Chesapeake Energy 2014 Annual Report Download - page 3

2014 ANNUAL REPORT 1
GENERATING VALUE
We grew our total oil and natural gas equivalent production
by 9% in 2014, adjusting for divestitures, while reducing our
total capital expenditures by approximately 14% compared
to 2013. We also reached a production record of 770,000
barrels of oil equivalent (boe) per day in mid-December.
More importantly, we drove billions of dollars in value into
our company through numerous efciencies, continuous im-
provement and cost leadership.
In 2014 we reduced drilling and completions capital ex-
penditures by 18% to $4.5 billion, saving $1 billion compared
to 2013. Our 2014 operating cash ow was approximately
$5 billion, reecting the lowest funding gap in 10 years. In
addition, combined production and general and administrative
costs per boe dropped 10% to a nine-year low.
GAINING FINANCIAL FLEXIBILITY
Chesapeake became dramatically stronger, less complex and
much more exible in 2014 as three major accomplishments
set us apart from our peers. We completed one of the largest
and most signicant transactions in company history with the
divestiture of certain assets in the southern Marcellus and
eastern Utica shales. Receiving approximately $5 billion for
the assets during a depressed commodity price environment
— assets which represented only 8% of proved reserves —
gives us tremendous nancial exibility. We also completed
a $450 million acquisition and exchange that doubled our
working interest in the oil-rich Powder River Basin. Finally, we
successfully spun off our oileld services division into the
public company Seventy Seven Energy Inc.
We reached another rst in company history with a new
unsecured $4 billion credit facility with investment grade-like
terms. Moody’s and S&P each upgraded Chesapeake by two
notches, placing us one level below investment grade at both
rating agencies. Since 2012 we have reduced total leverage
by $5.5 billion.
OPERATING RESPONSIBLY
The safety of our employees, contractors, the environment and
the public is our number one priority, and our 2014 performance
in those areas was outstand-
ing. We ended the year with the
lowest total recordable incident
rate in company history and
reduced our cumulative report-
able spill volume by 42%.
We remain focused on our
responsibility to stakeholders,
and in 2014 that included a
renewed commitment to our landowners. We initiated face-
to-face meetings in our two largest producing regions, Penn-
sylvania and Texas, and continue to initiate communications
with many of our landowners. In 2014 we also invested in our
employees through career development programs, introduced
a competitively based companywide employee compensation
program that aligned with our corporate performance goals
and fostered a culture of continuous learning and elevating
innovative solutions.
DEMONSTRATING E&P LEADERSHIP
Our record accomplishments have positioned us to remain
strong and exible in 2015. We continue to respond decisively
to the lower commodity price environment, including a reduced
capital budget and activity level. However, we will not shift our
focus from driving differential performance, ensuring every
dollar we invest creates value, increases our nancial and
operational exibility and lowers our business costs. These
strategies will allow us to continue the historic transformation
of our company into a leader in the E&P industry. We have
made impressive progress, yet there is so much more we will
accomplish. Thank you for investing in Chesapeake Energy.
DEAR FELLOW SHAREHOLDERS
In 2014 we transformed every aspect of our business to build a new foundation — one based on financial
discipline and profitable and efficient growth from our resources. During this critical year, our employees
delivered exceptional results while significantly improving our financial position. We achieved the best safety
performance in company history and further improved capital efficiencies in our major operating areas. From
a financial perspective, we became significantly stronger, less complex and much more flexible. These along
with many other achievements drove Chesapeake to greater stability and strength.
Robert D. Lawler
President, Chief Executive Ofcer and Director
April 10, 2015