Chesapeake Energy 2013 Annual Report Download - page 137

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Gathering Systems and Treating Plants. In 2013, CMD sold its wholly owned midstream subsidiary, Mid-America
Midstream Gas Services, L.L.C. (MAMGS), to SemGas, L.P. (SemGas), a wholly owned subsidiary of SemGroup
Corporation, for net proceeds of approximately $306 million, subject to post-closing adjustments. We recorded a $141
million gain associated with this transaction. MAMGS owns certain gathering and processing assets located in the
Mississippi Lime play, and the transaction with SemGas included a new long-term fixed-fee gathering and processing
agreement covering acreage dedication areas in the Mississippi Lime play.
In 2013, CMD sold its wholly owned subsidiary, Granite Wash Midstream Gas Services, L.L.C. (GWMGS), to
MarkWest Oklahoma Gas Company, L.L.C., a wholly owned subsidiary of MarkWest Energy Partners, L.P.
(NYSE:MWE), for net proceeds of approximately $252 million, subject to post-closing adjustments. We recorded a
$105 million gain associated with this transaction. GWMGS owns certain midstream assets in the Anadarko Basin that
service the Granite Wash and Hogshooter formations. The transaction with MWE included new long-term fixed-fee
agreements for gas gathering, compression, treating and processing services.
In 2013, we sold our interest in certain gathering system assets in Pennsylvania to Western Gas Partners, LP
(NYSE:WES) for proceeds of approximately $134 million. We recorded a $55 million gain associated with this
transaction.
In 2012, CMD sold its wholly owned subsidiary, CMO, which held a majority of our midstream business, to ACMP
for total consideration of $2.16 billion in cash. In connection with the sale, Chesapeake entered into new long-term
agreements in which ACMP agreed to perform certain natural gas gathering and related services for us within specified
acreage dedication areas in exchange for (i) cost-of-service based fees redetermined annually beginning January 2014
in the Niobrara and Marcellus shale plays, (ii) cost-of-service based fees redetermined annually beginning October
2013 for the wet gas gathering systems and January 2014 for the dry gas gathering systems in the Utica Shale play,
(iii) tiered fees based on volumes delivered relative to scheduled volumes through 2015 and thereafter cost-of-service
based fees redetermined annually in the Eagle Ford Shale play, and (iv) annual minimum volume commitments and
a fixed fee per mmbtu of natural gas gathered, subject to an annual 2.5% rate escalation, through 2017 and thereafter
tiered fees based on volumes delivered relative to scheduled volumes in the Haynesville Shale play. We recorded a
$289 million gain associated with this transaction.
In 2012, we sold our oil gathering business and related assets in the Eagle Ford Shale to Plains Pipeline, L.P. for
cash proceeds of approximately $115 million. Subsequent to December 31, 2012, we received an additional $10 million
of proceeds upon satisfaction of a certain closing contingency. We recorded a $3 million gain associated with this
transaction. In connection with the sale, we entered into new gathering and transportation agreements covering acreage
dedication areas.
In 2011, CMD sold its wholly owned subsidiary, Appalachia Midstream Services, L.L.C. (AMS), which held
substantially all of our Marcellus Shale midstream assets, to ACMP for total consideration of $884 million and recorded
a gain of $439 million. We, and other producers in the area, have 15-year cost of service gathering and compression
agreements with AMS that include acreage dedications and an annual fee redetermination.
Buildings and Land. In 2013, we recorded net losses of $27 million on sales of buildings and land located primarily
in our Barnett Shale operating area.
Acquisition of Bronco Drilling
In June 2011, we acquired Bronco Drilling Company, Inc., a publicly traded contract land drilling services company,
for an aggregate purchase price of approximately $339 million, or $11.00 per share of Bronco common stock. The
acquisition was accounted for as a business combination which, among other things, requires assets acquired and
liabilities assumed to be measured at their acquisition date fair values.