Chesapeake Energy 2014 Annual Report Download - page 49

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Overview
For an overview of our business and strategy, please see Our Business and Business Strategy in Item 1 of this
report.
Operating Results
We own interests in approximately 45,100 oil and natural gas wells and produced an average of approximately
729 mboe per day in the 2014 fourth quarter, net to our interest. Our 2014 production of 258 mmboe consisted of 42
mmbbls of oil (16% on an oil equivalent basis), 1.1 tcf of natural gas (71% on an oil equivalent basis), and 33 mmbbls
of NGL (13% on an oil equivalent basis). Liquids represented 29% of total production for 2014, up from 25% in 2013.
Our daily production for 2014 averaged approximately 706 mboe, an increase of 5% from 2013, or 9% when adjusted
for asset sales. Compared to 2013, average daily oil production increased by 3%, or approximately 3 mbbls per day;
average daily natural gas production remained the same year over year, primarily as a result of asset sales; and
average daily NGL production increased by 58%, or approximately 33 mbbls per day. Our oil, natural gas and NGL
revenues (excluding gains or losses on oil and natural gas derivatives) increased approximately $239 million to $7.2
billion in 2014 compared to $6.9 billion in 2013, primarily due to an increase in oil and NGL volumes sold and an
increase in the price received for our natural gas sold, partially offset by a decrease in the prices received for our oil
and NGL sold. See Results of Operations below for additional details.
Capital Expenditures
Our drilling and completion capital expenditures during 2014 were approximately $4.5 billion and capital
expenditures for the acquisition of unproved properties, geological and geophysical costs and other plant, property
and equipment were approximately $669 million, for a total of approximately $5.1 billion compared to the Company’s
forecasted range of $5.0 to $5.4 billion. The level of drilling and completion expenditures represented a decrease of
approximately $1.0 billion, or 18%, compared to 2013. In 2014, we operated an average of 64 rigs, a decrease of
seven rigs compared to 2013. In addition to a lower rig count, drilling and completion costs were lower in 2014 than
in 2013 as a result of improving capital efficiencies. The level of capital expenditures for the acquisition of unproved
properties, geological and geophysical costs and other plant, property and equipment decreased approximately $562
million, or 46%, compared to 2013. The reduction is primarily the result of a reduction in costs for construction of our
corporate headquarters and field offices and for our former oilfield services business which was spun off in June 2014.
Capital expenditures were also lower in 2014 because we sold substantially all of our midstream business and most
of our gathering assets in 2012 and 2013.
In addition, we invested approximately $499 million and $240 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. Both the spin-off and exchange are discussed below under 2014 Strategic Transactions. Our capitalized
interest was approximately $637 million and $816 million in 2014 and 2013, respectively. Including these items, total
capital investments were approximately $6.7 billion in 2014 compared to $7.6 billion for 2013.
Based on planned activity levels for 2015, we project that drilling and completion, net leasehold, geological and
geophysical and other plant, property and equipment capital expenditures will be $4.0 to $4.5 billion, inclusive of
capitalized interest. This decrease from 2014 is primarily driven by substantially lower oil and natural gas prices
forecasted in 2015 compared to 2014. See Liquidity and Capital Resources for additional information on how we plan
to fund our capital budget.