Chesapeake Energy 2012 Annual Report Download - page 143

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
133
Additional Disclosures Regarding Derivative Instruments and Hedging Activities
In accordance with accounting guidance for derivatives and hedging, to the extent that a legal right of set-off
exists, Chesapeake nets the value of its derivative arrangements with the same counterparty in the accompanying
consolidated balance sheets. Derivative instruments reflected as current in the consolidated balance sheets represent
the estimated fair value of derivatives scheduled to settle over the next twelve months based on market prices/rates
as of the respective balance sheet dates. The derivative settlement amounts are not due until the month in which the
related hedged transaction occurs. Cash settlements of our derivative instruments are generally classified as operating
cash flows unless the derivative is deemed to contain, for accounting purposes, a significant financing element at
contract inception, in which case these cash settlements are classified as financing cash flows in the accompanying
consolidated statements of cash flows.
The following table presents the fair value and location of each classification of derivative instrument disclosed
in the consolidated balance sheets as of December 31, 2012 and 2011 on a gross basis without regard to same-
counterparty netting:
Fair Value
December 31,
Balance Sheet Location 2012 2011
($ in millions)
Asset Derivatives:
Not designated as hedging instruments:
Commodity contracts........................... Short-term derivative instruments $ 110 $ 54
Commodity contracts........................... Long-term derivative instruments 5 1
Total 115 55
Liability Derivatives:
Designated as hedging instruments:
Foreign currency contracts .................. Long-term derivative instruments (20) (38)
Total ....................................................................................................... (20) (38)
Not designated as hedging instruments:
Commodity contracts........................... Short-term derivative instruments (157) (232)
Commodity contracts........................... Long-term derivative instruments (882) (1,462)
Interest rate contracts.......................... Long-term derivative instruments (35) (42)
Total ....................................................................................................... (1,074) (1,736)
Total derivative instruments............................................................... $ (979) $ (1,719)
A consolidated summary of the effect of derivative instruments on the consolidated statements of operations
for 2012, 2011 and 2010 is provided below, separating fair value, cash flow and undesignated derivatives.