Chesapeake Energy 2010 Annual Report Download - page 62

Acreage
We actively acquire new leases, most of which have a three-to-five year term. Managing lease expirations
to ensure that we do not experience unintended material expirations is an important part of our business. Our
leasehold management efforts include scheduling our drilling to establish production in paying quantities in
order to hold leases by production, timely exercising our contractual rights to pay delay rentals to extend the
terms of leases we value, planning leasehold asset sales and industry participation transactions to high-grade
our lease inventory or to raise capital for additional development and letting some low-value leases expire. We
maintain a very large drilling program that is rigorously scheduled to lock in our acreage with the highest
prospective value. The fact that we control a substantial rig fleet and other service operations gives us a high
degree of confidence that we will be able to execute our drilling plans. We have determined that the amount of
undeveloped leasehold that we reasonably believe will be abandoned or allowed to expire at the end of the
lease term is immaterial to our operations.
The following table sets forth as of December 31, 2010 the gross and net leasehold acres of both
developed and undeveloped natural gas and oil leases which we hold. “Gross” acres are the total number of
acres in which we own a working interest. “Net” acres refer to gross acres multiplied by our fractional working
interest. Acreage numbers do not include our options to acquire additional acreage which have not been
exercised.
Developed Undeveloped Total
Gross
Acres
Net
Acres
Gross
Acres
Net
Acres
Gross
Acres
Net
Acres
(in thousands)
Mid-Continent ............... 4,469 2,252 2,720 1,627 7,189 3,879
Haynesville/Bossier Shale ..... 375 269 405 258 780 527
Barnett Shale ................ 235 132 166 85 401 217
Fayetteville Shale ............ 414 188 955 413 1,369 601
Permian and Delaware
Basins ................... 364 212 1,567 992 1,931 1,204
Marcellus Shale .............. 408 211 2,972 1,460 3,380 1,671
Eagle Ford Shale ............ 45 25 852 440 897 465
Rockies/Williston Basin ....... 41 19 1,456 832 1,497 851
Other ...................... 2,182 1,736 3,437 2,062 5,619 3,798
Total ................... 8,533 5,044 14,530 8,169 23,063 13,213
Marketing, Gathering and Compression
Marketing
Chesapeake Energy Marketing, Inc., one of our wholly owned subsidiaries, provides natural gas and oil
marketing services, including commodity price structuring, contract administration and nomination services for
Chesapeake, its partners and other producers. We attempt to enhance the value of our natural gas and oil
production by aggregating volumes to be sold to various intermediary markets, end markets and pipelines. This
aggregation allows us to attract larger, more creditworthy customers that in turn assist in maximizing the prices
received for our production.
Our oil production is generally sold under market sensitive or spot price contracts. The revenue we receive
from the sale of natural gas liquids is included in oil sales.
Our natural gas production is sold to purchasers under percentage-of-proceeds contracts,
percentage-of-index contracts or spot price contracts. By the terms of the percentage-of-proceeds contracts,
we receive a percentage of the resale price received by the purchaser after transportation and processing of
our natural gas. Under percentage-of-index contracts, the price per mmbtu we receive for our natural gas is
tied to indexes published in Inside FERC or Gas Daily. Although exact percentages vary daily, as of February
2011, approximately 80% of our natural gas production was sold under short-term contracts at market-sensitive
prices. No customer accounted for more than 10% of total revenues (excluding gains (losses) on derivatives) in
2010.
16