Chesapeake Energy 2015 Annual Report Download - page 109

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
105
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 carryforwards which comprise deferred
taxes are as follows:
Years Ended December 31,
2015 2014
($ in millions)
Deferred tax liabilities:
Property, plant and equipment............................................................................... $ — $ (3,829)
Volumetric production payments ........................................................................... (802) (1,023)
Carrying value of debt ........................................................................................... — (443)
Derivative instruments ........................................................................................... (294) (428)
Other ..................................................................................................................... (74) (114)
Deferred tax liabilities ...................................................................................... (1,170) (5,837)
Deferred tax assets:
Property, plant and equipment............................................................................. 1,140 —
Net operating loss carryforwards (carrybacks) .................................................... 1,556 945
Carrying value of debt ......................................................................................... 535 —
Asset retirement obligations ................................................................................ 174 165
Investments ......................................................................................................... 132 84
Accrued liabilities ................................................................................................. 332 239
Other ................................................................................................................... 250 234
Deferred tax assets ......................................................................................... 4,119 1,667
Valuation allowance ............................................................................................. (2,949) (222)
Net deferred tax assets ................................................................................... 1,170 1,445
Net deferred tax assets (liabilities) .................................................................. $ — $ (4,392)
Reflected in accompanying balance sheets as:
Non-current deferred income tax liability ............................................................. $ — $ (4,392)
Total .......................................................................................................... $ — $ (4,392)
In connection with the exchange of our 8.00% Senior Secured Second Lien Notes due 2022, for Existing Notes,
we recognized approximately $2.8 billion of cancellation of indebtedness income for tax purposes. The income from
the cancellation of indebtedness is included in the deferred tax asset on property, plant and equipment.
As of December 31, 2015, Chesapeake had federal income tax NOL carryforwards of approximately $3.2 billion
and state NOL carryforwards of approximately $9.5 billion which excludes the NOL carryforwards related to
unrecognized tax benefits and stock compensation windfalls that have not been recognized under U.S. GAAP. The
associated deferred tax assets related to these NOL carryforwards were $1.107 billion and $449 million. Additionally,
we had $31 million of alternative minimum tax (AMT) NOL carryforwards, net of unrecognized tax benefits, available
as a deduction against future AMT income. The NOL carryforwards expire from 2031 through 2035. The value of these
carryforwards depends on the ability of Chesapeake to generate taxable income. As of December 31, 2015 and 2014,
we had deferred tax assets of $4.119 billion and $1.667 billion, respectively, upon which we had a valuation allowance
of $2.949 billion and $222 million, respectively. The net change in the valuation allowance of $2.727 billion for both
federal and state deferred tax assets is reflected as a component of income tax expense.