Chesapeake Energy 2013 Annual Report Download - page 88

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Along with a VIE that we consolidate, we also hold a variable interest in another VIE that is not consolidated
because we are not the primary beneficiary. We continually monitor both the consolidated and unconsolidated VIEs
to determine if any events have occurred that could cause the primary beneficiary to change. See Note 14 for further
discussion of VIEs.
Risks and Uncertainties
We have recently conducted a company-wide review of our operations, assets and organizational structure to
best position the Company to maximize shareholder value going forward as we focus on our strategic priorities of
financial discipline and profitable and efficient growth from captured resources. We intend to apply financial discipline
through all aspects of our business, and we believe that the successful execution of this strategy will allow us to better
balance capital expenditures with cash flow from operations as well as reduce financial leverage and complexity. While
furthering our strategic priorities, certain actions that would reduce financial leverage and complexity could negatively
impact our future results of operations and/or liquidity. We expect to incur various 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.
Cash and Cash Equivalents and Restricted Cash
For purposes of the consolidated financial statements, Chesapeake considers investments in all highly liquid
instruments with original maturities of three months or less at date of purchase to be cash equivalents. Restricted cash
consists of balances required to be maintained by the terms of the respective agreements governing the activities of
CHK Utica, L.L.C. (CHK Utica) and CHK Cleveland Tonkawa, L.L.C. (CHK C-T). See Note 8 for further discussion of
these entities.
Accounts Receivable
Our accounts receivable are primarily from purchasers of natural gas, oil and NGL and from exploration and
production companies that own interests in properties we operate. This industry concentration could affect our overall
exposure to credit risk, either positively or negatively, because our purchasers and joint working interest owners may
be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all our
counterparties and 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. We utilize an allowance method
in accounting for bad debt based on historical trends in addition to specifically identifying receivables we believe will
be uncollectible. During 2013, 2012 and 2011, we recognized $2 million, a nominal amount and $1 million of bad debt
expense related to potentially uncollectible receivables, and we reduced our allowance by $3 million in 2013 as we
wrote off specific receivables against our allowance. Accounts receivable as of December 31, 2013 and 2012 are
detailed below.
December 31,
2013 2012
($ in millions)
Natural gas, oil and NGL sales ....................................................................................... $ 1,548 $ 1,457
Joint interest ................................................................................................................... 417 592
Oilfield services .............................................................................................................. 63 24
Related parties(a) ....................................................................................................................... 62 23
Other .............................................................................................................................. 150 168
Allowance for doubtful accounts ..................................................................................... (18) (19)
Total accounts receivable, net ................................................................................ $ 2,222 $ 2,245
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(a) See Note 7 for discussion of related party transactions.