Chesapeake Energy 2012 Annual Report Download - page 157

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
147
The volumes remaining to be delivered on behalf of our VPP buyers as of December 31, 2012 are as follows:
Volume Remaining as of December 31, 2012
VPP # Term Remaining Natural Gas Oil NGL Total
(in months) (bcf) (mmbbl) (mmbbl) (bcfe)
10 110 68 2.3 7.5 127
9 98 102 1.2 3.5 130
8 32 164 — — 164
6 85 26 0.2 — 27
5 49 24 0.1 — 25
4 48 35 0.2 — 36
379 39——39
276 31——31
1 120 120 — — 120
609 4.0 11.0 699
For accounting purposes, cash proceeds from the sale of VPPs were reflected as a reduction of natural gas and
oil properties with no gain or loss recognized, and our proved reserves were reduced accordingly.
In September 2012, to facilitate the sales process associated with our Permian Basin divestiture packages, we
purchased the remaining reserves from our Permian Basin VPP (VPP #7), originally sold in June 2010, for $313 million.
The reserves purchased totaled 28 bcfe and were subsequently sold to the buyers of our Permian Basin assets.
Midstream Divestitures
As of December 31, 2012, we had sold substantially all of our remaining midstream business as described below.
Chesapeake Midstream Operating. In December 2012, our wholly owned midstream subsidiary, CMD, sold its
wholly owned subsidiary, CMO, which held a majority of our midstream business, to ACMP, for total consideration of
$2.16 billion in cash, subject to post-closing adjustments. In connection with the sale, Chesapeake entered into new
long-term agreements in which ACMP agreed to perform certain natural gas gathering and related services for us
within specified acreage dedication areas in exchange for (i) cost-of-service based fees redetermined annually
beginning January 2014 in the Niobrara and Marcellus shale plays, (ii) cost-of-service based fees redetermined annually
beginning October 2013 for the wet gas gathering systems and January 2014 for the dry gas gathering systems in the
Utica Shale play, (iii) tiered fees based on volumes delivered relative to scheduled volumes through 2015 and thereafter
cost-of-service based fees redetermined annually in the Eagle Ford Shale play, and (iv) annual minimum volume
commitments and a fixed fee per mmbtu of natural gas gathered, subject to an annual 2.5% rate escalation, through
2017 and thereafter tiered fees based on volumes delivered relative to scheduled volumes in the Haynesville Shale
play. We recorded a $289 million pre-tax gain associated with this transaction.
Midstream Eagle Ford Oil Gathering Assets. In November 2012, we sold our oil gathering business and related
assets in the Eagle Ford Shale to Plains Pipeline, L.P. for cash proceeds of approximately $115 million. Subsequent
to December 31, 2012, we received an additional $10 million of proceeds upon satisfaction of a certain closing
contingency. We recorded a $7 million pre-tax loss associated with this transaction that will adjust to a $3 million pre-
tax gain with the receipt of the $10 million contingency payment in 2013. In connection with the sale, we entered into
new gathering and transportation agreements covering acreage dedication areas.