 million, a little closer to $100 million, not quite $100 million. And yes, we do need a little bit of time to move some things around physically and deliver into those other access points and to take advantage of some options that exist in those contracts and work with our midstream providers to set all of that up. And then as we get into -- as we do the first part of it, manage production higher just through pressure optimization, then we'll add some volumes through drilling. So yes, we we've said by '23, but certainly, we'd like to be there sooner.

Congratulations on both these moves.

And the next question today comes from Matt Portillo with TPH.

Just a quick question on the balance sheet. You're levering up here a bit to do the transaction. How do you think about your absolute leverage target in terms of absolute debt moving forward over the next few years? And where would you like that to settle?

Yes. So I'll take that, Matt. Thanks for the question. The way we think about it is, again, I'll frame it back to the 5 nonnegotiables that we have. We kind of think in terms of the gearing metric, which is net debt to EBITDA. And what we've publicly said is 1x is a boundary condition that we don't want to breach. As part of this transaction, as we said, since we're paying $2 billion in cash, the net debt-to-EBITDA does increase to about 0.8x, still comfortably below the level where we'd like to keep it. As business generates more cash then we organically will just delever over time. But the way we think about it, Matt, to answer your question, is in terms of the net debt-to-EBITDA metric.

Perfect. And then maybe layering into that, if you're comfortable with the absolute debt outstanding, is it fair to assume that the priority for your free cash flow in '22 will be essentially the common dividend plus the variable dividend. But you'll still be able to execute on the buybacks, even though you're adding some leverage into the system today?

Absolutely. Yes. That's the status quo plan, is to service the base dividend, the variable dividend and also buyback. And then even after -- I mean, this is the strength of the business and the cash flows that we have from the acquisition and the base business, that we still -- despite doing all of that, we still delever over time.

Next question today comes from David Heikkinen from Pickering Energy Partners.

On the Powder sale, do you expect to take a gain or a loss? And can you quantify that for us?

We do have a tax loss here. And so one of the things you'll note in our updated outlook, Dave, is that our cash taxes actually go down a bit when you look at a pro forma of the Powder transaction. So there is a modest tax loss on that transaction.

Got it. And I guess the couple of hundred million a day, it looks like Chief has declined some on a gross basis, just pulling what data there is. So you really are in a debottlenecking mode. Can you slash the $200 million into what's debottlenecking and what's incremental capital, 40%, 50%, or is that -- just be helpful to see where exactly numbers are.

Yes, I think you should consider it to be approximately 50-50, Dave.

Okay. Perfect.

A little bit imprecise, but we have to see exactly how the pressures open up to us.

And our next question today comes from Noel Parks with Tuohy Brothers.

Just a couple of questions. One, would you say Chief has followed a similar drilling and completion philosophy as you have over their acreage? Just wondering how much in sync they were and what the opportunities might be, if any, for incremental efficiencies as you bring them into the fold?

Noel, thanks for the question. This is Tim Beard. I would generally say yes, the Chief has followed basically a very similar path to many others in the basin, including us. I do think there's some capital efficiencies that we'll see over time as we look at what they were doing on a per-foot basis. We see probably between 5% and 10% that we think we can reduce those capital costs per well. Obviously, we'll go in, we'll learn from these folks as well, right? These are great people that have developed the assets quite well. We're proud of what our team has done, but we also look across the fence and we see great things that these folks have done as well. So we're anxious to get with the team, learn from those folks. But we do think there's going to be some efficiencies because we'll have about 5 rigs, 4 to 5 running in the basin, 1 to 2 frac crews throughout the year. So there's going to be some efficiencies that we gain, and we look forward to those efficiencies. And as I said, we look forward also to talking to the folks at Chief and learning from them as well.

Great. And I was just wondering what Chief had done on emissions or if they've done any work towards RSG certification and what that might look like going forward?

Yes. Good question. So Chief had not started that process yet. And so we've highlighted in the presentation that we expect to incorporate them into our certification process. We had noted previously that our certification for the Marcellus, we expected to be finished in the second quarter of this year. And so it's our hope to pull them into that and have their assets included in the certification by the end of this year. We'll be starting essentially from scratch there. So just have a little bit of work to do, but we know the Chief, being an adjacent operator, we know they're a really high-quality operator. And we don't anticipate a whole lot of challenge there other than just some work to do with the certifying group to get it up to speed and get the information to them and bring them along, just take some time.

Great. If I can just throw in one more. With the overlap and the adjacency of their acreage, just curious if you had done much land work with them in the past, are there -- are you going to see a significant number of locations with increased lateral length as a result of the combination?

So we've had a really good relationship with Chief over the years, and we've done some swaps. But anytime you put things like this together, there are things that open up and you have the opportunity to look at more. We see those kinds of synergies as being ongoing operational headache-removing type synergies, not gigantic value drivers, but they make our business easier and therefore better every day.

And our next question today comes from Gregg Brody of Bank of America.

Congrats on getting the announcement out. Just a follow-up here on the debt questions. You talked about deleveraging. Is there a plan to pay down some of the revolver with cash flow here, or are you comfortable with the current debt levels? And just in general, where is your revolver today pro forma for all this?

Yes. So I'll take that, Gregg. This is Mohit. The revolver is currently undrawn. So we have $1 billion -- $1.75 billion of capacity on it. It is undrawn as part of this transaction. One of the very many things we like is the fact that we are doing Powder River at the same time as Chief. So from a cash -- liquidity perspective, the proceeds coming in from the divestiture helped defray some of the costs that you had to pay. So actually, when you look at it on a pro forma basis, the actual drawdown on the revolver would be sub-$500 million. We are very comfortable with that level, still retains a lot of liquidity and undrawn capacity on it. And after paying the base and the variable dividend and also doing some of the incremental share buyback that we have talked about, there's still cash flow left to pay that drawdown down in pretty quick order.

That's really helpful. And just one question on the PRB assets. I think you gave a free cash flow number for the next 5 years from the Marcellus acquisition. What's the trade-off here? How much did you give up by selling the PRB?

Not a huge amount. So you can see, again, we gave an outlook where we updated our outlook for the PRB sale in the middle column. And you can see that the EBITDA impact was relatively minimal. We didn't have a lot of CapEx going to that asset. But we also -- because we didn't have a lot of CapEx going to that asset, would have forecasted that in our hands, that asset would have declined. So it's not a huge number. And certainly, Chief is a big positive to it.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Great. Well, again, really excited about the combination of these transactions today for Chesapeake, really excited about what it means for the company going forward. We've been hard at work trying to improve upon our portfolio and present to shareholders the company that will be ready to operate for the long term. We think we've done that today. We've added a really talented member to our management team that we're excited to get onboard, and we look forward to executing throughout 2022 on what should be a great year for our company and generating tremendous returns for shareholders. Thanks again for your time. And if there are any other questions, please follow up with Brad Sylvester or any of us directly. Thank you.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation, and you may now disconnect your lines. And have a wonderful day.