Chesapeake Energy 2013 Annual Report Download - page 18

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lease inventory and letting some leases expire that are no longer part of our development plans. The following table
sets forth as of December 31, 2013 the expiration periods of gross and net undeveloped leasehold acres.
Acres Expiring
Gross
Acres Net Acres
(in thousands)
Years Ending December 31:
2014 .............................................................................................................................. 3,335 2,219
2015 .............................................................................................................................. 2,149 1,288
2016 .............................................................................................................................. 1,845 1,203
After 2016 ..................................................................................................................... 5,331 2,820
Total(a) ..................................................................................................................... 12,660 7,530
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(a) Includes 2.189 million gross (1.132 million net) held-by-production acres that will remain in force as our production
continues on the subject leases, and other leasehold acreage where management anticipates the lease to remain
in effect past the primary term of the agreement due to our contractual option to extend the lease term.
Marketing, Gathering and Compression
Marketing
Chesapeake Energy Marketing, Inc., one of our wholly owned subsidiaries, provides natural gas, oil and NGL
marketing services, including commodity price structuring, contract administration and nomination services for
Chesapeake, other interest owners in Chesapeake-operated wells and other producers. We attempt to enhance the
value of natural gas and oil production by aggregating volumes to be sold to various intermediary markets, end markets
and pipelines. This aggregation allows us to attract larger, more creditworthy customers that in turn assist in maximizing
the prices received.
Natural gas and oil production is generally sold under market-sensitive short-term or spot price contracts. Natural
gas and NGL production is sold to purchasers under percentage-of-proceeds contracts, percentage-of-index contracts
or spot price contracts. By the terms of the percentage-of-proceeds contracts, we receive a percentage of the resale
price received from the ultimate purchaser. Under percentage-of-index contracts, the price we receive is tied to published
indices. Although exact percentages vary daily, as of February 2014, approximately 80% of our natural gas production
was primarily sold under short-term contracts at market-sensitive prices. There were no sales to individual purchasers
constituting 10% or more of total revenues (before the effects of hedging) for the years ended December 31, 2013 and
2011. Sales to Plains Marketing, L.P. represented 11% of our total revenues (before the effects of hedging) for the year
ended December 31, 2012.
Our revenues and operating expenses from our marketing business increased substantially in 2013 compared
to 2012. In 2013, we marketed significantly more oil and NGL from both Chesapeake-operated wells and for third
parties while our marketing of natural gas was virtually unchanged. Due to the relative high prices of oil and NGL
compared to natural gas, our revenues and expenses increased substantially. In addition, we entered into a variety of
purchase and sales contracts with third parties for various commercial purposes including credit risk mitigation and to
help meet certain of our pipeline delivery commitments. These transactions also increased our marketing revenues
and operating expenses.
Midstream Gathering Operations
Historically, Chesapeake invested, directly and through affiliates, in gathering systems and processing facilities
to complement our natural gas operations in regions where we had significant production and additional infrastructure
was required. These systems were designed primarily to gather the Company's production for delivery into major
intrastate or interstate pipelines. In addition, our midstream business provided services to joint working interest owners
and other third-party customers. Chesapeake generated revenues from its gathering, treating and compression
activities through various gathering rate structures. The Company also processed a portion of its natural gas at various
third-party plants.