Chesapeake Energy 2013 Annual Report Download - page 56

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Credit Risk
Derivative instruments that enable us to manage our exposure to natural gas, oil and NGL prices, interest rate
and foreign currency volatility expose us to credit risk from our counterparties. To mitigate this risk, we enter into
derivative contracts only with counterparties that are rated investment grade and deemed by management to be
competent and competitive market makers, and we attempt to limit our exposure to non-performance by any single
counterparty. As of December 31, 2013, our natural gas, oil and interest rate derivative instruments were spread among
16 counterparties. Additionally, the counterparties under our multi-counterparty secured hedging facility are required
to secure their obligations in excess of defined thresholds. We use this facility for substantially all of our natural gas,
oil and NGL derivatives.
Our accounts receivable are primarily from purchasers of natural gas, oil and NGL ($1.548 billion as of
December 31, 2013) and exploration and production companies that own interests in properties we operate ($478
million as of December 31, 2013). This industry concentration has the potential to impact our overall exposure to credit
risk, either positively or negatively, in that our customers and joint working interest owners may be similarly affected
by changes in economic, industry or other conditions. We generally require letters of credit or parent guarantees for
receivables from parties which are judged to have sub-standard credit, unless the credit risk can otherwise be mitigated.
During 2013, 2012 and 2011, we recognized nominal amounts of bad debt expense related to potentially uncollectible
receivables.
Contractual Obligations and Off-Balance Sheet Arrangements
From time to time, we enter into arrangements and transactions that can give rise to off-balance sheet obligations.
As of December 31, 2013, these arrangements and transactions included (i) operating lease agreements, (ii) VPPs
(to purchase production and pay related production expenses and taxes in the future), (iii) open purchase commitments,
(iv) open delivery commitments, (v) open drilling commitments, (vi) undrawn letters of credit, (vii) open gathering and
transportation commitments and (viii) various other commitments we enter into in the ordinary course of business that
could result in a future cash obligation.
The table below summarizes our contractual cash obligations for both recorded obligations and certain off-balance
sheet arrangements and commitments as of December 31, 2013.
Payments Due By Period
Total Less Than
1 Year 1-3 Years 3-5 Years More Than 5 Years
($ in millions)
Long-term debt:
Principal ............................................... $ 13,230 $ — $ 2,566 $ 5,414 $ 5,250
Interest................................................. 4,615 753 1,267 987 1,608
Operating lease obligations(a) ................... 375 118 191 65 1
Purchase obligations(b) .............................. 17,261 2,069 3,755 3,710 7,727
Unrecognized tax benefits(c) ..................... 323 6 — 317 —
Standby letters of credit ......................... 23 23 — — —
Deferred premium on call options .......... 268 83 185 — —
Other ...................................................... 93 15 28 16 34
Total contractual cash obligations(d) .... $ 36,188 $ 3,067 $ 7,992 $ 10,509 $ 14,620
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(a) See Note 4 of the notes to our consolidated financial statements included in Item 8 of this report for a description
of our operating lease obligations. Also, see Note 23 for a description of operating lease obligations reduced
subsequent to December 31, 2013.
(b) See Note 4 of the notes to our consolidated financial statements included in Item 8 of this report for a description
of gathering, processing and transportation agreements, drilling contracts and property and equipment purchase
commitments.