Chesapeake Energy 2013 Annual Report Download - page 30

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as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using
reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program
was based and (ii) the project has been approved for development by all necessary parties and entities, including
governmental entities. Existing economic conditions include prices and costs at which economic producibility from a
reservoir is to be determined. The price is 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.
Proved Undeveloped Reserves (PUDs). Proved reserves that are expected to be recovered from new wells on
undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves
on undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of
production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of
economic producibility at greater distances. Undrilled locations can be classified as having proved undeveloped
reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years,
unless the specific circumstances justify a longer time. Estimates for proved undeveloped reserves are not attributed
to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless
such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by
other evidence using reliable technology establishing reasonable certainty.
Realized and Unrealized Gains and Losses on Natural Gas, Oil and NGL Derivatives. Realized gains and losses
includes the following items,( i) settlements of non-designated derivatives related to current period production revenues,
(ii) prior period settlements for option premiums and for early-terminated derivatives originally scheduled to settle
against current period production revenues, and (iii) gains and losses related to de-designated cash flow hedges
originally designated to settle against current period production revenues. Unrealized gains and losses include the
change in fair value of open derivatives scheduled to settle against future period production revenues offset by amounts
reclassified as realized gains and losses during the period. Although we no longer designate our derivatives as cash
flow hedges for accounting purposes, we believe these definitions are useful to management and investors in
determining the effectiveness of our price risk management program.
Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil
and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other
reservoirs.
Royalty Interest. An interest in a natural gas and oil property entitling the owner to a share of natural gas, oil or
NGL production free of costs of production.
Seismic. An exploration method of sending energy waves or sound waves into the earth and recording the wave
reflections to indicate the type, size, shape and depth of subsurface rock formation (3-D seismic provides three-
dimensional pictures).
Shale. Fine-grained sedimentary rock composed mostly of consolidated clay or mud. Shale is the most frequently
occurring sedimentary rock.
Standardized Measure of Discounted Future Net Cash Flows. The discounted future net cash flows relating to
proved reserves based on the prices used in estimating the proved reserves, year-end costs and statutory tax rates
(adjusted for permanent differences) and a 10% annual discount rate.
Tbtu. One trillion British thermal units.
Tcf. One trillion cubic feet.
Unconventional. Plays found within regional pervasive formations with low matrix permeability and close
association with hydrocarbon source rocks.
Undeveloped Acreage. Acreage on which wells have not been drilled or completed to a point that would permit
the production of economic quantities of natural gas and oil regardless of whether such acreage contains proved
reserves.
Unproved Properties. Properties with no proved reserves.