Oklahoma | 73-1395733 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
6100 North Western Avenue | ||
Oklahoma City, Oklahoma | 73118 | |
(Address of principal executive offices) | (Zip Code) |
PART I. | |||
Financial Information | |||
Page | |||
Item 1. | Condensed Consolidated Financial Statements (Unaudited) | ||
Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012 | |||
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012 | |||
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2013 and 2012 | |||
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 | |||
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2013 and 2012 | |||
Notes to Condensed Consolidated Financial Statements | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||
Item 4. | Controls and Procedures | ||
PART II. | |||
Other Information | |||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 3. | Defaults Upon Senior Securities | ||
Item 4. | Mine Safety Disclosures | ||
Item 5. | Other Information | ||
Item 6. | Exhibits |
March 31, 2013 | December 31, 2012 | |||||||
($ in millions) | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents ($1 and $1 attributable to our VIE) | $ | 33 | $ | 287 | ||||
Restricted cash | 81 | 111 | ||||||
Accounts receivable | 2,382 | 2,245 | ||||||
Short-term derivative assets | 5 | 58 | ||||||
Deferred income tax asset | 216 | 90 | ||||||
Other current assets | 156 | 153 | ||||||
Current assets held for sale | 11 | 4 | ||||||
Total Current Assets | 2,884 | 2,948 | ||||||
PROPERTY AND EQUIPMENT: | ||||||||
Natural gas and oil properties, at cost based on full cost accounting: | ||||||||
Evaluated natural gas and oil properties ($488 and $488 attributable to our VIE) | 51,918 | 50,172 | ||||||
Unevaluated properties | 14,626 | 14,755 | ||||||
Oilfield services equipment | 2,261 | 2,130 | ||||||
Other property and equipment | 3,797 | 3,778 | ||||||
Total Property and Equipment, at Cost | 72,602 | 70,835 | ||||||
Less: accumulated depreciation, depletion and amortization (($109) and ($58) attributable to our VIEs) | (35,043 | ) | (34,302 | ) | ||||
Property and equipment held for sale, net | 588 | 634 | ||||||
Total Property and Equipment, Net | 38,147 | 37,167 | ||||||
LONG-TERM ASSETS: | ||||||||
Investments | 711 | 728 | ||||||
Long-term derivative assets | 2 | 2 | ||||||
Other long-term assets | 737 | 766 | ||||||
TOTAL ASSETS | $ | 42,481 | $ | 41,611 | ||||
March 31, 2013 | December 31, 2012 | |||||||
($ in millions) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 1,909 | $ | 1,710 | ||||
Short-term derivative liabilities ($6 and $4 attributable to our VIEs) | 424 | 105 | ||||||
Accrued interest | 144 | 226 | ||||||
Current maturities of long-term debt, net | — | 463 | ||||||
Other current liabilities ($23 and $21 attributable to our VIEs) | 3,288 | 3,741 | ||||||
Current liabilities held for sale | 20 | 21 | ||||||
Total Current Liabilities | 5,785 | 6,266 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Long-term debt, net | 13,449 | 12,157 | ||||||
Deferred income tax liabilities | 3,021 | 2,807 | ||||||
Long-term derivative liabilities ($3 and $3 attributable to our VIEs) | 693 | 934 | ||||||
Asset retirement obligations | 387 | 375 | ||||||
Other long-term liabilities | 1,132 | 1,176 | ||||||
Total Long-Term Liabilities | 18,682 | 17,449 | ||||||
CONTINGENCIES AND COMMITMENTS (Note 4) | ||||||||
EQUITY: | ||||||||
Chesapeake Stockholders’ Equity: | ||||||||
Preferred stock, $0.01 par value, 20,000,000 shares authorized: | ||||||||
7,251,515 shares outstanding | 3,062 | 3,062 | ||||||
Common stock, $0.01 par value, 1,000,000,000 shares authorized: | ||||||||
669,274,935 and 666,467,664 shares issued | 7 | 7 | ||||||
Paid-in capital | 12,355 | 12,293 | ||||||
Retained earnings | 495 | 437 | ||||||
Accumulated other comprehensive income (loss) | (170 | ) | (182 | ) | ||||
Less: treasury stock, at cost; 2,229,977 and 2,147,724 common shares | (49 | ) | (48 | ) | ||||
Total Chesapeake Stockholders’ Equity | 15,700 | 15,569 | ||||||
Noncontrolling interests | 2,314 | 2,327 | ||||||
Total Equity | 18,014 | 17,896 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 42,481 | $ | 41,611 |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions except per share data) | ||||||||
REVENUES: | ||||||||
Natural gas, oil and NGL | $ | 1,453 | $ | 1,068 | ||||
Marketing, gathering and compression | 1,781 | 1,216 | ||||||
Oilfield services | 190 | 135 | ||||||
Total Revenues | 3,424 | 2,419 | ||||||
OPERATING EXPENSES: | ||||||||
Natural gas, oil and NGL production | 307 | 349 | ||||||
Production taxes | 53 | 47 | ||||||
Marketing, gathering and compression | 1,745 | 1,197 | ||||||
Oilfield services | 155 | 96 | ||||||
General and administrative | 110 | 136 | ||||||
Natural gas, oil and NGL depreciation, depletion and amortization | 648 | 506 | ||||||
Depreciation and amortization of other assets | 78 | 84 | ||||||
Net gains on sales of fixed assets | (49 | ) | (2 | ) | ||||
Impairments of fixed assets and other | 27 | — | ||||||
Employee retirement and other termination benefits | 133 | — | ||||||
Total Operating Expenses | 3,207 | 2,413 | ||||||
INCOME FROM OPERATIONS | 217 | 6 | ||||||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense | (21 | ) | (12 | ) | ||||
Losses on investments | (27 | ) | (5 | ) | ||||
Impairment of investment | (10 | ) | — | |||||
Other income | 6 | 6 | ||||||
Total Other Income (Expense) | (52 | ) | (11 | ) | ||||
INCOME (LOSS) BEFORE INCOME TAXES | 165 | (5 | ) | |||||
INCOME TAX EXPENSE (BENEFIT): | ||||||||
Current income taxes | 1 | — | ||||||
Deferred income taxes | 62 | (2 | ) | |||||
Total Income Tax Expense (Benefit) | 63 | (2 | ) | |||||
NET INCOME (LOSS) | 102 | (3 | ) | |||||
Net income attributable to noncontrolling interests | (44 | ) | (25 | ) | ||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | 58 | (28 | ) | |||||
Preferred stock dividends | (43 | ) | (43 | ) | ||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS | $ | 15 | $ | (71 | ) | |||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||
Basic | $ | 0.02 | $ | (0.11 | ) | |||
Diluted | $ | 0.02 | $ | (0.11 | ) | |||
CASH DIVIDEND DECLARED PER COMMON SHARE | $ | — | $ | 0.0875 | ||||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): | ||||||||
Basic | 651 | 642 | ||||||
Diluted | 651 | 642 |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
NET INCOME (LOSS) | $ | 102 | $ | (3 | ) | |||
Other comprehensive income (loss), net of income tax: | ||||||||
Unrealized gain (loss) on derivative instruments, net of income tax expense (benefit) of ($1) million and $2 million | (1 | ) | 4 | |||||
Reclassification of (gain) loss on settled derivative instruments, net of income tax expense (benefit) of $7 million and ($1) million | 12 | (2 | ) | |||||
Unrealized gain (loss) on investments, net of income tax expense (benefit) of ($3) million and $3 million | (5 | ) | 5 | |||||
Reclassification of impairment of investment, net of income tax expense (benefit) of $4 million and $0 | 6 | — | ||||||
Other comprehensive income | 12 | 7 | ||||||
COMPREHENSIVE INCOME | 114 | 4 | ||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (44 | ) | (25 | ) | ||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | $ | 70 | $ | (21 | ) |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
NET INCOME (LOSS) | $ | 102 | $ | (3 | ) | |||
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH PROVIDED BY OPERATING ACTIVITIES: | ||||||||
Depreciation, depletion and amortization | 726 | 590 | ||||||
Deferred income tax expense (benefit) | 62 | (2 | ) | |||||
Unrealized losses on derivatives | 152 | 276 | ||||||
Stock-based compensation | 32 | 32 | ||||||
Net gains on sales of fixed assets | (49 | ) | (2 | ) | ||||
Impairments of fixed assets and other | 27 | — | ||||||
Losses on investments | 29 | 33 | ||||||
Impairment of investment | 10 | — | ||||||
Employee retirement and other termination benefits | 105 | — | ||||||
Other | (20 | ) | (14 | ) | ||||
Changes in assets and liabilities | (252 | ) | (636 | ) | ||||
Cash provided by operating activities | 924 | 274 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Drilling and completion costs | (1,579 | ) | (2,574 | ) | ||||
Acquisitions of proved and unproved properties | (280 | ) | (1,135 | ) | ||||
Proceeds from divestitures of proved and unproved properties | 190 | 821 | ||||||
Additions to other property and equipment | (330 | ) | (690 | ) | ||||
Proceeds from sales of other assets | 201 | 48 | ||||||
Additions to investments | (3 | ) | (73 | ) | ||||
(Increase) decrease in restricted cash | 55 | (37 | ) | |||||
Other | 1 | (10 | ) | |||||
Cash used in investing activities | (1,745 | ) | (3,650 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from credit facilities borrowings | 3,632 | 5,688 | ||||||
Payments on credit facilities borrowings | (2,811 | ) | (4,546 | ) | ||||
Proceeds from issuance of senior notes, net of discount and offering costs | — | 1,263 | ||||||
Cash paid for prepayment of mortgage | (55 | ) | — | |||||
Cash paid for common stock dividends | (58 | ) | (56 | ) | ||||
Cash paid for preferred stock dividends | (43 | ) | (43 | ) | ||||
Cash paid on financing derivatives | (11 | ) | (9 | ) | ||||
Proceeds from sales of noncontrolling interests | — | 1,044 | ||||||
Proceeds from other financings | — | 225 | ||||||
Distributions to noncontrolling interest owners | (57 | ) | (39 | ) | ||||
Other | (30 | ) | (64 | ) | ||||
Cash provided by financing activities | 567 | 3,463 | ||||||
Net increase (decrease) in cash and cash equivalents | (254 | ) | 87 | |||||
Cash and cash equivalents, beginning of period | 287 | 351 | ||||||
Cash and cash equivalents, end of period | $ | 33 | $ | 438 |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Supplemental disclosure of cash flow information of net cash payments (refunds) for: | ||||||||
Interest, net of capitalized interest | $ | 60 | $ | 36 | ||||
Income taxes, net of refunds received | $ | — | $ | — | ||||
Supplemental disclosure of significant non-cash investing and financing activities: | ||||||||
Change in accrued drilling and completion costs | $ | (79 | ) | $ | 26 | |||
Change in accrued acquisition of proved and unproved property costs | $ | (3 | ) | $ | (2 | ) | ||
Change in accrued costs for other property and equipment | $ | 11 | $ | 24 |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
PREFERRED STOCK: | ||||||||
Balance, beginning and end of period | $ | 3,062 | $ | 3,062 | ||||
COMMON STOCK: | ||||||||
Balance, beginning and end of period | 7 | 7 | ||||||
PAID-IN CAPITAL: | ||||||||
Balance, beginning of period | 12,293 | 12,146 | ||||||
Stock-based compensation | 70 | 33 | ||||||
Reduction in tax benefit from stock-based compensation | (10 | ) | (4 | ) | ||||
Exercise of stock options | 2 | 1 | ||||||
Balance, end of period | 12,355 | 12,176 | ||||||
RETAINED EARNINGS: | ||||||||
Balance, beginning of period | 437 | 1,608 | ||||||
Net income (loss) attributable to Chesapeake | 58 | (28 | ) | |||||
Dividends on common stock | — | (56 | ) | |||||
Dividends on preferred stock | — | (43 | ) | |||||
Balance, end of period | 495 | 1,481 | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): | ||||||||
Balance, beginning of period | (182 | ) | (166 | ) | ||||
Hedging activity | 11 | 2 | ||||||
Investment activity | 1 | 5 | ||||||
Balance, end of period | (170 | ) | (159 | ) | ||||
TREASURY STOCK – COMMON: | ||||||||
Balance, beginning of period | (48 | ) | (33 | ) | ||||
Purchase of 160,145 and 142,655 shares for company benefit plans | (3 | ) | (3 | ) | ||||
Release of 77,892 and 12,834 shares from company benefit plans | 2 | — | ||||||
Balance, end of period | (49 | ) | (36 | ) | ||||
TOTAL CHESAPEAKE STOCKHOLDERS’ EQUITY | 15,700 | 16,531 | ||||||
NONCONTROLLING INTERESTS: | ||||||||
Balance, beginning of period | 2,327 | 1,337 | ||||||
Sales of noncontrolling interests | — | 1,040 | ||||||
Net income attributable to noncontrolling interests | 44 | 25 | ||||||
Distributions to noncontrolling interest owners | (57 | ) | (39 | ) | ||||
Balance, end of period | 2,314 | 2,363 | ||||||
TOTAL EQUITY | $ | 18,014 | $ | 18,894 |
1. | Basis of Presentation and Summary of Significant Accounting Policies |
March 31, 2013 | December 31, 2012 | |||||||
($ in millions) | ||||||||
Accounts receivable | $ | 11 | $ | 4 | ||||
Current assets held for sale | $ | 11 | $ | 4 | ||||
Natural gas gathering systems and treating plants, net of accumulated depreciation | $ | 330 | $ | 352 | ||||
Oilfield services equipment, net of accumulated depreciation(a) | — | 27 | ||||||
Other property and equipment, net of accumulated depreciation | 258 | 255 | ||||||
Property and equipment held for sale, net | $ | 588 | $ | 634 | ||||
Accounts payable | $ | — | $ | 4 | ||||
Accrued liabilities | 20 | 17 | ||||||
Current liabilities held for sale | $ | 20 | $ | 21 |
(a) | In the Current Quarter, we sold eight rigs classified as assets held for sale as of December 31, 2012 for proceeds of approximately $27 million. |
Net Gains (Losses) on Cash Flow Hedges | Net Gains (Losses) on Investments | Total | ||||||||||
($ in millions) | ||||||||||||
Balance, December 31, 2012 | $ | (189 | ) | $ | 7 | $ | (182 | ) | ||||
Other comprehensive income before reclassifications | (1 | ) | (5 | ) | (6 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income | 12 | 6 | 18 | |||||||||
Net current period other comprehensive income | 11 | 1 | 12 | |||||||||
Balance, March 31, 2013 | $ | (178 | ) | $ | 8 | $ | (170 | ) |
Details About Accumulated Other Comprehensive Income Components | Affected Line Item in the Statement Where Net Income is Presented | Amount Reclassified from Accumulated Other Comprehensive Income | ||||
($ in millions) | ||||||
Net losses on cash flow hedges: | ||||||
Commodity contracts | Natural gas, oil and NGL revenues | $ | 12 | |||
Investments: | ||||||
Impairment of investment | Impairment of investment | 6 | ||||
Total reclassifications for the period, net of tax | $ | 18 |
2. | Net Income Per Share |
Net Income Adjustments | Shares | ||||||
($ in millions) | (in millions) | ||||||
Three Months Ended March 31, 2013: | |||||||
Common stock equivalent of our preferred stock outstanding: | |||||||
5.75% cumulative convertible preferred stock | $ | 22 | 56 | ||||
5.75% cumulative convertible preferred stock (series A) | $ | 16 | 39 | ||||
5.00% cumulative convertible preferred stock (series 2005B) | $ | 3 | 5 | ||||
4.50% cumulative convertible preferred stock | $ | 3 | 6 | ||||
Three Months Ended March 31, 2012: | |||||||
Common stock equivalent of our preferred stock outstanding: | |||||||
5.75% cumulative convertible preferred stock | $ | 22 | 55 | ||||
5.75% cumulative convertible preferred stock (series A) | $ | 16 | 39 | ||||
5.00% cumulative convertible preferred stock (series 2005B) | $ | 3 | 5 | ||||
4.50% cumulative convertible preferred stock | $ | 3 | 6 | ||||
Unvested restricted stock | $ | — | 4 | ||||
Outstanding stock options | $ | — | 1 |
3. | Debt |
March 31, 2013 | December 31, 2012 | |||||||
($ in millions) | ||||||||
Term loan due 2017 | $ | 2,000 | $ | 2,000 | ||||
7.625% senior notes due 2013(a) | 464 | 464 | ||||||
9.5% senior notes due 2015 | 1,265 | 1,265 | ||||||
6.25% euro-denominated senior notes due 2017(b) | 440 | 454 | ||||||
6.5% senior notes due 2017 | 660 | 660 | ||||||
6.875% senior notes due 2018(a) | 474 | 474 | ||||||
7.25% senior notes due 2018 | 669 | 669 | ||||||
6.625% senior notes due 2019(c) | 650 | 650 | ||||||
6.775% senior notes due 2019(d) | 1,300 | 1,300 | ||||||
6.625% senior notes due 2020 | 1,300 | 1,300 | ||||||
6.875% senior notes due 2020 | 500 | 500 | ||||||
6.125% senior notes due 2021 | 1,000 | 1,000 | ||||||
2.75% contingent convertible senior notes due 2035(e) | 396 | 396 | ||||||
2.5% contingent convertible senior notes due 2037(e) | 1,168 | 1,168 | ||||||
2.25% contingent convertible senior notes due 2038(e) | 347 | 347 | ||||||
Corporate revolving bank credit facility | 832 | — | ||||||
Oilfield services revolving bank credit facility | 408 | 418 | ||||||
Discount on senior notes and term loan(f) | (441 | ) | (465 | ) | ||||
Interest rate derivatives(g) | 17 | 20 | ||||||
Total debt, net | 13,449 | 12,620 | ||||||
Less current maturities of long-term debt, net(a) | — | (463 | ) | |||||
Total long-term debt, net | $ | 13,449 | $ | 12,157 |
(a) | See Note 18 for further discussion of tender offers completed for a portion of these notes subsequent to March 31, 2013. We reclassified our 7.625% Senior Notes due 2013 from current liabilities to long-term debt as of March 31, 2013 as we refinanced these notes on a long-term basis subsequent to March 31, 2013. There is $1 million of discount associated with the 7.625% Senior Notes due 2013. |
(b) | The principal amount shown is based on the exchange rate of $1.2816 to €1.00 and $1.3193 to €1.00 as of March 31, 2013 and December 31, 2012, respectively. See Note 7 for information on our related foreign currency derivatives. |
(c) | Issuers are Chesapeake Oilfield Operating, L.L.C. (COO), an indirect wholly owned subsidiary of the Company, and Chesapeake Oilfield Finance, Inc. (COF), a wholly owned subsidiary of COO formed solely to facilitate the offering of the 6.625% Senior Notes due 2019. COF is nominally capitalized and has no operations or revenues. Chesapeake Energy Corporation is the issuer of all other senior notes and the contingent convertible senior notes. |
(d) | In the Current Quarter, we issued notice to the trustee to redeem our 6.775% Senior Notes due 2019 at par. See Note 18 for further discussion. |
(e) | The holders of our contingent convertible senior notes may require us to repurchase, in cash, all or a portion of their notes at 100% of the principal amount of the notes on any of four dates that are five, ten, fifteen and twenty years before the maturity date. The notes are convertible, at the holder’s option, prior to maturity under certain circumstances into cash and, if applicable, shares of our common stock using a net share settlement process. One such triggering circumstance is when the price of our common stock exceeds a threshold amount during a |
Contingent Convertible Senior Notes | Repurchase Dates | Common Stock Price Conversion Thresholds | Contingent Interest First Payable (if applicable) | |||||
2.75% due 2035 | November 15, 2015, 2020, 2025, 2030 | $ | 48.31 | May 14, 2016 | ||||
2.5% due 2037 | May 15, 2017, 2022, 2027, 2032 | $ | 63.93 | November 14, 2017 | ||||
2.25% due 2038 | December 15, 2018, 2023, 2028, 2033 | $ | 107.01 | June 14, 2019 |
(f) | Discount as of March 31, 2013 and December 31, 2012 included $359 million and $376 million, respectively, associated with the equity component of our contingent convertible senior notes. This discount is amortized based on an effective yield method. Also included $37 million and $40 million of discount as of March 31, 2013 and December 31, 2012, respectively, associated with our November 2012 term loan. |
(g) | See Note 7 for further discussion related to these instruments. |
Corporate Credit Facility(a) | Oilfield Services Credit Facility(b) | |||||||
($ in millions) | ||||||||
Facility structure | Senior secured revolving | Senior secured revolving | ||||||
Maturity date | December 2015 | November 2016 | ||||||
Borrowing capacity | $ | 4,000 | $ | 500 | ||||
Amount outstanding as of March 31, 2013 | $ | 832 | $ | 408 | ||||
Letters of credit outstanding as of March 31, 2013 | $ | 31 | $ | — |
(a) | Co-borrowers are Chesapeake Exploration, L.L.C., Chesapeake Appalachia, L.L.C. and Chesapeake Louisiana, L.P. |
(b) | Borrower is COO. |
Effective Date | Amended Indebtedness to EBITDA Ratio | |
December 31, 2012 | 5.00 to 1.00 | |
March 31, 2013 | 4.75 to 1.00 | |
June 30, 2013 | 4.50 to 1.00 | |
September 30, 2013 | 4.25 to 1.00 |
4. | Contingencies and Commitments |
March 31, 2013 | ||||
($ in millions) | ||||
2013 | $ | 1,215 | ||
2014 | 1,991 | |||
2015 | 1,810 | |||
2016 | 1,904 | |||
2017 | 1,931 | |||
2018 - 2099 | 9,381 | |||
Total | $ | 18,232 |
5. | Other Liabilities |
March 31, 2013 | December 31, 2012 | |||||||
($ in millions) | ||||||||
Revenues and royalties due others | $ | 1,275 | $ | 1,337 | ||||
Accrued natural gas, oil and NGL drilling and production costs | 444 | 525 | ||||||
Joint interest prepayments received | 594 | 749 | ||||||
Accrued payroll and benefits | 128 | 224 | ||||||
Accrued dividends(a) | — | 101 | ||||||
Other | 847 | 805 | ||||||
Total other current liabilities | $ | 3,288 | $ | 3,741 |
March 31, 2013 | December 31, 2012 | |||||||
($ in millions) | ||||||||
CHK Utica ORRI conveyance obligation(a) | $ | 269 | $ | 275 | ||||
CHK C-T ORRI conveyance obligation(b) | 160 | 164 | ||||||
Financing lease obligations(c) | 143 | 143 | ||||||
Mortgages payable(d) | — | 56 | ||||||
Other | 560 | 538 | ||||||
Total other long-term liabilities | $ | 1,132 | $ | 1,176 |
(a) | $20 million and $18 million of the total $289 million and $293 million obligations are recorded in other current liabilities as of March 31, 2013 and December 31, 2012, respectively. See Note 6 for further discussion of the transaction. |
(b) | $13 million and $14 million of the total $173 million and $178 million obligation is recorded in other current liabilities as of March 31, 2013 and December 31, 2012, respectively. See Note 6 for further discussion of the transaction. |
(c) | In 2009, we financed 111 real estate surface assets in the Barnett Shale area for approximately $145 million and entered into a 40-year master lease agreement under which we agreed to lease the sites for approximately $15 million to $27 million annually. This lease transaction was recorded as a financing lease and the cash received was recorded with an offsetting long-term liability on the condensed consolidated balance sheet. Chesapeake exercised its option to repurchase one of the assets in 2011. |
(d) | In 2009, we financed our regional Barnett Shale headquarters building in Fort Worth, Texas for net proceeds of approximately $54 million with a five-year term loan which had a floating interest rate of prime plus 275 basis points. In the Current Quarter, we prepaid the term loan in full without penalty. As of March 31, 2013, our Barnett Shale headquarters building was classified as property and equipment held for sale on our condensed consolidated balance sheet. |
6. | Stockholders’ Equity, Stock-Based Compensation, Performance Share Units and Noncontrolling Interests |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
(in thousands) | ||||||
Shares issued as of January 1 | 666,468 | 660,888 | ||||
Restricted stock issuances (net of forfeitures) | 2,631 | 3,184 | ||||
Stock option exercises | 176 | 109 | ||||
Shares issued as of March 31 | 669,275 | 664,181 |
5.75% | 5.75% (A) | 4.5% | 5.00% (2005B) | |||||||||
(in thousands) | ||||||||||||
Shares outstanding as of January 1, 2013 and March 31, 2013 | 1,497 | 1,100 | 2,559 | 2,096 | ||||||||
Shares outstanding as of January 1, 2012 and March 31, 2012 | 1,497 | 1,100 | 2,559 | 2,096 |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Natural gas and oil properties | $ | 21 | $ | 20 | ||||
General and administrative expenses | 20 | 19 | ||||||
Natural gas, oil and NGL production expenses | 6 | 6 | ||||||
Marketing, gathering and compression expenses | 3 | 4 | ||||||
Oilfield services expenses | 3 | 3 | ||||||
Total | $ | 53 | $ | 52 |
Number of Unvested Restricted Shares | Weighted Average Grant-Date Fair Value | ||||||
(in thousands) | |||||||
Unvested shares as of January 1, 2013 | 18,899 | $ | 23.72 | ||||
Granted | 4,945 | $ | 17.87 | ||||
Vested | (4,740 | ) | $ | 23.66 | |||
Forfeited | (583 | ) | $ | 21.89 | |||
Unvested shares as of March 31, 2013 | 18,521 | $ | 22.23 |
Number of Shares Underlying Options | Weighted Average Exercise Price Per Share | Weighted Average Contract Life in Years | Aggregate Intrinsic Value(a) | ||||||||||
(in thousands) | ($ in millions) | ||||||||||||
Outstanding at January 1, 2013 | 481 | $ | 12.69 | 0.96 | $ | 2 | |||||||
Granted | 4,563 | $ | 18.97 | ||||||||||
Exercised | (178 | ) | $ | 11.06 | |||||||||
Outstanding at March 31, 2013 | 4,866 | $ | 18.64 | 9.27 | $ | 9 | |||||||
Exercisable at March 31, 2013 | 302 | $ | 13.66 | 0.74 | $ | 2 |
(a) | The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option. |
7. | Derivative and Hedging Activities |
• | Swaps: Chesapeake receives a fixed price and pays a floating market price to the counterparty for the hedged commodity. |
• | Options: Chesapeake sells, and occasionally buys, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, Chesapeake pays the counterparty such excess on sold call options, and Chesapeake receives such excess on bought call options. If the market price settles below the fixed price of the call option, no payment is due from either party. |
• | Swaptions: Chesapeake sells call swaptions to counterparties that allow them, on a specific date, to extend an existing fixed-price swap for a certain period of time. |
• | Basis Protection Swaps: These instruments are arrangements that guarantee a price differential to NYMEX from a specified delivery point. Our natural gas basis protection swaps typically have negative differentials to NYMEX. Chesapeake receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract. Our oil basis protection swaps typically have positive differentials to NYMEX. Chesapeake receives a payment from the counterparty if the price differential is less than the stated terms of the contract and pays the counterparty if the price differential is greater than the stated terms of the contract. |
• | Collars: These instruments contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, Chesapeake receives the fixed price and pays the market price. If the market price is between the put and the call strike price, no payments are due from either party. Three-way collars include an additional put option in exchange for a more favorable strike price on the collar. This eliminates the counterparty’s downside exposure below the second put option. |
March 31, 2013 | December 31, 2012 | |||||||||||||
Volume | Fair Value | Volume | Fair Value | |||||||||||
($ in millions) | ($ in millions) | |||||||||||||
Natural gas (tbtu): | ||||||||||||||
Fixed-price swaps | 586 | $ | (233 | ) | 49 | $ | 24 | |||||||
Call options | 193 | (233 | ) | 193 | (240 | ) | ||||||||
Basis protection swaps | 101 | (15 | ) | 111 | (15 | ) | ||||||||
Three-way collars | 72 | (15 | ) | — | — | |||||||||
Total natural gas | 952 | (496 | ) | 353 | (231 | ) | ||||||||
Oil (mmbbl): | ||||||||||||||
Fixed-price swaps | 43.8 | (17 | ) | 28.1 | 68 | |||||||||
Call options | 69.5 | (514 | ) | 73.8 | (748 | ) | ||||||||
Call swaptions | 5.3 | (6 | ) | 5.3 | (13 | ) | ||||||||
Basis protection swaps | 3.2 | (2 | ) | 5.5 | — | |||||||||
Total oil | 121.8 | (539 | ) | 112.7 | (693 | ) | ||||||||
Total estimated fair value | $ | (1,035 | ) | $ | (924 | ) |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Natural gas, oil and NGL sales | $ | 1,595 | $ | 1,221 | ||||
Gains (losses) on natural gas, oil and NGL derivatives | (142 | ) | (153 | ) | ||||
Total natural gas, oil and NGL sales | $ | 1,453 | $ | 1,068 |
• | Swaps: Chesapeake enters into fixed-to-floating interest rate swaps (we receive a fixed interest rate and pay a floating market rate) to mitigate our exposure to changes in the fair value of our senior notes. We enter into floating-to-fixed interest rate swaps (we receive a floating market rate and pay a fixed interest rate) to manage our interest rate exposure related to our bank credit facilities borrowings. |
• | Swaptions: Occasionally we sell an option to a counterparty for a premium which allows the counterparty to enter into a pre-determined swap with us on a specific date. |
March 31, 2013 | December 31, 2012 | |||||||||||||||
Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
Interest rate: | ||||||||||||||||
Swaps | $ | 1,750 | $ | (37 | ) | $ | 1,050 | $ | (35 | ) | ||||||
Swaptions | 125 | (2 | ) | — | — | |||||||||||
Totals | $ | 1,875 | $ | (39 | ) | $ | 1,050 | $ | (35 | ) |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Interest expense on senior notes | $ | 186 | $ | 174 | ||||
Interest expense on credit facilities | 12 | 21 | ||||||
Interest expense on term loans | 29 | — | ||||||
(Gains) losses on interest rate derivatives | 4 | 4 | ||||||
Amortization of loan discount, issuance costs and other | 19 | 1 | ||||||
Capitalized interest | (229 | ) | (188 | ) | ||||
Total interest expense | $ | 21 | $ | 12 |
Fair Value | ||||||||||
Balance Sheet Location | March 31, 2013 | December 31, 2012 | ||||||||
($ in millions) | ||||||||||
Asset Derivatives: | ||||||||||
Not designated as hedging instruments: | ||||||||||
Commodity contracts | Short-term derivative instruments | $ | 18 | $ | 110 | |||||
Commodity contracts | Long-term derivative instruments | 22 | 5 | |||||||
Total | 40 | 115 | ||||||||
Liability Derivatives: | ||||||||||
Designated as hedging instruments: | ||||||||||
Foreign currency contracts | Long-term derivative instruments | (36 | ) | (20 | ) | |||||
Total | (36 | ) | (20 | ) | ||||||
Not designated as hedging instruments: | ||||||||||
Commodity contracts | Short-term derivative instruments | (435 | ) | (157 | ) | |||||
Commodity contracts | Long-term derivative instruments | (640 | ) | (882 | ) | |||||
Interest rate contracts | Short-term derivative instruments | (2 | ) | — | ||||||
Interest rate contracts | Long-term derivative instruments | (37 | ) | (35 | ) | |||||
Total | (1,114 | ) | (1,074 | ) | ||||||
Total derivative instruments | $ | (1,110 | ) | $ | (979 | ) |
March 31, 2013 | ||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||
Short-Term | Long-Term | Short-Term | Long-Term | |||||||||||||
($ in millions) | ||||||||||||||||
Commodity Contracts: | ||||||||||||||||
Gross amounts of recognized assets (liabilities) | $ | 18 | $ | 22 | $ | (435 | ) | $ | (640 | ) | ||||||
Gross amounts offset in the condensed consolidated statements of financial position | (13 | ) | (20 | ) | 13 | 20 | ||||||||||
Net amounts of assets (liabilities) presented in the statements of financial position | 5 | 2 | (422 | ) | (620 | ) | ||||||||||
Interest Rate Contracts: | ||||||||||||||||
Gross amounts of recognized assets (liabilities) | — | — | (2 | ) | (37 | ) | ||||||||||
Gross amounts offset in the condensed consolidated statements of financial position | — | — | — | — | ||||||||||||
Net amounts of assets (liabilities) presented in the statements of financial position | — | — | (2 | ) | (37 | ) | ||||||||||
Foreign Currency Contracts: | ||||||||||||||||
Gross amounts of recognized assets (liabilities) | — | — | — | (36 | ) | |||||||||||
Gross amounts offset in the condensed consolidated statements of financial position | — | — | — | — | ||||||||||||
Net amounts of assets (liabilities) presented in the statements of financial position | — | — | — | (36 | ) | |||||||||||
Total derivatives as reported | $ | 5 | $ | 2 | $ | (424 | ) | $ | (693 | ) | ||||||
December 31, 2012 | ||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||
Short-Term | Long-Term | Short-Term | Long-Term | |||||||||||||
($ in millions) | ||||||||||||||||
Commodity Contracts: | ||||||||||||||||
Gross amounts of recognized assets (liabilities) | $ | 110 | $ | 5 | $ | (157 | ) | $ | (882 | ) | ||||||
Gross amounts offset in the consolidated statements of financial position | (52 | ) | (3 | ) | 52 | 3 | ||||||||||
Net amounts of assets (liabilities) presented in the statements of financial position | 58 | 2 | (105 | ) | (879 | ) | ||||||||||
Interest Rate Contracts: | ||||||||||||||||
Gross amounts of recognized assets (liabilities) | — | — | — | (35 | ) | |||||||||||
Gross amounts offset in the consolidated statements of financial position | — | — | — | — | ||||||||||||
Net amounts of assets (liabilities) presented in the statements of financial position | — | — | — | (35 | ) | |||||||||||
Foreign Currency Contracts: | ||||||||||||||||
Gross amounts of recognized assets (liabilities) | — | — | — | (20 | ) | |||||||||||
Gross amounts offset in the consolidated statements of financial position | — | — | — | — | ||||||||||||
Net amounts of assets (liabilities) presented in the statements of financial position | — | — | — | (20 | ) | |||||||||||
Total derivatives as reported | $ | 58 | $ | 2 | $ | (105 | ) | $ | (934 | ) |
Three Months Ended March 31, | ||||||||||
Fair Value Derivatives | Location of Gain (Loss) | 2013 | 2012 | |||||||
($ in millions) | ||||||||||
Interest rate contracts | Interest expense | $ | 2 | $ | 2 |
Three Months Ended March 31, | ||||||||||||||||
2013 | 2012 | |||||||||||||||
Before Tax | After Tax | Before Tax | After Tax | |||||||||||||
($ in millions) | ||||||||||||||||
Balance, beginning of period | $ | (304 | ) | $ | (189 | ) | $ | (287 | ) | $ | (178 | ) | ||||
Net change in fair value | (2 | ) | (1 | ) | 6 | 4 | ||||||||||
(Gains) losses reclassified to income | 19 | 12 | (3 | ) | (2 | ) | ||||||||||
Balance, end of period | $ | (287 | ) | $ | (178 | ) | $ | (284 | ) | $ | (176 | ) |
Three Months Ended March 31, | ||||||||||
Cash Flow Derivatives | Location of Gain (Loss) | 2013 | 2012 | |||||||
($ in millions) | ||||||||||
Gain (Loss) Recognized in AOCI (Effective Portion): | ||||||||||
Commodity contracts | AOCI | $ | — | $ | 1 | |||||
Foreign currency contracts | AOCI | (2 | ) | 5 | ||||||
$ | (2 | ) | $ | 6 | ||||||
Gain (Loss) Reclassified from AOCI (Effective Portion): | ||||||||||
Commodity contracts | Natural gas, oil and NGL sales | $ | (19 | ) | $ | 3 | ||||
$ | (19 | ) | $ | 3 |
Three Months Ended March 31, | ||||||||||
Derivative Contracts | Location of Gain (Loss) | 2013 | 2012 | |||||||
($ in millions) | ||||||||||
Commodity contracts | Natural gas, oil and NGL sales | $ | (123 | ) | $ | (156 | ) | |||
Interest rate contracts | Interest expense | (6 | ) | (6 | ) | |||||
Equity contracts | Other income | — | (2 | ) | ||||||
Total | $ | (129 | ) | $ | (164 | ) |
8. | Acquisitions and Divestitures of Natural Gas and Oil Properties |
Primary Play | Joint Venture Partner(a) | Joint Venture Date | Interest Sold | Cash Proceeds Received at Closing | Total Drilling Carries | Total Cash and Drilling Carry Proceeds | Drilling Carries Remaining(b) | |||||||||||||||
($ in millions) | ||||||||||||||||||||||
Utica | TOT | December 2011 | 25.0% | $ | 610 | $ | 1,422 | (c) | $ | 2,032 | $ | 1,007 | ||||||||||
Niobrara | CNOOC | February 2011 | 33.3% | 570 | 697 | (d) | 1,267 | 428 | ||||||||||||||
Eagle Ford | CNOOC | November 2010 | 33.3% | 1,120 | 1,080 | 2,200 | — | |||||||||||||||
Barnett | TOT | January 2010 | 25.0% | 800 | 1,404 | 2,204 | — | |||||||||||||||
Marcellus | STO | November 2008 | 32.5% | 1,250 | 2,125 | 3,375 | — | |||||||||||||||
Fayetteville | BP | September 2008 | 25.0% | 1,100 | 800 | 1,900 | — | |||||||||||||||
Haynesville & Bossier | PXP | July 2008 | 20.0% | 1,650 | 1,508 | 3,158 | — | |||||||||||||||
$ | 7,100 | $ | 9,036 | $ | 16,136 | $ | 1,435 |
(a) | Joint venture partners include Total S.A. (TOT), CNOOC Limited (CNOOC), Statoil (STO), BP America (BP) and Plains Exploration & Production Company (PXP). |
(b) | As of March 31, 2013. |
(c) | The Utica drilling carries cover 60% of our drilling and completion costs for Utica wells drilled and must be used by December 2018. We expect to fully utilize these drilling carry commitments prior to expiration. See Note 4 for further discussion of the Utica drilling carries. |
(d) | The Niobrara drilling carries cover 67% of our drilling and completion costs for Niobrara wells drilled and must be used by December 2014. We expect to fully utilize these drilling carry commitments prior to expiration. |
Volume Sold | ||||||||||||||||||||
VPP # | Date of VPP | Division | Proceeds | Natural Gas | Oil | NGL | Total | |||||||||||||
($ in millions) | (bcf) | (mmbbl) | (mmbbl) | (bcfe) | ||||||||||||||||
10 | March 2012 | Anadarko Basin Granite Wash | $ | 744 | 87 | 3.0 | 9.2 | 160 | ||||||||||||
9 | May 2011 | Mid-Continent | 853 | 138 | 1.7 | 4.8 | 177 | |||||||||||||
8 | September 2010 | Barnett Shale | 1,150 | 390 | — | — | 390 | |||||||||||||
6 | February 2010 | East Texas and Texas Gulf Coast | 180 | 44 | 0.3 | — | 46 | |||||||||||||
5 | August 2009 | South Texas | 370 | 67 | 0.2 | — | 68 | |||||||||||||
4 | December 2008 | Anadarko and Arkoma Basins | 412 | 95 | 0.5 | — | 98 | |||||||||||||
3 | August 2008 | Anadarko Basin | 600 | 93 | — | — | 93 | |||||||||||||
2 | May 2008 | Texas, Oklahoma and Kansas | 622 | 94 | — | — | 94 | |||||||||||||
1 | December 2007 | Kentucky and West Virginia | 1,100 | 208 | — | — | 208 | |||||||||||||
$ | 6,031 | 1,216 | 5.7 | 14.0 | 1,334 |
Three Months Ended March 31, 2013 | Three Months Ended March 31, 2012 | |||||||||||||||||
VPP # | Natural Gas | Oil | NGL | Natural Gas | Oil | NGL | ||||||||||||
(bcf) | (mbbl) | (mbbl) | (bcf) | (mbbl) | (mbbl) | |||||||||||||
10 | 4 | 154.0 | 407.7 | 2 | 97.0 | 217.8 | ||||||||||||
9 | 4 | 56.2 | 148.5 | 5 | 66.6 | 169.3 | ||||||||||||
8 | 18 | — | — | 22 | — | — | ||||||||||||
7 | — | — | — | — | 175.0 | — | ||||||||||||
6 | 1 | 6.0 | — | 1 | 6.0 | — | ||||||||||||
5 | 2 | 6.0 | — | 2 | 7.6 | — | ||||||||||||
4 | 3 | 14.6 | — | 3 | 16.7 | — | ||||||||||||
3 | 2 | — | — | 3 | — | — | ||||||||||||
2 | 3 | — | — | 3 | — | — | ||||||||||||
1 | 4 | — | — | 4 | — | — | ||||||||||||
41 | 236.8 | 556.2 | 45 | 368.9 | 387.1 |
Volume Remaining as of March 31, 2013 | ||||||||||||||
VPP # | Term Remaining | Natural Gas | Oil | NGL | Total | |||||||||
(in months) | (bcf) | (mmbbl) | (mmbbl) | (bcfe) | ||||||||||
10 | 107 | 65 | 2.1 | 7.1 | 119.6 | |||||||||
9 | 95 | 98 | 1.2 | 3.3 | 125.0 | |||||||||
8 | 29 | 146 | — | — | 145.8 | |||||||||
6 | 82 | 25 | 0.2 | — | 26.0 | |||||||||
5 | 46 | 22 | 0.1 | — | 22.9 | |||||||||
4 | 45 | 32 | 0.2 | — | 33.4 | |||||||||
3 | 76 | 37 | — | — | 37.0 | |||||||||
2 | 73 | 28 | — | — | 28.2 | |||||||||
1 | 117 | 116 | — | — | 116.1 | |||||||||
569 | 3.8 | 10.4 | 654.0 |
9. | Investments |
Carrying Value | ||||||||||||
Approximate Ownership % | Accounting Method | March 31, 2013 | December 31, 2012 | |||||||||
($ in millions) | ||||||||||||
FTS International, Inc. | 30% | Equity | $ | 286 | $ | 298 | ||||||
Chaparral Energy, Inc. | 20% | Equity | 142 | 141 | ||||||||
Sundrop Fuels, Inc. | 50% | Equity | 103 | 111 | ||||||||
Clean Energy Fuels Corp. | — | Cost | 100 | 100 | ||||||||
Twin Eagle Resource Management, LLC | 30% | Equity | 33 | 34 | ||||||||
Maalt Specialized Bulk, LLC | 49% | Equity | 13 | 13 | ||||||||
Clean Energy Fuels Corp. | 1% | Fair Value | 13 | 12 | ||||||||
Gastar Exploration Ltd. | 10% | — | 9 | 8 | ||||||||
Other | — | — | 12 | 11 | ||||||||
Total investments | $ | 711 | $ | 728 |
10. | Variable Interest Entities |
11. | Net Gains on Sales of Fixed Assets |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Gathering systems and treating plants(a) | $ | 69 | $ | 1 | ||||
Drilling rigs and equipment | (1 | ) | — | |||||
Buildings and land(b) | (22 | ) | — | |||||
Other | 3 | 1 | ||||||
Total net gains on sales | $ | 49 | $ | 2 |
(a) | In the Current Quarter, we sold our interest in certain gathering system assets in Pennsylvania to Western Gas Partners, LP for proceeds of approximately $134 million. We recorded a $56 million pre-tax gain associated with this transaction. |
(b) | In the Current Quarter, the net losses on sales of buildings and land were primarily from the sale of certain of our buildings and land in our Barnett Shale operating area. |
12. | Impairments of Fixed Assets and Other |
13. | Employee Retirement and Other Termination Benefits |
Three Months Ended March 31, 2013 | ||||
($ in millions) | ||||
Termination benefits provided to Mr. McClendon: | ||||
Salary and bonus expense | $ | 11 | ||
Acceleration of 2008 performance bonus “claw-back” feature | 11 | |||
Acceleration of stock-based compensation awards | 22 | |||
Acceleration of performance share unit awards | 13 | |||
Estimated aircraft usage benefits | 7 | |||
Total termination benefits provided to Mr. McClendon | 64 | |||
Termination benefits provided to VSP participants: | ||||
Salary and bonus expense | 30 | |||
Acceleration of restricted stock awards | 24 | |||
Other associated costs | 2 | |||
Total termination benefits provided to VSP participants | 56 | |||
Other termination benefits | 13 | |||
Total employee retirement and other termination benefits | $ | 133 |
14. | Fair Value Measurements |
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
Financial Assets (Liabilities): | ||||||||||||||||
Other current assets | $ | 7 | $ | — | $ | — | $ | 7 | ||||||||
Investments | 13 | — | — | 13 | ||||||||||||
Other long-term assets | 82 | — | — | 82 | ||||||||||||
Other long-term liabilities | (87 | ) | — | — | (87 | ) | ||||||||||
Derivatives: | ||||||||||||||||
Commodity assets | — | 32 | 8 | 40 | ||||||||||||
Commodity liabilities | — | (282 | ) | (793 | ) | (1,075 | ) | |||||||||
Interest rate liabilities | — | (37 | ) | (2 | ) | (39 | ) | |||||||||
Foreign currency liabilities | — | (36 | ) | — | (36 | ) | ||||||||||
Total derivatives | — | (323 | ) | (787 | ) | (1,110 | ) | |||||||||
Total | $ | 15 | $ | (323 | ) | $ | (787 | ) | $ | (1,095 | ) |
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
Financial Assets (Liabilities): | ||||||||||||||||
Other current assets | $ | 4 | $ | — | $ | — | $ | 4 | ||||||||
Investments | 20 | — | — | 20 | ||||||||||||
Other long-term assets | 88 | — | — | 88 | ||||||||||||
Other long-term liabilities | (87 | ) | — | — | (87 | ) | ||||||||||
Derivatives: | ||||||||||||||||
Commodity assets | — | 105 | 10 | 115 | ||||||||||||
Commodity liabilities | — | (13 | ) | (1,026 | ) | (1,039 | ) | |||||||||
Interest rate liabilities | — | (35 | ) | — | (35 | ) | ||||||||||
Foreign currency liabilities | — | (20 | ) | — | (20 | ) | ||||||||||
Total derivatives | — | 37 | (1,016 | ) | (979 | ) | ||||||||||
Total | $ | 25 | $ | 37 | $ | (1,016 | ) | $ | (954 | ) |
Derivatives | ||||||||
Commodity | Interest Rate | |||||||
($ in millions) | ||||||||
Beginning Balance as of January 1, 2013 | $ | (1,016 | ) | $ | — | |||
Total gains (losses) (realized/unrealized): | ||||||||
Included in earnings(a) | 194 | (1 | ) | |||||
Total purchases, issuances, sales and settlements: | ||||||||
Sales | — | (1 | ) | |||||
Settlements | 37 | — | ||||||
Ending Balance as of March 31, 2013 | $ | (785 | ) | $ | (2 | ) | ||
Beginning Balance as of January 1, 2012 | $ | (1,654 | ) | $ | — | |||
Total gains (losses) (realized/unrealized): | ||||||||
Included in earnings(a) | (59 | ) | (1 | ) | ||||
Total purchases, issuances, sales and settlements: | ||||||||
Sales | — | (2 | ) | |||||
Settlements | 8 | — | ||||||
Ending Balance as of March 31, 2012 | $ | (1,705 | ) | $ | (3 | ) |
(a) | Natural Gas, Oil and NGL Sales | Interest Expense | ||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
($ in millions) | ||||||||||||||||
Total gains (losses) included in earnings for the period | $ | 194 | $ | (59 | ) | $ | (1 | ) | $ | (1 | ) | |||||
Change in unrealized gains (losses) relating to assets still held at reporting date | $ | 191 | $ | (132 | ) | $ | (2 | ) | $ | (3 | ) |
Instrument Type | Unobservable Input | Range | Weighted Average | Fair Value March 31, 2013 | ||||||||
($ in millions) | ||||||||||||
Oil Trades(a) | Oil price volatility curves | 9.40% - 22.10% | 17.17 | % | $ | (520 | ) | |||||
Oil Basis Swaps(b) | Physical pricing point forward curves | $9.41 - $15.43 | $ | 12.79 | $ | (2 | ) | |||||
Natural Gas Trades(a) | Natural gas price volatility curves | 20.70% - 34.15% | 25.52 | % | $ | (248 | ) | |||||
Natural Gas Basis Swaps(b) | Physical pricing point forward curves | ($1.40) - $0.06 | $ | (0.20 | ) | $ | (15 | ) |
(a) | Fair value is based on an estimate derived from option models. |
(b) | Fair value is based on an estimate of discounted cash flows. |
March 31, 2013 | December 31, 2012 | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
Current maturities of long-term debt (Level 1) | $ | — | $ | — | $ | 463 | $ | 480 | ||||||||
Long-term debt (Level 1) | $ | 10,229 | $ | 10,193 | $ | 9,759 | $ | 10,457 | ||||||||
Long-term debt (Level 2) | $ | 3,203 | $ | 3,160 | $ | 2,378 | $ | 2,284 |
15. | Segment Information |
Exploration and Production | Marketing, Gathering and Compression | Oilfield Services | Other Operations | Intercompany Eliminations | Consolidated Total | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Three Months Ended March 31, 2013: | ||||||||||||||||||||||||
Revenues | $ | 1,453 | $ | 3,529 | $ | 538 | $ | 10 | $ | (2,106 | ) | $ | 3,424 | |||||||||||
Intersegment revenues | — | (1,748 | ) | (352 | ) | (6 | ) | 2,106 | — | |||||||||||||||
Total revenues | $ | 1,453 | $ | 1,781 | $ | 186 | $ | 4 | $ | — | $ | 3,424 | ||||||||||||
Income (Loss) Before Income Taxes | $ | 170 | $ | 129 | $ | 22 | $ | (58 | ) | $ | (98 | ) | $ | 165 | ||||||||||
Three Months Ended March 31, 2012: | ||||||||||||||||||||||||
Revenues | $ | 1,068 | $ | 2,392 | $ | 447 | $ | — | $ | (1,488 | ) | $ | 2,419 | |||||||||||
Intersegment revenues | — | (1,176 | ) | (312 | ) | — | 1,488 | — | ||||||||||||||||
Total revenues | $ | 1,068 | $ | 1,216 | $ | 135 | $ | — | $ | — | $ | 2,419 | ||||||||||||
Income (Loss) Before Income Taxes | $ | 86 | $ | 66 | $ | 40 | $ | (100 | ) | $ | (97 | ) | $ | (5 | ) | |||||||||
As of March 31, 2013: | ||||||||||||||||||||||||
Total Assets | $ | 37,756 | $ | 2,499 | $ | 2,190 | $ | 2,526 | $ | (2,490 | ) | $ | 42,481 | |||||||||||
As of December 31, 2012: | ||||||||||||||||||||||||
Total Assets | $ | 37,004 | $ | 2,291 | $ | 2,115 | $ | 2,529 | $ | (2,328 | ) | $ | 41,611 |
16. | Condensed Consolidating Financial Information |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 33 | $ | — | $ | 33 | ||||||||||
Restricted cash | — | — | 81 | — | 81 | |||||||||||||||
Other | 4 | 2,614 | 619 | (478 | ) | 2,759 | ||||||||||||||
Current assets held for sale | — | 11 | — | — | 11 | |||||||||||||||
Total Current Assets | 4 | 2,625 | 733 | (478 | ) | 2,884 | ||||||||||||||
PROPERTY AND EQUIPMENT: | ||||||||||||||||||||
Natural gas and oil properties, at cost based on full cost accounting, net | — | 29,782 | 3,074 | 36 | 32,892 | |||||||||||||||
Other property and equipment, net | — | 2,692 | 1,975 | — | 4,667 | |||||||||||||||
Property and equipment held for sale, net | — | 588 | — | — | 588 | |||||||||||||||
Total Property and Equipment, Net | — | 33,062 | 5,049 | 36 | 38,147 | |||||||||||||||
LONG-TERM ASSETS: | ||||||||||||||||||||
Other assets | 207 | 1,378 | 237 | (372 | ) | 1,450 | ||||||||||||||
Investments in subsidiaries and intercompany advances | 2,863 | 176 | — | (3,039 | ) | — | ||||||||||||||
TOTAL ASSETS | $ | 3,074 | $ | 37,241 | $ | 6,019 | $ | (3,853 | ) | $ | 42,481 | |||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Current liabilities | $ | 133 | $ | 5,560 | $ | 550 | $ | (478 | ) | $ | 5,765 | |||||||||
Current liabilities held for sale | — | 20 | — | — | 20 | |||||||||||||||
Intercompany payable to (receivable from) parent | (24,957 | ) | 23,887 | 964 | 106 | — | ||||||||||||||
Total Current Liabilities | (24,824 | ) | 29,467 | 1,514 | (372 | ) | 5,785 | |||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||||||
Long-term debt, net | 11,560 | 832 | 1,057 | — | 13,449 | |||||||||||||||
Deferred income tax liabilities | 382 | 2,581 | 128 | (70 | ) | 3,021 | ||||||||||||||
Other long-term liabilities | 256 | 1,498 | 830 | (372 | ) | 2,212 | ||||||||||||||
Total Long-Term Liabilities | 12,198 | 4,911 | 2,015 | (442 | ) | 18,682 | ||||||||||||||
EQUITY: | ||||||||||||||||||||
Chesapeake stockholders’ equity | 15,700 | 2,863 | 2,490 | (5,353 | ) | 15,700 | ||||||||||||||
Noncontrolling interests | — | — | — | 2,314 | 2,314 | |||||||||||||||
Total Equity | 15,700 | 2,863 | 2,490 | (3,039 | ) | 18,014 | ||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 3,074 | $ | 37,241 | $ | 6,019 | $ | (3,853 | ) | $ | 42,481 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 228 | $ | 59 | $ | — | $ | 287 | ||||||||||
Restricted cash | — | — | 111 | — | 111 | |||||||||||||||
Other | 1 | 2,369 | 513 | (337 | ) | 2,546 | ||||||||||||||
Current assets held for sale | — | — | 4 | — | 4 | |||||||||||||||
Total Current Assets | 1 | 2,597 | 687 | (337 | ) | 2,948 | ||||||||||||||
PROPERTY AND EQUIPMENT: | ||||||||||||||||||||
Natural gas and oil properties, at cost, based on full cost accounting, net | — | 29,063 | 3,077 | (222 | ) | 31,918 | ||||||||||||||
Other property and equipment, net | — | 3,066 | 1,549 | — | 4,615 | |||||||||||||||
Property and equipment held for sale, net | — | 255 | 379 | — | 634 | |||||||||||||||
Total Property and Equipment, Net | — | 32,384 | 5,005 | (222 | ) | 37,167 | ||||||||||||||
LONG-TERM ASSETS: | ||||||||||||||||||||
Other assets | 217 | 1,396 | 261 | (378 | ) | 1,496 | ||||||||||||||
Investments in subsidiaries and intercompany advances | 2,254 | (185 | ) | — | (2,069 | ) | — | |||||||||||||
TOTAL ASSETS | $ | 2,472 | $ | 36,192 | $ | 5,953 | $ | (3,006 | ) | $ | 41,611 | |||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Current liabilities | $ | 789 | $ | 5,368 | $ | 426 | $ | (338 | ) | $ | 6,245 | |||||||||
Current liabilities held for sale | — | — | 21 | — | 21 | |||||||||||||||
Intercompany payable to (receivable from) parent | (25,571 | ) | 24,372 | 1,330 | (131 | ) | — | |||||||||||||
Total Current Liabilities | (24,782 | ) | 29,740 | 1,777 | (469 | ) | 6,266 | |||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||||||
Long-term debt, net | 11,089 | — | 1,068 | — | 12,157 | |||||||||||||||
Deferred income tax liabilities | 361 | 2,415 | 127 | (96 | ) | 2,807 | ||||||||||||||
Other liabilities | 235 | 1,783 | 839 | (372 | ) | 2,485 | ||||||||||||||
Total Long-Term Liabilities | 11,685 | 4,198 | 2,034 | (468 | ) | 17,449 | ||||||||||||||
EQUITY: | ||||||||||||||||||||
Chesapeake stockholders’ equity | 15,569 | 2,254 | 2,142 | (4,396 | ) | 15,569 | ||||||||||||||
Noncontrolling interests | — | — | — | 2,327 | 2,327 | |||||||||||||||
Total Equity | 15,569 | 2,254 | 2,142 | (2,069 | ) | 17,896 | ||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 2,472 | $ | 36,192 | $ | 5,953 | $ | (3,006 | ) | $ | 41,611 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUES | ||||||||||||||||||||
Natural gas, oil and NGL | $ | — | $ | 1,322 | $ | 128 | $ | 3 | $ | 1,453 | ||||||||||
Marketing, gathering and compression | — | 1,778 | 3 | — | 1,781 | |||||||||||||||
Oilfield services | — | — | 554 | (364 | ) | 190 | ||||||||||||||
Total Revenues | — | 3,100 | 685 | (361 | ) | 3,424 | ||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Natural gas, oil and NGL production | — | 296 | 11 | — | 307 | |||||||||||||||
Production taxes | — | 51 | 2 | — | 53 | |||||||||||||||
Marketing, gathering and compression | — | 1,742 | 3 | — | 1,745 | |||||||||||||||
Oilfield services | — | — | 426 | (271 | ) | 155 | ||||||||||||||
General and administrative | — | 87 | 23 | — | 110 | |||||||||||||||
Natural gas, oil and NGL depreciation, depletion and amortization | — | 591 | 57 | — | 648 | |||||||||||||||
Depreciation and amortization of other assets | — | 48 | 71 | (41 | ) | 78 | ||||||||||||||
Net gains on sales of fixed assets | — | (49 | ) | — | — | (49 | ) | |||||||||||||
Impairment of natural gas and oil properties | — | — | 91 | (91 | ) | — | ||||||||||||||
Impairments of fixed assets and other | — | 27 | — | — | 27 | |||||||||||||||
Employee retirement and other termination benefits | — | 131 | 2 | — | 133 | |||||||||||||||
Total Operating Expenses | — | 2,924 | 686 | (403 | ) | 3,207 | ||||||||||||||
INCOME (LOSS) FROM OPERATIONS | — | 176 | (1 | ) | 42 | 217 | ||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||
Interest expense | (219 | ) | (3 | ) | (21 | ) | 222 | (21 | ) | |||||||||||
Losses on investments | — | (27 | ) | — | — | (27 | ) | |||||||||||||
Impairment of investment | — | (10 | ) | — | — | (10 | ) | |||||||||||||
Other income (expense) | 216 | 14 | 3 | (227 | ) | 6 | ||||||||||||||
Equity in net earnings of subsidiary | 60 | (87 | ) | — | 27 | — | ||||||||||||||
Total Other Income (Expense) | 57 | (113 | ) | (18 | ) | 22 | (52 | ) | ||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 57 | 63 | (19 | ) | 64 | 165 | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) | (1 | ) | 57 | (7 | ) | 14 | 63 | |||||||||||||
NET INCOME (LOSS) | 58 | 6 | (12 | ) | 50 | 102 | ||||||||||||||
Net income attributable to noncontrolling interests | — | — | — | (44 | ) | (44 | ) | |||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | 58 | 6 | (12 | ) | 6 | 58 | ||||||||||||||
Other comprehensive income (loss) | (2 | ) | 14 | — | — | 12 | ||||||||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | $ | 56 | $ | 20 | $ | (12 | ) | $ | 6 | $ | 70 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUES: | ||||||||||||||||||||
Natural gas, oil and NGL | $ | — | $ | 1,044 | $ | 24 | $ | — | $ | 1,068 | ||||||||||
Marketing, gathering and compression | — | 1,173 | 43 | — | 1,216 | |||||||||||||||
Oilfield services | — | — | 449 | (314 | ) | 135 | ||||||||||||||
Total Revenues | — | 2,217 | 516 | (314 | ) | 2,419 | ||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Natural gas, oil and NGL production | — | 348 | 1 | — | 349 | |||||||||||||||
Production taxes | — | 46 | 1 | — | 47 | |||||||||||||||
Marketing, gathering and compression | — | 1,170 | 27 | — | 1,197 | |||||||||||||||
Oilfield services | — | — | 355 | (259 | ) | 96 | ||||||||||||||
General and administrative | — | 109 | 26 | 1 | 136 | |||||||||||||||
Natural gas, oil and NGL depreciation, depletion and amortization | — | 492 | 14 | — | 506 | |||||||||||||||
Depreciation and amortization of other assets | — | 46 | 72 | (34 | ) | 84 | ||||||||||||||
Net gains on sales of fixed assets | — | (1 | ) | (1 | ) | — | (2 | ) | ||||||||||||
Total Operating Expenses | — | 2,210 | 495 | (292 | ) | 2,413 | ||||||||||||||
INCOME (LOSS) FROM OPERATIONS | — | 7 | 21 | (22 | ) | 6 | ||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Interest expense | (161 | ) | (2 | ) | (18 | ) | 169 | (12 | ) | |||||||||||
Earnings (losses) on investments | — | (31 | ) | 26 | — | (5 | ) | |||||||||||||
Other income | 163 | 9 | 34 | (200 | ) | 6 | ||||||||||||||
Equity in net earnings of subsidiary | (29 | ) | (18 | ) | — | 47 | — | |||||||||||||
Total Other Income (Expense) | (27 | ) | (42 | ) | 42 | 16 | (11 | ) | ||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (27 | ) | (35 | ) | 63 | (6 | ) | (5 | ) | |||||||||||
INCOME TAX EXPENSE (BENEFIT) | 1 | (7 | ) | 25 | (21 | ) | (2 | ) | ||||||||||||
NET INCOME (LOSS) | (28 | ) | (28 | ) | 38 | 15 | (3 | ) | ||||||||||||
Net income attributable to noncontrolling interests | — | — | — | (25 | ) | (25 | ) | |||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | (28 | ) | (28 | ) | 38 | (10 | ) | (28 | ) | |||||||||||
Other comprehensive income (loss) | 3 | 4 | — | — | 7 | |||||||||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | $ | (25 | ) | $ | (24 | ) | $ | 38 | $ | (10 | ) | $ | (21 | ) |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | $ | — | $ | 790 | $ | 146 | $ | (12 | ) | $ | 924 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Additions to proved and unproved properties | — | (1,643 | ) | (216 | ) | — | (1,859 | ) | ||||||||||||
Proceeds from divestitures of proved and unproved properties | — | 138 | 52 | — | 190 | |||||||||||||||
Additions to other property and equipment | — | (186 | ) | (144 | ) | — | (330 | ) | ||||||||||||
Other investing activities | — | 135 | 74 | 45 | 254 | |||||||||||||||
Cash used in investing activities | — | (1,556 | ) | (234 | ) | 45 | (1,745 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from credit facilities borrowings | — | 3,395 | 237 | — | 3,632 | |||||||||||||||
Payments on credit facilities borrowings | — | (2,563 | ) | (248 | ) | — | (2,811 | ) | ||||||||||||
Proceeds from issuance of senior notes, net of discount and offering costs | — | — | — | — | — | |||||||||||||||
Proceeds from sales of noncontrolling interests | — | — | — | — | — | |||||||||||||||
Other financing activities | (133 | ) | (94 | ) | 6 | (33 | ) | (254 | ) | |||||||||||
Intercompany advances, net | 133 | (200 | ) | 67 | — | — | ||||||||||||||
Cash provided by financing activities | — | 538 | 62 | (33 | ) | 567 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (228 | ) | (26 | ) | — | (254 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | — | 228 | 59 | — | 287 | |||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | — | $ | 33 | $ | — | $ | 33 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | $ | — | $ | 346 | $ | 48 | $ | (120 | ) | $ | 274 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Additions to proved and unproved properties | — | (3,520 | ) | (189 | ) | — | (3,709 | ) | ||||||||||||
Proceeds from divestitures of proved and unproved properties | — | 821 | — | — | 821 | |||||||||||||||
Additions to other property and equipment | — | (229 | ) | (461 | ) | — | (690 | ) | ||||||||||||
Other investing activities | — | 720 | (36 | ) | (756 | ) | (72 | ) | ||||||||||||
Cash used in investing activities | — | (2,208 | ) | (686 | ) | (756 | ) | (3,650 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from credit facilities borrowings | — | 4,698 | 990 | — | 5,688 | |||||||||||||||
Payments on credit facilities borrowings | — | (3,956 | ) | (590 | ) | — | (4,546 | ) | ||||||||||||
Proceeds from issuance of senior notes, net of discount and offering costs | 1,263 | — | — | — | 1,263 | |||||||||||||||
Proceeds from sales of noncontrolling interests | — | — | 1,044 | — | 1,044 | |||||||||||||||
Other financing activities | (131 | ) | (24 | ) | (707 | ) | 876 | 14 | ||||||||||||
Intercompany advances, net | (1,132 | ) | 1,144 | (12 | ) | — | — | |||||||||||||
Cash provided by financing activities | — | 1,862 | 725 | 876 | 3,463 | |||||||||||||||
Net increase in cash and cash equivalents | — | — | 87 | — | 87 | |||||||||||||||
Cash and cash equivalents, beginning of period | — | 1 | 350 | — | 351 | |||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 1 | $ | 437 | $ | — | $ | 438 |
17. | Recently Issued Accounting Standards |
18. | Subsequent Events |
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Net Production: | ||||||||
Natural gas (bcf) | 273.1 | 270.8 | ||||||
Oil (mmbbl) | 9.3 | 6.0 | ||||||
NGL (mmbbl) | 4.9 | 4.3 | ||||||
Natural gas equivalent (bcfe)(a) | 358.1 | 332.8 | ||||||
Natural Gas, Oil and NGL Sales ($ in millions): | ||||||||
Natural gas sales | $ | 573 | $ | 478 | ||||
Natural gas derivatives – realized gains (losses) | 8 | 158 | ||||||
Natural gas derivatives – unrealized gains (losses) | (278 | ) | (147 | ) | ||||
Total natural gas sales | 303 | 489 | ||||||
Oil sales | 884 | 591 | ||||||
Oil derivatives – realized gains (losses) | (4 | ) | (34 | ) | ||||
Oil derivatives – unrealized gains (losses) | 132 | (138 | ) | |||||
Total oil sales | 1,012 | 419 | ||||||
NGL sales | 138 | 152 | ||||||
NGL derivatives – realized gains (losses) | — | (7 | ) | |||||
NGL derivatives – unrealized gains (losses) | — | 15 | ||||||
Total NGL sales | 138 | 160 | ||||||
Total natural gas, oil and NGL sales | $ | 1,453 | $ | 1,068 | ||||
Average Sales Price (excluding gains (losses) on derivatives): | ||||||||
Natural gas ($ per mcf) | $ | 2.10 | $ | 1.77 | ||||
Oil ($ per bbl) | $ | 95.23 | $ | 98.36 | ||||
NGL ($ per bbl) | $ | 28.25 | $ | 35.16 | ||||
Natural gas equivalent ($ per mcfe) | $ | 4.45 | $ | 3.67 | ||||
Average Sales Price (excluding unrealized gains (losses) on derivatives): | ||||||||
Natural gas ($ per mcf) | $ | 2.13 | $ | 2.35 | ||||
Oil ($ per bbl) | $ | 94.85 | $ | 92.63 | ||||
NGL ($ per bbl) | $ | 28.25 | $ | 33.60 | ||||
Natural gas equivalent ($ per mcfe) | $ | 4.46 | $ | 4.02 | ||||
Other Operating Income(b) ($ in millions): | ||||||||
Marketing, gathering and compression net margin | $ | 36 | $ | 19 | ||||
Oilfield services net margin | $ | 35 | $ | 39 | ||||
Other Operating Income(b) ($ per mcfe): | ||||||||
Marketing, gathering and compression net margin | $ | 0.10 | $ | 0.06 | ||||
Oilfield services net margin | $ | 0.10 | $ | 0.12 |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Expenses ($ per mcfe): | ||||||||
Natural gas, oil and NGL production | $ | 0.86 | $ | 1.05 | ||||
Production taxes | $ | 0.15 | $ | 0.14 | ||||
General and administrative expenses(c) | $ | 0.31 | $ | 0.41 | ||||
Natural gas, oil and NGL depreciation, depletion and amortization | $ | 1.81 | $ | 1.52 | ||||
Depreciation and amortization of other assets | $ | 0.22 | $ | 0.25 | ||||
Interest expense(d) | $ | 0.04 | $ | 0.02 | ||||
Interest Expense ($ in millions): | ||||||||
Interest expense | $ | 17 | $ | 8 | ||||
Interest rate derivatives – realized (gains) losses | (2 | ) | — | |||||
Interest rate derivatives – unrealized (gains) losses | 6 | 4 | ||||||
Total interest expense | $ | 21 | $ | 12 |
(a) | Natural gas equivalent is based on six mcf of natural gas to one barrel of oil or one barrel of NGL. This ratio reflects an energy content equivalency and not a price or revenue equivalency. Given recent natural gas, oil and NGL prices, the price for an mcfe of natural gas is significantly less than the price for an mcfe of oil or NGL. |
(b) | Includes revenue and operating costs and excludes depreciation and amortization of other assets. See Depreciation and Amortization of Other Assets under Results of Operations for details of the depreciation and amortization of other assets associated with our marketing, gathering and compression and oilfield services operating segments. |
(c) | Includes stock-based compensation. |
(d) | Includes the effects of realized (gains) losses from interest rate derivatives, but excludes the effects of unrealized (gains) losses and is net of amounts capitalized. |
• | other relationships in which both Mr. McClendon and the Company conducted business with the same financial institutions; |
• | the trading activities of the Heritage Hedge Fund (co-founded by Mr. McClendon) through 2007, when the Heritage Hedge Fund ceased operations; and |
• | other matters, including issues regarding administration of the FWPP, and a 1998 loan to Mr. McClendon by then Board member Frederick B. Whittemore. |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Cash provided by operating activities(a) | $ | 924 | $ | 274 | ||||
Sales of natural gas and oil assets: | ||||||||
Volumetric production payment | — | 744 | ||||||
Joint venture leasehold | 25 | 18 | ||||||
Other natural gas and oil properties | 165 | 59 | ||||||
Total sales of natural gas, oil and other assets | 190 | 821 | ||||||
Other sources of cash and cash equivalents: | ||||||||
Sales of other property and equipment | 201 | 48 | ||||||
Sale of preferred interest and ORRI in CHK C-T | — | 1,250 | ||||||
Proceeds from long-term debt | — | 1,263 | ||||||
Proceeds from credit facilities borrowings, net | 821 | 1,142 | ||||||
Other | 56 | 19 | ||||||
Total other sources of cash and cash equivalents | 1,078 | 3,722 | ||||||
Total sources of cash and cash equivalents | $ | 2,192 | $ | 4,817 |
(a) | Includes cash settlements of derivative instruments classified as operating cash flows. |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Natural Gas and Oil Expenditures: | ||||||||
Drilling and completion costs(a)(b) | $ | (1,566 | ) | $ | (2,503 | ) | ||
Acquisitions of proved properties | (3 | ) | (5 | ) | ||||
Acquisitions of unproved properties | (70 | ) | (968 | ) | ||||
Geological and geophysical costs(b) | (13 | ) | (71 | ) | ||||
Interest capitalized on unproved properties | (207 | ) | (162 | ) | ||||
Total natural gas and oil expenditures | (1,859 | ) | (3,709 | ) | ||||
Other Uses of Cash and Cash Equivalents: | ||||||||
Additions to other property and equipment | (330 | ) | (690 | ) | ||||
Cash paid for prepayment of mortgage | (55 | ) | — | |||||
Dividends paid | (101 | ) | (99 | ) | ||||
Distributions to noncontrolling interest owners | (57 | ) | (39 | ) | ||||
Cash paid for financing derivatives(c) | (11 | ) | (9 | ) | ||||
Additions to investments | (3 | ) | (73 | ) | ||||
Other | (30 | ) | (111 | ) | ||||
Total uses of cash and cash equivalents | $ | (2,446 | ) | $ | (4,730 | ) |
(a) | Net of $180 million and $448 million in drilling and completion carries received from our joint venture partners during the Current Quarter and the Prior Quarter, respectively. |
(b) | Includes related capitalized interest. |
(c) | Reflects derivatives deemed to contain, for accounting purposes, a significant financing element at contract inception. |
Corporate Credit Facility(a) | Oilfield Services Credit Facility(b) | |||||||
($ in millions) | ||||||||
Facility structure | Senior secured revolving | Senior secured revolving | ||||||
Maturity date | December 2015 | November 2016 | ||||||
Borrowing capacity | $ | 4,000 | $ | 500 | ||||
Amount outstanding as of March 31, 2013 | $ | 832 | $ | 408 | ||||
Letters of credit outstanding as of March 31, 2013 | $ | 31 | $ | — |
(a) | Co-borrowers are Chesapeake Exploration, L.L.C., Chesapeake Appalachia, L.L.C. and Chesapeake Louisiana, L.P. |
(b) | Borrower is Chesapeake Oilfield Operating, L.L.C. |
Effective Date | Amended Indebtedness to EBITDA Ratio | |
December 31, 2012 | 5.00 to 1.00 | |
March 31, 2013 | 4.75 to 1.00 | |
June 30, 2013 | 4.50 to 1.00 | |
September 30, 2013 | 4.25 to 1.00 |
March 31, 2013 | ||||
($ in millions) | ||||
7.625% senior notes due 2013(a) | $ | 464 | ||
9.5% senior notes due 2015 | 1,265 | |||
6.25% euro-denominated senior notes due 2017(b) | 440 | |||
6.5% senior notes due 2017 | 660 | |||
6.875% senior notes due 2018(a) | 474 | |||
7.25% senior notes due 2018 | 669 | |||
6.625% senior notes due 2019(c) | 650 | |||
6.775% senior notes due 2019(d) | 1,300 | |||
6.625% senior notes due 2020 | 1,300 | |||
6.875% senior notes due 2020 | 500 | |||
6.125% senior notes due 2021 | 1,000 | |||
2.75% contingent convertible senior notes due 2035(e) | 396 | |||
2.5% contingent convertible senior notes due 2037(e) | 1,168 | |||
2.25% contingent convertible senior notes due 2038(e) | 347 | |||
Discount on senior notes(f) | (404 | ) | ||
Interest rate derivatives(g) | 17 | |||
Total senior notes, net | $ | 10,246 |
(a) | See Recent Developments for further discussion of tender offers completed for a portion of these notes subsequent to March 31, 2013. |
(b) | The principal amount shown is based on the exchange rate of $1.2816 to €1.00 as of March 31, 2013. See Note 7 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for information on our related foreign currency derivatives. |
(c) | Issuers are COO, an indirect wholly owned subsidiary of the Company, and Chesapeake Oilfield Finance, Inc. (COF), a wholly owned subsidiary of COO formed solely to facilitate the offering of the 6.625% Senior Notes due 2019. COF is nominally capitalized and has no operations or revenues. Chesapeake Energy Corporation is the issuer of all other senior notes and the contingent convertible senior notes. |
(d) | In the Current Quarter, we issued notice to the trustee to redeem our 6.775% Senior Notes due 2019 at par. See Recent Developments for further discussion. |
(e) | The holders of our contingent convertible senior notes may require us to repurchase, in cash, all or a portion of their notes at 100% of the principal amount of the notes on any of four dates that are five, ten, fifteen and twenty |
(f) | Included in this discount was $359 million as of March 31, 2013 associated with the equity component of our contingent convertible senior notes. This discount is amortized based on an effective yield method. |
(g) | See Note 7 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for discussion related to these instruments. |
Three Months Ended March 31, 2013 | |||||||||||||||||||||||||||
Natural Gas | Oil | NGL | Total | ||||||||||||||||||||||||
(bcf) | ($/mcf)(a) | (mmbbl) | ($/bbl)(a) | (mmbbl) | ($/bbl)(a) | (bcfe) | % | ($/mcfe)(a) | |||||||||||||||||||
Southern(b) | 134.3 | 1.91 | 0.4 | 90.45 | 0.4 | 18.85 | 139.0 | 39 | 2.16 | ||||||||||||||||||
Northern | 49.7 | 2.45 | 4.4 | 90.29 | 2.7 | 32.25 | 92.6 | 26 | 6.59 | ||||||||||||||||||
Eastern(c) | 80.3 | 2.38 | 0.3 | 83.88 | 0.7 | 39.32 | 86.1 | 24 | 2.81 | ||||||||||||||||||
Western(d) | 8.8 | 0.29 | 4.2 | 101.76 | 1.1 | 15.72 | 40.4 | 11 | 10.90 | ||||||||||||||||||
Total(e) | 273.1 | 2.10 | 9.3 | 95.23 | 4.9 | 28.25 | 358.1 | 100 | % | 4.45 | |||||||||||||||||
Three Months Ended March 31, 2012 | |||||||||||||||||||||||||||
Natural Gas | Oil | NGL | Total | ||||||||||||||||||||||||
(bcf) | ($/mcf)(a) | (mmbbl) | ($/bbl)(a) | (mmbbl) | ($/bbl)(a) | (bcfe) | % | ($/mcfe)(a) | |||||||||||||||||||
Southern(b) | 149.8 | 1.59 | 0.3 | 107.76 | 0.4 | 32.28 | 153.8 | 47 | 1.83 | ||||||||||||||||||
Northern | 53.3 | 2.18 | 3.3 | 97.40 | 2.8 | 30.54 | 89.7 | 28 | 5.75 | ||||||||||||||||||
Eastern(c) | 53.8 | 1.89 | — | — | 0.4 | 51.83 | 56.2 | 16 | 2.30 | ||||||||||||||||||
Western(d) | 13.9 | 1.61 | 2.4 | 99.19 | 0.7 | 45.76 | 33.1 | 9 | 9.05 | ||||||||||||||||||
Total(e) | 270.8 | 1.77 | 6.0 | 98.36 | 4.3 | 35.16 | 332.8 | 100 | % | 3.67 |
(a) | The average sales price excludes gains (losses) on derivatives. |
(b) | Our Barnett Shale production is concentrated in urban areas where the cost to develop the necessary infrastructure to gather and deliver the natural gas to intrastate pipelines significantly exceeds the cost of similar infrastructure in non-urban areas. Additionally, the rapid development of the Barnett Shale required the construction of new pipelines to provide an adequate market for these new gas reserves. In order to support the timely construction of these new pipelines, we entered into firm transportation contracts that have resulted in lower natural gas price realizations in the Barnett Shale than in our other major natural gas plays. |
(c) | Our Eastern division primarily includes the Marcellus Shale, which held approximately 23% of our estimated proved reserves by volume as of December 31, 2012. Production for the Marcellus Shale for the Current Quarter and the Prior Quarter was 76.9 bcfe and 51.3 bcfe, respectively. |
(d) | Our Western division primarily includes the Eagle Ford Shale, which held approximately 21% of our estimated proved reserves by volume as of December 31, 2012. Production for the Eagle Ford Shale for the Current Quarter and the Prior Quarter was 36.5 bcfe and 11.3 bcfe, respectively. |
(e) | Current Quarter and Prior Quarter production reflects various asset sales. See Note 8 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for information on our natural gas and oil property divestitures. |
Three Months Ended March 31, | Useful Life | |||||||||
2013 | 2012 | |||||||||
($ in millions) | (in years) | |||||||||
Oilfield services equipment(a) | $ | 23 | $ | 13 | 3 - 15 | |||||
Natural gas gathering systems and treating plants(b) | 3 | 18 | 20 | |||||||
Buildings and improvements | 13 | 10 | 10 - 39 | |||||||
Natural gas compressors(b) | 9 | 5 | 3 - 20 | |||||||
Computers and office equipment | 12 | 11 | 3 - 7 | |||||||
Vehicles | 11 | 12 | 0 - 5 | |||||||
Other | 7 | 15 | 2 - 20 | |||||||
Total depreciation and amortization of other assets | $ | 78 | $ | 84 |
(a) | Included in our oilfield services operating segment. |
(b) | Included in our marketing, gathering and compression operating segment. |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Interest expense on senior notes | $ | 186 | $ | 174 | ||||
Interest expense on credit facilities | 12 | 21 | ||||||
Interest expense on term loan | 29 | — | ||||||
Realized (gains) losses on interest rate derivatives | (2 | ) | — | |||||
Unrealized (gains) losses on interest rate derivatives | 6 | 4 | ||||||
Amortization of loan discount, issuance costs and other | 19 | 1 | ||||||
Capitalized interest | (229 | ) | (188 | ) | ||||
Total interest expense | $ | 21 | $ | 12 | ||||
Average senior notes borrowings | $ | 10,283 | $ | 10,152 | ||||
Average term loan borrowings | $ | 2,000 | $ | — | ||||
Average credit facilities borrowings | $ | 1,095 | $ | 3,424 |
• | the volatility of natural gas, oil and NGL prices; |
• | the limitations our level of indebtedness may have on our financial flexibility; |
• | declines in the prices of natural gas and oil potentially resulting in a write-down of our asset carrying values; |
• | the availability of capital on an economic basis, including through planned sales, to fund reserve replacement costs; |
• | our ability to replace reserves and sustain production; |
• | uncertainties inherent in estimating quantities of natural gas, oil and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; |
• | our ability to generate profits or achieve targeted results in drilling and well operations; |
• | leasehold terms expiring before production can be established; |
• | hedging activities resulting in lower prices realized on natural gas, oil and NGL sales; |
• | the need to secure hedging liabilities and the inability of hedging counterparties to satisfy their obligations; |
• | drilling and operating risks, including potential environmental liabilities; |
• | legislative and regulatory changes adversely affecting our industry and our business, including initiatives related to hydraulic fracturing, air emissions and endangered species; |
• | current worldwide economic uncertainty which may have a material adverse effect on our results of operations, liquidity and financial condition; |
• | oilfield services shortages, gathering system and transportation capacity constraints and various transportation interruptions that could adversely affect our revenues and cash flow; |
• | losses possible from pending or future litigation and regulatory investigations; |
• | cyber attacks adversely impacting our operations; and |
• | a delay in naming a new CEO, the loss of key operational personnel or inability to maintain our corporate culture. |
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk |
• | Swaps: Chesapeake receives a fixed price and pays a floating market price to the counterparty for the hedged commodity. |
• | Options: Chesapeake sells, and occasionally buys, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, Chesapeake pays the counterparty such excess on sold call options, and Chesapeake receives such excess on bought call options. If the market price settles below the fixed price of the call options, no payment is due from either party. |
• | Swaptions: Chesapeake sells call swaptions to counterparties that allow them, on a specific date, to extend an existing fixed-price swap for a certain period of time. |
• | Basis Protection Swaps: These instruments are arrangements that guarantee a price differential to NYMEX from a specified delivery point. Our natural gas basis protection swaps typically have negative differentials to NYMEX. Chesapeake receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract. Our oil basis protection swaps typically have positive differentials to NYMEX. Chesapeake receives a payment from the counterparty if the price differential is less than the stated terms of the contract and pays the counterparty if the price differential is greater than the stated terms of the contract. |
• | Collars: These instruments contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, Chesapeake receives the fixed price and pays the market price. If the market price is between the put and the call strike price, no payments are due from either party. Three-way collars include an additional put option in exchange for a more favorable strike price on the collar. This eliminates the counterparty’s downside exposure below the second put option. |
Weighted Average Price | Fair Value | |||||||||||||||||||||
Volume | Fixed | Call | Put | Differential | Asset (Liability) | |||||||||||||||||
(tbtu) | (per mmbtu) | ($ in millions) | ||||||||||||||||||||
Natural Gas: | ||||||||||||||||||||||
Swaps: | ||||||||||||||||||||||
Q2 2013 | 171 | $ | 3.72 | $ | — | $ | — | $ | — | $ | (52 | ) | ||||||||||
Q3 2013 | 179 | 3.67 | — | — | — | (80 | ) | |||||||||||||||
Q4 2013 | 179 | 3.67 | — | — | — | (98 | ) | |||||||||||||||
2014 | 57 | 4.21 | — | — | — | (3 | ) | |||||||||||||||
Call Options (sold): | ||||||||||||||||||||||
2013 | 203 | — | 6.39 | — | — | (1 | ) | |||||||||||||||
2014 | 330 | — | 6.43 | — | — | (16 | ) | |||||||||||||||
2015 | 226 | — | 6.31 | — | — | (27 | ) | |||||||||||||||
2016 | 279 | — | 6.72 | — | — | (53 | ) | |||||||||||||||
2017 – 2020 | 114 | — | 10.92 | — | — | (12 | ) | |||||||||||||||
Call Options (bought)(a): | ||||||||||||||||||||||
2013 | (203 | ) | — | 6.39 | — | — | (7 | ) | ||||||||||||||
2014 | (330 | ) | — | 6.43 | — | — | (24 | ) | ||||||||||||||
2015 | (226 | ) | — | 6.31 | — | — | (54 | ) | ||||||||||||||
2016 | (200 | ) | — | 6.02 | — | — | (39 | ) | ||||||||||||||
Basis Protection Swaps: | ||||||||||||||||||||||
2013 | 33 | — | — | — | (0.21 | ) | (1 | ) | ||||||||||||||
2014 | 28 | — | — | — | (0.32 | ) | (4 | ) | ||||||||||||||
2015 | 31 | — | — | — | (0.34 | ) | (3 | ) | ||||||||||||||
2016 | 4 | — | — | — | (1.03 | ) | (3 | ) | ||||||||||||||
2017 – 2022 | 5 | — | — | — | (1.02 | ) | (4 | ) | ||||||||||||||
3-Way Collars: | ||||||||||||||||||||||
Q2 2013 | 18 | — | 4.03 | 3.03 / 3.55 | — | (2 | ) | |||||||||||||||
Q3 2013 | 18 | — | 4.03 | 3.03 / 3.55 | — | (5 | ) | |||||||||||||||
Q4 2013 | 18 | — | 4.03 | 3.03 / 3.55 | — | (7 | ) | |||||||||||||||
2014 – 2015 | 18 | — | 4.70 | 3.50 / 4.00 | — | (1 | ) | |||||||||||||||
Total Natural Gas | $ | (496 | ) |
Weighted Average Price | Fair Value | |||||||||||||||||||||
Volume | Fixed | Call | Put | Differential | Asset (Liability) | |||||||||||||||||
(mmbbl) | (per bbl) | ($ in millions) | ||||||||||||||||||||
Oil: | ||||||||||||||||||||||
Swaps: | ||||||||||||||||||||||
Q2 2013 | 7.9 | $ | 95.55 | $ | — | $ | — | $ | — | $ | (15 | ) | ||||||||||
Q3 2013 | 8.5 | 95.42 | — | — | — | (14 | ) | |||||||||||||||
Q4 2013 | 8.8 | 95.33 | — | — | — | (4 | ) | |||||||||||||||
2014 – 2015 | 18.6 | 93.54 | — | — | — | 16 | ||||||||||||||||
Call Options (sold): | ||||||||||||||||||||||
2013 | 12.9 | — | 94.04 | — | — | (86 | ) | |||||||||||||||
2014 | 16.9 | — | 96.92 | — | — | (104 | ) | |||||||||||||||
2015 | 24.7 | — | 100.45 | — | — | (152 | ) | |||||||||||||||
2016 | 18.9 | — | 104.71 | — | — | (103 | ) | |||||||||||||||
2017 | 5.3 | — | 83.50 | — | — | (67 | ) | |||||||||||||||
Call Options (bought)(b): | ||||||||||||||||||||||
2013 | (7.0 | ) | — | 90.80 | — | — | 2 | |||||||||||||||
2014 | (2.2 | ) | — | 94.91 | — | — | (4 | ) | ||||||||||||||
Swaptions: | ||||||||||||||||||||||
2014 | 2.9 | 106.69 | — | — | — | (4 | ) | |||||||||||||||
2015 | 2.4 | 106.61 | — | — | — | (2 | ) | |||||||||||||||
Basis Protection Swaps: | ||||||||||||||||||||||
2013 | 3.2 | — | — | — | 11.82 | (2 | ) | |||||||||||||||
Total Oil | $ | (539 | ) | |||||||||||||||||||
Total Natural Gas and Oil | $ | (1,035 | ) |
(a) | Included in the fair value are deferred premiums of $8 million, $41 million, $82 million and $84 million which we will realize in 2013, 2014, 2015 and 2016, respectively. |
(b) | Included in the fair value are deferred premiums of $61 million and $19 million which we will realize in 2013 and 2014, respectively. |
March 31, 2013 | ||||
($ in millions) | ||||
Q2 2013 | $ | 35 | ||
Q3 2013 | 31 | |||
Q4 2013 | 22 | |||
2014 | (165 | ) | ||
2015 | 216 | |||
2016 – 2022 | 16 | |||
Total | $ | 155 |
2013 | ||||
($ in millions) | ||||
Fair value of contracts outstanding, as of January 1 | $ | (924 | ) | |
Change in fair value of contracts | (122 | ) | ||
Fair value of new contracts when entered into | — | |||
Contracts realized or otherwise settled | 11 | |||
Fair value of contracts when closed | — | |||
Fair value of contracts outstanding, as of March 31 | $ | (1,035 | ) |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Natural gas, oil and NGL sales | $ | 1,595 | $ | 1,221 | ||||
Realized gains (losses) on natural gas, oil and NGL derivatives | 4 | 117 | ||||||
Unrealized gains (losses) on natural gas, oil and NGL derivatives | (146 | ) | (270 | ) | ||||
Total natural gas, oil and NGL sales | $ | 1,453 | $ | 1,068 |
Years of Maturity | |||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | |||||||||||||||||||||
($ in millions) | |||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||
Debt – fixed rate(a) | $ | 464 | $ | — | $ | 1,661 | $ | — | $ | 2,269 | $ | 6,239 | $ | 10,633 | |||||||||||||
Average interest rate | 7.63 | % | — | % | 7.89 | % | — | % | 4.39 | % | 6.44 | % | 6.28 | % | |||||||||||||
Debt – variable rate(b) | $ | — | $ | — | $ | 832 | $ | 408 | $ | 2,000 | $ | — | $ | 3,240 | |||||||||||||
Average interest rate | — | % | — | % | 2.20 | % | 2.94 | % | 5.75 | % | — | % | 4.48 | % |
(a) | This amount does not include the discount included in debt of $404 million and interest rate derivatives of $17 million. |
(b) | This amount does not include the discount included in debt of $37 million. |
• | Swaps: Chesapeake enters into fixed-to-floating interest rate swaps (we receive a fixed interest rate and pay a floating market rate) to mitigate our exposure to changes in the fair value of our senior notes. We enter into floating-to-fixed interest rate swaps (we receive a floating market rate and a pay fixed interest rate) to manage our interest rate exposure related to our bank credit facility borrowings. |
• | Swaptions: Occasionally we sell an option to a counterparty for a premium which allows the counterparty to enter into a pre-determined swap with us on a specific date. |
Weighted Average Rate | Fair Value | |||||||||||||||||
Notional Amount | Fixed | Floating(a) | Fair Value Hedge | Net Premiums | Asset (Liability) | |||||||||||||
($ in millions) | ($ in millions) | |||||||||||||||||
Fixed to Floating: | ||||||||||||||||||
Swaps | ||||||||||||||||||
Mature 2020 – 2021 | $ | 700 | 6.34 | % | 1 – 3 mL | No | $ | — | $ | (6 | ) | |||||||
Swaption | ||||||||||||||||||
Q2 2013 | $ | 125 | 6.13 | % | 3 mL | No | 1 | (2 | ) | |||||||||
Floating to Fixed: | ||||||||||||||||||
Swaps | ||||||||||||||||||
Mature 2014 – 2015 | $ | 1,050 | 2.13 | % | 1 – 6 mL | No | — | (31 | ) | |||||||||
$ | 1 | $ | (39 | ) |
(a) | Month LIBOR has been abbreviated “mL” and basis points has been abbreviated “bp”. |
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
($ in millions) | ||||||||
Interest expense on senior notes | $ | 186 | $ | 174 | ||||
Interest expense on credit facilities | 12 | 21 | ||||||
Interest expense on term loans | 29 | — | ||||||
Realized (gains) losses on interest rate derivatives | (2 | ) | — | |||||
Unrealized (gains) losses on interest rate derivatives | 6 | 4 | ||||||
Amortization of loan discount, issuance costs and other | 19 | 1 | ||||||
Capitalized interest | (229 | ) | (188 | ) | ||||
Total interest expense | $ | 21 | $ | 12 |
ITEM 4. | Controls and Procedures |
Period | Total Number of Shares Purchased(a) | Average Price Paid Per Share (a) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(b) | |||||||||
January 1, 2013 through January 31, 2013 | 1,303,513 | $ | 16.96 | — | — | ||||||||
February 1, 2013 through February 28, 2013 | 399,285 | $ | 20.48 | — | — | ||||||||
March 1, 2013 through March 31, 2013 | 29,094 | $ | 20.04 | — | — | ||||||||
Total | 1,731,892 | $ | 17.82 | — | — |
(a) | Reflects the surrender to the Company of shares of common stock to pay withholding taxes in connection with the vesting of employee restricted stock. |
(b) | We make matching contributions to our 401(k) plan and deferred compensation plan using Chesapeake common stock that is held in treasury or is purchased by the respective plan trustees in the open market. The plans contain no limitation on the number of shares that may be purchased for purposes of Company contributions. |
ITEM 5. | Other Information |
ITEM 6. | Exhibits and Financial Statement Schedules |
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
3.1.1 | Chesapeake’s Restated Certificate of Incorporation, as amended. | 10-Q | 001-13726 | 3.1.1 | 8/10/2009 | |||||||||
3.1.2 | Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005B), as amended. | 10-Q | 001-13726 | 3.1.4 | 11/10/2008 | |||||||||
3.1.3 | Certificate of Designation of 4.5% Cumulative Convertible Preferred Stock, as amended. | 10-Q | 001-13726 | 3.1.6 | 8/11/2008 | |||||||||
3.1.4 | Certificate of Designation of 5.75% Cumulative Non-Voting Convertible Preferred Stock (Series A). | 8-K | 001-13726 | 3.2 | 5/20/2010 | |||||||||
3.1.5 | Certificate of Designation of 5.75% Cumulative Non-Voting Convertible Preferred Stock, as amended. | 10-Q | 001-13726 | 3.1.5 | 8/9/2010 | |||||||||
3.2 | Chesapeake’s Amended and Restated Bylaws. | 8-K | 001-13726 | 3.2 | 6/8/2012 | |||||||||
4.1 | Fourteenth Supplemental Indenture dated May 18, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated August 2, 2010. | S-3 | 333-168509 | 4.17 | 3/18/2013 | |||||||||
4.2 | Fifteenth Supplemental Indenture dated April 1, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated August 2, 2010 with respect to 3.25% Senior Notes due 2016. | 8-A | 001-13726 | 4.2 | 4/8/2013 | |||||||||
4.3 | Sixteenth Supplemental Indenture dated April 1, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated as of August 2, 2010 with respect to 5.375% Senior Notes due 2021. | 8-A | 001-13726 | 4.3 | 4/8/2013 | |||||||||
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
4.4 | Seventeenth Supplemental Indenture dated April 1, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated as of August 2, 2010 with respect to 5.75% Senior Notes due 2023. | 8-A | 001-13726 | 4.4 | 4/8/2013 | |||||||||
10.1 | Form of Employment Agreement, effective January 1, 2013, between Chesapeake Energy Corporation and respective executive and senior vice presidents. | 8-K | 001-13726 | 10.1 | 1/7/2013 | |||||||||
10.2 | Founder Separation and Services Agreement effective January 29, 2013 between Chesapeake Energy Corporation and Aubrey K. McClendon. | 8-K | 001-13726 | 10.1 | 4/19/2013 | |||||||||
10.3 | Founder Joint Operating Services Agreement effective January 29, 2013 among Chesapeake Energy Corporation, Aubrey K. McClendon, Arcadia Resources, L.P., Larchmont Resources, L.L.C., Jamestown Resources, L.L.C. and Pelican Energy, L.L.C. | 8-K | 001-13726 | 10.2 | 4/19/2013 | |||||||||
10.4 | Map Sale Rescission Agreement, effective as of April 1, 2013, by and between Aubrey K. McClendon and Chesapeake Energy Corporation. | 8-K | 001-13726 | 10.3 | 4/19/2013 | |||||||||
10.5.1 | Restricted Stock Award Agreement for Amended and Restated Long Term Incentive Plan by and between Chesapeake Energy Corporation and Aubrey K. McClendon. | X | ||||||||||||
10.5.2 | Nonqualified Stock Option Agreement for Amended and Restated Long Term Incentive Plan by and between Chesapeake Energy Corporation and Aubrey K. McClendon. | X | ||||||||||||
10.5.3 | 2013 Performance Share Unit Award Agreement for Amended and Restated Long Term Incentive Plan by and between Chesapeake Energy Corporation and Aubrey K. McClendon | X | ||||||||||||
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
12 | Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends. | X | ||||||||||||
31.1 | Steven C. Dixon, Acting Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
31.2 | Domenic J. Dell’Osso, Jr., Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
32.1 | Steven C. Dixon, Acting Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
32.2 | Domenic J. Dell’Osso, Jr., Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document. | X | ||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
CHESAPEAKE ENERGY CORPORATION | |||
Date: May 10, 2013 | By: | /s/ STEVEN C. DIXON | |
Steven C. Dixon Acting Chief Executive Officer and Chief Operating Officer |
Date: May 10, 2013 | By: | /s/ DOMENIC J. DELL’OSSO, JR. | |
Domenic J. Dell’Osso, Jr. Executive Vice President and Chief Financial Officer |
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
3.1.1 | Chesapeake’s Restated Certificate of Incorporation, as amended. | 10-Q | 001-13726 | 3.1.1 | 8/10/2009 | |||||||||
3.1.2 | Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005B), as amended. | 10-Q | 001-13726 | 3.1.4 | 11/10/2008 | |||||||||
3.1.3 | Certificate of Designation of 4.5% Cumulative Convertible Preferred Stock, as amended. | 10-Q | 001-13726 | 3.1.6 | 8/11/2008 | |||||||||
3.1.4 | Certificate of Designation of 5.75% Cumulative Non-Voting Convertible Preferred Stock (Series A). | 8-K | 001-13726 | 3.2 | 5/20/2010 | |||||||||
3.1.5 | Certificate of Designation of 5.75% Cumulative Non-Voting Convertible Preferred Stock, as amended. | 10-Q | 001-13726 | 3.1.5 | 8/9/2010 | |||||||||
3.2 | Chesapeake’s Amended and Restated Bylaws. | 8-K | 001-13726 | 3.2 | 6/8/2012 | |||||||||
4.1 | Fourteenth Supplemental Indenture dated May 18, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated August 2, 2010. | S-3 | 333-168509 | 4.17 | 3/18/2013 | |||||||||
4.2 | Fifteenth Supplemental Indenture dated April 1, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated August 2, 2010 with respect to 3.25% Senior Notes due 2016. | 8-A | 001-13726 | 4.2 | 4/8/2013 | |||||||||
4.3 | Sixteenth Supplemental Indenture dated April 1, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated as of August 2, 2010 with respect to 5.375% Senior Notes due 2021. | 8-A | 001-13726 | 4.3 | 4/8/2013 | |||||||||
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
4.4 | Seventeenth Supplemental Indenture dated April 1, 2013 among Chesapeake Energy Corporation, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas, as Trustee, to Indenture dated as of August 2, 2010 with respect to 5.75% Senior Notes due 2023. | 8-A | 001-13726 | 4.4 | 4/8/2013 | |||||||||
10.1 | Form of Employment Agreement, effective January 1, 2013, between Chesapeake Energy Corporation and respective executive and senior vice presidents. | 8-K | 001-13726 | 10.1 | 1/7/2013 | |||||||||
10.2 | Founder Separation and Services Agreement effective January 29, 2013 between Chesapeake Energy Corporation and Aubrey K. McClendon. | 8-K | 001-13726 | 10.1 | 4/19/2013 | |||||||||
10.3 | Founder Joint Operating Services Agreement effective January 29, 2013 among Chesapeake Energy Corporation, Aubrey K. McClendon, Arcadia Resources, L.P., Larchmont Resources, L.L.C., Jamestown Resources, L.L.C. and Pelican Energy, L.L.C. | 8-K | 001-13726 | 10.2 | 4/19/2013 | |||||||||
10.4 | Map Sale Rescission Agreement, effective as of April 1, 2013, by and between Aubrey K. McClendon and Chesapeake Energy Corporation. | 8-K | 001-13726 | 10.3 | 4/19/2013 | |||||||||
10.5.1 | Restricted Stock Award Agreement for Amended and Restated Long Term Incentive Plan by and between Chesapeake Energy Corporation and Aubrey K. McClendon. | X | ||||||||||||
10.5.2 | Nonqualified Stock Option Agreement for Amended and Restated Long Term Incentive Plan by and between Chesapeake Energy Corporation and Aubrey K. McClendon. | X | ||||||||||||
10.5.3 | 2013 Performance Share Unit Award Agreement for Amended and Restated Long Term Incentive Plan by and between Chesapeake Energy Corporation and Aubrey K. McClendon | X | ||||||||||||
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
12 | Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends. | X | ||||||||||||
31.1 | Steven C. Dixon, Acting Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
31.2 | Domenic J. Dell’Osso, Jr., Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
32.1 | Steven C. Dixon, Acting Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
32.2 | Domenic J. Dell’Osso, Jr., Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document. | X | ||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
1. | The Plan. The Plan, a copy of which has been made available to the Participant, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). Any capitalized terms used but not defined in this Agreement have the same meanings given to them in the Plan. |
2. | Grant of Award. The Company hereby awards to the Participant the number of shares of Common Stock set forth on the Notice, on the terms and conditions set forth herein and in the Plan (the “Award”). |
3. | Terms of Award. |
(a) | Escrow of Shares. A certificate, or book-entry equivalent representing the shares of Common Stock subject to the Award (the “Restricted Stock”) shall be issued in the name of the Participant and shall be escrowed with the Secretary of the Company (the “Escrow Agent”) subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Agreement. |
(b) | Vesting. The shares of Restricted Stock will vest in accordance with the vesting schedule set forth on the Notice. Such vesting will continue as though the Participant continues to be an Eligible Person through the last date of the vesting schedule, subject to the terms of the Plan and this Agreement. Once vested pursuant to the terms of this Agreement, the Restricted Stock shall be deemed “Vested Stock.” |
(c) | Voting Rights and Dividends. Subject to the restrictions on transfer set forth in this Agreement, the Participant will have customary rights of a shareholder attributable to the shares of Restricted Stock issued in an Award pursuant to this Agreement, including the rights to vote and to receive dividends on the shares. Participant appoints the Company to be Participant’s agent to receive for Participant dividends on shares based on record dates that occur while the shares are subject to restriction under this Agreement. The Company will transmit such dividends, net of required taxes pursuant to section 6, to or for the account of Participant in such manner as the Company determines. |
(d) | Vested Stock - Removal of Restrictions. Upon Restricted Stock becoming Vested Stock, all restrictions shall be removed from the Stock and the Secretary of the Company shall deliver to the Participant shares either in certificate form or via D.W.A.C. (delivery/withdrawal at custodian) representing such Vested Stock free and clear of all restrictions, except for any |
4. | Fundamental Transaction; Change of Control. In accordance with the terms of the Plan, all Restricted Stock that becomes Vested Stock upon the occurrence of a Fundamental Transaction or a Change of Control shall be delivered to the Participant in certificate form or via D.W.A.C. free and clear of all restrictions, except for any applicable securities law restrictions. |
5. | Nontransferability of Award. Restricted Stock is not transferable other than by will or the laws of descent and distribution. Any attempted sale, assignment, transfer, pledge, hypothecation or other disposition of, or the levy of execution, attachment or similar process upon, Restricted Stock contrary to the provisions hereof shall be void and ineffective, shall give no right to any purported transferee, any may, at the sole discretion of the Committee, result in forfeiture of the Restricted Stock involved in such attempt. |
6. | Withholding. The Company may make such provision as it may deem appropriate for the withholding of any applicable federal, state or local taxes that it determines it may be obligated to withhold or pay in connection with the vesting of the Restricted Stock or any election made by the Participant. Required withholding taxes as determined by the Company associated with this Award must be paid in cash unless the Committee requires the Participant to pay such withholding taxes by directing the Company to withhold from the Award the number of shares of Common Stock having a Fair Market Value on the date of vesting equal to the amount of required withholding taxes. The Company in its sole discretion may also withhold any required taxes from dividends paid on the Restricted Stock. |
7. | Notification of 83(b) Election. In the event the Participant elects to make an 83(b) election with respect to this Award, the Participant must provide the Company notice of such election at the same time the election is filed with the Internal Revenue Service. The Participant must also tender to the Company payment of the required withholding taxes associated with such election. In the event the Participant makes an 83(b) election without consulting with the Company as to the payment of required withholding taxes, the Company may withhold from other payments to the Participant amounts necessary to effect the required withholding. |
8. | Amendments. This Award Agreement may be amended by a written agreement signed by the Company and the Participant; provided that the Committee may modify the terms of this Award Agreement without the consent of the Participant in any manner that is not adverse to the Participant. |
9. | Securities Law Restrictions. This Award shall be vested and common stock issued only in compliance with the Securities Act of 1933, as amended (the “Act”), and any other applicable securities law, or pursuant to an exemption therefrom. If deemed necessary by the Company to comply with the Act or any applicable laws or regulations relating to the sale of securities, the Participant at the time of vesting and as a condition imposed by the Company, shall represent, warrant and agree that the shares of Common Stock subject to the Award are being acquired for investment and not with any present intention to resell the same and without a view to distribution, and the Participant shall, upon the request of the Company, execute and deliver to the Company an agreement to such a fact. The Participant acknowledges that any stock certificate representing Common Stock acquired under such circumstances will be issued with a restricted securities legend. |
10. | Participant Misconduct; Compensation Recovery. |
(a) | Notwithstanding anything in the Plan or this Agreement to the contrary, the Committee shall have the authority to determine that in the event of serious misconduct by the Participant (including material violations of the Founder Separation and Services Agreement effective January 29, 2013 between the Participant and the Company (the “Separation Agreement”), surviving terms of the employment agreement between the Participant and the Company, confidentiality or other proprietary matters, in each case that have not been cured within a reasonable period following notice) or any activity of a Participant in competition with the business of the Company or any Subsidiary or Affiliated Entity not otherwise permitted by the Separation Agreement which has not been cured following notice, the Award may be cancelled, in whole or in part, whether or not vested. The determination of whether a Participant has violated the Separation Agreement or otherwise engaged in a serious breach of conduct or any activity in competition with the business of the Company or any Subsidiary or Affiliated Entity shall be determined by the Committee in good faith. This paragraph 10 shall have no effect and be deleted from this Agreement following a Change of Control. |
(b) | The Award made pursuant to this Agreement is subject to recovery pursuant to the Company’s compensation recovery policy then in effect. To the extent required by applicable laws, rules, regulations or securities exchange listing requirements and the Company’s compensation recovery policy then in effect, the Company shall have the right, and shall take all actions necessary, to recover shares of the Company’s common stock awarded to the Participant pursuant to this Award. |
11. | Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in electronic or written form. If in writing, such notices shall be deemed to have been made (a) if personally delivered in return for a receipt, (b) if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at his last known address evidenced on the payroll records of the Company or (c) if provided electronically, provided to Participant at his e-mail address specified in the Company’s or its Affiliated Entity’s records or as other specified pursuant to and in accordance with the Committee’s applicable administrative procedures. |
12. | Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of Oklahoma. |
13. | Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. |
14. | Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. |
Notice of Grant of Award and Award Agreement | Chesapeake Energy Corporation ID: 73-1395733 6100 N. Western Avenue Oklahoma City, OK 73118 |
AUBREY McCLENDON Post Office Box 18756 OKLAHOMA CITY, OK United States 73154 | Award Number: 00138654 Plan: 2005 ID: 010106 |
Shares | Full Vest Date | ||
59,305 | 1/29/2014 | ||
59,305 | 1/29/2015 | ||
59,305 | 1/29/2016 |
/s/ James R. Webb | |
Chesapeake Energy Corporation | |
/s/ Aubrey K. McClendon | |
AUBREY McCLENDON |
1. | Grant of Stock Option. The Company hereby grants to the Participant a nonqualified stock option (the "Stock Option") to purchase all or any part of the number of shares of its common stock, par value $.01 (the "Stock"), as set forth on the Notice, under and subject to the terms and conditions of this Option Agreement and the Plan, which is incorporated herein by reference and made a part hereof for all purposes and a copy of which has been made available to the Participant. The purchase price for each share to be purchased hereunder shall be the option price set forth on the Notice (the "Option Price"). Any capitalized terms used but not defined in this Option Agreement have the same meanings given to them in the Plan. |
2. | Times of Exercise of Stock Option. After, and only after, the conditions of Section 10 hereof have been satisfied, the Participant shall be eligible to exercise the Stock Option pursuant to the vesting schedule set forth on the Notice (the "Vesting Schedule"). The Participant shall be entitled, subject to the applicable provisions of the Plan and this Option Agreement having been satisfied, to exercise the Stock Option and purchase on or after the applicable exercise dates specified on the Notice (the “Exercisable Dates”), on a cumulative basis, the number of shares of Stock as set forth on the Notice. Such right will continue as though the Participant continues to be an Eligible Person through the last date of the vesting schedule, subject to the terms of the Plan and this Option Agreement. |
3. | Term of Stock Option. The Stock Option shall expire at the close of business on the expiration date set forth on the Notice and may not be exercised after such expiration date; provided, however, in no event shall the term of the Stock Option be longer than ten years from the Date of Grant. |
4. | Nontransferability of Stock Option. The Stock Option is not transferable otherwise than by will or the laws of descent and distribution, and the Stock Option may be exercised, during the lifetime of the Participant, only by the Participant. More particularly (but without limiting the generality of the foregoing), the Stock Option may not be transferred (except as provided above), assigned, pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of, or the levy of execution, attachment or similar process upon, the Stock Option contrary to the provisions hereof shall be null and void and without effect, shall give no right to any purported transferee and may, in the Committee's sole discretion, result in the forfeiture of the Stock Option. |
5. | Acceleration of Otherwise Unexercisable Stock Option on Death, Disability, Retirement or Other Circumstances. The Committee, in its sole discretion, may accelerate the vesting of Stock Options for which the applicable Exercisable Date(s) has not yet occurred upon Participant’s (i) Disability, (ii) death, or (iii) other circumstances (as defined by the Committee). |
6. | Method of Exercising Stock Option. |
(a) | Procedures for Exercise. The manner of exercising the Stock Option shall be by written or electronic notice to the Secretary of the Company at the time the Stock Option, or part thereof, is to be exercised, and in any event prior to the expiration of the Stock Option. Such notice shall state the election to exercise the Stock Option, the number of shares of Stock to be purchased upon exercise, the form of payment to be used, and if submitted in written form shall be signed by the person so exercising the Stock Option. |
(b) | Form of Payment of Option Price. Payment of the Option Price for shares of Stock purchased under this Option Agreement shall accompany the Participant's notice of exercise, together with payment for any applicable withholding taxes. Payment of the Option Price shall be made (i) in cash or by check, bank draft or money order payable to the Company; (ii) by tendering, by either actual delivery of shares or by attestation, shares of Stock acceptable to the Committee having a Fair Market Value as of the day of exercise equal to the amount of the Option Price; (iii) by instructing the Company to withhold a number of shares from such exercise having a Fair Market Value as of the day of exercise equal to the amount of the Option Price; (iv) a combination of the approaches contained in clauses (i), (ii) and (iii); or (v) by irrevocably authorizing a broker-dealer to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Option Price and any tax withholding resulting from such exercise. |
(c) | Further Information. In the event the Stock Option is exercised, pursuant to the foregoing provisions of this Section 8, by any person other than the Participant due to the death of the Participant, such notice shall also be accompanied by appropriate proof of the right of such person to exercise the Stock Option. The notice so required shall be given by personal delivery to the Secretary of the Company or by registered or certified mail, addressed to the Company, Attn: Secretary, at 6100 North Western Avenue, Oklahoma City, Oklahoma 73118, and it shall be deemed to have been given when it is so personally delivered or when it is deposited in the United States mail in an envelope addressed to the Company, as aforesaid, properly stamped for delivery as a registered or certified letter. |
7. | Acceleration of Stock Option Upon Fundamental Transaction or Change of Control. In accordance with the terms of the Plan, any unvested Stock Options subject to this Agreement shall become fully exercisable upon the closing of a Fundamental Transaction or Change of Control. |
8. | Participant Misconduct; Compensation Recovery. |
(a) | Notwithstanding anything in the Plan or this Agreement to the contrary, the Committee shall have the authority to determine that in the event of serious misconduct by the Participant (including material violations of the Founder Separation and Services Agreement effective January 29, 2013 between the Participant and the Company (the “Separation Agreement”), surviving terms of the employment agreement between the Participant and the Company, confidentiality or other proprietary matters, in each case that have not been cured within a reasonable period following notice) or any activity of a Participant in competition with the business of the Company or any Subsidiary or Affiliated Entity not otherwise permitted by the Separation Agreement which has not been cured following notice, the Stock Options may be cancelled, in whole or in part, whether or not vested. The determination of whether a Participant has violated the Separation Agreement or otherwise engaged in serious misconduct or any activity in competition with the business of the Company or any Subsidiary or Affiliated Entity shall be determined by the Committee in good faith. This Section 8 shall have no effect and be deleted from this Agreement following a Change of Control. |
(b) | The Award made pursuant to this Agreement is subject to recovery pursuant to the Company’s compensation recovery policy then in effect. To the extent required by applicable laws, rules, regulations or securities exchange listing requirements and the Company’s compensation recovery policy then in effect, the Company shall have the right, and shall take all actions necessary, to recover shares of the Company’s common stock received by the Participant pursuant to the exercise of a Stock Option granted under this Award. |
9. | Securities Law Restrictions. The Stock Option shall be exercised and Stock issued only upon compliance with the Securities Act of 1933, as amended (the "Act"), and any other applicable securities law, or pursuant to an exemption therefrom. If deemed necessary by the Company to comply with the Act or any applicable laws or regulations relating to the sale of securities, the Participant, at the time of exercise and as a condition imposed by the Company, shall represent, warrant and agree that the shares of Stock subject to the Stock Option are being purchased for investment and not with any present intention to resell the same and without a view to distribution, and the Participant shall, upon the request of the Company, execute and deliver to the Company an agreement to such effect. The Participant acknowledges that any stock certificate representing Stock purchased under such circumstances will be issued with a restricted securities legend. |
10. | Payment of Withholding Taxes. A Participant must pay the amount of taxes required to be withheld by law upon the exercise of the Stock Option in cash or by instructing the Company to withhold a number of shares from such exercise having a Fair Market Value as of the day of exercise equal to the amount of the withholding taxes due to the Company. |
11. | Notices. All notices or other communications relating to the Plan and this Option Agreement as it relates to the Participant shall be in electronic or written form. If in writing, such notices shall be deemed to have been made (a) if personally delivered in return for a receipt, (b) if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at his last known address evidenced on the payroll records of the Company, or (c) if provided electronically, provided to Participant at his e-mail address specified in the Company’s or its Affiliated Entity’s records or as otherwise specified pursuant to and in accordance with the Committee’s applicable administrative procedures. |
12. | Amendments. This Option Agreement may be amended by a written agreement signed by the Company and the Participant; provided, that the Committee may modify the terms of this Option Agreement without the consent of the Participant in any manner that is not adverse to the Participant. |
13. | Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns, subject to the limitations on transferability of Section 4 and except as may be limited by the Plan and (ii) governed and construed under the laws of the State of Oklahoma. |
14. | Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. |
15. | Counterparts; Entire Agreement. This Option Agreement may be accepted by the required form of acceptance established by the Committee pursuant to the Notice, which may include deemed acceptance. If execution of the Notice is the required form of acceptance established by the Committee, then such execution may be in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. This Option Agreement, together with the Notice, shall constitute the entire agreement between the parties. |
Notice of Grant of Award and Award Agreement | Chesapeake Energy Corporation ID: 73-1395733 6100 N. Western Avenue Oklahoma City, OK 73118 |
AUBREY McCLENDON Post Office Box 18756 OKLAHOMA CITY, OK United States 73154 | Option Number: 00138671 Plan: 2005 ID: 010106 |
Shares | Vest Type | Full Vest | Expiration | |||
152,029 | On Vest Date | 1/29/2014 | 1/29/2023 | |||
152,028 | On Vest Date | 1/29/2015 | 1/29/2023 | |||
152,029 | On Vest Date | 1/29/2016 | 1/29/2023 |
/s/ James R. Webb | |
Chesapeake Energy Corporation | |
/s/ Aubrey K. McClendon | |
AUBREY McCLENDON |
1. | The Plan. The Plan, a copy of which has been made available to the Participant, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). Any capitalized terms used but not defined in this Agreement have the same meanings given to them in the Plan. The Participant acknowledges that he has received a copy of, or has online access to, the Plan, and hereby accepts the Performance Share Units (“PSUs”) subject to all the terms and provisions of the Plan and this Agreement. Such acceptance may be in any manner that the Committee may establish pursuant to the Notice, including deemed acceptance. The Participant hereby further agrees that he has received a copy of, or has online access to, the most recent Form S-8 prospectus relating to the Plan and hereby acknowledges his or her acceptance and receipt of such prospectus electronically. |
2. | Grant of Award. The Company hereby awards to the Participant the number of PSUs in accordance with the Notice, on the terms and conditions set forth herein, in the Plan and in the Notice (the “Award”). The Award gives the Participant the opportunity to earn the right to receive payment of cash for each PSU awarded in accordance with this Agreement and the Notice. The Award is subject to adjustment under the terms of the Plan. This Agreement and the Notice establish vesting requirements and determination of payment based on attainment by the Company of specified performance levels for the Performance Measures described in the Notice during the period commencing on the grant date and ending on the date set forth in the Notice (the “Performance Period”), as established and determined by the Committee. The Participant shall have no rights as a shareholder of the Company with respect to the PSUs. |
3. | Vesting and Forfeiture. The PSUs will vest in accordance with the vesting schedule set forth on the Notice. Notwithstanding any other provision of this Agreement, a Participant shall not be entitled to any payment under this Agreement unless and until the Committee certifies the level of performance respecting the Performance Measures that has been achieved and the Participant satisfies applicable vesting conditions for such payment. |
4. | Fundamental Transaction; Change of Control. In accordance with the terms of the Plan, upon the occurrence of a Fundamental Transaction or a Change of Control, all PSUs shall be deemed to have achieved a level of performance respecting the Performance Measures equal to the higher of (i) such performance level as required to achieve the Target PSU Allocation (as described in the Notice) or (ii) the actual performance level. The Committee may, in its discretion, adjust the level of performance respecting the Performance Measures described above to account for the change in any specified Performance Measure caused by measuring such values over the period commencing on the grant date and ending on the date of the Fundamental Transaction or Change of Control instead of over the Performance Period. All PSUs awarded pursuant to this paragraph 4 shall be deemed to fully vest at such time. |
5. | Nontransferability of Award. A PSU is not transferable other than by will or the laws of descent and distribution. Any attempted sale, assignment, transfer, pledge, hypothecation or other disposition of, or the levy of execution, attachment or similar process upon, a PSU contrary to the provisions hereof shall be void and ineffective, shall give no right to any purported transferee, and may, at the sole discretion of the Committee, result in forfeiture of the PSU involved in such attempt. |
6. | Payment. The payment date(s) with respect to all PSUs in which a Participant becomes vested shall be the earlier of (i) the payment date(s) set forth on the Notice or, (ii) in the event of a Fundamental Transaction or Change of Control, no later than 60 days following such Fundamental Transaction or Change of Control. |
7. | Withholding. The Company may make such provision as it may deem appropriate for the withholding of any applicable federal, state or local taxes that it determines it may be obligated to withhold or pay in connection with the PSUs. |
8. | Amendments. This Award Agreement may be amended by a written agreement signed by the Company and the Participant; provided that the Committee may modify the terms of this Award Agreement without the consent of the Participant in any manner that is not adverse to the Participant. |
9. | Securities Law Restrictions. This Award shall be issued, vested and paid only in compliance with the Securities Act of 1933, as amended (the “Act”), and any other applicable securities law, or pursuant to an exemption therefrom. |
10. | Participant Misconduct. |
(a) | Notwithstanding anything in the Plan or this Agreement to the contrary, the Committee shall have the authority to determine that in the event of serious misconduct by the Participant (including material violations of the Founder Separation and |
(b) | The Award made pursuant to this Agreement is subject to recovery pursuant to the Company’s compensation recovery policy then in effect. To the extent required by applicable laws, rules, regulations or securities exchange listing requirements and the Company’s compensation recovery policy then in effect, the Company shall have the right, and shall take all actions necessary, to recover the incentive compensation received by the Participant pursuant to the Award. |
11. | Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in electronic or written form. If in writing, such notices shall be deemed to have been made if personally delivered, or if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at his last known address evidenced on the payroll records of the Company. |
12. | Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of Oklahoma. |
13. | Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. |
14. | Counterparts; Entire Agreement. This Agreement may be accepted by the required form of acceptance established by the Committee pursuant to the Notice, which may include deemed acceptance. If execution of the Notice is the required form of acceptance established by the Committee, then such execution may be in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. This Agreement, together with the Notice, shall constitute the entire agreement between the parties. |
15. | Code Section 409A. The Agreement and all Awards granted hereunder are intended to comply with, or otherwise be exempt from, Code Section 409A. The Plan and all Awards shall be administered, interpreted, and construed in a manner constituent with Code Section 409A or an exemption thereform. Should any provision of the Plan, the Agreement or any Award hereunder be found not to comply with, or otherwise be exempt from, the provisions |
of the Code Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Committee, and without the consent of the Participant, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Code Section 409A. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six-month period immediately following the Employee’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s termination date (or death, if earlier), with interest from the date such amounts would otherwise have been paid at the short-term applicable federal rate, compounded semi-annually, as determined under Section 1274 of the Code, for the month in which payment would have been made but for the delay in payment required to avoid the imposition of an additional rate of tax on the Employee under Section 409A. Any payments to be made under this Plan upon a termination of employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Plan comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Employee on account of non-compliance with Section 409A. |
Notice of PSU Award | Chesapeake Energy Corporation ID: 73-1395733 6100 N. Western Avenue Oklahoma City, OK 73118 |
Aubrey K. McClendon 6902 Avondale Drive Oklahoma City, OK 73116 | Plan: Chesapeake Energy Corporation Amended and Restated Long Term Incentive Plan ID: 010106 |
Grant Date Value of Target Award: | $6,750,000 | |||
Target PSU Allocation: | 324,680 | |||
Last Day of the Performance Period: | 12/31/2015 |
• | Relative TSR Modifier: The Relative Total Shareholder Return1 (“TSR”) Modifier is based on the Company’s relative TSR performance. Relative TSR measures the performance of the Company’s share price and dividends compared to its peer group2 during the Performance Period. |
1 | The TSR for given Performance Period shall be calculated based on the difference between the average closing price per share of the Company's common stock for the 20 trading days including and immediately preceding the Grant Date and the average closing price per share of the Company's common stock for the 20 trading days including and immediately preceding the Last Day of the Performance Period (each as reported on the New York Stock Exchange), adjusting for dividend distributions and such other adjustments deemed necessary and appropriate by the Committee. |
2 | The performance peer group consists of the following companies: Anadarko Petroleum Corporation, Apache Corporation, Continental Resources, Inc., Devon Energy Corporation, EOG Resources, Inc., Hess Corp., Marathon Oil Corporation, Murphy Oil Corporation, Noble Energy, Inc., Occidental Petroleum Corporation and SandRidge Energy Inc. |
• | Relative Proved Reserves Growth Modifier: The Relative Proved Reserves Growth Modifier is based on the Company’s relative proved reserves growth (as adjusted for asset purchases or dispositions) compared to its peer group over the Performance Period. |
• | Relative Production Growth Modifier: The Relative Production Growth Modifier is based on the Company’s production growth (as adjusted for asset purchases or dispositions) compared to its peer group over the Performance Period. |
PSUs | Time Vesting | |
108,227 | 01/29/2014 | |
108,227 | 01/29/2015 | |
108,226 | 01/29/2016 |
/s/ James R. Webb | |
Chesapeake Energy Corporation | |
/s/ Aubrey K. McClendon | |
AUBREY McCLENDON |
Relative Performance and Plan Payout | |||||
3-Year Modifiers | <25th %ile | 25th %ile | 50th %ile | 75th %ile | 100th %ile |
Relative TSR Over 3 Years | 0.0% | 25.0% | 50.0% | 75.0% | 125.0% |
Relative Proved Reserves Growth Over 3 Years | 0.0% | 12.5% | 25.0% | 37.5% | 62.5% |
Relative Production Growth Over 3 Years | 0.0% | 12.5% | 25.0% | 37.5% | 62.5% |
Years Ended December 31, | Three Months Ended March 31, | |||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
EARNINGS: | ||||||||||||||||||||||||
Income (loss) before income taxes and cumulative effect of accounting change | $ | 991 | $ | (9,288 | ) | $ | 2,884 | $ | 2,880 | $ | (974 | ) | $ | 165 | ||||||||||
Interest expense(a) | 225 | 237 | 122 | 94 | 142 | 28 | ||||||||||||||||||
(Gain)/loss on investment in equity investees in excess of distributed earnings | 40 | 39 | (232 | ) | (154 | ) | 108 | 29 | ||||||||||||||||
Amortization of capitalized interest | 74 | 150 | 212 | 297 | 402 | 114 | ||||||||||||||||||
Loan cost amortization | 19 | 26 | 25 | 28 | 43 | 9 | ||||||||||||||||||
Earnings | $ | 1,349 | $ | (8,836 | ) | $ | 3,011 | $ | 3,145 | $ | (279 | ) | $ | 345 | ||||||||||
FIXED CHARGES: | ||||||||||||||||||||||||
Interest Expense | $ | 225 | $ | 237 | $ | 122 | $ | 94 | $ | 142 | $ | 28 | ||||||||||||
Capitalized interest | 586 | 627 | 711 | 727 | 976 | 228 | ||||||||||||||||||
Loan cost amortization | 19 | 26 | 25 | 28 | 43 | 9 | ||||||||||||||||||
Fixed Charges | $ | 830 | $ | 890 | $ | 858 | $ | 849 | $ | 1,161 | $ | 265 | ||||||||||||
PREFERRED STOCK DIVIDENDS: | ||||||||||||||||||||||||
Preferred dividend requirements | $ | 33 | $ | 23 | $ | 111 | $ | 172 | $ | 171 | $ | 43 | ||||||||||||
Ratio of income (loss) before provision for taxes to net income (loss)(b) | 1.64 | 1.59 | 1.63 | 1.65 | 1.64 | 1.61 | ||||||||||||||||||
Preferred Dividends | $ | 54 | $ | 37 | $ | 181 | $ | 284 | $ | 280 | $ | 69 | ||||||||||||
COMBINED FIXED CHARGES AND REFERRED DIVIDENDS | $ | 884 | $ | 927 | $ | 1,039 | $ | 1,131 | $ | 1,441 | $ | 334 | ||||||||||||
RATIO OF EARNINGS TO FIXED CHARGES | 1.6 | (9.9 | ) | 3.5 | 3.7 | (0.2 | ) | 1.3 | ||||||||||||||||
INSUFFICIENT COVERAGE | $ | — | $ | 9,726 | $ | — | $ | — | $ | 1,440 | $ | 1 | ||||||||||||
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS | 1.5 | (9.5 | ) | 2.9 | 2.8 | (0.2 | ) | — | ||||||||||||||||
INSUFFICIENT COVERAGE | $ | — | $ | 9,763 | $ | — | $ | — | $ | 1,720 | $ | — |
(a) | Excludes the effect of unrealized gains or losses on interest rate derivatives and includes amortization of bond discount. |
(b) | Amounts of income (loss) before provision for taxes and of net income (loss) exclude the cumulative effect of accounting change. |
1. | I have reviewed this quarterly report on Form 10-Q of Chesapeake Energy Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
May 10, 2013 | /s/ STEVEN C. DIXON |
Steven C. Dixon | |
Acting Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Chesapeake Energy Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
May 10, 2013 | /s/ DOMENIC J. DELL’OSSO, JR. |
Domenic J. Dell’Osso, Jr. | |
Executive Vice President and Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 10, 2013 | By: | /s/ STEVEN C. DIXON |
Steven C. Dixon Acting Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 10, 2013 | By: | /s/ DOMENIC J. DELL’OSSO, JR. |
Domenic J. Dell’Osso, Jr. | ||
Executive Vice President and Chief Financial Officer |
Employee Retirement and Other Termination Benefits Employee Retirement and other Termination Benefits (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Postemployment Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Costs of Retirement Plans [Table Text Block] | In addition, we provide benefits under certain circumstances to other employees that retire from or are terminated by Chesapeake. During the Current Quarter, we recorded the following expenses related to the termination benefits provided to Mr. McClendon, the VSP participants and others.
|
Debt - Senior Notes and Contingent Convertible Senior Notes Purchased Narrative (Details) (USD $)
|
3 Months Ended | 0 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Dec. 31, 2012
|
Mar. 31, 2013
2.5% Contingent Convertible Senior Notes due 2037
|
Mar. 31, 2013
2.75% Contingent Convertible Senior Notes Due 2035
|
Mar. 31, 2013
2.5% Contingent Convertible Senior Notes Due 2038
|
Mar. 31, 2013
6.775% Senior Notes Due 2019
|
Mar. 31, 2013
7.625% Senior Notes Due 2013
|
Mar. 31, 2013
6.625% Senior Notes Due 2019
|
Apr. 03, 2013
Senior Notes
|
Mar. 31, 2013
Senior Notes
|
Mar. 31, 2013
Senior Notes
2.5% Contingent Convertible Senior Notes due 2037
|
Dec. 31, 2012
Senior Notes
2.5% Contingent Convertible Senior Notes due 2037
|
Mar. 31, 2013
Senior Notes
2.75% Contingent Convertible Senior Notes Due 2035
|
Dec. 31, 2012
Senior Notes
2.75% Contingent Convertible Senior Notes Due 2035
|
Mar. 31, 2013
Senior Notes
2.5% Contingent Convertible Senior Notes Due 2038
|
Dec. 31, 2012
Senior Notes
2.5% Contingent Convertible Senior Notes Due 2038
|
Mar. 31, 2012
Senior Notes
6.775% Senior Notes Due 2019
|
Dec. 31, 2012
Senior Notes
6.775% Senior Notes Due 2019
|
Apr. 01, 2013
Senior Notes
6.775% Senior Notes Due 2019
|
Mar. 31, 2013
Senior Notes
6.775% Senior Notes Due 2019
|
Mar. 31, 2013
Senior Notes
7.625% Senior Notes Due 2013
|
Apr. 01, 2013
Senior Notes
7.625% Senior Notes Due 2013
|
Dec. 31, 2012
Senior Notes
7.625% Senior Notes Due 2013
|
Oct. 31, 2011
Senior Notes
6.625% Senior Notes Due 2019
|
Mar. 31, 2013
Senior Notes
6.625% Senior Notes Due 2019
|
Dec. 31, 2012
Senior Notes
6.625% Senior Notes Due 2019
|
Mar. 31, 2013
Minimum
|
Mar. 31, 2013
Maximum
|
Mar. 31, 2013
Maximum
Senior Notes
|
|
Long-Term Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||
Debt Outstanding Principal Amount | $ 50,000,000 | $ 75,000,000 | ||||||||||||||||||||||||||||
Debt Instrument Interest Rate Percentage | 2.50% | 2.75% | 2.25% | 6.775% | 7.625% | 6.625% | 2.50% | 2.75% | 2.25% | 6.775% | 6.775% | 7.625% | 6.625% | |||||||||||||||||
Proceeds from issuance of senior notes, net of discount and offering costs | 0 | 1,263,000,000 | 2,277,000,000 | 1,263,000,000 | 637,000,000 | |||||||||||||||||||||||||
Debt Instrument, Convertible, Effective Interest Rate | 8.00% | 6.86% | 8.00% | |||||||||||||||||||||||||||
Long-term Debt | 1,300,000,000 | 650,000,000 | ||||||||||||||||||||||||||||
Percentage Of Redeemable Notes At Redemption Price | 100.00% | |||||||||||||||||||||||||||||
Unsecured Debt | 2,000,000,000 | |||||||||||||||||||||||||||||
Principal Payment On Senior Notes Due In Two Years | 464,000,000 | |||||||||||||||||||||||||||||
Debt Instrument Principal Amount Redeemed Percent | 35.00% | |||||||||||||||||||||||||||||
Long-term Debt, Gross | $ 13,449,000,000 | $ 12,620,000,000 | $ 1,168,000,000 | $ 1,168,000,000 | $ 396,000,000 | $ 396,000,000 | $ 347,000,000 | $ 347,000,000 | $ 1,300,000,000 | $ 1,300,000,000 | $ 464,000,000 | $ 464,000,000 | $ 650,000,000 | $ 650,000,000 | $ 50,000,000 | |||||||||||||||
Document Effective Period | 60 days |
Derivative and Hedging Activities Natural Gas and Oil Sales (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Disclosure Components Of Natural Gas And Oil Sales [Abstract] | ||
Natural gas, oil and NGL sales | $ 1,595 | $ 1,221 |
Gains (losses) on natural gas, oil and NGL derivatives | (142) | (153) |
Natural gas, oil and NGL | $ 1,453 | $ 1,068 |
Debt - Bank Credit Facilities Narrative (Details) (USD $)
|
3 Months Ended | 3 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 3 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
bank_credit_facility
|
Dec. 31, 2012
|
Mar. 31, 2013
Begin Covenant Ratio
|
Mar. 31, 2013
Ending Q3 2012 Covenant Ratio
|
Mar. 31, 2013
Q4 2013 Covenant Ratio
|
Mar. 31, 2013
Q1 2013 Covenant Ratio
|
Mar. 31, 2013
Q2 2013 Covenant Ratio
|
Mar. 31, 2013
Q3 2013 Covenant Ratio
|
Dec. 31, 2012
Q3 2013 Covenant Ratio
|
Mar. 31, 2013
Maximum
|
Mar. 31, 2013
Maximum
Senior Notes
|
Mar. 31, 2013
Minimum
|
Mar. 31, 2013
Corporate Revolving Bank Credit Facility
|
Dec. 31, 2012
Corporate Revolving Bank Credit Facility
|
Mar. 31, 2013
Corporate Revolving Bank Credit Facility
Maximum
|
Mar. 31, 2013
Corporate Revolving Bank Credit Facility
Minimum
|
Mar. 31, 2013
Corporate Revolving Bank Credit Facility
Union Bank N.A.
Maximum
|
Mar. 31, 2013
Corporate Revolving Bank Credit Facility
Union Bank N.A.
Minimum
|
Mar. 31, 2013
Oilfield Services Revolving Bank Credit Facility
|
Mar. 31, 2013
Oilfield Services Revolving Bank Credit Facility
In Excess
|
Mar. 31, 2013
Oilfield Services Revolving Bank Credit Facility
Bank Of America N.A.
|
Mar. 31, 2013
Oilfield Services Revolving Bank Credit Facility
Bank Of America N.A.
Maximum
|
Mar. 31, 2013
Oilfield Services Revolving Bank Credit Facility
Bank Of America N.A.
Minimum
|
Mar. 31, 2013
Midstream Revolving Bank Credit Facility
|
|
Long-Term Debt Instrument [Line Items] | ||||||||||||||||||||||||
Number of revolving bank credit facilities used | 2 | |||||||||||||||||||||||
Borrowing Capacity | $ 4,000,000,000 | $ 500,000,000 | ||||||||||||||||||||||
Interest Rate In Addition To Federal Funds Rate | 0.50% | 0.50% | ||||||||||||||||||||||
Debt Instrument Margin Rate Range, Minimum | 4.50% | 1.50% | 0.50% | 1.00% | ||||||||||||||||||||
Debt Instrument Margin Rate Range, Maximum | 2.25% | 1.25% | 1.75% | |||||||||||||||||||||
Line of Credit Facility, Commitment Fee Percentage | 0.50% | 0.50% | 0.375% | |||||||||||||||||||||
Debt Instrument, Covenant Description | 4.00 to 1.00 | 6.00 to 1.00 | 4.00 to 1.00 | 4.75 to 1.00 | 4.50 to 1.00 | 4.25 to 1.00 | 5.00 to 1.00 | |||||||||||||||||
Increase to Applicable Margin, Credit Facility | 0.25% | |||||||||||||||||||||||
Credit Facility Borrowing Capacity Margin | 50.00% | |||||||||||||||||||||||
Credit Facility Lender Fee | 0.05% | |||||||||||||||||||||||
Additional Interest Payment, Credit Facility | 2,000,000 | |||||||||||||||||||||||
Minimum Collateral Value, Credit Facility | 75,000,000 | |||||||||||||||||||||||
Debt Outstanding Principal Amount | 75,000,000 | 50,000,000 | 50,000,000 | |||||||||||||||||||||
Long-term Debt | 125,000,000 | |||||||||||||||||||||||
Line Of Credit Facility Extended Borrowing Capacity | 900,000,000 | |||||||||||||||||||||||
Debt Instrument Interest Rate In Addition To Eurodollar Rate | 1.00% | |||||||||||||||||||||||
Percentage above LIBOR rate | 2.75% | 2.00% | ||||||||||||||||||||||
Acceleration of Principal Amount Due, Credit Facility | 50,000,000 | |||||||||||||||||||||||
Long-term Debt, Gross | 13,449,000,000 | 12,620,000,000 | 50,000,000 | |||||||||||||||||||||
Line of Credit Facility, Amount Outstanding | $ 832,000,000 | $ 408,000,000 | $ 15,000,000 | $ 600,000,000 |
Derivative and Hedging Activities Derivatives Not Designated as Hedging Instruments (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in net income (loss) | $ (4) | $ (4) |
Not designated as hedging instruments
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in net income (loss) | (129) | (164) |
Not designated as hedging instruments | Commodity contracts | Natural Gas, Oil and NGL sales
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in net income (loss) | (123) | (156) |
Not designated as hedging instruments | Interest rate contract | Interest Expense
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in net income (loss) | (6) | (6) |
Not designated as hedging instruments | Equity Contracts [Member] | Interest Expense
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in net income (loss) | $ 0 | $ (2) |
Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies AOCI Reclassified (Details) (Accumulated Other Comprehensive Income (Loss) [Member], USD $)
In Millions, unless otherwise specified |
3 Months Ended |
---|---|
Mar. 30, 2013
|
|
AOCI Reclassification into Statement of Operations [Line Items] | |
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | $ 18 |
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]
|
|
AOCI Reclassification into Statement of Operations [Line Items] | |
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | 12 |
Accumulated Net Unrealized Investment Gain (Loss) [Member]
|
|
AOCI Reclassification into Statement of Operations [Line Items] | |
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | $ 6 |
Other Liabilities Other Liabilities (Tables)
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
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Other Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Current Assets [Table Text Block] | Other current liabilities as of March 31, 2013 and December 31, 2012 are detailed below.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Long-Term Liabilities [Table Text Block] | Other long-term liabilities as of March 31, 2013 and December 31, 2012 are detailed below.
|
Derivative and Hedging Activities Narrative (Details)
|
1 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
USD ($)
|
Dec. 31, 2012
USD ($)
|
Mar. 31, 2013
Not designated as hedging instruments
USD ($)
|
Dec. 31, 2012
Not designated as hedging instruments
USD ($)
|
Mar. 31, 2013
Designated as Hedging Instrument
USD ($)
|
Dec. 31, 2012
Designated as Hedging Instrument
USD ($)
|
Mar. 31, 2013
6.25% Euro-Denominated Senior Notes Due 2017
|
Apr. 01, 2013
Senior Notes
USD ($)
|
Mar. 31, 2013
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
USD ($)
|
Dec. 31, 2012
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
USD ($)
|
Mar. 31, 2011
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
Cross Currency Interest Rate Contract [Member]
EUR (€)
|
Mar. 31, 2013
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
Cross Currency Interest Rate Contract [Member]
USD ($)
|
Mar. 31, 2013
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
Cross Currency Interest Rate Contract [Member]
EUR (€)
|
Mar. 31, 2013
Multi-Counterparty Hedging Facility
USD ($)
Mcfe
counterparty
|
Mar. 31, 2013
Multi-Counterparty Hedging Facility
Credit Risk
counterparty
|
Mar. 31, 2013
Multi-Counterparty Hedging Facility
Basis Derivative [Member]
Mcfe
|
Mar. 31, 2013
Multi-Counterparty Hedging Facility
Semi-Annual Collateral Dates
|
Mar. 31, 2013
Multi-Counterparty Hedging Facility
Between Semi-Annual Collateral Dates
|
Mar. 31, 2013
Scenario, Forecast
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
Cross Currency Interest Rate Contract [Member]
USD ($)
|
Mar. 31, 2013
Scenario, Forecast
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
Cross Currency Interest Rate Contract [Member]
EUR (€)
|
Mar. 31, 2013
Issuance Date [Member]
Senior Notes
6.25% Euro-Denominated Senior Notes Due 2017
Cross Currency Interest Rate Contract [Member]
USD ($)
|
Mar. 31, 2013
Short-term derivative instruments
Commodity derivatives
USD ($)
|
Dec. 31, 2012
Short-term derivative instruments
Commodity derivatives
USD ($)
|
Mar. 31, 2013
Short-term derivative instruments
Interest rate contract
USD ($)
|
Dec. 31, 2012
Short-term derivative instruments
Interest rate contract
USD ($)
|
Mar. 31, 2013
Short-term derivative instruments
Foreign currency derivatives
USD ($)
|
Dec. 31, 2012
Short-term derivative instruments
Foreign currency derivatives
USD ($)
|
Mar. 31, 2013
Short-term derivative instruments
Not designated as hedging instruments
Commodity derivatives
USD ($)
|
Dec. 31, 2012
Short-term derivative instruments
Not designated as hedging instruments
Commodity derivatives
USD ($)
|
Mar. 31, 2013
Short-term derivative instruments
Not designated as hedging instruments
Interest rate contract
USD ($)
|
Dec. 31, 2012
Short-term derivative instruments
Not designated as hedging instruments
Interest rate contract
USD ($)
|
Mar. 31, 2013
Long-term derivative instruments
Commodity derivatives
USD ($)
|
Dec. 31, 2012
Long-term derivative instruments
Commodity derivatives
USD ($)
|
Mar. 31, 2013
Long-term derivative instruments
Interest rate contract
USD ($)
|
Dec. 31, 2012
Long-term derivative instruments
Interest rate contract
USD ($)
|
Mar. 31, 2013
Long-term derivative instruments
Foreign currency derivatives
USD ($)
|
Dec. 31, 2012
Long-term derivative instruments
Foreign currency derivatives
USD ($)
|
Mar. 31, 2013
Long-term derivative instruments
Not designated as hedging instruments
Commodity derivatives
USD ($)
|
Dec. 31, 2012
Long-term derivative instruments
Not designated as hedging instruments
Commodity derivatives
USD ($)
|
Mar. 31, 2013
Long-term derivative instruments
Not designated as hedging instruments
Interest rate contract
USD ($)
|
Dec. 31, 2012
Long-term derivative instruments
Not designated as hedging instruments
Interest rate contract
USD ($)
|
Mar. 31, 2013
Long-term derivative instruments
Designated as Hedging Instrument
Foreign currency derivatives
USD ($)
|
Dec. 31, 2012
Long-term derivative instruments
Designated as Hedging Instrument
Foreign currency derivatives
USD ($)
|
|
Derivative [Line Items] | |||||||||||||||||||||||||||||||||||||||||||
Asset commodity contracts | $ 40,000,000 | $ 115,000,000 | $ 18,000,000 | $ 110,000,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 18,000,000 | $ 110,000,000 | $ 22,000,000 | $ 5,000,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 22,000,000 | $ 5,000,000 | |||||||||||||||||||||||||
Number of counterparties in hedge facility | 17 | 15 | |||||||||||||||||||||||||||||||||||||||||
Multi-counterparty hedging facility, committed to provide a trading capacity (in tcfe) | 6,400,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Multi-counterparty hedge facility, committed to provide an aggregate mark-to-market capacity | 17,250,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Multi-counterparty hedge facility, hedged total (in tcfe) | 1,500,000,000 | 100,000,000 | |||||||||||||||||||||||||||||||||||||||||
Natural gas and oil proved reserves, the value of which must cover the fair value of the transactions outstanding under the facility, multiplier | 1.65 | 1.30 | |||||||||||||||||||||||||||||||||||||||||
Duration gains will be recognized on terminated qualifying interest rate derivative transactions, years | 8 years | ||||||||||||||||||||||||||||||||||||||||||
Deferred (Gain) Loss on Discontinuation of Fair Value Hedge | 18,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Face Amount | 2,300,000,000 | 600,000,000 | |||||||||||||||||||||||||||||||||||||||||
Debt Instrument Interest Rate Percentage | 6.25% | 6.25% | |||||||||||||||||||||||||||||||||||||||||
Debt instrument, increase (decrease) for period, net | 256,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Semi-annual interest rate swaps proceeds | 11,000,000 | 344,000,000 | |||||||||||||||||||||||||||||||||||||||||
Semi-annual interest rate swaps payments | 459,000,000 | 17,000,000 | |||||||||||||||||||||||||||||||||||||||||
Dollar-equivalent interest rate | 7.491% | ||||||||||||||||||||||||||||||||||||||||||
US To Euro Exchange On Debt Ratio | 1.2816 | 1.3325 | |||||||||||||||||||||||||||||||||||||||||
Liability commodity contracts | 1,114,000,000 | 1,074,000,000 | 36,000,000 | 20,000,000 | 36,000,000 | 13,000,000 | 52,000,000 | 0 | 0 | 0 | 0 | 435,000,000 | 157,000,000 | 2,000,000 | 0 | 20,000,000 | 3,000,000 | 0 | 0 | 0 | 0 | 640,000,000 | 882,000,000 | 37,000,000 | 35,000,000 | 36,000,000 | 20,000,000 | ||||||||||||||||
Euro-denominated debt in notes payable, adjusted value | 13,449,000,000 | 12,620,000,000 | 440,000,000 | 454,000,000 | 440,000,000 | ||||||||||||||||||||||||||||||||||||||
Derivative Instruments, Gain (Loss) Reclassification from AOCI to Income, Estimated Net Amount to be Transferred | 166,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Cash Flow Hedges, Accumulated OCI Balance | 178,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Expected amount to be transferred of during the next 12 months | $ 19,000,000 | ||||||||||||||||||||||||||||||||||||||||||
Derivative, Number of Instruments Held | 0 |
Derivative and Hedging Activities Derivative Instruments in Balance Sheet (Details) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Liability Derivatives: | ||
Total derivative instruments | $ (1,110) | $ (979) |
Commodity contracts | Short-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 18 | 110 |
Liability Derivatives: | ||
Liability commodity contracts | (13) | (52) |
Commodity contracts | Long-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 22 | 5 |
Liability Derivatives: | ||
Liability commodity contracts | (20) | (3) |
Foreign currency contracts | Short-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 0 | 0 |
Liability Derivatives: | ||
Liability commodity contracts | 0 | 0 |
Foreign currency contracts | Long-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 0 | 0 |
Liability Derivatives: | ||
Liability commodity contracts | 0 | 0 |
Interest rate contract | Short-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 0 | 0 |
Liability Derivatives: | ||
Liability commodity contracts | 0 | 0 |
Interest rate contract | Long-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 0 | 0 |
Liability Derivatives: | ||
Liability commodity contracts | 0 | 0 |
Designated as Hedging Instrument
|
||
Liability Derivatives: | ||
Liability commodity contracts | (36) | (20) |
Designated as Hedging Instrument | Foreign currency contracts | Long-term derivative instruments
|
||
Liability Derivatives: | ||
Liability commodity contracts | (36) | (20) |
Not designated as hedging instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 40 | 115 |
Liability Derivatives: | ||
Liability commodity contracts | (1,114) | (1,074) |
Not designated as hedging instruments | Commodity contracts | Short-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 18 | 110 |
Liability Derivatives: | ||
Liability commodity contracts | (435) | (157) |
Not designated as hedging instruments | Commodity contracts | Long-term derivative instruments
|
||
Asset Derivatives: | ||
Asset commodity contracts | 22 | 5 |
Liability Derivatives: | ||
Liability commodity contracts | (640) | (882) |
Not designated as hedging instruments | Interest rate contract | Short-term derivative instruments
|
||
Liability Derivatives: | ||
Liability commodity contracts | (2) | 0 |
Not designated as hedging instruments | Interest rate contract | Long-term derivative instruments
|
||
Liability Derivatives: | ||
Liability commodity contracts | $ (37) | $ (35) |
Net Gains on Sales of Fixed Assets Narrative (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 30, 2012
|
Mar. 31, 2012
|
|
Significant Acquisitions and Disposals [Line Items] | |||
Proceeds from Sale of Property, Plant, and Equipment | $ 165 | $ 59 | |
Gain (Loss) on Sale of Property Plant Equipment | 49 | 2 | |
Marketing, Gathering And Compression
|
|||
Significant Acquisitions and Disposals [Line Items] | |||
Proceeds from Sale of Property, Plant, and Equipment | 134 | ||
Gain (Loss) on Sale of Property Plant Equipment | $ 56 |
Contingencies and Commitments - Additional Information Narrative (Details) (USD $)
|
0 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 3 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 30, 2012
|
Apr. 30, 2011
|
Mar. 31, 2013
Shareholder_Actions
acre
|
Mar. 30, 2012
|
Mar. 31, 2012
|
Mar. 31, 2013
Fair Value Amount Remianing [Member]
|
Mar. 31, 2013
Chesapeake Utica L.L.C
well
|
Dec. 31, 2012
Chesapeake Utica L.L.C
well
|
Mar. 31, 2013
Clean Energy Fuels Corp.
|
Jul. 31, 2011
Clean Energy Fuels Corp.
|
Jul. 11, 2011
Clean Energy Fuels Corp.
|
Mar. 31, 2013
Sundrop Fuels, Inc.
|
Jul. 31, 2011
Sundrop Fuels, Inc.
|
Dec. 31, 2011
Chesapeake Midstream Development, L.P
|
Dec. 31, 2012
Chesapeake Midstream Development, L.P
|
Dec. 31, 2012
Chesapeake Midstream Development, L.P
EBITD Minimum Committed Amount In 2012
|
Mar. 31, 2013
Chesapeake Midstream Development, L.P
EBITD Minimum Committed Amount In 2013
|
Mar. 31, 2013
Civil Penalties
|
Mar. 31, 2013
Rigs
|
Dec. 31, 2012
Rigs
Oilfield Services
|
Sep. 30, 2012
Equipment
Rigs
|
Sep. 30, 2012
Equipment
Maximum
|
Sep. 30, 2012
Equipment
Minimum
|
Mar. 31, 2013
Compressor Leases
Rigs
Compressor
|
Mar. 31, 2013
Drilling Obligations
|
|
Commitments and Contingencies [Line Items] | |||||||||||||||||||||||||
Interest paid | $ 12,000,000 | ||||||||||||||||||||||||
Attorney fees and expenses to plaintiffs' counsel | 3,750,000 | ||||||||||||||||||||||||
Stay Period | 30 days | ||||||||||||||||||||||||
Maximum working interest percentage allowed | 2.50% | ||||||||||||||||||||||||
Loss Contingency, New Claims Filed, Number | 13 | ||||||||||||||||||||||||
Civil penalties | 37,500 | ||||||||||||||||||||||||
Loss Contingency, Range of Possible Loss | 100,000 | ||||||||||||||||||||||||
Equipment sold | 94 | 2,558 | |||||||||||||||||||||||
Master Lease Agreement Miinimum Term (in years) | 5 years | 4 years | |||||||||||||||||||||||
Master Lease Agreement Maximum Term (in years) | 10 years | 10 years | |||||||||||||||||||||||
Number of repurchased equipment | 26 | 238 | |||||||||||||||||||||||
Business Acquisition, Purchase Price Allocation, Property, Plant and Equipment | 282,000,000 | ||||||||||||||||||||||||
Number Of Drilling Rigs Leased | 18 | ||||||||||||||||||||||||
Lease Term | 3 years | 1 year | |||||||||||||||||||||||
Operating Leases, Future Minimum Payments Due | 145,000,000 | 384,000,000 | |||||||||||||||||||||||
Proceeds from Sale of Property, Plant, and Equipment | 165,000,000 | 59,000,000 | 884,000,000 | ||||||||||||||||||||||
Minimum committed wells per year | 90 | ||||||||||||||||||||||||
Minimum committed wells per year, year one | 270 | ||||||||||||||||||||||||
Minimum committed wells per year, year two | 540 | ||||||||||||||||||||||||
Number of spud wells | 217 | ||||||||||||||||||||||||
Drilling carrying percentage, previous amount | 60.00% | ||||||||||||||||||||||||
Drilling carrying percentage, current amount | 45.00% | ||||||||||||||||||||||||
Capital Expenditures Incurred but Not yet Paid | 85,000,000 | ||||||||||||||||||||||||
Net Acreage Shortfall | 13,000 | ||||||||||||||||||||||||
Cash Payment for Shortfall | 26,000,000 | ||||||||||||||||||||||||
Guaranteed gross profit margin | 10.00% | ||||||||||||||||||||||||
Investment in newly issued convertible notes | 50,000,000 | 150,000,000 | 50,000,000 | ||||||||||||||||||||||
Investment in preferred stock | 115,000,000 | 155,000,000 | |||||||||||||||||||||||
EBITDA minimum commitment amount | 100,000,000 | 150,000,000 | |||||||||||||||||||||||
Gain (Loss) on Sale of Property Plant Equipment | 49,000,000 | 2,000,000 | 18,000,000 | 27,000,000 | |||||||||||||||||||||
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest | $ 1,000,000 | ||||||||||||||||||||||||
Numbr of Misdemeanor Counts | 3 |
Investments Narrative (Details) (USD $)
In Millions, except Share data, unless otherwise specified |
3 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2013
Frac Tech Holdings, L.L.C.
|
Dec. 31, 2012
Frac Tech Holdings, L.L.C.
|
Mar. 31, 2013
Chaparral Energy, Inc.
|
Jul. 31, 2011
Sundrop Fuels, Inc.
gal
|
Mar. 31, 2013
Sundrop Fuels, Inc.
|
Oct. 31, 2012
Clean Energy Fuels Corp.
|
Jul. 31, 2011
Clean Energy Fuels Corp.
|
Mar. 31, 2013
Clean Energy Fuels Corp.
|
Dec. 31, 2011
Clean Energy Fuels Corp.
|
Jul. 11, 2011
Clean Energy Fuels Corp.
|
Mar. 31, 2013
Twin Eagle Resources Management, LLC
|
Dec. 31, 2010
Twin Eagle Resources Management, LLC
|
Mar. 31, 2013
Maalt Specialized Bulk, LLC
|
Dec. 31, 2011
Maalt Specialized Bulk, LLC
|
Mar. 31, 2009
Gastar Exploration Ltd.
|
Mar. 31, 2013
Gastar Exploration Ltd.
|
Dec. 31, 2012
Gastar Exploration Ltd.
|
|
Schedule of Equity Method Investments [Line Items] | |||||||||||||||||||
Positive equity method adjustments | $ 26 | $ 4 | $ 8 | $ 1 | |||||||||||||||
Equity method accretion adjustments | 11 | ||||||||||||||||||
Excess carrying value of investment over underlying equity in net assets | 510 | 51 | 53 | ||||||||||||||||
Equity Method Investment, Difference Between Carrying Amount and Underlying Equity Attributable to Goodwill | 187 | 1 | |||||||||||||||||
Goodwill, Not Allocated, Amount | 107 | ||||||||||||||||||
Property, Plant and Equipment, Useful Life | P9Y | ||||||||||||||||||
Other Commitment, Due in Next Twelve Months | 3 | ||||||||||||||||||
Available-for-sale Securities, Equity Securities | 106 | ||||||||||||||||||
Depreciation | 2 | ||||||||||||||||||
Equity method depreciation adjustments | 1 | ||||||||||||||||||
Investment in newly issued convertible notes | 150 | 50 | 50 | ||||||||||||||||
Investment in preferred stock | 155 | 115 | |||||||||||||||||
Expected production of gallons of gasoline from natural gas and waste cellulosic | 40,000,000 | ||||||||||||||||||
Equity Method Investment, Ownership Percentage | 0.00% | 20.00% | 50.00% | 30.00% | 49.00% | ||||||||||||||
Annual interest rate on notes | 7.50% | ||||||||||||||||||
Conversion premium of convertible option into shares | 22.50% | ||||||||||||||||||
Conversion price for convertible promissory note | $ 15.80 | ||||||||||||||||||
Shares purchased | 1,000,000 | ||||||||||||||||||
Cost of investment | 10 | 89 | |||||||||||||||||
Litigation Settlement | $ 1.44 | ||||||||||||||||||
Maximum common stock price per share | $ 12.45 | $ 1.21 | |||||||||||||||||
Minimum common stock price per share | $ 13.00 | ||||||||||||||||||
Equity Method Investment, Other than Temporary Impairment | 70 | ||||||||||||||||||
Losses on investments | 29 | 33 | 3 | 10 | |||||||||||||||
Litigation Settlement, Gross | 75 | ||||||||||||||||||
Equity method investment | $ 20 | $ 12 |
Acquisitions and Divestitures VPP Transactions (Details) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
MBbls
|
Dec. 31, 2012
|
Dec. 31, 2012
Natural Gas
Mcf
|
Dec. 31, 2012
Oil
MBbls
|
Dec. 31, 2012
NGL Reserves
MBbls
|
Mar. 31, 2012
Bcfe
Mcf
|
Mar. 31, 2013
Andarko Basin Granite Wash
MBbls
|
Mar. 31, 2012
Andarko Basin Granite Wash
|
Mar. 31, 2012
Andarko Basin Granite Wash
Natural Gas
Mcf
|
Mar. 31, 2012
Andarko Basin Granite Wash
Oil
MBbls
|
Mar. 31, 2012
Andarko Basin Granite Wash
NGL Reserves
MBbls
|
Mar. 31, 2012
Andarko Basin Granite Wash
Bcfe
Mcf
|
Mar. 31, 2013
Mid-Continent
MBbls
|
May 31, 2012
Mid-Continent
|
May 31, 2012
Mid-Continent
Natural Gas
Mcf
|
May 31, 2012
Mid-Continent
Oil
MBbls
|
May 31, 2012
Mid-Continent
NGL Reserves
MBbls
|
May 31, 2012
Mid-Continent
Bcfe
Mcf
|
Mar. 31, 2013
Barnett Shale
MBbls
|
Sep. 30, 2010
Barnett Shale
|
Sep. 30, 2010
Barnett Shale
Natural Gas
Mcf
|
Sep. 30, 2010
Barnett Shale
Oil
MBbls
|
Sep. 30, 2010
Barnett Shale
NGL Reserves
MBbls
|
Sep. 30, 2010
Barnett Shale
Bcfe
Mcf
|
Mar. 31, 2013
East Texas And Texas Gulf Coast
MBbls
|
Feb. 28, 2010
East Texas And Texas Gulf Coast
|
Feb. 28, 2010
East Texas And Texas Gulf Coast
Natural Gas
Mcf
|
Feb. 28, 2010
East Texas And Texas Gulf Coast
Oil
MBbls
|
Feb. 28, 2010
East Texas And Texas Gulf Coast
NGL Reserves
MBbls
|
Feb. 28, 2010
East Texas And Texas Gulf Coast
Bcfe
Mcf
|
Mar. 31, 2013
South Texas
MBbls
|
Aug. 31, 2009
South Texas
|
Aug. 31, 2009
South Texas
Natural Gas
Mcf
|
Aug. 31, 2009
South Texas
Oil
MBbls
|
Aug. 31, 2009
South Texas
NGL Reserves
MBbls
|
Aug. 31, 2009
South Texas
Bcfe
Mcf
|
Mar. 31, 2013
Anadarko And Arkoma Basins
MBbls
|
Dec. 31, 2008
Anadarko And Arkoma Basins
|
Dec. 31, 2008
Anadarko And Arkoma Basins
Natural Gas
Mcf
|
Dec. 31, 2008
Anadarko And Arkoma Basins
Oil
MBbls
|
Dec. 31, 2008
Anadarko And Arkoma Basins
NGL Reserves
MBbls
|
Dec. 31, 2008
Anadarko And Arkoma Basins
Bcfe
Mcf
|
Mar. 31, 2013
Anadarko Basin Woodford Shale
MBbls
|
Aug. 31, 2008
Anadarko Basin Woodford Shale
|
Aug. 31, 2008
Anadarko Basin Woodford Shale
Natural Gas
Mcf
|
Aug. 31, 2008
Anadarko Basin Woodford Shale
Oil
MBbls
|
Aug. 31, 2008
Anadarko Basin Woodford Shale
NGL Reserves
MBbls
|
Aug. 31, 2008
Anadarko Basin Woodford Shale
Bcfe
Mcf
|
Mar. 31, 2013
Texas, Oklahoma And Kansas
MBbls
|
May 31, 2008
Texas, Oklahoma And Kansas
|
May 31, 2008
Texas, Oklahoma And Kansas
Natural Gas
Mcf
|
May 31, 2008
Texas, Oklahoma And Kansas
Oil
MBbls
|
May 31, 2008
Texas, Oklahoma And Kansas
NGL Reserves
MBbls
|
May 31, 2008
Texas, Oklahoma And Kansas
Bcfe
Mcf
|
Mar. 31, 2013
Kentucky And West Virginia
MBbls
|
Dec. 31, 2007
Kentucky And West Virginia
|
Dec. 31, 2007
Kentucky And West Virginia
Natural Gas
Mcf
|
Dec. 31, 2007
Kentucky And West Virginia
Oil
MBbls
|
Dec. 31, 2007
Kentucky And West Virginia
NGL Reserves
MBbls
|
Dec. 31, 2007
Kentucky And West Virginia
Bcfe
Mcf
|
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Business Combination, Separately Recognized Transactions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long Lived Assets Held-for-sale, Proceeds from Sale | $ 6,031 | $ 744 | $ 853 | $ 1,150 | $ 180 | $ 370 | $ 412 | $ 600 | $ 622 | $ 1,100 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Proved Developed Reserves (Volume) | 654,000,000 | 1,216,000,000 | 5,700,000 | 14,000,000 | 1,334,000,000 | 119,600,000 | 87,000,000 | 3,000,000 | 9,200,000 | 160,000,000 | 125,000,000 | 138,000,000 | 1,700,000 | 4,800,000 | 177,000,000 | 145,800,000 | 390,000,000 | 0 | 0 | 390,000,000 | 26,000,000 | 44,000,000 | 300,000 | 0 | 46,000,000 | 22,900,000 | 67,000,000 | 200,000 | 0 | 68,000,000 | 33,400,000 | 95,000,000 | 500,000 | 0 | 98,000,000 | 37,000,000 | 93,000,000 | 0 | 0 | 93,000,000 | 28,200,000 | 94,000,000 | 0 | 0 | 94,000,000 | 116,100,000 | 208,000,000 | 0 | 0 | 208,000,000 |
Derivative and Hedging Activities Interest Rate Derivatives (Details) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Derivative [Line Items] | ||
Notional Amount | $ 1,875 | $ 1,050 |
Fair Value | (39) | (35) |
Swap
|
||
Derivative [Line Items] | ||
Notional Amount | 1,750 | 1,050 |
Fair Value | (37) | (35) |
Swaptions
|
||
Derivative [Line Items] | ||
Notional Amount | 125 | 0 |
Fair Value | $ (2) | $ 0 |
Condensed Consolidating Financial Information (Notes)
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Mar. 31, 2013
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Condensed Financial Information of Parent Company Only Disclosure [Text Block] |
Chesapeake Energy Corporation is a holding company, owns no operating assets, and has no significant operations independent of its subsidiaries. Our obligations under our outstanding senior notes and contingent convertible senior notes listed in Note 3 are fully and unconditionally guaranteed, jointly and severally, by certain of our wholly owned subsidiaries on a senior unsecured basis. Our oilfield services subsidiary, COS, and its subsidiaries were released as guarantors in October 2011 when they were reorganized and separately capitalized and are not currently guarantors of our senior notes or our other debt obligations, but are subject to the covenants and guarantees in the oilfield services revolving bank credit facility agreement referred to in Note 3 that limit their ability to pay dividends or distributions or make loans to Chesapeake. Our midstream subsidiary, CMD, and certain of its subsidiaries, including Chesapeake Midstream Operating, L.L.C. (CMO), were added as guarantors of our senior notes and certain other obligations in June 2012 upon the termination of the midstream credit facility. In December 2012 upon the sale of CMO to ACMP, CMO and its subsidiaries were then released as guarantors of our senior notes and of our other debt obligations. All prior year information has been restated to reflect COS, CMO and their subsidiaries as non-guarantor subsidiaries and CMD and certain of its remaining subsidiaries as guarantor subsidiaries. Certain of our oilfield services subsidiaries and subsidiaries formed to invest in natural gas demand initiatives, subsidiaries with noncontrolling interests, subsidiaries qualified as variable interest entities, and certain de minimis subsidiaries are also non-guarantors. Set forth below are condensed consolidating financial statements for Chesapeake Energy Corporation (parent) on a stand-alone, unconsolidated basis, and its combined guarantor and combined non-guarantor subsidiaries as of March 31, 2013 and December 31, 2012 and for the three months ended March 31, 2013 and 2012. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities. CONDENSED CONSOLIDATING BALANCE SHEET AS OF MARCH 31, 2013 ($ in millions)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2012 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2013 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2012 ($ in millions)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2013 ($ in millions)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2012 ($ in millions)
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