Chesapeake Energy 2015 Annual Report Download - page 141

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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Natural Gas Compressors. In 2015, we recorded a $21 million impairment related to 465 compressors for the
difference between the aggregate sales price of $40 million and the carrying value.
Buildings and Land. In 2013, we determined we would sell certain of our buildings and land (other than our core
campus) in the Oklahoma City area. We recognized an impairment loss of $186 million on these assets for the difference
between the carrying amount and fair value of the assets, less the anticipated costs to sell. Given the impairment
losses associated with these assets, we tested other noncore buildings and land that we owned in the Oklahoma City
area for recoverability. As a result of this test, we recognized an impairment loss of $69 million on these assets in 2013.
Due to a decrease in the estimated market prices of certain property classified as held for sale in the Fort Worth
area, we recognized an additional impairment loss of $86 million in 2013. We tested other noncore surface land that
we owned in the Fort Worth area for recoverability in 2013 and recognized an additional impairment loss of $10 million
on these assets for the difference between the carrying amount and fair value of the assets.
Finally, we recorded an impairment loss of approximately $15 million on certain of our buildings and land outside
of the Oklahoma City and Fort Worth areas in 2013. All the buildings and land for which impairment losses were
recognized in 2015, 2014 and 2013 are included in our other segment.
Oilfield Services Equipment. In 2014, we purchased 31 leased rigs and equipment from various lessors for an
aggregate purchase price of $140 million. In connection with these purchases, we paid $8 million in early lease
termination costs, which are included in impairments of fixed assets and other in the consolidated statement of
operations. In addition, we recognized an impairment loss of approximately $15 million related to leasehold
improvements associated with these assets. The drilling rigs and equipment are included in our former oilfield services
operating segment. In 2013, we purchased 23 leased rigs from various lessors for an aggregate purchase price of
$141 million and paid approximately $22 million in early lease termination costs, which is included in impairments of
fixed assets and other in the consolidated statement of operations. In addition, we impaired approximately $22 million
related to leasehold improvements and other costs associated with these assets. In 2013, we also recognized $27
million of impairment losses on certain of our drilling rigs for the difference between the carrying amount and fair value,
less the anticipated costs to sell. We estimated the fair value using prices expected to be received.
Other. In 2015, we recorded a $47 million loss contingency related to contract disputes. In 2015, we recorded a
$22 million impairment of a note receivable as a result of the increased credit risk associated with declining commodity
prices. In addition, under the terms of our joint venture agreements (see Note 12), we are required to extend, renew
or replace certain expiring joint leasehold, at our cost, to ensure that the net acreage is maintained in certain designated
areas. In 2015, we entered into a settlement with Total regarding our acreage maintenance commitment in our Barnett
Shale joint venture and accrued a $70 million charge. In 2015, as a result of reductions in our planned drilling activity
in response to declines in oil and natural gas prices, we terminated contracts with drilling contractors and incurred
charges of $18 million. Further contract termination charges in subsequent quarters may occur if commodity prices
remain low or continue to decline. The contract termination charges are included in our exploration and production
operating segment. In 2014, we revised our estimate of our net acreage shortfall with Total under the terms of our
Barnett Shale joint venture agreement and recorded a $22 million charge. See Note 4 for additional discussion regarding
our net acreage maintenance commitments. In 2013, we recorded a $26 million charge for terminating a gas gathering
agreement, a $28 million charge for the impairment of certain assets used to promote natural gas demand and $15
million for the termination of a contract drilling agreement with a third party.
Nonrecurring Fair Value Measurements. Fair value measurements for certain of the impairments discussed above
were based on recent sales information for comparable assets. As the fair value was estimated using the market
approach based on recent prices from orderly sales transactions for comparable assets between market participants,
these values were classified as Level 2 in the fair value hierarchy. Other inputs used were not observable in the market;
these values were classified as Level 3 in the fair value hierarchy.