Chesapeake Energy 2013 Annual Report Download - page 61

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Excluding the impact of derivatives, our percentage of revenues from natural gas, oil and NGL is shown in the
following table.
2013 2012 2011
Natural gas ............................................................................ 36% 37% 60%
Oil .......................................................................................... 56% 53% 29%
NGL ....................................................................................... 8% 10% 11%
Total ................................................................................ 100% 100% 100%
Marketing, Gathering and Compression Sales and Expenses. Marketing, gathering and compression revenues
and expenses consist of third-party revenues and expenses related to our marketing, gathering and compression
operations and excludes depreciation and amortization, general and administrative expenses, impairments of fixed
assets and other, net gains or losses on sales of fixed assets and interest expense. See Depreciation and Amortization
of Other Assets below for the depreciation and amortization recorded on our marketing, gathering and compression
assets. Chesapeake recognized $9.559 billion in marketing, gathering and compression revenues in 2013 with
corresponding expenses of $9.461 billion, for a net margin before depreciation of $98 million. This compares to revenues
of $5.431 billion and $5.090 billion, expenses of $5.312 billion and $4.967 billion and a net margin before depreciation
of $119 million and $123 million in 2012 and 2011, respectively. Our revenues and operating expenses from our
marketing business increased substantially in 2013 compared to 2012 and 2011. In 2013, we marketed significantly
more oil and NGL from both Chesapeake-operated wells and for third parties while our marketing of natural gas was
virtually unchanged. Due to the relative high prices of oil and NGL compared to natural gas, our revenues and expenses
increased substantially. In addition, we entered into a variety of purchase and sales contracts with third parties for
various commercial purposes, including credit risk mitigation and to help meet certain of our pipeline delivery
commitments. These transactions also increased our marketing revenues and operating expenses. In addition,
compression services increased in 2013 compared to 2012 and 2011, offset by the loss of activity from the sale of
substantially all of our gathering business and most of our gathering assets in the 2012 and 2013. Our gathering
business provided approximately $16 million, $51 million and $44 million of the total marketing, gathering and
compression net margin, or 16%, 43% and 36%, in 2013, 2012 and 2011, respectively.
Oilfield Services Revenues and Expenses. Oilfield services consists of third-party revenues and expenses related
to our oilfield services operations and excludes depreciation and amortization, general and administrative expenses,
impairments of fixed assets and other, net gains or losses on sales of fixed assets and interest expense. See Depreciation
and Amortization of Other Assets below for the depreciation and amortization recorded on our oilfield services assets.
Chesapeake recognized $895 million in oilfield services revenues in 2013 with corresponding expenses of $736 million,
for a net margin before depreciation of $159 million. This compares to revenues of $607 million and $521 million,
expenses of $465 million and $402 million and a net margin before depreciation of $142 million and $119 million in
2012 and 2011, respectively. Oilfield services revenues and expenses increased from 2011 to 2013, primarily as a
result of the increase in third-party utilization of our oilfield services.
Natural Gas, Oil and NGL Production Expenses. Production expenses, which include lifting costs and ad valorem
taxes, were $1.159 billion in 2013, compared to $1.304 billion in 2012 and $1.073 billion in 2011. On a unit-of-production
basis, production expenses were $4.74 per boe in 2013 compared to $5.50 and $5.39 per boe in 2012 and 2011,
respectively. The per unit expense decrease in 2013 was primarily the result of a general improvement in operating
efficiencies across most of our operating areas as well as lower saltwater disposal costs and the divestiture in 2012
of our Permian Basin assets, which had comparatively high operating costs per unit of production. Production expenses
in 2013, 2012 and 2011 included approximately $170 million, $220 million and $234 million, or $0.70, $0.93 and $1.18
per boe, respectively, associated with VPP production volumes. We anticipate a continued decrease in production
expenses associated with VPP production volumes as the contractually scheduled volumes under our VPP agreements
decrease in addition to the general improvement in operating efficiencies noted above.