Good morning, ladies and gentlemen. Welcome to the Chesapeake Energy 2018 Annual Meeting of Shareholders. I'm Brad Martin, chairman of the board of the company. I'd like to call the meeting to order. First, I'd like to introduce the members of our board of directors and other invited guests here today. As I announce the name of each member of our board, would you please stand and remain standing until all names have been called? Our directors, including myself, are Archie Dunham, Gloria Boylan, Luke Corbett, Leslie Starr Keating, Doug Lawler, Tom Ryan, and Pete Miller. Extraordinary group of individuals working diligently and collaboratively to support the mission of Chesapeake, and grateful for your service and your leadership. Thank you, members of the board. A representative of PricewaterhouseCoopers, LLP, our independent registered public accounting firm, is here.
Greg Cheshire, our managing partner and our engagement partner, he's available during the Q&A period to answer any questions that you might have. Don Hager has been appointed to serve as our Inspector of Election. Don is in front of us here. Don, thank you for your service. I'd like to introduce to you our President and CEO, who leads this company with great vigor, with great energy, with great integrity, and has led the transformation of Chesapeake Energy, Mr. Doug Lawler.
Thank you, Brad. Good morning, everyone. We look forward to sharing with you a short presentation in just a few moments on the status of the company and the progress we continue to make. Just real quickly before we proceed with the meeting, I want to introduce the members of our Executive Management Team that are here with us today. If you'd please stand as well. Mr. Nick Dell'Osso , our Chief Financial Officer. Mr. Frank Patterson, Executive Vice President of Exploration and Production. Jason Pigott, our Executive Vice President of Operations and Technical Services. We have William Buergler , is our Chief Accounting Officer, and Cathy Tompkins, our Chief Information Officer. You also heard of Jim Webb, our General Counsel, if you'd please stand as well. Thank you to all the members of our Executive Management Team.
Thank you, Doug. I'd now like to turn the meeting over to Jim Webb, who will serve as our secretary. He'll provide an overview of the procedural and legal requirements for the annual meeting.
Thank you, Mr. Chairman. Each of you should have received an agenda and a list of rules of conduct as you came in this morning. We'd ask to conduct an orderly meeting, that you follow those rules of conduct. If you did not receive an agenda and rules of conduct, will you raise your hand so we can get you one? Got one in the back here, if someone can get them. Two of them. As they're getting those for you, I'd note that all legal requirements for this meeting have been met. Shareholders of record at the close of business on March 19th, 2018, are entitled to vote. Mr. Hager has advised me a majority of the shares entitled to vote at the meeting are present, either in person or by proxy, so we have a quorum, Mr. Chairman.
Thank you. Because we have a quorum, I declare the meeting to be duly convened for the purposes of transacting any business that may properly come before it. It is 10:12 A.M. by my watch. The polls are now open. Would you discuss the voting procedures?
Yes, Mr. Chairman. Shareholders of record may vote by ballot today, although you do not need to vote if you previously voted. Ballots were available also as you entered this morning. If you've not voted and you need to vote this morning, or if you wish to change a previous vote, you should complete the ballot as directed and then return it to one of our representatives when we give you the appointed time to do that. If you're changing your vote, please inform Mr. Hager down here in the front, our Inspector of Election, so that we can get an accurate count. As the polls close, we'll collect and tabulate any ballots that we receive today.
Thank you, Jim. The next order of business is a description of the matters to be voted on at today's meeting. The first proposal is to elect eight directors to serve until the annual meeting of the 2019 shareholders of Chesapeake, or until their successors are duly elected and qualified as otherwise provided for in our bylaws. Your board of directors recommends a vote for the following directors for the reasons stated in the proxy: Gloria Boylan, Luke Corbett, Archie Dunham, Leslie Keating, Doug Lawler, Brad Martin, Pete Miller, and Tom Ryan. The second proposal submitted to the shareholders for action is the advisory vote to approve named executive officer compensation. Your board of directors recommends a vote for this proposal for the reasons stated in the proxy report.
The third item submitted to the shareholders for action is the ratification of the appointment of PricewaterhouseCoopers, LLP, as our independent public accounting firm for the fiscal year ending December 31st, 2018. Your board of directors recommends a vote for this proposal for reasons stated. The fourth proposal submitted is a shareholder proposal relating to a report on lobbying activities and expenditures. I understand that we have a person here to present this proposal. Ms. Skye?
Yes.
Welcome.
Thank you.
Would you state your name and who you represent?
Chris. Chris. Chris, come on. Nice to meet you. Come on. Fellow shareholders, members of the board. It's a pleasure to be here in this beautiful green room once again. I'm Julie Skye. I'm from Tulsa, a member of All Souls Unitarian Church, and I'm here representing the Unitarian Universalist Association. We are headquartered in Boston. We actually own significant number of shares, so we are here representing our shares at this meeting. On behalf of the association, I hereby announce we are withdrawing our shareholder proposal. We are delighted that the work, the engagement, and the progress we have made has resulted in our recognizing that we are working together on this issue. One of the Unitarian Universalist seven principles calls for us to uphold the democratic process in society at large.
We are deeply concerned that excessive spending and dark money in the policy-making process can corrupt the democratic process, especially if it comes without full transparency. Furthermore, we believe transparency and accountability in corporate spending to influence public policy is in the best interest of all Chesapeake shareholders. Former Supreme Court Justice Scalia, who supported Citizens United ruling, which removed restraints from corporate political contributions, qualified his report saying, and I love his vision, that requiring people to stand up in public for their political acts fosters civic courage. Without that, democracy is doomed. After we filed our resolution, the company engaged in frank dialogue on this issue and demonstrated a commitment to improving its disclosure of lobbying expenditures and oversight. We very much appreciate this opportunity to explore best practices and disclosure with company management.
We believe transparency and accountability in corporate spending to influence public policy are in the best interest of Chesapeake Energy. The unfolding scandal at AT&T shows when the company doesn't know what one hand is doing, headline risks ensue. It can be very harmful for the company's reputation. Chesapeake now disclosing federal and lobbying totals, including naming the states where it lobbies. Our company is now listing its trade association payments and disclosing all significant trade associate memberships and clarifying it does not support tax-exempt groups that write endorse model legislation, like the American Legislative Exchange Council. These are significant and meaningful steps our company has taken. We believe our company's willingness to disclose its sound risk management, and we commend our company for taking this leadership position.
Thank all of you down on the front row for showing up at your meetings and doing the work to put Chesapeake where it needs to be. We congratulate you. Again, we congratulate Chesapeake on its new disclosure. We look forward to continuing dialogue on this important issue. We are pleased to withdraw this proposal here today. Congratulations.
Thank you, Ms. Skye, and thank you very much for the quality of the engagement with the members of this team and the constructive dialogue, and we appreciate immensely the nature of that relationship. Because this proposal has been withdrawn, it will not be placed before the meeting for a vote today. The fifth proposal submitted to the shareholders for action is a proposal relating to a two-degree Celsius scenario assessment report. I understand someone is here to present on this. Mr. Mitchell, would you identify yourself?
Hi, my name is Larry Mitchell. Greetings as shareholders and members of the board. I'm here on behalf of the Office of the Comptroller of the State of New York. The proposal dealing with climate change is asking Chesapeake for an assessment of the long-term impacts of scenarios consistent with internationally recognized goal of limiting the global increase in temperature to 2 degrees Celsius. This assessment should outline the impacts of multiple fluctuating demand and price scenarios on the company's existing reserves and resource portfolio and explain how capital planning and business strategies incorporate analyses of the financial risks of a low carbon transition. We are asking that the report should be done at reasonable cost and omit proprietary information.
Supporting this request, the Office of the Comptroller of the State of New York states that regulatory and market changes driven by the desire to limit global temperature rise is already shaping global energy policy decisions. It's starting to happen already, and it might meaningfully reduce the demand for carbon-based fuels. The increasing likelihood of public action under a range of climate scenarios could definitely impact Chesapeake's bottom line. A recent analysis by the nonprofit Carbon Tracker states that 40%-50% of Chesapeake's potential capital expenditure could be stranded under a low carbon scenario. The Office of the Comptroller says that investors are increasingly seeking more disclosure of carbon asset risks. Several of the peers of Chesapeake, including ConocoPhillips and Occidental, have begun the process already of providing more and more detailed and approved disclosure on this subject.
In dialogue leading up to this meeting, Chesapeake has agreed to produce this report as requested. The Office of the Comptroller of the State of New York is pleased to withdraw this proposal, and their statement, it's a positive first step from the company to commit to producing the reports. Investors are looking for a full accounting of climate risk under the 2-degree scenario and whether the company is taking steps to address those risks. We look forward to closely reviewing the report when it's completed. On behalf of the Office of the New York State Comptroller, owner of 1,699,500 shares of Chesapeake Energy stock, we withdraw this proposal, and thank you for acceding to this request.
Thank you, Mr. Mitchell. We appreciate, again, the collaboration and the conversation and the constructive dialogue between you and the Office of the Comptroller and the company on this matter. We take very seriously our responsibility as stewards for our environment. You've heard a little bit about that. You'll hear more about it today. Our corporate sustainability report addresses many issues associated with that responsibility, and this will be an incremental step for us to share to investors how we look at this particular topic. I think you'll find it is one we discuss regularly in our board meeting, among our management, and I think you'll like not just the quality of our disclosure, but the position that Chesapeake is in with that information, where we define that scenario to be a scenario that should be operative for investors.
We thank you again for your constructive suggestions and collaboration. Because this proposal has been withdrawn, it will not be placed before the meeting today. That concludes the discussion of proposals that have been submitted for action. If you have any ballots to pass out, please send those to the center aisle if you wish to vote or have not voted at this time. We'll collect them. Are there any ballots that we're collecting? Great. We will now declare at 10:20 A.M., by my watch, that the polls are closed. The ballots are en route to the Inspector of Election who will review those votes and advise us of the totals.
Mr. Chairman, Mr. Hager's preliminary report is as follows. Each of the eight director nominees has received the affirmative vote of a majority of the votes cast. The proposal to approve on an advisory basis the compensation of our named executive officers received support from 45.2% of the votes cast. The proposal to ratify the appointment of PricewaterhouseCoopers, LLP as the company's independent registered public accounting firm for the 2018 fiscal year received support from 95.2% of the votes cast. As you mentioned before, proposal four and proposal five have been withdrawn. Mr. Chairman, this concludes the preliminary report of voting. Details of the final voting numbers will be released in an 8-K in the next four business days. Thank you.
Super. Thank you. Get caught up here. In summary, the members of the board have been elected. Pricewaterhouse has been selected. 45% of our shareholders voted for the approval of the advisory resolution on executive compensation, and the other two proposals were withdrawn. I've commented already on our commitment with respect to the enhanced disclosures and our responsibility under the proposal withdrawn with respect to the two degrees Celsius and our broader commitment to environmental stewardship at Chesapeake. Let me just comment briefly while I am here on the topic of our executive compensation. Just as we've engaged with the groups who advocate with respect to the lobbying proposal or the climate disclosures, we discuss with our shareholders our compensation strategies that the board has in place to compensate our management team for their service.
We intentionally do that because we want and value that input from investors. Many of our institutional owners follow the guidelines of a couple of the proxy services that make recommendations in this regard that I frankly think don't quite understand some of the factors that go into our decisions or properly report our outcomes. At Chesapeake, we find that in many instances, the single metric used to measure our performance is the total return to our shareholders over a period of time. We obviously know and believe that is how the score is to be kept over time. We on the board also understand that when this leadership team arrived at Chesapeake, it was a different commodity price environment with a company built to operate a big natural gas company with high natural gas prices. That environment has not been available for a long time.
That company had billions of dollars of debt, $ billions more of other fixed commitments, but for the significant actions taken by this leadership team, would have failed in the 2015 and 2016 period when about 150 other E&P companies in the U.S. filed bankruptcy. Dozens filed bankruptcy in the Oklahoma and Texas regions that we're very familiar with. That didn't happen at Chesapeake. Our company has been able to preserve, through the leadership team's work, $6 billion of equity value and all of our debt trades at par. That is an extraordinary performance not captured in any of the metrics or calculations done by these agencies who don't support or would not recommend endorsing our compensation programs.
The second thing they don't get is that we have target compensation for our executive service, that target relates to what we believe are the most important things to achieve over a given period of time. All of us would love to pay that target level of compensation. Unfortunately, because of the difficult times, we've not been able to do that, our executives that are referred to in the advisory proposal have earned, on average, about a third of their targeted pay. I would argue that our leadership team has done an extraordinary job of preserving value for Chesapeake and all of its stakeholders, build a foundation that will create significant incremental value from this day on, indeed has had their pay highly correlated with performance and highly correlated with the shareholders' performance over that period of time.
This board feels very strongly that our compensation programs and our leadership team are right for Chesapeake Energy at this point in time. With that, I would like to invite Doug to share some thoughts about where Chesapeake is and where Chesapeake is going.
Thank you, Chairman. I'd like to say thank you again to all of our shareholders. I appreciate those that are in attendance here today. Thank you to our board, thank you also to our executive leadership, also to all the talented employees that we have in the company. It was almost exactly five years to the day that I accepted the position of Chief Executive Officer at Chesapeake Energy, I thought it might be important just to share real quickly and reiterate today why I accepted that position five years ago. What I saw in this company was outstanding assets, outstanding people, an opportunity to make significant financial improvements and significant operational improvements to drive what I believe a company that had the absolute best opportunity to be the finest E&P company in the U.S.
I believe that the characteristics, the quality of our people, the quality of our assets, and the right strategy would accomplish those things. What I did not anticipate and what I did not expect at that time was commodity prices would drop to unprecedented levels in the last few decades. The resulting impact to our company, to our employees, to our assets, and importantly, to our shareholders, has been quite significant. I look forward to sharing with you here in just a few moments about the progress that we've made, look forward also to any questions that the shareholders might have for us. Our forward-looking statement is common with some obligatory language to provide the necessary legal documentation for this information I'm going to share. There is some forward-looking information in here, and I'll make some comments about the future.
I want to reiterate to you the business strategies that we have as a company. These strategies were put in place essentially the day that I started at the company. They have been resilient through the commodity price cycle, and I believe that these four planks of our strategy today will serve the company and create the greatest value for our shareholders. Financial discipline being the first, making sure that every dollar we spend drives for the greatest value that we can capture. That includes capital efficiency. It also includes our cash cost management. Profitable and efficient growth from our captured resources, meaning the value that we see, our field development plans, and the investments we make will drive for the greatest value and most efficiently develop the assets to drive, again, the greatest shareholder value. Exploration is a key component of our strategy.
It is one because of the significantly reduced cash flow that we've not been able to invest in the way that we would like to over the past five years. I will tell you that we have within the company some of the finest explorationists, the finest geoscientists in the industry, some that compare like no other that I've ever seen before. I think that the technology available in the company, the innovation in the way that we drive for greater value in every investment we make, will yield better results for the company in the future as we look at the exploration opportunities that we're presently evaluating. Business development is a strategy where we continue to evolve our portfolio. We look for opportunities to monetize, accelerate value, whether it be through acquisitions or through divestitures. Business development will continue to be a key component in our strategy going forward.
Strategic goals or near-term priorities that fit within that strategy, we've highlighted here, and you've probably seen in a number of different presentations that we've provided. We have a target to reduce our total debt by another $2 billion-$3 billion in the next few years. This is a target that we believe is appropriate for the company, it's directionally putting us in a position to be at a net debt to EBITDA at a two times factor. That's what I believe, I think that many in the industry and many industry analysts, as well as our executive team, believe a very competitive position for us to be in. Keep in mind that when we started this journey, we had the greatest amount of debt of any of our peers, that's been a significant hurdle to overcome. Free cash flow neutrality is the second near-term strategic priority.
I'm going to share a little bit more about that in just a moment. It's not just free cash flow neutrality, though. It's how do we generate positive free cash flow. Positive free cash flow that will generate value for you, our shareholders. Margin enhancement is the third, and it's something that we've been actively pursuing over the past few years and driven considerable value and actually industry-leading positions around what we can control. These strategic goals we're making progress on. I look forward to sharing more information with you as we continue in 2018 to make progress on these goals. I want to step back for just a second and remind everyone of the obvious. Forgive me for just one moment to step back.
As I highlighted up front when I started this presentation, what we didn't fully anticipate and expect was the radical drop in oil and gas prices that we experienced. Just as everyone knows, we saw a significant decrease in price a year into this journey and into our transformation. The reason why I highlight it, and I think it's important, is that it represents a key challenge that we had to address aggressively and actually viciously to protect and preserve this company's equity. We did not push an easy button. We never stopped fighting. What my commitment to the shareholders today is that we will continue to fight and we will not stop fighting to drive the greatest value independent of price. I've always maintained a very strict philosophy in the management positions I've held in the past that we will not run a company based on commodity price.
We will run our company based on how we can drive, with every single incremental dollar that we spend, the most value to drive it to our shareholders. These prices have been quite a challenge. Couple that with a few things here highlighted that were quite difficult for us to overcome. Some of the highest debt in the industry. Challenging legacy transportation costs that were in the $billions and $billions and $billions. Poor capital efficiency. Some of the worst capital efficiency metrics in the industry. High cash costs, extreme governance challenges, as well as poor EH&S performance.
Just to share with you, over the past five years, our focus during this low commodity price environment has yielded outstanding results and has positioned the company to benefit materially in the future in what I consider to be a disproportionate opportunity for value compared to our competitors and for our shareholders. Over the past five years, we've reduced about 50% of our total leverage, a significant accomplishment while prices have been cut in half. During that time, we've reduced about 50% of those $billions and $billions of midstream obligations and other corporate commitments. During that time, we've reduced our capital spend by 83%, essentially today spending a fraction of the capital spent five years ago, six years ago, to deliver the same production volume. Today, Chesapeake is recognized and known as an industry leader in cash costs.
Cash costs being how we operate our assets in the field, cash costs being what we employ for G&A expenses here in our office, and how we run our business. The strength of our board has been a very strong attribute and a key strength to the company. For those of you that are not aware, there are a number of different companies and organizations that evaluate the effectiveness and the strength of a board each year. We have seen over the past several years continued recognition for Chesapeake Energy 's board. I'm extremely pleased to say that one of those agencies, or one of those services, James Drury Partners, has recognized our board in the top 2% of Fortune 500 companies in the last several years.
This speaks to the leadership, the quality, the experience, and the expertise that each of our board members has, I'm so pleased that the shareholders have continued to support and vote for the election of our board because their service to us is vital. Just as I'm standing here talking to you today, their support and guidance and advice is key and instrumental to the future of the company. Today, we are recognized as one of the best EH&S companies in the industry. We've recognized significant improvements in the way that we operate our assets, the way we protect our employees, the way we protect our environment, and our regulatory compliance in all the areas in which we operate.
This slide is perhaps one of the most important slides and one that I'm so very, very proud of when you think about the environmental health and safety performance of Chesapeake Energy today. You look at our protecting the environment. The progress that we've seen each year, reducing spills, protecting the environment, focusing on making sure that in every single asset that we operate, that we have the right mindset, we have the right appreciation, and the right respect for the environment, that we protect all the areas in which we operate. Protecting our employees, protecting our contractors. You can see the material progress that's been made over the past few years, setting a record for the company of a total recordable incident rate of 0.05 in 2017. This so far exceeds industry averages recognized by any organization. This is an outstanding accomplishment. It's something we're very proud of.
It's a part of our culture today, that we will protect our employees, we will protect the environment. It is a given. Along that is regulatory compliance. When I started at the company, we had the most egregious record of regulatory infractions and violations of any organization by a factor of multiple. Today, we are recognized as a partner of choice in every single area that we operate, whether it be state, local governments, communities, trade groups negotiations, any sort of organization that is mindful of the environment and mindful of our operating practices, the agreement that we recognize today by a few of these shareholder proposals, our commitment to the environment, our commitment to improving our environment could not be stronger. Just talking just briefly about some of our past performance, just want to highlight for you a few slides.
On the right, we have a graph showing from the first quarter of 2017 to the first quarter of 2018. We're very pleased about that. As I noted, we are not running our company based on higher prices. If you look at the graph or the two bars on the left showing revenue per barrel oil equivalent, you can see that we recognize approximately 13% improvement on the revenue generated on every barrel that we produce. Importantly, the earnings actually that we generate from that each barrel that we produce on the bars on the right show that earnings increased 33%. Why is that important? What that means is that the improvements in this company, the margin enhancement, is not dependent upon price.
We are recognizing material cash cost improvements, productivity enhancements that are driving greater value to every barrel that we produce. This is something we're very focused on. It's one of our key strategies around our financial discipline and around the margin enhancement. Our teams are challenged and incentivized to drive for greater margin because that is what drives shareholder value. This is a slide that we're very pleased to show. I apologize if it's a little bit small. I'll explain it in detail. Return on capital has emerged in the past few years as a very popular metric by the investment community. Comments such as, why are oil and gas companies not focused on return on capital? What I can tell you is that Chesapeake Energy has been focused on return on capital since day one that I got here. That is not a new revelation.
We have not developed a new science or new religion around return on capital. This company is wholly focused on return on capital, on all of our bonus metrics, all of our incentive metrics. It is something that we have always paid attention to. Importantly, when you think about how prices have collapsed and how we can continue to drive value to our shareholders and how we can protect the value of the company, without that focus on return on capital, we would not have been able to do that. Looking at this graph real quickly, the blue bars represent a weighted average revenue per barrel oil equivalent. You can see that in 2012, 2013 and 2014, those blue bars were increasing. That was a result of the higher prices.
As we saw in 2015 and 2016, that price collapse, correspondingly, you saw a significant decrease in that weighted average revenue per barrel oil equivalent. Here in 2017 and 2018, it's begun to start to increase again as we've recognized some higher oil prices, not natural gas prices to the same degree. The green line shows our operating cash flow over our net debt plus our equity. This is an important metric because it demonstrates the improvements that we're making over our capital structure, hence the return on capital. You can see that in 2012, 2013 and 2014, we made radical improvements. That was before the price downturn. Radical improvements to that metric of operating cash flow over our net debt to equity. Again, correspondingly, we saw that decrease significantly with the reduction in oil and gas prices.
Very importantly, the rate of change in our return on capital and proof that our program is working and that future value will continue to be driven to our shareholders is that the rate of change between 2017 and 2018, the green line, is greater than the blue bar. There's differential returns being driven over our capital structure, and you can expect, with our focus on return on capital, that to continue in the future. We've made the comment in a few recent earnings calls and other investor presentations that all the improvements in the debt reduction, the obligations and commitments around other contracts that the company has, all those improvements that we've made, the proceeds from asset sales, have gone towards fixing the balance sheet and reducing the complexity of the company and paying obligations from legacy related issues.
Today, essentially, all of those legacy obligations, with exception of the debt service that we need to continue to focus on, have been cleaned up. It is now, this is the best time to own Chesapeake Energy because all of the outstanding work done by our employees on our assets will drive towards the greater value to our shareholders and will accrue to the common shareholder. Importantly, on our free cash flow neutrality, this is a slide that we love to share, showing the green bars represent the negative free cash flow or the actual over expenditures of the company over the last few years. The blue bars represent when we include asset sales, how that free cash flow number changed. Importantly, in 2012, the company had an overspend of $11 billion. A similar very high overspend in 2013.
We actually had to put a dotted line on there because if we were to show it true to scale, that would be all the way down to the floor. You can see that 2013, we made a few asset sales, as well as 2014. That significant asset sale to Southern Marcellus in 2014 to try to help offset some of those expenses. Other asset sales have taken place, and you can see that outspend is continuing to be reduced every single year. Our focus now as we look at 2018, we will be free cash flow positive for the year. All the work that we're doing going forward with the debt obligation in the current commodity price environment, is doing our very best that we are not in a position to have a negative free cash flow in the future.
Negative free cash flow itself does not mean that we're not driving for the greatest value. It's important to note that. We could have negative free cash flow in the future, but it will be driving for greater returns around disciplined investments and profitable investments, not fulfilling obligations from legacy related issues. Just real quickly about our asset base. Chesapeake Energy still today has a world-class gas asset base. I think that we have some of the very best gas assets in the world. Notably in the Marcellus, is just an outstanding asset. In Pennsylvania, the Utica, in Ohio, and then the Haynesville down in Louisiana. Each of these assets have outstanding economics in the current pricing environment. Each asset at $2.75 gas can generate returns in the 30%-40% range or greater.
We continue to invest in gas, but we are not looking at trying to increase our natural gas production, especially in 2018, as we still recognize a lower commodity price in the near term. We're excited about our oil opportunities. Today the company is producing more than 90,000 barrels of crude oil. We continue to look for, particularly around a margin enhancement, is oil to being a very key part of our strategy going forward. The Eagle Ford down in South Texas continues to be a very strong source of EBITDA and growth for the company. We're very excited about what's taking place in the Powder River Basin in Wyoming. A new emerging play that we see as an oil growth engine for the company.
Very encouraging results there that we look forward to sharing more with you. Really the principal oil driving earnings growth engine that we see in the future is from the Powder River. Then in the Mid-Continent here in Oklahoma, we still have about a million acres of stacked opportunities that we continue to explore and exploit. We're excited about that opportunity because with our talented geoscience staff, we believe that there are plays that we could pursue there to generate differential value for our shareholders going forward, and we look forward to sharing more with you about those opportunities in the future. I believe that Chesapeake is the unconventional leader.
The capital efficiency that we've driven into our program, our operational excellence, the portfolio depth, the portfolio diversity that we have, not only in product but also in the geographic areas, allow us to optimize each investment depending on current market conditions. The technology, the use of technology, and how that's helped us advance and learn. There's not a company that's drilled more horizontal wells, pumped more stages, or has more experience and expertise than Chesapeake in the unconventional world. Couple that with the EH&S excellence track record, and that which we'll continue to pursue, protecting our employees and protecting the environment, is what gives me the confidence that the same things that I came for five years ago to this great company, I believe in today.
I believe with your continued support and with the strategy that we have before us, the continued leadership and support of our board, that this company has an outstanding future, one in which that I'm excited about. I hope you share that same enthusiasm and excitement. Just finishing, just to highlight again what we're trying to accomplish here in the near term. Further reducing our leverage is key to the company and our balance sheet, positioning us for continued improvement on our balance sheet and better shareholder returns, enhancing our margins and our cash flow, focusing on capital discipline and our EH&S excellence. That concludes my presentation. I think we'll now go to questions. We're happy to take questions from the audience at this time.
Thank you, Doug. There's three ways that you can ask your questions today. The first is a comment card that you received like this. If you can fill that out, give us your contact information, and I'd ask that you let us know the best way to get in touch with you, and we'll answer those questions very promptly. The second way is the expo that you probably walked through on your way down this morning. Up on the first floor, the ground floor, we have outstanding representatives from across the company, different disciplines that are there to answer any questions that you have. If they don't know the answer, they'll find out who does and also get back with you. The third way is to ask them live here in the room today.
To do that, I'd ask you to look back at the rules of conduct. You will have two minutes to ask your question. You'll have a timer down on the bottom right of the screen. What I'd ask you to do is raise your hand. I'll call on you, and you can move to one of the aisles. We'll get you a microphone, and like you heard done previously, ask that you identify yourself as either a shareholder or having a proxy for a shareholder. With that, we'll take your questions.
My name is Ralph Seitzer, and I'm a shareholder of record. I was wondering if you could disclose how much more emphasis are you placing on oil and NGLs versus the gas, which you have traditionally found at this company?
Yes. Thank you, sir. That's a very good question. With the strength of our gas assets, we have a very rich, prolific inventory of natural gas that we can invest in. We are very focused and have a disproportionate amount of our capital directed towards oil assets today. The reason for that is the margin that we generate off of the oil is far greater than natural gas today. We have so much flexibility in our portfolio and portfolio strength that we could optimize that capital allocation year to year. What we know is that our production stream is 75%, or approximately 75%, natural gas. We have a disproportionate weighting and a disproportionate amount of risk associated with that particular commodity. We want to try to improve that balance.
We haven't set a particular target of the product mix, but we want to be in a position where we increase our margins on a barrel oil equivalent basis, which oil will help us do. We also want to be in a position that we have greater flexibility around our capital allocation. If we're relying principally on natural gas, that limits the amount of revenue that we generate to continue to invest in these high-quality assets. We'll continue to direct the majority of our capital towards oil and continue to look to expand the quality assets that we have with those oil investments.
Do we have a question down here? Yes, sir. Mike Sonsoy.
Hey, Mike Sonsoy here from Catoosa, Oklahoma. I'm a long-term investor. My question is, I've observed the stock of Chesapeake bouncing up and down between $3 and $4 for I don't know how many years, but it's a very volatile stock. Recently, I noticed a similar situation with another stock that was a Bakken player named Whiting Petroleum. Whiting Petroleum did a reverse stock, and they went from $6 to $49, and the stock stabilized and increased in value. Why hasn't Chesapeake considered a reverse stock to stop this manipulation by the hedge funds guys and the short people? It seems to me like if you got more price behind your stock, then you would have more interest in investors.
That's an excellent question, and I thank you for your long-term support of the company. I look forward to seeing you every year, and I think your questions are always very pertinent and relevant. What I'll tell you that there is not a board or a management team more dissatisfied with a $3 to $4 stock price, given the quality of our assets and the improvements that we've recognized over the past few years. Interestingly, if you look back two years ago when oil was more than half what it is today, and gas prices lower than they are today. At that time, we had roughly $3 billion of debt still on our balance sheet that's gone today. We had cash costs of approaching almost $1 billion more of annual expense than what we have today. Why are we still in that $3 range?
All the improvements to the company, all the things that we've been working on have not been fully recognized in the stock price. We know that. We're very focused on it. A reverse stock split is something that has been discussed. We'll continue to discuss any and all opportunities to enhance greater shareholder value. Keep in mind, the reverse stock split is just a mathematical exercise. It doesn't drive for value. It's not a value recognition component. We are very mindful of it, though. We know that that is a potential consideration that we might consider, that the board might consider at a given point in time. Whiting Petroleum has done very well. It's essentially a single-basin stock or company. They've also participated very strongly with the correlation with oil prices increasing in the past few months.
What's important to me and what's important to the company and Chesapeake today is that we're doing all the right things. The underlying strength of the company, the focus on return on capital, and all of the components that go into return on capital, whether it be the balance sheet and the debt, whether it be our cash costs, our capital efficiency, the oil growth margins that we can generate, all will lead to a higher share price. It's just a matter of time, sir. We will consider, I assure you, we will consider and evaluate all those different options.
He had 10 bedrooms.
It is an interesting possibility.
if you're living on the beach in Hawaii, you're going to have visitors.
What we are focused on is what drives the business. That is an exercise or a method to increase the stock price, but it's not necessarily a reflection of value.
Even then, I think I'd have more than enough.
Everything we can do to position this company to compete more strongly with our capital allocation, with our further debt reduction, our margin enhancement targets, we are doing and will continue to do.
Yes, ma'am.
Hi, Julie Skye with the UUA. On a recent flight, I sat next to a gentleman that was one of three men that was working in the U.S. to develop and roll out Shell's wind farm division. When I'm thinking about your stranded asset risk, are you looking at anything really wacky and crazy, like seeing how to diversify among renewables with some of the assets that you have that are potentially strandable?
Thank you for your question. At this point in time, we are concentrated on our core business, which is exploration and production. We recognize the role that renewables will play in the energy stack in the future, the increasing role that they will play. We also know with our resources, whether it be oil assets or natural gas assets, that we have a tremendous portfolio that is underdeveloped and has tremendous opportunity for future investment. What's been most important to us in the past several years is that we focus on our key business and drive the greatest profitability. Some of you may not be aware, when I started with the company, we had active ownership interest or participation in over 30 different businesses. All those different businesses provided significant distraction of how we drive the greatest value from our core E&P business, and that's what we're focused on today.
Thank you for your question.
Behind you.
Peter Miceli, a shareholder. I walk with a cane, and this is a comment more than a question. Everybody has been most helpful, and thank you very much for the assistance you've given me.
Thanks, sir. This is a company of great people. We're here to serve.
I'm wondering what happened to compressed natural gas. I know Chesapeake Energy has half ton trucks or quarter ton trucks running around with signs on them about compressed natural gas. Is Chesapeake Energy able to do anything to get the 18 wheelers on the highway on natural gas, or the buses or anything like this? Do you think it's important?
Yes, sir. I think it's very important. I think it's important from a carbon footprint and emissions reduction. The clean burning nature of the natural gas is something that we have the opportunity to provide more natural gas to that transportation market. What's different today than in the past is we're not promoting or we're not on the promotion side. We generate the fuel, and we will continue to generate the fuel the most efficient way. We're strong proponents. It doesn't change the use of compressed natural gas or for LNG supported vehicles, ships, other ways to use natural gas as a clean burning fuel. Being on the promotional side of how it's used is not our core expertise. Our core expertise is developing the hydrocarbons in the most efficient, profitable way. We're highly supportive of it.
We believe there's significant opportunity there for transportation, as well as additional opportunity for power generation conversion in this country, as well as across the globe. At this point in time, we are not on the promotional side of it. We're driving the greatest value with our E&P business providing that fuel. Thank you for your question.
Question up in the back here, Chris.
My name is Gary. I'm from Hong Kong. I fly 30 hours for here for the shareholder meeting.
Wow.
Yeah. I bought the Chesapeake last year at $5. For the past of the year, I read everything what Doug says in the presentation and in the lot of the investment security firms presentation. I appreciate you, what you did for the company. He delivers what he said in the past year. Company become greater and become stronger now. I'm very sad that they do not approve their salary package incentive. I hope you do not lose faith in doing this company become stronger and better. I thank you for your work for Chesapeake, and I'm very proud to be a shareholder now. Okay.
Thank you.
No more question because you answer all my question in the presentation. I'm glad to hear it. Yeah. Thank you.
Thank you very much.
Back down here.
Got another question.
Sure.
Okay. I recently read about a transaction that occurred at the end of last month, April. Mr. Jerry Jones, owner of the Dallas Cowboys, has apparently about 10,500 barrels of production in the Bakken. He elected to trade that oil production to a small company in East Texas for outstanding shares in their company. Essentially, he is going opposite from what your Chesapeake Energy strategy is. He's trading oil for natural gas. Why is that? What does he know that I don't know? Is it because of the margins of the new completions in the Haynesville Shale that is making it attractive for him? Or what's your opinion? I noticed that you didn't have Chesapeake Energy ranked the Haynesville Shale as a current investment strategy. Could you elaborate on that as to what you think the outlook for the Haynesville Shale that Chesapeake Energy has?
Certainly. It's a great question. I'll say Jerry Jones is a very smart man. I cannot comment as exactly why he would have made that transaction. I apologize. On our slide, what we represented as the Gulf Coast is the Haynesville asset. We have a very strong focus on the Haynesville. The Haynesville is a key asset towards providing natural gas to the new liquefaction facilities that are being built to put gas on the water to meet global needs. We have recognized in the past year or two significant productivity and completion improvements in the Haynesville that make it a very competitive investment inside of our portfolio. We see the opportunity to generate 40% rate of returns at $2.75 gas, our current gas prices. It is an area that we really like and we will continue to invest in.
When you think about the Haynesville versus our other assets, as I noted, the Marcellus and the Utica, also very strong gas assets. The beauty of Chesapeake today, and when I came to the company, I still believe it, is we have an outstanding portfolio of oil and gas assets. Our desire to increase our oil production gives us greater stability during these commodity price fluctuations. It gives us greater margins on a barrel equivalent basis. We'll continue to invest in the Haynesville. We like it very much. I think that perhaps the move that Mr. Jones made is a longer-term investment, that there'll be structural improvements to gas prices. LNG continues to be built out along the Gulf Coast, providing gas to those global markets.
I also know that the strong improvements in the fundamentals around oil prices, he might be regretting that move today, as oil has definitely seen an increase that gas hasn't. The beauty of it is, though, is that, again, sir, I'll remind you, we're not running this company based on price. We're running it based on value. The underlying things that we're working on and focused on, if gas prices help us, if oil prices help us, that's just more opportunity for this company to add more value back to you. Otherwise, the things we're focused on, return on capital and the investments we make, that's how we're going to drive the value for our shareholders.
Well, thank you for the excellent questions. That concludes the live Q&A that we're going to do. Remember, we have the comment cards. I'd encourage you to use those and then speak to our employees up in the expo. Mr. Chairman?
It is always a delight to come to a Chesapeake annual shareholders meeting because the questions are owner-oriented, insightful. We learn. The quality engagement's just extraordinary. That's not the case at every public company in America. I would just like to say, on behalf of the board of directors and the management team, to our shareholders who came today, and those of you who asked these terrific owner-oriented questions, how much we appreciate your engagement. All business that was to come before the meeting has been conducted. With that, I would entertain a motion to adjourn. I heard one, and there's a second, and all in favor, aye. The meeting is adjourned. Thank you very much.