Chesapeake Energy 2014 Annual Report Download - page 134

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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In connection with the spin-off, we entered into several agreements to define the terms and conditions of the spin-
off and our ongoing relationship with SSE after the spin-off, including a master separation agreement, a tax sharing
agreement, an employee matters agreement, a transition services agreement, a services agreement and certain
commercial agreements. These agreements, among other things, allocate responsibility for obligations arising before
and after the distribution date, including obligations relating to taxes, employees, various transition services and oilfield
services.
• The master separation agreement sets forth the agreements between SSE and Chesapeake regarding the
principal transactions that were necessary to effect the spin-off and also sets forth other agreements that
govern certain aspects of SSE’s relationship with Chesapeake after completion of the spin-off.
• The tax sharing agreement governs the respective rights, responsibilities and obligations of SSE and
Chesapeake with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns,
the control of audits and other tax proceedings, and certain other matters regarding taxes.
• The employee matters agreement addresses employee compensation and benefit plans and programs, and
other related matters in connection with the spin-off, including the treatment of holders of Chesapeake
common stock options, restricted stock and performance share units, and the cooperation between SSE
and Chesapeake in the sharing of employee information and maintenance of confidentiality. See Note 9 for
additional information regarding the effect of the spin-off on outstanding equity compensation.
• The transition services agreement sets forth the terms on which we provide SSE certain services. Transition
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 a
negotiated fee for providing those services.
• The services agreement requires us to utilize, at market-based pricing, certain SSE pressure pumping
services. See Note 4 for a summary of the terms of the services agreement.
• We have also entered into drilling agreements that are rig-specific daywork drilling contracts with terms
ranging from three months to three years and at market-based rates. We have the right to terminate a drilling
agreement in certain circumstances. As of December 31, 2014, the aggregate undiscounted minimum future
payments under these drilling agreements were approximately $410 million.
In 2014, our stockholders’ equity decreased by $270 million, net of $151 million of associated deferred tax liabilities,
as the result of the spin-off, and we recognized $15 million of charges associated with the spin-off that are included in
restructuring and other termination costs on our consolidated statement of operations. See Note 18 for further details
regarding these charges.