Chesapeake Energy 2012 Annual Report Download - page 102

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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We believe we have taken appropriate measures to mitigate the risks and uncertainties facing us in 2013.
Nevertheless, our ability to generate operating cash flow and close asset sales in order to manage debt is subject to
all the risks and uncertainties that exist in our industry, some of which we may not be able to anticipate at this time.
We do not have binding agreements for all of our planned asset sales and our ability to consummate each of these
transactions is subject to changes in market conditions and other factors beyond our control. If one or more of the
transactions is not completed in the anticipated time frame, or at all, or for less proceeds than anticipated, our ability
to fund budgeted capital expenditures and reduce our indebtedness could be adversely affected. Future impairments
of the carrying value of our natural gas and oil properties, if any, will be dependent on many factors, including natural
gas, oil and NGL prices, production rates, levels of reserves, the evaluation of costs excluded from amortization, the
timing and impact of asset sales, future development costs and service costs.
Cash and Cash Equivalents and Restricted Cash
For purposes of the consolidated financial statements, Chesapeake considers investments in all highly liquid
instruments with original maturities of three months or less at date of purchase to be cash equivalents. Restricted cash
consists of balances required to be maintained by the terms of the respective agreements governing the activities of
CHK Utica, L.L.C. (CHK Utica) and CHK Cleveland Tonkawa, L.L.C. (CHK C-T). For CHK Utica, we must retain a
minimum cash balance equal to two quarterly dividend payments. In addition, cash proceeds received from CHK Utica
asset sales must be used to fund CHK Utica's capital expenditures or to redeem its preferred shares. For CHK C-T,
we must retain an amount of cash (remeasured quarterly) equal to (i) the next two quarters of preferred dividend
payments plus (ii) the projected operating funding shortfall for the next six months. See Note 8 for further discussion
of these transactions.
Accounts Receivable
Our accounts receivable are primarily from purchasers of natural gas and oil and exploration and production
companies which own interests in properties we operate. This industry concentration has the potential to impact our
overall exposure to credit risk, either positively or negatively, in that our customers and joint working interest owners
may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all
our counterparties and we generally require letters of credit or parent guarantees for receivables from parties which
are judged to have sub-standard credit, unless the credit risk can otherwise be mitigated. We utilize an allowance
method in accounting for bad debt based on historical trends in addition to specifically identifying receivables we believe
will be uncollectible. During 2012, 2011 and 2010, we recognized nominal amounts of bad debt expense related to
potentially uncollectible receivables. Accounts receivable as of December 31, 2012 and 2011 are detailed below.
December 31,
2012 2011
($ in millions)
Natural gas, oil and NGL sales ....................................................................................... $ 1,457 $ 1,089
Joint interest ................................................................................................................... 592 1,171
Oilfield services .............................................................................................................. 24 43
Related parties(a) ....................................................................................................................... 23 45
Other .............................................................................................................................. 168 176
Allowance for doubtful accounts ..................................................................................... (19) (19)
Total accounts receivable ....................................................................................... $ 2,245 $ 2,505
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(a) See Note 6 for discussion of related party transactions.