Chesapeake Energy 2013 Annual Report Download - page 35

27
would be required to post cash or letters of credit with the counterparties. Future collateral requirements are dependent
to a great extent on natural gas and oil prices.
Actions taken in furtherance of our strategic priorities are expected to cause us to recognize various
cash and noncash charges that could negatively impact our financial condition, future results of operations
or liquidity.
Certain actions that are intended to further our strategic priorities by reducing financial leverage and complexity
could negatively impact our future results of operations and/or liquidity. We expect to incur various cash and noncash
charges including but not limited to impairments of fixed assets, lease termination charges, financing extinguishment
costs and charges for unused transportation and gathering capacity.
The oil and gas exploration and production industry is very competitive, and some of our competitors
may have greater financial and other resources than we do.
We face competition in every aspect of our business, including, but not limited to, buying and selling reserves
and leases, obtaining goods and services needed to operate our business and marketing natural gas, oil or NGL.
Competitors include multinational oil companies, independent production companies and individual producers and
operators. Some of our competitors may have greater financial and other resources than we do. As a result, these
competitors may be able to address these competitive factors more effectively than we can or weather industry
downturns more easily than we can.
Our performance also depends largely on the talents and efforts of highly skilled individuals and on our ability to
attract new employees and to retain and motivate our existing employees. Competition in our industry for qualified
employees is intense. In 2013, the Company underwent significant transformational changes that are intended to
encourage standardization, efficiency and continuous improvement. Our future success is largely dependent on our
employees accomplishing these goals. If we are unsuccessful in doing so, our ability to compete effectively will be
diminished.
Natural gas and oil drilling and producing operations can be hazardous and may expose us to liabilities,
including environmental liabilities.
Natural gas and oil operations are subject to many risks, including well blowouts, cratering and explosions, pipe
failures, fires, formations with abnormal pressures, uncontrollable flows of natural gas, oil, brine or well fluids and other
environmental hazards and risks. Some of these risks or hazards could materially and adversely affect our revenues
and expenses by reducing or shutting in production from wells, loss of equipment or otherwise negatively impacting
the projected economic performance of our prospects. If any of these risks occurs, we could sustain substantial losses
as a result of:
• injury or loss of life;
• severe damage to or destruction of property, natural resources or equipment;
• pollution or other environmental damage;
• clean-up responsibilities;
• regulatory investigations and administrative, civil and criminal penalties; and
• injunctions resulting in limitation or suspension of operations.
There is inherent risk of incurring significant environmental costs and liabilities in our operations due to our use,
generation, handling and disposal of materials, including wastes, petroleum hydrocarbons and other chemicals. We
may incur joint and several, strict liability under applicable federal and state environmental laws in connection with
releases of petroleum hydrocarbons and other hazardous substances at, on, under or from our leased or owned
properties resulting from current or historical operations. In some cases our properties have been used for natural gas
and oil exploration and production activities for a number of years, often by third parties not under our control. We also
could incur material fines, penalties and government or third-party claims as a result of violations of, or liabilities under,
applicable environmental laws and regulations. For our non-operated properties, we are dependent on the operator
for operational and regulatory compliance. While we may maintain insurance against some, but not all, of the risks
described above, our insurance may not be adequate to cover casualty losses or liabilities, and our insurance does
not cover penalties or fines that may be assessed by a governmental authority. Also, in the future we may not be able
to obtain insurance at premium levels that justify its purchase.