Chesapeake Energy 2013 Annual Report Download - page 52

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Uses of Funds
The following table presents the uses of our cash and cash equivalents for 2013, 2012 and 2011:
Years Ended December 31,
2013 2012 2011
($ in millions)
Natural Gas and Oil Expenditures:
Drilling and completion costs(a) .................................................................. $ (5,490) $ (8,707) $ (7,257)
Acquisitions of proved properties ............................................................... (22) (342) (48)
Acquisitions of unproved properties ........................................................... (280) (2,043) (4,296)
Geological and geophysical costs ............................................................. (33) (170) (192)
Interest capitalized on unproved properties ............................................... (811) (829) (648)
Total natural gas and oil expenditures................................................. (6,636) (12,091) (12,441)
Other Uses of Cash and Cash Equivalents:
Additions to other property and equipment(b) ............................................. (972) (2,651) (2,009)
Acquisition of drilling company .................................................................. — — (339)
Payments on credit facility borrowings, net................................................ (13) (1,332) (1,957)
Cash paid to purchase debt ....................................................................... (2,141) (4,000) (2,015)
Cash paid for prepayment of mortgage ..................................................... (55) — —
Dividends paid ........................................................................................... (404) (398) (379)
Cash paid to purchase preferred shares of subsidiary............................... (212) — —
Cash paid to extinguish other financing ..................................................... (141) — —
Distributions to noncontrolling interest owners .......................................... (215) (218) (9)
Cash paid for financing derivatives(c) ............................................................... (91) (37) —
Additions to investments ............................................................................ (44) (395) —
Other .......................................................................................................... (105) (474) (227)
Total other uses of cash and cash equivalents................................... (4,393) (9,505) (6,935)
Total uses of cash and cash equivalents......................................... $ (11,029) $ (21,596) $ (19,376)
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(a) Net of $884 million, $784 million and $2.570 billion in drilling and completion carries received from our joint venture
partners during 2013, 2012 and 2011, respectively.
(b) Includes approximately $240 million and $36 million (excluding lease termination costs) in 2013 and 2012,
respectively, to purchase rigs and compressors subject to sale leaseback agreements, lowering our future
operating lease commitments. See Notes 4 and 16 of the notes to our consolidated financial statements included
in Item 8 of this report for further discussion of these transactions.
(c) Reflects derivatives deemed to contain, for accounting purposes, a significant financing element at contract
inception.
Our primary use of funds is for capital expenditures related to exploration and development of natural gas and
oil properties. Historically, a significant use was also for the acquisition of leasehold and construction and acquisition
of other property and equipment. During 2012, our average operated rig count was 131 rigs as we were quickly ramping
up our liquids-focused drilling while gradually ramping down drilling of natural gas wells. During 2013, our average rig
count was 71 operated rigs, and as of February 20, 2014, our rig count was 63 operated rigs. Our 2013 drilling and
completion expenditures also reflected significant well completion costs for natural gas wells that had been drilled, but
not completed, in prior periods. These completions enabled us to hold by production the related leasehold according
to the terms of our leases.
Our unproved property leasehold acquisition costs were $280 million during 2013, a substantial decrease from
prior years. Through 2012, the Company invested heavily in unproved properties and now holds a substantial inventory
of resources that provides a foundation for future growth. We believe that focusing on profitable and efficient growth
from captured resources will allow us to deliver attractive profit margins and financial returns in the future through all
phases of the commodity price cycle.