Chesapeake Energy 2015 Annual Report Download - page 26

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ITEM 1A. Risk Factors
There are numerous factors that affect our business and operating results, many of which are beyond our control.
The following is a description of significant factors that might cause our future results to differ materially from those
currently expected. The risks described below are not the only risks facing our company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations.
If any of these risks actually occur, our business, financial position, operating results, cash flows, reserves and/or our
ability to pay our debts and other liabilities could suffer, the trading price and liquidity of our securities could decline
and you may lose all or part of your investment in our securities.
Oil, natural gas and NGL prices fluctuate widely, and continued low prices or lower prices for an extended
period of time are likely to have a material adverse effect on our business.
Our revenues, operating results, profitability, liquidity and ability to grow depend primarily upon the prices we
receive for the oil, natural gas and NGL we sell. We require substantial expenditures to replace reserves, sustain
production and fund our business plans. Low oil, natural gas and NGL prices can negatively affect the amount of cash
available for capital expenditures and debt repayment and our ability to borrow money or raise additional capital and,
as a result, could have a material adverse effect on our financial condition, results of operations, cash flows and
reserves. In addition, low prices may result in ceiling test write-downs of our oil and natural gas properties. We urge
you to read the risk factors below for a more detailed description of each of these risks.
Historically, the markets for oil, natural gas and NGL have been volatile and they are likely to continue to be
volatile. Wide fluctuations in oil, natural gas and NGL prices may result from relatively minor changes in the supply of
or demand for oil, natural gas and NGL, market uncertainty and other factors that are beyond our control, including:
• domestic and worldwide supplies of oil, natural gas and NGL, including U.S. inventories of oil and natural
gas reserves;
• weather conditions;
• changes in the level of consumer and industrial demand;
• the price and availability of alternative fuels;
• the effectiveness of worldwide conservation measures;
• the availability, proximity and capacity of pipelines, other transportation facilities and processing facilities;
• the level and effect of trading in commodity futures markets, including by commodity price speculators and
others;
• U.S. exports of oil and/or liquefied natural gas;
• the price and level of foreign imports;
• the nature and extent of domestic and foreign governmental regulations and taxes;
• the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain
oil price and production controls;
• political instability or armed conflict in oil and natural gas producing regions;
• acts of terrorism; and
• domestic and global economic conditions.
These factors and the volatility of the energy markets make it extremely difficult to predict future oil, natural gas
and NGL price movements with any certainty. Oil and natural gas prices continued to decline and remain low throughout
2015 and into the 2016 first quarter. As of February 23, 2016, 56% and 58% of our forecasted 2016 oil production and
natural gas production, respectively, was hedged under swaps. Even with oil and natural gas derivatives currently in
place to mitigate price risks associated with a portion of our future production, our 2016 revenue and results of operations
are expected to be below 2015 levels and will be further adversely affected if commodity prices remain at current levels.
In addition, a prolonged extension of prices at these levels will reduce the quantities of reserves that may be economically
produced.