Chesapeake Energy 2013 Annual Report Download - page 59

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Results of Operations
General. For the year ended December 31, 2013, Chesapeake had net income of $894 million, or $0.73 per
diluted common share, on total revenues of $17.506 billion. This compares to a net loss of $594 million, or $1.46 per
diluted common share, on total revenues of $12.316 billion during the year ended December 31, 2012 and net income
of $1.757 billion, or $2.32 per diluted common share, on total revenues of $11.635 billion during the year ended
December 31, 2011. The year ended December 31, 2013 includes charges of approximately $546 million for the
impairment of buildings, land, drilling rigs, gathering systems and other assets and $248 million related to restructuring
and other termination costs incurred in connection with a workforce reduction, executive officer separations and other
employee terminations. The charges reflect actions taken as a result of the company-wide review of our operations,
assets and organizational structure in the second half of 2013. Certain other actions we expect to take in the future to
further our strategic priorities of reducing financial leverage and complexity could negatively impact our future results
of operations and/or liquidity. Going forward, we expect to incur further cash and noncash charges, including but not
limited to impairments of fixed assets, lease termination charges, financing extinguishment costs and charges for
unused natural gas transportation and gathering capacity. The net loss in 2012 was primarily driven by a $2.022 billion
after-tax impairment of natural gas and oil properties recorded in the 2012 third quarter. See Impairment of Natural
Gas and Oil Properties below.
Natural Gas, Oil and NGL Sales. During 2013, natural gas, oil and NGL sales were $7.052 billion compared to
$6.278 billion in 2012 and $6.024 billion in 2011. In 2013, Chesapeake produced and sold 244 mmboe for $6.923
billion at a weighted average price of $28.33 per boe, compared to 237 mmboe produced and sold in 2012 for $5.359
billion at a weighted average price of $22.61 per boe and 199 mmboe produced and sold in 2011 for $5.259 billion at
a weighted average price of $26.42 per boe. The increase in the price received per boe in 2013 compared to 2012
resulted in an increase in revenues of $1.397 billion, and increased sales volumes resulted in a $167 million increase
in revenues, for a total increase in revenues of $1.564 billion.
For 2013, our average price received per mcf of natural gas of $2.22 compared to $1.77 in 2012 and $3.12 in
2011 (excluding the effect of derivatives). Oil prices received per barrel (excluding the effect of derivatives) were $95.17,
$90.49 and $89.80 in 2013, 2012 and 2011, respectively. NGL prices realized per barrel (excluding the effect of
derivatives) were $27.87, $29.89 and $40.96 in 2013, 2012 and 2011, respectively. In 2013, realized prices for natural
gas were negatively affected by higher year-over-year natural gas gathering and transportation costs, primarily as a
result of construction of midstream systems being undertaken in certain of our less mature operating areas and a fee
associated with a production shortfall below the minimum volume commitment under our Barnett gathering
agreement. For 2014, we expect that we will continue to see increased gathering and transportation costs and those
increases are reflected in our natural gas price differential forecast for 2014.
Gains and losses from our natural gas, oil and NGL derivatives resulted in a net increase in natural gas, oil and
NGL revenues of $129 million, $919 million and $765 million in 2013, 2012 and 2011, respectively. See Item 7A of this
report for a complete listing of all of our derivative instruments as of December 31, 2013.
A change in natural gas, oil and NGL prices has a significant impact on our revenues and cash flows. Assuming
our 2013 production levels, an increase or decrease of $0.10 per mcf of natural gas sold would result in an increase
or decrease in 2013 revenues and cash flows of approximately $109 million and $107 million, respectively, and an
increase or decrease of $1.00 per barrel of liquids sold would result in an increase or decrease in 2013 revenues and
cash flows of approximately $62 million and $60 million, respectively, without considering the effect of derivatives.