Chesapeake Energy 2013 Annual Report Download - page 113

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
105
Accumulated Other Comprehensive Income (Loss)
For the year ended December 31, 2013, changes in accumulated other comprehensive income (loss) by
component, net of tax, are detailed below.
Net Gains
(Losses) on
Cash Flow
Hedges
Net Gains
(Losses)
on
Investments Total
($ in millions)
Balance, December 31, 2012 ............................................. $ (189) $ 7 $ (182)
Other comprehensive income before reclassifications... 2 (6) (4)
Amounts reclassified from accumulated other
comprehensive income ............................................... 20 4 24
Net current period other comprehensive income ..... 22 (2) 20
Balance, December 31, 2013 ............................................. $ (167) $ 5 $ (162)
For the year ended December 31, 2013, amounts reclassified from accumulated other comprehensive income
(loss), net of tax, into the consolidated statement of operations are detailed below.
Details About Accumulated
Other Comprehensive
Income (Loss) Components
Affected Line Item
in the Statement
Where Net Income is Presented
Year Ended
December 31,
2013
($ in millions)
Net losses on cash flow hedges:
Commodity contracts............................................. Natural gas, oil and NGL revenues $ 20
Investments:
Impairment of investment ...................................... Impairment of investment 6
Sale of investment................................................. Gain on sale of investment (2)
Total reclassifications for the period, net of tax.................................................................. $ 24
Noncontrolling Interests
Cleveland Tonkawa Financial Transaction. We formed CHK C-T in March 2012 to continue development of a
portion of our natural gas and oil assets in our Cleveland and Tonkawa plays. CHK C-T is an unrestricted subsidiary
under our corporate credit facility agreement and is not a guarantor of, or otherwise liable for, any of our indebtedness
or other liabilities, including indebtedness under our indentures. In exchange for all of the common shares of CHK C-
T, we contributed to CHK C-T approximately 245,000 net acres of leasehold and the existing wells within an area of
mutual interest in the plays between the top of the Tonkawa and the top of the Big Lime formations covering Ellis and
Roger Mills counties in western Oklahoma. In March 2012, in a private placement, third-party investors contributed
$1.25 billion in cash to CHK C-T in exchange for (i) 1.25 million preferred shares, and (ii) our obligation to deliver a
3.75% overriding royalty interest (ORRI) in the existing wells and up to 1,000 future net wells to be drilled on the
contributed play leasehold. Subject to customary minority interest protections afforded the investors by the terms of
the CHK C-T limited liability company agreement (the CHK C-T LLC Agreement), as the holder of all the common
shares and the sole managing member of CHK C-T, we maintain voting and managerial control of CHK C-T and
therefore include it in our consolidated financial statements. Of the $1.25 billion of investment proceeds, we allocated
$225 million to the ORRI obligation and $1.025 billion to the preferred shares based on estimates of fair values. The
remaining ORRI obligation is included in other current and long-term liabilities and the preferred shares are included
in noncontrolling interests on our consolidated balance sheets. Pursuant to the CHK C-T LLC Agreement, CHK C-T
is required to retain an amount of cash equal to the next two quarters of preferred dividend payments and, until
December 31, 2013, it was also required to retain an amount of cash equal to its projected operating funding shortfall
for the next six months. The amounts retained, approximately $38 million and $57 million as of December 31, 2013
and 2012, respectively, were reflected as restricted cash on our consolidated balance sheets.