Chesapeake Energy 2013 Annual Report Download - page 74
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66
The change in natural gas and oil prices during the year ended December 31, 2013 decreased the liability related
to our derivative instruments by $218 million. This unrealized gain is recorded in natural gas, oil and NGL sales. We
entered into new contracts which were in a liability position of $48 million and we settled contracts in 2013 that were
in a liability position for $203 million. The realized losses will be recorded in natural gas, oil and NGL sales in the month
of related production.
Interest Rate Derivatives
The table below presents principal cash flows and related weighted average interest rates by expected maturity
dates.
Years of Maturity
2014 2015 2016 2017 2018 Thereafter Total
($ in millions)
Liabilities:
Debt – fixed rate(a) .............. $ — $ 1,661 $ 500 $ 2,302 $ 1,112 $ 5,250 $ 10,825
Average interest rate.......... —% 7.89% 3.25% 4.42% 5.66% 6.20% 5.89%
Debt – variable rate(b) ......... $ — $ — $ 405 $ 2,000 $ — $ — $ 2,405
Average interest rate.......... —% —% 2.92% 5.75% —% —% 5.27%
___________________________________________
(a) This amount does not include the discount included in debt of $324 million and interest rate derivatives of $13
million.
(b) This amount does not include the discount included in debt of $33 million.
Changes in interest rates affect the amount of interest we earn on our cash, cash equivalents and short-term
investments and the interest rate we pay on borrowings under our revolving bank credit facilities. All of our other
indebtedness is fixed rate and, therefore, does not expose us to the risk of fluctuations in earnings or cash flow due
to changes in market interest rates. However, changes in interest rates do affect the fair value of our fixed-rate debt.
We enter into interest rate derivatives, including fixed-to-floating interest rate swaps (we receive a fixed interest
rate and pay a floating market rate) to mitigate our exposure to changes in the fair value of our senior notes and floating-
to-fixed interest rate swaps (we receive a floating market rate and pay a fixed interest rate) to manage our interest rate
exposure related to our bank credit facility borrowings. As of December 31, 2013, the following interest rate derivatives
were outstanding:
Weighted
Average Rate Fair Value
Notional
Amount Fixed Floating(a) Fair Value
Hedge Asset
(Liability)
($ in millions) ($ in millions)
Fixed to Floating:
Swaps
Mature 2020 – 2023 ............. $ 1,200 6.01% 1 – 3 mL
430 bp No $ (79)
Floating to Fixed:
Swaps
Mature 2014 – 2015 ............. $ 1,050 2.13% 1 – 6 mL No (19)
$ (98)
___________________________________________
(a) Month LIBOR has been abbreviated “mL” and basis points has been abbreviated “bp”.