Chesapeake Energy 2013 Annual Report Download - page 124

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
116
swaps, on each semi-annual interest payment date, the counterparties pay us €11 million and we pay the counterparties
$17 million, which yields an annual dollar-equivalent interest rate of 7.491%. Upon maturity of the notes, the
counterparties will pay us €344 million and we will pay the counterparties $459 million. The terms of the cross currency
swaps were based on the dollar/euro exchange rate on the issuance date of $1.3325 to €1.00. Through the cross
currency swaps, we have eliminated any potential variability in our expected cash flows related to changes in foreign
exchange rates and therefore the swaps are designated as cash flow hedges. The fair values of the cross currency
swaps are recorded on the consolidated balance sheet as an asset of $2 million as of December 31, 2013. The euro-
denominated debt in long-term debt has been adjusted to $473 million as of December 31, 2013 using an exchange
rate of $1.3743 to €1.00.
Additional Disclosures Regarding Derivative Instruments and Hedging Activities
The following table presents the fair value and location of each classification of derivative instrument disclosed
in the consolidated balance sheets as of December 31, 2013 and 2012 on a gross basis without regard to same-
counterparty netting:
Fair Value
December 31,
Balance Sheet Location 2013 2012
($ in millions)
Asset Derivatives:
Designated as hedging instruments:
Foreign currency contracts............... Long-term derivative instruments $ 2 $ —
Total........................................... 2 —
Not designated as hedging instruments:
Commodity contracts.......................... Short-term derivative instruments 29 110
Commodity contracts.......................... Long-term derivative instruments 11 5
Total...................................................................................................... 40 115
Liability Derivatives:
Designated as hedging instruments:
Foreign currency contracts................. Long-term derivative instruments — (20)
Total...................................................................................................... — (20)
Not designated as hedging instruments:
Commodity contracts.......................... Short-term derivative instruments (231) (157)
Commodity contracts.......................... Long-term derivative instruments (362) (882)
Interest rate contracts......................... Short-term derivative instruments (6) —
Interest rate contracts......................... Long-term derivative instruments (92) (35)
Total...................................................................................................... (691) (1,074)
Total derivative instruments.............................................................. $ (649) $ (979)
As of December 31, 2013 and 2012, we did not have any cash collateral balances for these derivatives.