Chesapeake Energy 2013 Annual Report Download - page 162

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION – (Continued)
154
Results of Operations from Natural Gas, Oil and NGL Producing Activities
Chesapeake's results of operations from natural gas, oil and NGL producing activities are presented below for
2013, 2012 and 2011. The following table includes revenues and expenses associated directly with our natural gas,
oil and NGL producing activities. It does not include any interest costs or indirect general and administrative costs and,
therefore, is not necessarily indicative of the contribution to consolidated net operating results of our natural gas, oil
and NGL operations.
Years Ended December 31,
2013 2012 2011
($ in millions)
Natural gas, oil and NGL sales ................................................................ $ 7,052 $ 6,278 $ 6,024
Natural gas, oil and NGL production expenses ........................................ (1,159) (1,304) (1,073)
Production taxes ...................................................................................... (229) (188) (192)
Impairment of natural gas and oil properties ............................................ — (3,315) —
Depletion and depreciation ...................................................................... (2,589) (2,507) (1,632)
Imputed income tax provision(a) ...................................................................... (1,169) 404 (1,220)
Results of operations from natural gas, oil and NGL producing
activities ............................................................................................... $ 1,906 $ (632) $ 1,907
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(a) The imputed income tax provision is hypothetical (at the effective income tax rate) and determined without regard
to our deduction for general and administrative expenses, interest costs and other income tax credits and
deductions, nor whether the hypothetical tax provision (benefit) will be payable (receivable).
Natural Gas, Oil and NGL Reserve Quantities
Chesapeake's petroleum engineers and independent petroleum engineering firms estimated all of our proved
reserves as of December 31, 2013, 2012 and 2011. Independent petroleum engineering firms estimated an aggregate
of 81%, 89% and 77% of our estimated proved reserves (by volume) as of December 31, 2013, 2012 and 2011,
respectively, as set forth below.
December 31,
2013 2012 2011
Ryder Scott Company, L.P. ................................................................................................. 51% 44% 19%
PetroTechnical Services, Division of Schlumberger Technology Corporation ..................... 30% 24% 7%
Netherland, Sewell & Associates, Inc. ................................................................................ —% 21% 42%
Lee Keeling and Associates, Inc. ........................................................................................ —% —% 9%
Proved natural gas, oil and NGL reserves are those quantities of natural gas, oil and NGL which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a
given date forward, from known reservoirs, and under existing economic conditions, operating methods, and
government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence
indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for
the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir
is to be determined. Based on reserve reporting rules, the price is calculated using the average price during the 12-
month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic
average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual
arrangements, excluding escalations based upon future conditions. A project to extract hydrocarbons must have
commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
The area of the reservoir considered as proved includes: (i) the area identified by drilling and limited by fluid contacts,
if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous
with it and to contain economically producible natural gas or oil on the basis of available geoscience and engineering
data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known
hydrocarbons as seen in a well penetration unless geoscience, engineering or performance data and reliable technology
establish a lower contact with reasonable certainty. Where direct observation from well penetrations has defined a
highest known oil elevation and the potential exists for an associated natural gas cap, proved oil reserves may be