Chesapeake Energy 2013 Annual Report Download - page 139

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Buildings and Land. In 2013, we determined we would sell certain of our buildings and land (other than our core
campus) in the Oklahoma City area. Some of these assets have been actively marketed and we believe it is probable
they will be sold over the next 12 months. As a result, these assets qualified as held for sale as of December 31, 2013.
We recognized an impairment loss of $186 million during 2013 on these assets for the difference between the carrying
amount and fair value of the assets, less the anticipated costs to sell. See Assets and Liabilities Held for Sale in Note
15. We measured the fair value of these assets based on prices from orderly sales transactions for comparable
properties between market participants, discounted cash flows or purchase offers we received from third parties.
Given the impairment losses associated with these assets, in 2013 we tested other noncore buildings and land
that we own in the Oklahoma City area for recoverability. Our estimate of the future undiscounted cash flows for these
assets was less than their carrying amounts, and we recognized an additional impairment loss of $69 million on these
assets for the difference between the carrying amount and fair value of the assets. We measured the fair value of these
assets based on prices from orderly sales transactions for comparable properties between market participants and,
in certain cases, discounted cash flows.
Due to a decrease in the estimated market prices of certain surface land classified as held for sale in the Fort
Worth, Texas area, we recognized an additional impairment loss of $86 million in 2013. We measured the fair value
of these assets based on recent prices from orderly sales transactions for comparable properties between market
participants. In addition, we tested other noncore surface land that we own in the Fort Worth area for recoverability in
2013 and recognized an additional impairment loss of $10 million on these assets for the difference between the
carrying amount and fair value of the assets. In 2012, we recognized $248 million of impairment losses associated
with an office building and surface land located in our Barnett Shale operating area. The change in business climate
in the Barnett Shale in 2012, evidenced by our significant reduction in Barnett Shale operations and depressed natural
gas prices, required us to test these long-lived assets for recoverability. We received a purchase offer from a third party
that we used to determine the fair value of the office building and measured the fair value of the surface land using
prices from orderly sales transactions for comparable properties between market participants.
Finally, we recorded an impairment loss of approximately $15 million on certain of our buildings and land outside
of the Oklahoma City and Fort Worth areas in 2013. All the buildings and land for which impairment losses were
recognized in 2013, 2012 and 2011 are included in our other segment.
Drilling Rigs and Equipment. In 2013, we negotiated the purchase of 23 leased rigs (two of which were classified
as held for sale assets as of December 31, 2013) from various lessors for an aggregate purchase price of $141 million
and paid approximately $22 million in early lease termination costs, which is included in impairments of fixed assets
and other in the consolidated statement of operations. In addition, we impaired approximately $22 million of leasehold
improvements and other costs associated with these transactions. See Note 4 for a description of the master lease
agreements. In addition, in 2013, we recognized $27 million of impairment losses on certain of our drilling rigs that
qualified as held for sale during 2013 for the difference between the carrying amount and fair value, less the anticipated
costs to sell. We estimated the fair value using prices expected to be received. In 2012, we negotiated the purchase
of 25 leased rigs from various lessors for an aggregate purchase price of $36 million and paid approximately $25 million
in early lease termination costs, which is included in impairments of fixed assets and other in the consolidated statement
of operations. In addition, in 2012, we recognized $26 million of impairment losses on certain of our drilling rigs that
we expected would have insufficient cash flow to recover carrying values because of a change in business climate
resulting from depressed natural gas prices. We estimated the fair value of the drilling rigs using prices expected to
be received from the sale of each rig in an orderly transaction between market participants. Also in 2012, we recognized
$9 million of impairment losses primarily related to drill pipe and other oilfield services equipment. The drilling rigs and
equipment are included in our oilfield services operating segment.
Gathering Systems. In 2013, 2012 and 2011, we recognized approximately $22 million, $6 million and $43 million,
respectively, of impairment losses on certain of our gathering systems classified as held for sale as of December 31,
2013 and 2012 based on decreases in the estimated fair value of these assets. We estimated the fair value of the
gathering systems using prices expected to be received from the sale of each gathering system in an orderly transaction
between market participants. These gathering systems are included in our marketing, gathering and compression
operating segment.