Chesapeake Energy 2012 Annual Report Download - page 161

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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and $3 million of long-term derivative liabilities were attributable to the Trust. We have presented parenthetically on
the face of the consolidated balance sheets the assets of the Trust that can be used only to settle obligations of the
Trust and the liabilities of the Trust for which creditors do not have recourse to the general credit of Chesapeake.
Unconsolidated VIE
Mineral Acquisition Company I, L.P. In 2012, MAC-LP, L.L.C., a wholly owned non-guarantor unrestricted
subsidiary of Chesapeake, entered into a partnership agreement with KKR Royalty Aggregator LLC (KKR) to form
Mineral Acquisition Company I, L.P. The purpose of the partnership is to acquire mineral interests, or royalty interests
carved out of mineral interests, in oil and natural gas basins in the continental United States. We are committed to
acquire for our own account (outside the partnership) 10% of any acquisition agreed upon by the partnership up to a
maximum of $25 million, and the partnership will acquire the remaining 90% up to a maximum of $225 million, funded
entirely by KKR, making KKR the sole equity investor. We have significant influence over the decisions made by the
partnership, as we hold two of five seats on the board of directors. We will receive proportionate distributions from the
partnership of any cash received from royalties in excess of expenses paid, ranging from 7% to 22.5%. The partnership
is considered a VIE because KKR’s control over the partnership is disproportionate to its economic interest. This VIE
remains unconsolidated as the power to direct the activities of the partnership is shared between the Company and
KKR. We are using the equity method to account for this investment.
14. Net Gains on Sales of Fixed Assets and Impairments of Fixed Assets and Other
Net Gains on Sales of Fixed Assets
For assets outside of our full cost pool, the costs of assets retired or otherwise disposed of and the applicable
accumulated depreciation are removed from accounts, and the resulting gain or loss is reflected in operating costs. A
summary of our gains or losses by asset class for the years ended December 31, 2012, 2011 and 2010 is as follows:
Years Ended December 31,
2012 2011 2010
($ in millions)
Gathering systems and treating plants ..................................... $ 286 $ 440 $ 139
Drilling rigs and equipment ....................................................... (10) (1) (1)
Buildings and land .................................................................... (7) (2) (3)
Other ........................................................................................ (2) — 2
Total net gains on sales .................................................. $ 267 $ 437 $ 137
The net gains on sales of gathering systems and treating plants were primarily from the sale of our midstream
subsidiary CMO to ACMP in 2012, the sale of our midstream subsidiary AMS to ACMP in 2011 and the sale of our
Springridge gas gathering system to ACMP in 2010. See Note 11 for further discussion of these transactions.