Chesapeake Energy 2015 Annual Report Download - page 63

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Restructuring and Other Termination Costs. We recorded expense of $36 million, $7 million and $248 million in
2015, 2014 and 2013, respectively, related to restructuring and other termination costs. In 2015, we reduced our
workforce by approximately 15% as part of an overall plan to reduce costs and better align our workforce with the
needs of our business and current oil and natural gas commodity prices. In connection with the reduction, we incurred
a total charge of approximately $55 million in 2015 for one-time termination benefits, all of which were paid in cash in
the fourth quarter of 2015. Additionally, the 2015 and 2014 amounts include negative fair value adjustments to PSUs
granted to former executives of the Company, which corresponded to a decrease in the trading price of our common
stock. The 2014 expense also includes charges incurred in connection with the spin-off of our oilfield services business
and senior management separations. The Company committed to a workforce reduction plan in September 2013 that
resulted in a reduction of approximately 900 employees. In connection with the workforce reduction plan, we incurred
a total charge of $66 million. The acceleration of vesting of stock-based compensation accounted for approximately
$45 million of this expense. We also incurred charges of approximately $182 million in 2013 related to the separation
from the Company of certain other employees, including approximately $107 million related to our former CEO and
other executive officers that were outside the workforce reduction plan. See Note 18 of the notes to our consolidated
financial statements included in Item 8 of this report for further discussion of our restructuring and other termination
costs.
Provision for Legal Contingencies. In 2015 and 2014, respectively, we recorded $353 million and $234 million
for legal contingencies. The 2015 provision consisted of $25 million related to the April 2015 resolution of litigation we
were defending against the state of Michigan and $339 million related to litigation involving our early redemption of
our 2019 Notes. See Notes 3 and 4 of the notes to our consolidated financial statements included in Item 8 of this
report for discussion of ongoing 2019 Notes litigation. Additionally in 2015, we reduced our royalty provision amount
from $119 million to $109 million to reflect the amount paid in 2015 to settle litigation with Oklahoma royalty owners,
net of claimants that opted-out. In 2014, we accrued $134 million of loss contingencies related to royalty claims. See
Note 4 of the notes to our consolidated financial statements included in Item 8 of this report for further discussion of
royalty claims. In 2014, we also accrued a $100 million loss contingency for litigation regarding our 2019 Notes litigation.
Oil, Natural Gas and NGL Depreciation, Depletion and Amortization. Depreciation, depletion and amortization
(DD&A) of oil, natural gas and NGL properties was $2.099 billion, $2.683 billion and $2.589 billion in 2015, 2014 and
2013, respectively. The average DD&A rate per boe, which is a function of capitalized costs, future development costs
and the related underlying reserves in the periods presented, was $8.47, $10.41 and $10.59 in 2015, 2014 and 2013,
respectively. The absolute and per unit decrease in 2015 was the result of a lower amortization base as a result of our
impairment of oil and gas properties in 2015 and a reduction in our estimated future development costs as a result of
drilling efficiencies and a forecasted reduction in our future capital plans, partially offset by an approximate 39% reduction
in our reserve base driven primarily by lower prices used in calculating our estimated reserves. Approximately 46% of
the reduction in our reserves base due to price was associated with proved undeveloped reserves. The $94 million
increase in 2014 was primarily driven by increases in our production.