Chesapeake Energy 2015 Annual Report Download - page 67

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In December 2014, we entered into a new five-year $4.0 billion senior unsecured revolving credit facility to use
for general corporate purposes. That credit facility replaced our then-existing $4.0 billion senior secured revolving credit
facility that was scheduled to mature in December 2015. We recognized a loss of approximately $2 million in
extinguishment costs related to lenders under the terminated facility that were not lenders under the new facility. In
2014, we repaid the borrowings under and terminated our $2.0 billion term loan credit facility due 2017 and recorded
a loss of approximately $90 million, including $40 million in premiums, $30 million of unamortized discount and $20
million of unamortized deferred charges. Also in 2014, we purchased and redeemed $1.265 billion in aggregate principal
amount of our 9.5% Senior Notes due 2015. We recorded a loss of approximately $99 million associated with the
purchase and redemption, including $87 million in premiums, $9 million of unamortized debt discount and $3 million
of unamortized deferred charges. In addition, in 2014, we redeemed $97 million in principal amount of our 6.875%
Senior Notes due 2018 at par. We recorded a loss of approximately $6 million associated with the redemption, including
$5 million in premiums and $1 million of unamortized deferred charges.
In 2013, we terminated the financing master lease agreement on our real estate surface properties in the Fort
Worth, Texas area for $258 million and recorded a loss of approximately $123 million associated with the extinguishment.
Also, in 2013, we completed tender offers to purchase $217 million in aggregate principal amount of our 7.625% Senior
Notes due 2013 for $221 million and $377 million in aggregate principal amount of our 6.875% Senior Notes due 2018
for $405 million. We recorded a loss of approximately $37 million associated with the tender offers, including $32 million
in premiums and $5 million of unamortized deferred charges. In addition, we redeemed $1.3 billion in aggregate principal
amount of our 6.775% Senior Notes due 2019 at par pursuant to a notice of special early redemption. We recorded a
loss of approximately $33 million associated with the redemption, including $19 million of unamortized deferred charges
and $14 million of discount.
Other Income. Other income was $8 million in 2015, compared to $22 million in 2014 and $26 million in 2013.
The 2015 income consisted of $6 million of interest income and $2 million of miscellaneous income. The 2014 other
income consisted primarily of $3 million of interest income and $19 million of miscellaneous income. The 2013 other
income consisted of $5 million of interest income and $21 million of miscellaneous income.
Income Tax Expense (Benefit). Chesapeake recorded an income tax benefit of $4.463 billion in 2015 and income
tax expense of $1.144 billion and $548 million in 2014 and 2013, respectively. Our effective income tax rate was 23.4%
in 2015, 35.8% in 2014 and 38.0% in 2013. The decrease in the effective income tax rate from 2014 to 2015 is primarily
due to the tax benefit at expected rates being offset by a significant increase in our valuation allowance. Further, our
effective tax rate can fluctuate as a result of the impact of state income taxes and permanent differences. See Note 6
of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of income tax
expense (benefit).
Based on the material write-downs of the carrying value of our oil and natural gas properties and our operating
results for the year ending December 31, 2015, we are in a net deferred tax asset position at year end. We believe it
is more likely than not that these deferred tax assets will not be realized. Management assesses the available positive
and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of
deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over
the three-year period ending December 31, 2015. Such objective negative evidence limits the ability to consider other
subjective positive evidence, such as our projections for future growth. The amount of the deferred tax asset considered
realizable, however, could be adjusted if estimates of future taxable income are reduced or increased, or if objective
negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective
evidence such as expected future growth.
Net Income Attributable to Noncontrolling Interests. Chesapeake recorded net income attributable to
noncontrolling interests of $50 million, $139 million and $170 million in 2015, 2014 and 2013, respectively. Net income
attributable to noncontrolling interests in 2015 consisted of income related to the Chesapeake Granite Wash Trust and
dividends paid on preferred stock of our CHK C-T subsidiary. The 2014 and 2013 amounts included income related to
the Chesapeake Granite Wash Trust as well as dividends paid on preferred stock of our CHK C-T and CHK Utica
subsidiaries. The decreases from 2014 to 2015 and from 2013 to 2014 are primarily due to the repurchase of all of the
outstanding preferred shares of CHK Utica and CHK C-T from third-party preferred shareholders in July 2014 and
August 2015, respectively. See Note 8 of the notes to our consolidated financial statements included in Item 8 of this
report for a discussion of these entities.