Chesapeake Energy 2012 Annual Report Download - page 44

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Our cash flow from operations, our revolving bank credit facilities and cash on hand historically have not been
sufficient to fund all of our expenditures, and we have relied on the capital markets and asset sales to provide us with
additional capital. Poor economic conditions may negatively affect:
• our ability to access the capital markets at a time when we would like, or need, to raise capital;
• the number of participants in our proposed asset sales transactions or the values we are able to realize in
those transactions, making them uneconomic or harder or impossible to consummate;
• the collectability of our trade receivables if our counterparties are unable to perform their obligations or seek
bankruptcy protection; or
• the ability of our joint venture partners to meet their obligations to fund a portion of our drilling costs under
our joint venture agreements.
Our operations may be adversely affected by oilfield services shortages, pipeline and gathering system
capacity constraints and various transportation interruptions.
From time to time, we experience delays in drilling and completing our natural gas and oil wells. In developing
plays, the demand for equipment such as pipe and compressors can exceed the supply, and it is challenging to attract
and retain qualified oilfield workers. Delays in developing our natural gas and oil assets for these and other reasons
could negatively affect our revenues and cash flow.
In certain natural gas and liquids-rich shale plays, the capacity of gathering systems and transportation pipelines
is insufficient to accommodate potential production from existing and new wells. We rely heavily on third parties to
meet our natural gas, oil and NGL gathering demand following the sale of substantially all of our midstream business
in 2012. Capital constraints could limit the construction of new pipelines and gathering systems by third parties, and
we may experience delays in building intrastate gathering systems necessary to transport our natural gas to interstate
pipelines. Until this new capacity is available, we may experience delays in producing and selling our natural gas, oil
and NGL. In such event, we might have to shut in our wells awaiting a pipeline connection or capacity and/or sell
natural gas, oil or NGL production at significantly lower prices than those quoted on NYMEX or than we currently
project, which would adversely affect our results of operations.
A portion of our natural gas, oil and NGL production in any region may be interrupted, or shut in, from time to time
for numerous reasons, including as a result of weather conditions, accidents, loss of pipeline or gathering system
access, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions, an
action we took in 2012. If a substantial amount of our production is interrupted at the same time, it could temporarily
adversely affect our cash flow.
There are significant costs associated with pending legal and governmental proceedings, and the ultimate
outcome of these matters is uncertain.
The Company and current and former directors and officers are the subject of a number of shareholder lawsuits,
and there are ongoing governmental and regulatory investigations and inquiries. The Company cannot predict the
outcome or impact of these pending matters, but the lawsuits could result in judgments against the Company and
directors and officers named as defendants and there could be one or more enforcement actions in respect of the
governmental investigations. For example, we could be exposed to enforcement or other actions with respect to the
continuing SEC investigation into certain disclosure, accounting and financial reporting matters. Our legal expenses
increased in 2012 compared to 2011 due primarily to defending the shareholder lawsuits, responding to governmental
investigations and inquiries, and conducting the Board's review of certain matters involving our Chief Executive Officer,
and such expenses in the future may be significant. In addition, attention to these matters by members of our senior
management has been required, reducing the time they have available to devote to managing the Company's business.
Cyber attacks targeting systems and infrastructure used by the oil and gas industry may adversely impact
our operations.
Our business has become increasingly dependent on digital technologies to conduct certain exploration,
development and production activities. We depend on digital technology to estimate quantities of natural gas, oil and
NGL reserves, process and record financial and operating data, analyze seismic and drilling information, and
communicate with our employees and third party partners. We have been the subject of cyber attacks on our internal
systems and through those of third parties, but these incidents did not have a material adverse impact on our results
of operations. Nevertheless, unauthorized access to our seismic data, reserves information or other proprietary or
commercially sensitive information could lead to data corruption, communication interruption, or other disruptions in