Chesapeake Energy 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 Chesapeake Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 173

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173

CHESAPEAKE ENERGY CORPORATION | 2014 ANNUAL REPORT

Table of contents

  • Page 1
    C H E S A P E A K E E N E R G Y C O R P O R AT I O N | 2 0 1 4 A N N U A L R E P O R T

  • Page 2
    ... operational and financial leadership as well as capital efficiency, our employees are creating lasting value for our shareholders every day. Our core values are the foundation for every decision we make. We are committed to conducting ourselves and our business with: INTEGRITY AND TRUST RESPECT...

  • Page 3
    ... that doubled our working interest in the oil-rich Powder River Basin. Finally, we successfully spun off our oilfield services division into the public company Seventy Seven Energy Inc. We reached another first in company history with a new unsecured $4 billion credit facility with investment grade...

  • Page 4
    KEY ACCOMPLISHMENTS Generated ~$5 billion in cash from one of our largest asset sales in company history Doubled our working interest in the oil-rich Powder River Basin Improved capital efficiency 40 - 65% across major operating areas since 2012 Continued our commitment to safety with a 35% ...

  • Page 5
    ...2014 2013 2012 2011 2010 Revenues: Oil, natural gas and NGL Marketing, gathering and compression Oilfield services Total revenues Total operating expenses Total other income (expense) Income (loss) before income taxes Income tax expense (benefit) Net income (loss) attributable to Chesapeake Net...

  • Page 6
    ... employees' outstanding commitment to financial discipline, which resulted in a dramatically improved balance sheet by the end of 2014. Combined with the proceeds from our southern Marcellus and eastern Utica divestiture and our $5.5 billion reduction in leverage since 2012, the new credit facility...

  • Page 7
    ...Chesapeake Energy Corporation (Exact name of registrant as specified in its charter) Oklahoma 73-1395733 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 6100 North Western Avenue Oklahoma City, Oklahoma 73118 (Address of principal executive offices...

  • Page 8
    ... Statements and Supplementary Data Changes In and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners...

  • Page 9
    ... liquids and natural gas assets. We have leading positions in the liquids-rich resource plays of the Eagle Ford Shale in South Texas; the Utica Shale in Ohio and Pennsylvania; the Granite Wash, Cleveland, Tonkawa and Mississippian Lime plays in the Anadarko Basin in northwestern Oklahoma and the...

  • Page 10
    ... average daily natural gas production remained the same; and our average daily NGL production increased 58%, or approximately 33 mbbls per day over the average daily production for 2013. Information About Us We make available, free of charge on our website at www.chk.com, our annual reports on Form...

  • Page 11
    ... and East Texas and the Barnett Shale in the Fort Worth Basin in northcentral Texas. Northern Division. Includes the Utica Shale in Ohio and Pennsylvania, the Marcellus Shale in the northern Appalachian Basin in Pennsylvania and the Niobrara Shale and Upper Cretaceous sands in the Powder River Basin...

  • Page 12
    ... and "net" refers to gross wells multiplied by our working interest. Gross Development: Productive Dry Total Exploratory: Productive Dry Total 1,784 3 1,787 2014 % Net 99 1 100 629 1 630 % 99 1 100 Gross 1,704 21 1,725 2013 % Net 99 1 100 847 9 856 % 99 1 100 Gross 2,075 21 2,096 2012 % Net 99...

  • Page 13
    ...Oilfield services net margin Expenses ($ per boe): Oil, natural gas and NGL production Production taxes General and administrative expenses(d) Oil, natural gas and NGL depreciation, depletion and amortization Depreciation and amortization of other assets Interest expense(e) December 31, 2013 2012 41...

  • Page 14
    ... by the Chesapeake Granite Wash Trust, 1 mmbbl of oil, 22 bcf of natural gas and 2 mmbbl of NGL of which are attributable to the noncontrolling interest holders. Estimated future net revenue represents the estimated future gross revenue to be generated from the production of proved reserves, net of...

  • Page 15
    ... drilling and completion cost carries of $11 million, for PUD conversion. The downward revisions of 162 mmboe of PUDs in 2014 were primarily related to the removal of PUDs in the Marcellus Shale, the Eagle Ford Shale and the Anadarko Basin. The future net revenue attributable to our estimated proved...

  • Page 16
    .... Reserves Estimation Chesapeake's Corporate Reserves Department prepared approximately 21% of the proved reserves estimates (by volume) disclosed in this report. Those estimates were based upon the best available production, engineering and geologic data. Chesapeake's Director - Corporate Reserves...

  • Page 17
    ..., Corporate Reserves Department managers, the Director - Corporate Reserves, the Vice Presidents of our business units, the Vice President of Corporate and Strategic Planning and the Executive Vice Presidents of our operating divisions review all significant reserves changes and all new proved...

  • Page 18
    ...101) $ Sales of Proved Properties $ (289) (4,461) (4,750) $ Total(a) $ 2,874 (2,662) 212 _____ (a) Includes capitalized internal costs of $230 million and related capitalized interest of $604 million. Acreage The following table sets forth, as of December 31, 2014, our gross and net developed and...

  • Page 19
    ... this report. Marketing Chesapeake Energy Marketing, L.L.C., one of our wholly owned subsidiaries, provides oil, natural gas and NGL marketing services, including commodity price structuring, securing and negotiating gathering, hauling, processing and transportation services, contract administration...

  • Page 20
    ... oilfield services business, which we previously conducted through our indirect, wholly owned subsidiary Chesapeake Oilfield Operating, L.L.C. (COO), into an independent, publicly traded company called Seventy Seven Energy Inc. (SSE). See Note 13 of the notes to our consolidated financial statements...

  • Page 21
    ... systems and processing facilities to complement our natural gas operations in regions where we had significant production and additional infrastructure was required. In 2012 and 2013, we sold substantially all of our midstream business, including most of our gathering assets. As a result, the...

  • Page 22
    ... that our natural gas pipelines and related facilities are engaged in exempt gathering and intrastate transportation and, therefore, are not subject to the FERC's jurisdiction. Nevertheless, FERC regulation affects our gathering and compression business, generally, in that some of our assets feed...

  • Page 23
    ...restore sites where hazardous substances, hydrocarbons or wastes have been disposed or otherwise released. Moreover, local restrictions, such as state or local moratoria, city ordinances, zoning laws and traffic regulations, may restrict or prohibit the execution of our drilling and production plans...

  • Page 24
    ... compressor stations, and impose various control, monitoring and reporting requirements. Permits and related compliance obligations under the CAA, each state's development and promulgation of regulatory programs to comport with federal requirements, as well as changes to state implementation plans...

  • Page 25
    ... a study of the potential impacts of hydraulic fracturing activities on drinking water resources in these states where the EPA is the permitted authority, including Pennsylvania, with a progress report released in late 2012 and a final draft report expected to be released for public comment and peer...

  • Page 26
    ... addressing climate change, such as the President's Climate Action Plan which calls for reducing methane emissions, could require us to incur additional operating costs and could adversely affect demand for the oil and natural gas that we sell. The EPA announced it will propose new standards...

  • Page 27
    ... Robert D. Lawler, President, Chief Executive Officer and Director Robert D. ("Doug") Lawler, 48, has served as President and Chief Executive Officer since June 2013. Prior to joining Chesapeake, Mr. Lawler served in multiple engineering and leadership positions at Anadarko Petroleum Corporation...

  • Page 28
    ... acquisition, exploration and development activities for a company using the full cost method of accounting. Additionally, any internal costs that can be directly identified with acquisition, exploration and development activities are included. Any costs related to production, general corporate...

  • Page 29
    ... future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices calculated as the average oil and natural gas price during the preceding 12-month period prior to the end of the current reporting period, (determined...

  • Page 30
    ... payment represents a limitedterm overriding royalty interest in oil and natural gas reserves that: (i) entitles the purchaser to receive scheduled production volumes over a period of time from specific lease interests; (ii) is free and clear of all associated future production costs and capital...

  • Page 31
    .... Our revenues, operating results, profitability and ability to grow depend primarily upon the prices we receive for our share of the oil, natural gas and NGL we sell. We require substantial expenditures to replace reserves, sustain production and fund our business plans. Lower oil, natural gas and...

  • Page 32
    ... and development drilling, prevailing oil and natural gas prices and other factors, many of which are beyond our control. As of December 31, 2014, approximately 25% of our estimated proved reserves (by volume) were undeveloped. These reserve estimates reflect our plans to make significant capital...

  • Page 33
    ... drilling plans for these areas are subject to change based upon various factors, including drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, gathering system and pipeline transportation...

  • Page 34
    ... in connection with the production and sales of natural gas and NGL. We have agreed to settle, subject to court approval, with a putative class of Oklahoma royalty owners for 2004-2014 claims for $119 million. An agreed-upon settlement with Pennsylvania royalty owners for approximately $12 million...

  • Page 35
    ... funds, pay dividends and make certain investments and may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; additional financing we may need in the future for working capital, capital expenditures, acquisitions, general corporate or other...

  • Page 36
    ... to state laws, some local municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict or prohibit the performance of well drilling in general and/or hydraulic fracturing in particular. Our inability to secure sufficient amounts of water...

  • Page 37
    ..., produced water, drilling fluids and other materials associated with the exploration, development or production of oil and natural gas. Potential legislative and regulatory actions addressing climate change could significantly impact our industry and the Company, causing increased costs and reduced...

  • Page 38
    ... competition in every aspect of our business, including, but not limited to, buying and selling reserves and leases, obtaining goods and services needed to operate our business and marketing oil, natural gas or NGL. Competitors include multinational oil companies, independent production companies...

  • Page 39
    ... agreements or an operator's failure to act in ways that are in our best interest could reduce our production and revenues. Our dependence on the operator and other working interest owners for these projects and our limited ability to influence or control the operation and future development...

  • Page 40
    ... Oklahoma state court derivative action have been stayed since 2012 pending resolution of a related, previously reported putative federal securities class action. The shareholder derivative actions allege breaches of fiduciary duty, among other things, related to the former CEO's personal financial...

  • Page 41
    ... in the 2014 consolidated statement of operations. A fairness hearing on the settlement has been scheduled for April 17, 2015. Although Chesapeake believes that its royalty calculation and payment methodologies are appropriate under Oklahoma oil and gas law and denies that it committed any acts or...

  • Page 42
    ... Protection Agency, the U.S. Army Corps of Engineers and the Pennsylvania Department of Environmental Protection (PADEP) regarding potential violations of the permitting requirements of the federal Clean Water Act, the Pennsylvania Clean Streams Law and the Pennsylvania Dam Safety and Encroachments...

  • Page 43
    ... the Board of Directors. In addition, our revolving credit facility contains a restriction on our ability to declare and pay cash dividends on our common or preferred stock if an event of default has occurred. The certificates of designation for our preferred stock prohibit payment of cash dividends...

  • Page 44
    ... of Chesapeake's deferred compensation plan related to participant deferrals and Company matching contributions. On December 22, 2014, the Company issued a press release announcing that its Board of Directors has authorized the repurchase of up to $1 billion in value of its common stock from time to...

  • Page 45
    ... production Production taxes Marketing, gathering and compression Oilfield services General and administrative Restructuring and other termination costs Provision for legal contingencies Oil, natural gas and NGL depreciation, depletion and amortization Depreciation and amortization of other assets...

  • Page 46
    2014 STATEMENT OF OPERATIONS DATA (continued): EARNINGS (LOSS) PER COMMON SHARE: Basic Diluted CASH DIVIDEND DECLARED PER COMMON SHARE CASH FLOW DATA: Cash provided by operating activities Cash provided by (used in) investing activities Cash provided by (used in) financing activities BALANCE SHEET ...

  • Page 47
    ... our production volumes, oil, natural gas and NGL sales, average sales prices received, and other operating income and expenses for the periods indicated: Years Ended December 31, 2014 2013 2012 Net Production: Oil (mmbbl) Natural gas (bcf) NGL (mmbbl) Oil equivalent (mmboe)(a) Oil, Natural Gas and...

  • Page 48
    ... Ended December 31, 2014 2013 2012 Other Operating Income(c) ($ in millions): Marketing, gathering and compression net margin Oilfield services net margin Expenses ($ per boe): Oil, natural gas and NGL production Production taxes General and administrative(d) Oil, natural gas and NGL depreciation...

  • Page 49
    ... million in 2014 and 2013, respectively, to purchase rigs and compressors previously sold under long-term lease arrangements to facilitate asset sales and the spin-off of our oilfield services business. In 2014, we also invested approximately $450 million in our Powder River Basin property exchange...

  • Page 50
    ...Prior to the spin-off, SSE's services included drilling, hydraulic fracturing, oilfield rentals, rig relocation, and water transport and disposal. We believe the benefits of the spin-off include enhancing the flexibility of the management team of Chesapeake and SSE to make strategic and operational...

  • Page 51
    ... net proceeds from the sale of our common equity ownership in Chaparral Energy, Inc. We also sold an equity investment in a natural gas trading and management firm for cash proceeds of $30 million. Buildings and Land. We sold buildings and land, located primarily in the Oklahoma City and Fort Worth...

  • Page 52
    ... in discretionary capital expenditures could entail penalty payments for certain of our oilfield services and midstream commitments. Our current budget anticipates having enough cash on hand to remain undrawn on our revolving credit facility as of December 31, 2015. 2014 Refinancings In 2014, we...

  • Page 53
    ... and Utica South Texas East Texas and Louisiana Marcellus Eagle Ford Haynesville SIPC (Mississippian Lime joint venture) Permian Basin Texoma Chitwood Knox Volumetric production payments Joint venture leasehold Other oil and natural gas properties Total Sales of Oil and Natural Gas Assets Sales of...

  • Page 54
    ... use the facility and cash on hand to fund daily operating activities and capital expenditures as needed. Prior to June 2014, we also utilized a $500 million oilfield services credit facility. This facility was terminated in June 2014 in connection with the spin-off of our oilfield services business...

  • Page 55
    ... in 2014 as compared to 2013 and 2012 is primarily the result of the spin-off of our oilfield services business, divestiture of our midstream and gathering business and reductions in construction expenditures on our corporate headquarters and field offices. In 2014, we used $3.362 billion of cash to...

  • Page 56
    ... as well as to facilitate asset sales and the spin-off of SSE. We paid dividends on our common stock of $234 million, $233 million and $227 million in 2014, 2013 and 2012, respectively. We paid dividends on our preferred stock of $171 million in each of 2014, 2013 and 2012. Revolving Credit Facility...

  • Page 57
    ...senior notes. This discount is amortized based on an effective yield method. See Note 11 of the notes to our consolidated financial statements included in Item 8 of this report for discussion related to these instruments. As of December 31, 2014, there was $15 million of discount associated with the...

  • Page 58
    ... off-balance sheet obligations. As of December 31, 2014, these arrangements and transactions included (i) operating lease agreements, (ii) volumetric production payments (VPPs) (to purchase production and pay related production expenses and taxes in the future), (iii) open purchase commitments, (iv...

  • Page 59
    ... risk management activities and the Board of Directors reviews the Company's derivative program at its quarterly board meetings. We believe we have sufficient internal controls to prevent unauthorized trading. As of December 31, 2014, our oil and natural gas derivative instruments consisted of swaps...

  • Page 60
    ... of related production. As of December 31, 2014, 2013 and 2012, accumulated other comprehensive income included unrealized losses, net of related tax effects, totaling $136 million, $159 million and $179 million, respectively, associated with commodity derivative contracts. Based upon the market...

  • Page 61
    ...in 2013 and $1.02 per mcf in 2012. This was primarily the result of significant weakening of Marcellus Shale basis differentials and increased gathering and transportation costs, including higher minimum volume commitment fees under our Barnett and Haynesville natural gas gathering agreements. Gains...

  • Page 62
    ... plays and the Haynesville/Bossier and Barnett unconventional natural gas shale plays. The Eagle Ford Shale accounted for approximately 19% of our estimated proved reserves by volume as of December 31, 2014. Production for the Eagle Ford Shale for 2014, 2013 and 2012 was 35.4 mmboe, 31.7 mmboe and...

  • Page 63
    ... credit risk mitigation and to help meet certain of our pipeline delivery commitments. In addition, we marketed more oil and NGL from Chesapeake-operated wells for third parties. The margin decrease in 2014 and 2013 as compared to 2012 was primarily a result of losses on certain sales contracts...

  • Page 64
    ...statements included in Item 8 of this report for further discussion of our stock-based compensation. Chesapeake follows the full cost method of accounting under which all costs associated with oil and natural gas property acquisition, drilling and completion activities are capitalized. We capitalize...

  • Page 65
    ... depreciation expense by asset class for 2014, 2013 and 2012 and the estimated useful lives of these assets. Years Ended December 31, 2014 Oilfield services equipment(a) Buildings and improvements Natural gas compressors(b) Computers and office equipment Vehicles Natural gas gathering systems and...

  • Page 66
    ... land, a gas gathering termination fee and a contract drilling agreement termination fee. The 2012 amount relates to impairments of buildings and land, drilling rigs and equipment and charges for a joint venture net acreage shortfall. See Note 17 of the notes to our consolidated financial statements...

  • Page 67
    ... gain related to the sale. In addition, we sold an equity investment in a natural gas trading and management firm for cash proceeds of $30 million and recorded a loss of $6 million associated with the transaction. In 2013, we sold all of our shares of Clean Energy Fuels Corp. (Clean Energy) for cash...

  • Page 68
    ... in 2014, 2013 and 2012, respectively. Net income attributable to noncontrolling interests is primarily driven by the dividends paid on preferred stock of our subsidiaries CHK Utica and CHK Cleveland Tonkawa L.L.C. (CHK C-T), in addition to income or loss related to the Chesapeake Granite Wash Trust...

  • Page 69
    ... deferred income taxes, is generally written off as an expense. See Oil and Natural Gas Properties in Note 1 of the notes to our consolidated financial statements included in Item 8 of this report for further information on the full cost method of accounting. Derivatives. Chesapeake uses commodity...

  • Page 70
    ... completion and other capital expenditures (including the use of joint venture drilling carries), potential future write-downs of our oil and natural gas assets, anticipated sales, and the adequacy of our provisions for legal contingencies, as well as statements concerning anticipated cash flow and...

  • Page 71
    ... of potential legislative and regulatory actions addressing climate change; competition in the oil and gas exploration and production industry; a deterioration in general economic, business or industry conditions; negative public perceptions of our industry; limited control over properties we do not...

  • Page 72
    .... In 2012 and 2013, we bought oil and natural gas calls to, in effect, lock in sold call positions. Due to lower oil, natural gas and NGL prices, we were able to achieve this at a low cost to us. In some cases, we deferred the payment of the premium on these trades to the related month of production...

  • Page 73
    .... Options: Chesapeake sells, and occasionally buys, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, Chesapeake pays the counterparty the excess on sold call options, and Chesapeake receives the excess on bought call...

  • Page 74
    ... in oil, natural gas and NGL sales as realized gains (losses) in 2015 and 2016, respectively. In addition to the open derivative positions disclosed above, as of December 31, 2014, we had $216 million of net derivative gains related to settled contracts for future production periods that will...

  • Page 75
    ... gain is recorded in oil, natural gas and NGL sales. We settled contracts in 2014 that were in a liability position for $202 million. The realized losses will be recorded in oil, natural gas and NGL sales in the month of related production. We terminated contracts that were in a liability position...

  • Page 76
    ... of our senior notes and floatingto-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 revolving credit facility borrowings. As of December 31, 2014, the following interest rate derivatives were outstanding...

  • Page 77
    ... TO FINANCIAL STATEMENTS CHESAPEAKE ENERGY CORPORATION Management's Report on Internal Control Over Financial Reporting Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2014 and 2013 Consolidated Statements of...

  • Page 78
    ... the Company's internal control over financial reporting as of December 31, 2014 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein. /s/ ROBERT D. LAWLER Robert D. Lawler President and Chief Executive Officer...

  • Page 79
    ... on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 80
    ... ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2014 ($ in millions) CURRENT ASSETS: Cash and cash equivalents ($1 and $1 attributable to our VIE) Restricted cash Accounts receivable, net Short-term derivative assets ($16 and $0 attributable to our VIE) Deferred income...

  • Page 81
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - (Continued) December 31, 2014 CURRENT LIABILITIES: Accounts payable Current maturities of long-term debt, net Accrued interest Deferred income tax liabilities Short-term derivative liabilities ($0 and $5 attributable to ...

  • Page 82
    ..., 2014 2013 2012 ($ in millions except per share data) REVENUES: Oil, natural gas and NGL Marketing, gathering and compression Oilfield services Total Revenues OPERATING EXPENSES: Oil, natural gas and NGL production Production taxes Marketing, gathering and compression Oilfield services General and...

  • Page 83
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX: Unrealized gain on derivative instruments, net of income tax expense of $0, $1 and $4 Reclassification of (gain) loss on ...

  • Page 84
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2014 2013 2012 ($ in millions) CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation, ...

  • Page 85
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facilities borrowings Payments on credit facilities borrowings Proceeds from issuance of senior notes, net of discount and offering costs ...

  • Page 86
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, 2014 2013 2012 ($ in millions) PREFERRED STOCK: Balance, beginning and end of period COMMON STOCK: Balance, beginning and end of period PAID-IN CAPITAL: Balance, beginning of ...

  • Page 87
    ... ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation and Summary of Significant Accounting Policies Description of Company Chesapeake Energy Corporation ("Chesapeake" or the "Company") is an oil and natural gas exploration and production company...

  • Page 88
    ...2014, in connection with the spin-off of our oilfield services business, accounts receivable related to oilfield services were removed from our consolidated balance sheet. See Note 7 for discussion of related party transactions. Oil and Natural Gas Properties Chesapeake follows the full cost method...

  • Page 89
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Proceeds from the sale of oil and natural gas properties are accounted for as reductions of capitalized costs unless these sales involve a significant change in proved reserves and significantly ...

  • Page 90
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) other property and equipment held for sale as of December 31, 2014 and 2013. Other property and equipment costs, excluding land, are depreciated on a straight-line basis. Realization of the ...

  • Page 91
    ... services business in June 2014, we reported oilfield services revenue. Our former oilfield services operating segment was responsible for contract drilling, hydraulic fracturing, oilfield rentals, oilfield trucking and other oilfield services operations for both Chesapeake-operated wells and wells...

  • Page 92
    ...on market prices/rates as of the respective balance sheet dates. Cash settlements of our derivative instruments are generally classified as operating cash flows unless the derivatives are deemed to contain, for accounting purposes, a significant financing element at contract inception, in which case...

  • Page 93
    ...Chesapeake's share-based compensation program consists of restricted stock, stock options and performance share units granted to employees and restricted stock granted to non-employee directors under our Long Term Incentive Plan. We recognize in our financial statements the cost of employee services...

  • Page 94
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For the years ended December 31, 2014, 2013 and 2012, shares of the following securities and associated adjustments to net income, representing dividends on preferred stock and allocated earnings ...

  • Page 95
    .... Chesapeake Energy Corporation is the issuer of all other senior notes and the contingent convertible senior notes. In 2014, in connection with the spin-off of our oilfield services business, the obligations with respect to the COO senior notes were removed from our consolidated balance sheet. See...

  • Page 96
    ... amount of the notes, payable in cash. (g) (h) In 2014, in connection with the spin-off of our oilfield services business, we terminated our oilfield services credit facility. See Note 13 for further discussion of the spin-off. Discount as of December 31, 2014 and 2013 included $224 million and $303...

  • Page 97
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Total principal amount of debt maturities, using the earliest demand repurchase date for contingent convertible senior notes, for the five years ended after December 31, 2014 and thereafter are as...

  • Page 98
    ...In December 2014, we entered into a new five-year $4.0 billion senior unsecured revolving credit facility to use for general corporate purposes. The new credit facility replaced our then-existing $4.0 billion senior secured revolving credit facility that was scheduled to mature in December 2015. The...

  • Page 99
    ... a portion of outstanding indebtedness under the new revolving credit facility discussed above and for general corporate purposes. • All deferred charges and debt balances related to these transactions were removed from our consolidated balance sheet as of June 30, 2014. See Note 13 for further...

  • Page 100
    ... to the former CEO's personal financial practices and purported conflicts of interest, and the Company's accounting for volumetric production payments. With the dismissal of the federal securities class action now affirmed, the parties have stipulated to continue the stay of the Oklahoma state court...

  • Page 101
    ... of royalties as a result of the Company's divestiture of substantially all of its midstream business and most of its gathering assets in 2012 and 2013. These Pennsylvania cases include claims for violation of and conspiracy to violate the federal Racketeer Influenced and Corrupt Organizations Act...

  • Page 102
    ... pipeline carriers for future gathering, processing and transportation of natural gas and liquids to move certain of our production to market. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related...

  • Page 103
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners or credits for ...

  • Page 104
    ...service providers. The aggregate undiscounted minimum future payments under this agreement are detailed below. December 31, 2014 ($ in millions) $ 245 162 59 Total Drilling Commitments We have committed to drill wells for the benefit of CHK Cleveland Tonkawa, L.L.C. and Chesapeake Granite Wash Trust...

  • Page 105
    .... December 31, 2014 2013 ($ in millions) 1,176 $ 1,409 385 457 189 464 344 320 55 161 101 101 811 599 3,061 $ 3,511 Revenues and royalties due others Accrued oil, natural gas and NGL drilling and production costs Joint interest prepayments received Accrued compensation and benefits Other accrued...

  • Page 106
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 6. Income Taxes The components of the income tax provision (benefit) for each of the periods presented below are as follows: Years Ended December 31, 2014 2013 2012 ($ in millions) Current Federal...

  • Page 107
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Deferred income taxes are provided to reflect temporary differences in the basis of net assets for income tax and financial reporting purposes. The tax-effected temporary differences and tax loss ...

  • Page 108
    ... ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Deferred tax assets relating to tax benefits of employee share-based compensation have been reduced for stock options exercised and restricted stock that vested in periods in which Chesapeake was in a net...

  • Page 109
    .... (FTS). In 2013 and 2012, Chesapeake sold produced gas to our 30%-owned investee, Twin Eagle Resource Management LLC (Twin Eagle). We sold our investment in Twin Eagle in 2014. Hydraulic fracturing and other services provided to us by FTS in the ordinary course of business. As well operators, we...

  • Page 110
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Preferred Stock Following is a summary of our preferred stock, including the primary conversion terms as of December 31, 2014: Liquidation Preference per Share Holder's Conversion Right Company's ...

  • Page 111
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accumulated Other Comprehensive Income (Loss) For the years ended December 31, 2014 and 2013, changes in accumulated other comprehensive income (loss) by component, net of tax, are detailed below....

  • Page 112
    ... to the next two quarters of preferred dividend payments. The amount reserved, approximately $38 million as of December 31, 2014 and 2013, was reflected as restricted cash on our consolidated balance sheets. Dividends on the preferred shares are payable on a quarterly basis at a rate of 6% per annum...

  • Page 113
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) met our then-current cumulative drilling commitment. CHK C-T is responsible for all capital and operating costs of the wells drilled for the benefit of the entity. Under the development agreement,...

  • Page 114
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) As of December 31, 2014 and 2013, $0 and $807 million, respectively, of noncontrolling interests on our consolidated balance sheets were attributable to CHK Utica. In 2014, 2013 and 2012, income ...

  • Page 115
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For the years ended December 31, 2014, 2013 and 2012, the Trust declared and paid the following distributions: Cash Distribution per Common Unit $ 0.5079 $ 0.5796 $ 0.6454 $ 0.6624 $ 0.6671 $ 0....

  • Page 116
    .... In connection with the spin-off of our oilfield services business on June 30, 2014, and pursuant to the terms of our share-based compensation plans and the employee matters agreement between Chesapeake and Seventy Seven Energy Inc., unexercised stock options and unvested restricted stock were...

  • Page 117
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Equity-Classified Awards Restricted Stock. We grant restricted stock to employees and non-employee directors. Restricted stock vests over a minimum of three years and the holder receives dividends...

  • Page 118
    ... date fair value of the stock options granted in 2014: Expected option life - years Volatility Risk-free interest rate Dividend yield The following table provides information related to stock option activity for 2014, 2013 and 2012: Number of Shares Underlying Options (in thousands) 5.9 48.63% 1.93...

  • Page 119
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The vesting of certain stock option grants may result in state and federal income tax benefits, or reductions in these benefits, related to the difference between the market price of the common ...

  • Page 120
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table presents a summary of our PSU awards: Fair Value as of Grant Date Liability for Vested Amount Units 2012 Awards (b) Payable 2015 2013 Awards Payable 2016 2014 Awards Payable ...

  • Page 121
    ... open market. The Company contributed $61 million, $81 million and $91 million to the 401(k) Plan in 2014, 2013 and 2012, respectively. Beginning January 1, 2015, Chesapeake will match employee contributions in cash. Chesapeake also maintains a nonqualified deferred compensation plan (DC Plan). To...

  • Page 122
    .... Options: Chesapeake sells, and occasionally buys, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, Chesapeake pays the counterparty the excess on sold call options, and Chesapeake receives the excess on bought call...

  • Page 123
    ... 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. The notional amount of our interest rate derivatives, associated with our long-term debt, as of December 31, 2014 and 2013 was...

  • Page 124
    ... 31, 2014 and 2013 on a gross basis and after same-counterparty netting: Amounts Netted in Consolidated Balance Sheet ($ in millions) Net Fair Value Presented in Consolidated Balance Sheet Balance Sheet Classification As of December 31, 2014 Commodity Contracts Short-term derivative asset Long-term...

  • Page 125
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Effect of Derivative Instruments - Consolidated Statements of Operations The components of oil, natural gas and NGL sales for the years ended December 31, 2014, 2013 and 2012 are presented below. ...

  • Page 126
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Credit Risk Considerations Over-the-counter traded derivative instruments expose us to our counterparties' credit risk. To mitigate this risk, we enter into derivative contracts only with ...

  • Page 127
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Fair Value The fair value of our derivatives is based on third-party pricing models which utilize inputs that are either readily available in the public market, such as oil and natural gas forward...

  • Page 128
    ...and settlements: Sales Settlements Ending Balance as of December 31, 2013 _____ (a) $ $ $ Total gains (losses) included in earnings for the period Change in unrealized gains (losses) related to assets still held at reporting date (b) Oil, Natural Gas and NGL Sales Interest Expense 2014 2013 2014...

  • Page 129
    ...as the sales have not involved a significant change in proved reserves or significantly altered the relationship between costs and proved reserves. 2014 Transactions We sold certain assets in the southern Marcellus Shale and a portion of the eastern Utica Shale to a subsidiary of Southwestern Energy...

  • Page 130
    ... ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2012 Transactions We sold the vast majority of our Permian Basin assets, representing approximately 6% of our total proved reserves as of June 30, 2012, in three separate transactions for total net cash...

  • Page 131
    ... production, and the purchased natural gas and liquids are resold at market prices. As of December 31, 2014, our outstanding VPPs consisted of the following: Volume Sold VPP # Date of VPP Location Anadarko Basin Granite Wash Mid-Continent Barnett Shale Anadarko and Arkoma Basins Anadarko Basin Texas...

  • Page 132
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The volumes produced on behalf of our VPP buyers during 2014, 2013 and 2012 were as follows: Year Ended December 31, 2014 VPP # Oil (mbbl) Natural Gas (bcf) NGL (mbbl) Total (bcfe) 10 9 8 6(a) ...

  • Page 133
    ... and used the net proceeds to make a cash distribution of approximately $391 million to us, to repay a portion of outstanding indebtedness under the new revolving credit facility and for general corporate purposes. COO converted from a limited liability company into a corporation named Seventy Seven...

  • Page 134
    ... services include marketing and corporate communication, human resources, information technology, security, legal, risk management, tax, environmental health and safety, maintenance, internal audit, accounting, treasury and certain other services specified in the agreement. SSE pays Chesapeake...

  • Page 135
    ... company engaged in the production, acquisition and exploitation of oil and natural gas properties. In 2014, we sold all of our interest in Chaparral for net cash proceeds of $209 million. We recorded a $73 million gain related to the sale. Clean Energy Fuels Corp. In 2013, we sold all of our shares...

  • Page 136
    ... ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Glass Mountain Pipeline, LLC. In 2012, our wholly owned midstream subsidiary, Chesapeake Midstream Development, L.L.C. (CMD), entered into an agreement with two other parties to form Glass Mountain Pipeline...

  • Page 137
    ... plants Oilfield services equipment Buildings and land Other Total net gains on sales of fixed assets Natural Gas Compressors. In 2014, as part of a divestiture of noncore oil and natural gas properties in South Texas, we sold 61 compressors and related equipment to Hilcorp Energy Company for $19...

  • Page 138
    ... and Barnett Shale operating area. Assets Held for Sale In 2013, we determined we would sell certain of our buildings and land (other than our core campus) in the Oklahoma City area. In addition, as of December 31, 2014, we were continuing to pursue the sale of land located in the Fort Worth, Texas...

  • Page 139
    ... of a change in business climate resulting from depressed natural gas prices. In 2012, we also recognized $9 million of impairment losses primarily related to drill pipe and other oilfield services equipment. Buildings and Land. In 2013, we determined we would sell certain of our buildings and land...

  • Page 140
    ... of certain assets used to promote natural gas demand, $15 million for the termination of a contract drilling agreement with a third party, $2 million related to the estimated 2012 shortfall of our net acreage maintenance commitment with Total in the Barnett Shale and $16 million related to various...

  • Page 141
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 18. Restructuring and Other Termination Costs On June 30, 2014, we completed the spin-off of our oilfield services business through a pro rata distribution of SSE common stock to holders of ...

  • Page 142
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Below is a summary of our restructuring and other termination costs for the years ended December 31, 2014, 2013 and 2012: Years Ended December 31, 2014 2013 2012 ($ in millions) Oilfield services ...

  • Page 143
    ... to Chesapeake's employee benefit plans are included in other current assets. The fair value of these assets is determined using quoted market prices as they consist of exchange-traded securities. Other Current Liabilities. Liabilities related to Chesapeake's deferred compensation plan are...

  • Page 144
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 20. Asset Retirement Obligations The components of the change in our asset retirement obligations are shown below. Years Ended December 31, 2014 2013 ($ in millions) $ 405 $ 375 29 20 101 8 (92) (...

  • Page 145
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables present selected financial information for Chesapeake's operating segments: Exploration and Production Year Ended December 31, 2014: Revenues Intersegment revenues Total ...

  • Page 146
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Marketing, Gathering and Compression Exploration and Production Year Ended December 31, 2013: Revenues Intersegment revenues Total revenues Unrealized gains on commodity derivatives Oil, natural ...

  • Page 147
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Exploration and Production Year Ended December 31, 2012: Revenues Intersegment revenues Total revenues Unrealized losses on commodity derivatives Oil, natural gas, NGL and other depreciation, ...

  • Page 148
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2014 ($ in millions) Guarantor Subsidiaries NonGuarantor Subsidiaries Parent Eliminations Consolidated CURRENT ASSETS: Cash and cash ...

  • Page 149
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING BALANCE SHEET YEAR ENDED DECEMBER 31, 2013 ($ in millions) Guarantor Subsidiaries NonGuarantor Subsidiaries Parent Eliminations Consolidated CURRENT ASSETS: Cash and ...

  • Page 150
    ... production Production taxes Marketing, gathering and compression Oilfield services General and administrative Restructuring and other termination costs Provision for legal contingencies Oil, natural gas and NGL depreciation, depletion and amortization Depreciation and amortization of other assets...

  • Page 151
    ... natural gas and NGL Marketing, gathering and compression Oilfield services Total Revenues OPERATING EXPENSES: Oil, natural gas and NGL production Production taxes Marketing, gathering and compression Oilfield services General and administrative Restructuring and other termination costs Oil, natural...

  • Page 152
    ... natural gas and NGL Marketing, gathering and compression Oilfield services Total Revenues OPERATING EXPENSES: Oil, natural gas and NGL production Production taxes Marketing, gathering and compression Oilfield services General and administrative Restructuring and other termination costs Oil, natural...

  • Page 153
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2014 ($ in millions) Guarantor Subsidiaries NonGuarantor Subsidiaries Parent Eliminations Consolidated CASH FLOWS FROM ...

  • Page 154
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2013 ($ in millions) Guarantor Subsidiaries NonGuarantor Subsidiaries Parent Eliminations Consolidated CASH FLOWS FROM ...

  • Page 155
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2012 ($ in millions) Guarantor Subsidiaries(a) NonGuarantor Subsidiaries Parent(a) Eliminations Consolidated CASH FLOWS ...

  • Page 156
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 23. Recently Issued Accounting Standards In April 2014, the FASB issued an accounting standards update that raises the threshold for a disposal or classification as held for sale to qualify as a ...

  • Page 157
    ... financial data for 2014 and 2013 are as follows: Quarters Ended June 30, September 30, 2014 2014 ($ in millions except per share data) 5,046 $ 5,152 $ 5,703 733 $ 610 $ 1,174 425 $ 191 $ 662 375 $ 145 $ 169 March 31, 2014 Total revenues Gross profit(a) Net income attributable to Chesapeake Net...

  • Page 158
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION - (Continued) Supplemental Disclosures About Oil, Natural Gas and NGL Producing Activities (unaudited) Net Capitalized Costs Capitalized costs related to Chesapeake's oil, natural gas and NGL producing activities are ...

  • Page 159
    ... costs and other income tax credits and deductions, nor whether the hypothetical tax provision (benefit) will be payable (receivable). Oil, Natural Gas and NGL Reserve Quantities Chesapeake's petroleum engineers and independent petroleum engineering firms estimated all of our proved reserves...

  • Page 160
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION - (Continued) assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty. Reserves which can ...

  • Page 161
    ... of oil, 46 bcf of natural gas and 5 mmbbls of NGL reserves owned by the Chesapeake Granite Wash Trust, 1 mmbbls of oil, 22 bcf of natural gas and 2 mmbbls of NGL of which are attributable to the noncontrolling interest holders. As of December 31, 2014, 2013 and 2012, there were no PUDs that had...

  • Page 162
    ... measure of future net cash flows and changes therein relating to estimated proved reserves. Chesapeake has followed these guidelines which are briefly discussed below. Future cash inflows and future production and development costs as of December 31, 2014, 2013 and 2012 were determined by...

  • Page 163
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION - (Continued) The following summary sets forth our future net cash flows relating to proved oil, natural gas and NGL reserves based on the standardized measure: Years Ended December 31, 2014 2013 2012 ($ in millions) (a) (b) $ ...

  • Page 164
    ... Act of 1934 not later than April 30, 2015 (the "2015 Proxy Statement"). ITEM 11. Executive Compensation The information called for by this Item 11 is incorporated herein by reference to the 2015 Proxy Statement. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 165
    PART IV ITEM 15. Exhibits and Financial Statement Schedules _____ (a) The following financial statements, financial statement schedules and exhibits are filed as a part of this report: 1. 2. 3. Financial Statements. Chesapeake's consolidated financial statements are included in Item 8 of Part II of ...

  • Page 166
    ...of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHESAPEAKE ENERGY CORPORATION Date: February 27, 2015 By: /s/ ROBERT D. LAWLER Robert D. Lawler President and Chief Executive Officer POWER OF...

  • Page 167
    ... and Sale Agreement by and between Chesapeake Appalachia, L.L.C. and SWN Production Company, LLC (formerly Southwestern Energy Production Company) dated December 22, 2014. Settlement Agreement by and between Chesapeake Appalachia, L.L.C. and SWN Production Company, LLC (formerly Southwestern Energy...

  • Page 168
    ...of December 6, 2006 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, The Bank of New York Mellon Trust Company, N.A., as Trustee, AIB/BNY Fund Management (Ireland) Limited, as Irish Paying Agent and Transfer Agent, and The Bank of New York, London Branch, as...

  • Page 169
    ... Senior Notes due 2022. Credit Agreement dated December 15, 2014 by and among: Chesapeake Energy Corporation, as borrower; MUFG Union Bank N.A., as administrative agent, cosyndication agent, a swingline lender and a letter of credit issuer; Wells Fargo Bank and National Association, as cosyndication...

  • Page 170
    ...1, 2013 between Executive Vice President/Senior Vice President and Chesapeake Energy Corporation. Form of Indemnity Agreement for officers and directors of Chesapeake Energy Corporation and its subsidiaries. Chesapeake Energy Corporation 2013 Annual Incentive Plan. Chesapeake Energy Corporation 2014...

  • Page 171
    ... Services, Division of Schlumberger Technology Corporation. Consent of Ryder Scott Company, L.P. Robert D. Lawler, President and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Domenic J. Dell'Osso, Jr., Executive Vice President and Chief Financial...

  • Page 172
    ... OF DIRECTORS Archie W. Dunham (1,2) Chairman of the Board Former Chairman ConocoPhillips Houston, Texas Vincent J. Intrieri (1,2) Senior Managing Director Icahn Capital LP New York, New York Robert D. Lawler President and Chief Executive Officer Chesapeake Energy Corporation Oklahoma City, Oklahoma...

  • Page 173
    6100 NORTH WESTERN AVENUE O K L A H O M A C I T Y, O K 7 3 1 1 8 CHK.COM