Chesapeake Energy 2014 Annual Report Download - page 38

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severance tax rate have been proposed in Ohio and Pennsylvania. These changes, if enacted, will make it more costly
for us to explore for and develop our oil and natural gas resources.
Evolving OTC derivatives regulation could impact the effectiveness of our commodity hedging program.
In July 2010, the U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act), which contains measures aimed at migrating over-the-counter (OTC) derivative markets to exchange-
traded and cleared markets. Certain companies that use derivatives to hedge commercial risk, referred to as end-
users, are permitted to continue to use OTC derivatives under newly adopted regulations. We maintain an active price
and basis risk management program related to the oil and natural gas we produce for our own account in order to
manage the impact of low commodity prices and to predict future cash flows with greater certainty. We have used the
OTC market exclusively for our oil and natural gas derivative contracts, and we also use OTC derivatives to manage
risks arising from interest rate exposure. The Dodd-Frank Act and the rules and regulations promulgated thereunder
should permit us, as an end user, to continue to utilize OTC derivatives, but could cause increased costs and reduce
liquidity in such markets. Such changes could materially reduce our hedging opportunities which would negatively
affect our revenues and cash flow during periods of low commodity prices. New position limits rules proposed under
the Dodd-Frank Act could also impact our commodity hedging program and could, if enacted as proposed, affect our
ability to continue to use the full scope of OTC derivatives to hedge commodity price risk in the manner that we have
in the past.
The oil and gas exploration and production industry is very competitive, and some of our competitors
have greater financial and other resources than we do.
We face 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 and individual producers and
operators. Some of our competitors have greater financial and other resources than we do. As a result, these competitors
may be able to address these competitive factors more effectively than we can or weather industry downturns more
easily than we can. We also face indirect competition from alternative energy sources, including wind, solar and electric
power.
Our performance depends largely on the talents and efforts of highly skilled individuals and on our ability to attract
new employees and to retain and motivate our existing employees. Competition in our industry for qualified employees
is intense. If we are unsuccessful in attracting and retaining skilled employees and managerial talent, our ability to
compete effectively will be diminished.
A deterioration in general economic, business or industry conditions would have a material adverse effect
on our results of operations, liquidity and financial condition.
In recent years, concerns over global economic conditions, energy costs, geopolitical issues, the availability and
cost of credit, and the U.S. real estate and financial markets have contributed to economic uncertainty and reduced
expectations for the global economy. Meanwhile, continued hostilities in the Middle East and the occurrence or threat
of terrorist attacks in the United States or other countries also could adversely affect the global economy. Concerns
about global economic growth have had a significant impact on global financial markets and commodity prices. If the
economic climate in the United States or abroad deteriorates, worldwide demand for petroleum products could diminish,
which could impact the price at which we can sell our production, affect the ability of our vendors, suppliers and
customers to continue operations and ultimately adversely impact our results of operations, liquidity and financial
condition.