Chesapeake Energy 2015 Annual Report Download - page 24

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Natural Gas Liquids (NGL). Those hydrocarbons in natural gas that are separated from the gas as liquids through
the process of absorption, condensation, adsorption or other methods in gas processing or cycling plants. Natural gas
liquids primarily include ethane, propane, butane, isobutene, pentane, hexane and natural gasoline.
Net Acres or Net Wells. The sum of the fractional working interests owned in gross acres or gross wells.
NYMEX. New York Mercantile Exchange.
Play. A term applied to a portion of the exploration and production cycle following the identification by geologists
and geophysicists of areas with potential oil, natural gas and NGL reserves.
Present Value or PV-10. When used with respect to oil, natural gas and NGL reserves, present value, or PV-10,
means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated
production and future development costs, using prices calculated as the average oil and natural gas price during the
preceding 12-month period prior to the end of the current reporting period, (determined as the unweighted arithmetic
average of prices on the first day of each month within the 12-month period) and costs in effect at the determination
date, without giving effect to non-property related expenses such as general and administrative expenses, debt service
and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount
rate of 10%.
Price Differential. The difference in the price of oil, natural gas or NGL received at the sales point and the NYMEX
price.
Productive Well. A well that is not a dry well. Productive wells include producing wells and wells that are
mechanically capable of production.
Proved Developed Reserves. Proved reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared
to the cost of a new well.
Proved Properties. Properties with proved reserves.
Proved Reserves. Proved oil and natural gas reserves are those quantities of oil and natural gas, which, by
analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible
– from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and
government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence
indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for
the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably
certain that it will commence the project within a reasonable time. The area of a reservoir considered as proved includes
(i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir
that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or
natural gas on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved
quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless
geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable
certainty. Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the
potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of
the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact
with reasonable certainty. Reserves that can be produced economically through application of improved recovery
techniques (including, but not limited to, fluid injection) are included in the proved classification when (i) successful
testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole,
the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable
technology establishes the reasonable certainty of the engineering analysis on which the project or program was based
and (ii) the project has been approved for development by all necessary parties and entities, including governmental
entities. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to
be determined. The price is the average price during the 12-month period prior to the ending date of the period covered
by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within
the period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.