Chesapeake Energy 2012 Annual Report Download - page 35

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Natural Gas Liquids (NGL). Those hydrocarbons in natural gas that are separated from the gas as liquids through
the process of absorption, condensation, adsorption or other methods in gas processing or cycling plants. Natural gas
liquids primarily include ethane, propane, butane, isobutene, pentane, hexane and natural gasoline.
Net Acres or Net Wells. The sum of the fractional working interests owned in gross acres or gross wells.
NYMEX. New York Mercantile Exchange.
Play. A term applied to a portion of the exploration and production cycle following the identification by geologists
and geophysicists of areas with potential natural gas, oil and NGL reserves.
Present Value or PV-10. When used with respect to natural gas, oil and NGL reserves, present value, or PV-10,
means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated
production and future development costs, using prices calculated as the average natural gas and oil price during the
preceding 12-month period prior to the end of the current reporting period, (determined as the unweighted arithmetic
average of prices on the first day of each month within the 12-month period) and costs in effect at the determination
date, without giving effect to non-property related expenses such as general and administrative expenses, debt service
and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount
rate of 10%.
Price Differential. The difference in the price of natural gas, oil or NGL received at the sales point and the New
York Mercantile Exchange (NYMEX).
Productive Well. A well that is not a dry well. Productive wells include producing wells and wells that are
mechanically capable of production.
Proved Developed Reserves. Proved reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared
to the cost of a new well.
Proved Properties. Properties with proved reserves.
Proved Reserves. Proved natural gas and oil reserves are those quantities of natural gas and oil, which, by
analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible
- from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and
government regulations - prior to the time at which contracts providing the right to operate expire, unless evidence
indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for
the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably
certain that it will commence the project within a reasonable time. The area of a reservoir considered as proved includes
(i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir
that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible natural
gas or oil on the basis of available geoscience and engineering data. In the absence of information on fluid contacts,
proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration
unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with
reasonable certainty. Where direct observation from well penetrations has defined a highest known oil (HKO) elevation
and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher
portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the
higher contact with reasonable certainty. Reserves that can be produced economically through application of improved
recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when (i)
successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir
as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using
reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program
was based and (ii) the project has been approved for development by all necessary parties and entities, including
governmental entities. Existing economic conditions include prices and costs at which economic producibility from a
reservoir is to be determined. The price is the average price during the 12-month period prior to the ending date of the
period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for
each month within such period, unless prices are defined by contractual arrangements, excluding escalations based
upon future conditions.
Proved Undeveloped Location. A site on which a development well can be drilled consistent with spacing rules
for purposes of recovering proved undeveloped reserves.