Chesapeake Energy 2012 Annual Report Download - page 182

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
172
21. Subsequent Events
In December 2012, Chesapeake announced that it had offered a voluntary separation program (VSP) to certain
employees as part of the Company's ongoing efforts to improve efficiencies and reduce costs. The VSP was offered
to approximately 275 employees who met criteria based upon a combination of age and years of Chesapeake service.
Employees had until February 7, 2013 to respond to the offer. Prior to December 31, 2012, 14 employees accepted
the offer and we recorded $2 million in charges related to their termination. Subsequent to December 31, 2012, 197
employees accepted the offer and we expect to record approximately $62 million of charges in 2013 related to their
termination.
On January 23, 2013, Methanex Corporation and Chesapeake announced the execution of a 10-year agreement
to supply all of the natural gas required for Methanex's one million tonne per year methanol plant in Geismar, Louisiana.
Commencement of natural gas deliveries will coincide with the startup of the plant, which is expected by the end of
2014. The agreement is structured so that the natural gas price is linked to the methanol price; however, Chesapeake
will never receive less than $4.00 per mmbtu for the natural gas it delivers to the plant regardless of methanol prices.
On January 29, 2013, we announced that Aubrey K. McClendon, our President, Chief Executive Officer (CEO)
and a director, agreed to retire from the Company. Mr. McClendon will continue to serve as President, CEO and a
director until the earlier of April 1, 2013 or the time at which his successor is appointed. Mr. McClendon's departure
from the Company will be treated as a termination without cause under his employment agreement.
Also on January 29, 2013, the Compensation Committee of our Board of Directors approved retention awards
for 14 of the Company's senior management team in the form of time-vested stock options to purchase an aggregate
of 2.560 million shares of common stock. These awards, ranging from 150,000 to 360,000 stock options, have an
exercise price equal to the closing price of the Company's common stock on the grant date, and vest one-third on each
of the third, fourth and fifth anniversaries of the grant date. The options are subject to accelerated vesting if the executive
is terminated (other than for cause) during the vesting period; however, no accelerated vesting will occur if the executive
retires or voluntarily resigns prior to vesting.
On February 25, 2013 Chesapeake Energy Corporation and Sinopec International Petroleum Exploration and
Production Corporation (Sinopec) announced the execution of an agreement which provides for Sinopec to purchase
a 50% undivided interest in 850,000 of our net oil and natural gas leasehold acres in the Mississippi Lime play in
northern Oklahoma (425,000 acres net to Sinopec). The total consideration for the transaction will be $1.02 billion in
cash, of which approximately 93% will be received upon closing. Payment of the remaining proceeds will be subject
to certain customary title contingencies. Production from these assets (including Mississippi Lime and other formations),
net to our interest and prior to Sinopec's purchase, averaged approximately 34 thousand barrels of oil equivalent per
day in the 2012 fourth quarter and, as of December 31, 2012, there was approximately 140 million barrels of oil
equivalent of net proved reserves associated with the assets. All future exploration and development costs in the joint
venture will be shared proportionately between the parties with no drilling carries involved. As the operator of the
project, we will conduct all leasing, drilling, completion, operations and marketing activities for the joint venture. The
transaction is anticipated to be completed in the 2013 second quarter.