8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 22, 2014

CHESAPEAKE ENERGY CORPORATION
(Exact name of Registrant as specified in its Charter)
Oklahoma		1-13726	73-1395733
(State or other jurisdiction of incorporation)		(Commission File No.)	(IRS Employer Identification No.)
6100 North Western Avenue, Oklahoma City, Oklahoma			73118
(Address of principal executive offices)			(Zip Code)
	(405) 848-8000
	(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

*	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
*	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
*	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
*	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.01 Entry into a Material Definitive Agreement

On December 22, 2014, Chesapeake Appalachia, L.L.C. (“CHK Appalachia”), a wholly owned subsidiary of Chesapeake Energy Corporation (the “Company”), entered into a Settlement Agreement with Southwestern Energy Production Company (“SEPC”), a wholly owned subsidiary of Southwestern Energy Company, pursuant to which the CHK Appalachia completed the previously announced sale of certain of its assets in the southern Marcellus Shale and a portion of the eastern Utica Shale to SEPC, for net proceeds of approximately $4.975 billion in cash. The net proceeds include a $400 million adjustment to the $5.375 billion purchase price that was previously disclosed in a Current Report on Form 8-K filed on October 17, 2014. The price adjustment is attributable to various items, including, but not limited to, SEPC's waiver of potential post-closing price adjustments for certain title deficiencies and environmental liabilities (as specified in the Settlement Agreement). The sold properties consist of approximately 413,000 net acres and approximately 1,500 wells in northern West Virginia and southern Pennsylvania, along with related property, plant and equipment (collectively, the "Designated Properties").

The foregoing is a summary of the terms of the Settlement Agreement and does not purport to summarize or include all terms relating to the Settlement Agreement. The foregoing summary is qualified in its entirety by reference to the Settlement Agreement, which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Item 2.01 Completion of Acquisition or Disposition of Assets

On December 22, 2014, CHK Appalachia completed the sale of the Designated Properties to SEPC for cash consideration of $4.975 billion.  Additional information regarding the transaction is provided in Item 1.01 above and the related Current Report on Form 8-K filed on October 17, 2014, which information is incorporated by reference in this Item 2.01.

Item 7.01 Regulation FD Disclosure

On December 22, 2014, the Company issued a press release announcing the completion of the sale of the Designated Properties and authorization of a common stock repurchase program. A copy of the press release is furnished as Exhibit 99.1 to this Current Report.

Item 8.01 Other Information

On December 22, 2014, the Company issued a press release announcing that its Board of Directors has authorized the repurchase of up to $1 billion in value of its common stock from time to time. The repurchase authorization permits the Company to make repurchases on a discretionary basis as determined by management, subject to market conditions, applicable legal requirements, available liquidity, compliance with the Company's debt arrangements and other appropriate factors. Acquisitions under this repurchase authorization are to be made through open market or privately negotiated transactions and may be made pursuant to plans entered into in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. This repurchase authorization does not obligate the Company to acquire any particular amount of common stock and may be modified, extended, suspended or discontinued at any time without prior notice. No assurance can be given that any particular amount of common stock will be repurchased.

Item 9.01 Financial Statements and Exhibits

(b)	Pro Forma Financial Information:
	The unaudited pro forma condensed consolidated financial statements have been derived from the Company's historical consolidated financial statements and are being presented to give effect to the sale of the Designated Properties. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2014 and the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2014 and for the year ended December 31, 2013, and the related notes thereto, are furnished as Exhibit 99.2 to this Current Report.
(d)	Exhibits:
	The following exhibits are furnished as part of this Current Report on Form 8-K:
Exhibit No.	Document Description
99.1	Chesapeake Energy Corporation press release dated December 22, 2014 announcing the completion of the sale of the Designated Properties and authorization of a common stock repurchase program.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information of Chesapeake Energy Corporation and subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014 and the year ended December 31, 2013.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CHESAPEAKE ENERGY CORPORATION
Date: December 22, 2014	By:	/s/ James R. Webb
		James R. Webb
		Executive Vice President - General Counsel
		and Corporate Secretary

EXHIBIT INDEX

Exhibit No.	Document Description
99.1	Chesapeake Energy Corporation press release dated December 22, 2014 announcing the completion of the sale of the Designated Properties and authorization of a common stock repurchase program.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information of Chesapeake Energy Corporation and subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014 and the year ended December 31, 2013.

EX-99.1

	Exhibit 99.1
News Release

FOR IMMEDIATE RELEASE

DECEMBER 22, 2014

CHESAPEAKE ENERGY CORPORATION CLOSES SOUTHERN MARCELLUS

AND UTICA SHALE SALE; ANNOUNCES $1 BILLION COMMON STOCK REPURCHASE AUTHORIZATION

OKLAHOMA CITY, DECEMBER 22, 2014 – Chesapeake Energy Corporation (NYSE:CHK) today announced the closing of its asset sale to Southwestern Energy Company (NYSE:SWN) and initiatives to further enhance shareholder value.

Chesapeake closed the previously announced sale of its assets in the Southern Marcellus Shale and a portion of the Eastern Utica Shale to Southwestern for net proceeds of $4.975 billion. The $400 million adjustment to the previously reported $5.375 billion sale price is attributable to a settlement for various items, including Southwestern’s waiver of any future claims related to title defects and environmental liabilities. The properties sold to Southwestern consist of approximately 413,000 net acres and approximately 1,500 wells located in northern West Virginia and southern Pennsylvania, along with related property, plant and equipment. Net production of the divested properties in mid-December was approximately 57,000 barrels of oil equivalent (boe) per day. This represents approximately 7% of a new company record for total production that was achieved last week of 770,000 boe per day.

Doug Lawler, Chesapeake’s Chief Executive Officer, commented, “This transaction marks another significant event in Chesapeake’s transformation and solidifies our strong financial position. With the closing of this transaction and the available borrowing capacity under our unsecured revolving credit facility, Chesapeake now has a liquidity position of approximately $9 billion, putting Chesapeake in an advantageous position to enhance shareholder value in this volatile commodity price market. Consistent with our financial strength and our focus on enhancing shareholder value, Chesapeake’s Board of Directors has authorized a $1 billion common stock repurchase program. Further, building on our outstanding operational momentum of 2014, we will be focused on additional strategic growth opportunities to enhance our asset portfolio and continue to improve our ability to deliver top quartile growth metrics and shareholder returns.”

INVESTOR CONTACT:	MEDIA CONTACT:	CHESAPEAKE ENERGY CORPORATION
Brad Sylvester, CFA (405) 935-8859 ir@chk.com	Gordon Pennoyer (405) 935-8878 media@chk.com	6100 North Western Avenue P.O. Box 18496 Oklahoma City, OK 73154

Chesapeake Energy Corporation (NYSE:CHK) is the second-largest producer of natural gas and the 11th largest producer of oil and natural gas liquids in the U.S. Headquartered in Oklahoma City, the company's operations are focused on discovering and developing its large and geographically diverse resource base of unconventional natural gas and oil assets onshore in the U.S. The company also owns substantial marketing and compression businesses. Further information is available at www.chk.com where Chesapeake routinely posts announcements, updates, events, investor information, presentations and news releases.

This news release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than statements of historical fact that give our current expectations or forecasts of future events. They include, but are not limited to, the effect of the asset sale and use of proceeds, the common stock repurchase program and other strategic growth alternatives on the Company’s efforts to enhance current and long-term shareholder value, deliver top quartile growth metrics and shareholder returns. The company’s ability to execute on the stock repurchase program depends upon many factors, including the price of the common stock, the availability of other alternatives and market conditions. Although we believe the expectations and forecasts reflected in the forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Chesapeake does not intend to update any forward looking statements. Factors that could cause actual results to differ materially from expected results include those described under “Risk Factors” in Item 1A of our 2013 Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission on February 27, 2014. These risk factors include: 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 asset 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; a deterioration in general economic, business or industry conditions having 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; adverse developments and losses in connection with pending or future litigation and regulatory investigations; cyber-attacks adversely impacting our operations; and an interruption at our headquarters that adversely affects our business.

2

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On December 22, 2014, Chesapeake Appalachia, L.L.C., a wholly owned subsidiary of Chesapeake Energy Corporation (the “Company”), closed the sale of its southern Marcellus Shale and a portion of its eastern Utica Shale assets to Southwestern Energy Production Company, a wholly owned subsidiary of Southwestern Energy Company, for net proceeds of approximately $4.975 billion.

The following unaudited pro forma condensed consolidated balance sheet and statement of operations are derived from the historical consolidated financial statements of the Company. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2014 gives effect to the disposition of the Company’s southern Marcellus and eastern Utica Shale assets as if it had occurred on September 30, 2014. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2013 and the nine months ended September 30, 2014 reflect the southern Marcellus and eastern Utica Shale asset disposition as if it had occurred on January 1, 2013. The unaudited pro forma condensed consolidated balance sheet and statement of operations should be read in conjunction with the notes thereto and the historical financial statements, including the notes thereto, of the Company included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2014 and in its Annual Report on Form 10-K for the year ended December 31, 2013.

The preparation of the unaudited pro forma consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that affect the reported amounts of revenues and expenses. Actual results could differ from those estimates.

The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transaction occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflect estimates and assumptions that the Company’s management believes to be reasonable.

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2014

	Historical			Pro Forma Adjustments				Pro Forma
	($ in millions)
CURRENT ASSETS:
Cash and cash equivalents	$	90		$	4,975		(a)	$	5,065
Other current assets	3,039			—				3,039
Total Current Assets	3,129			4,975				8,104
PROPERTY AND EQUIPMENT:
Natural gas and oil properties, at cost based on full cost accounting:
Proved natural gas and oil properties	60,260			(3,991		)	(b)(c)(d)	56,269
Unproved properties	11,513			(1,001		)	(d)	10,512
Other property and equipment	3,127			(9		)	(e)	3,118
Total Property and Equipment, at Cost	74,900			(5,001		)		69,899
Less: accumulated depreciation, depletion and amortization	(38,349		)	3			(e)	(38,346		)
Property and equipment held for sale, net	101			—				101
Total Property and Equipment, Net	36,652			(4,998		)		31,654
OTHER LONG-TERM ASSETS	737			—				737
TOTAL ASSETS	$	40,518		$	(23	)		$	40,495
CURRENT LIABILITIES:
Current liabilities	$	5,602		$	36		(f)	$	5,638
LONG-TERM LIABILITIES:
Long-term debt, net	11,592			—				11,592
Deferred income tax liabilities	4,285			(319		)	(f)	3,966
Other long-term liabilities	1,408			144			(f)(c)	1,552
Total Long-Term Liabilities	17,285			(175		)		17,110
EQUITY:
Total Equity	17,631			116			(f)(g)	17,747
TOTAL LIABILITIES AND EQUITY	$	40,518		$	(23	)		$	40,495

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

1

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

	Historical			Pro Forma Adjustments				Pro Forma
	($ in millions)
REVENUES:
Natural gas, oil and NGL	$	5,812		$	(347	)	(h)	$	5,465
Marketing, gathering and compression	9,543			(188		)	(i)	9,355
Oilfield services	546			—				546
Total Revenues	15,901			(535		)		15,366
OPERATING EXPENSES:
Natural gas, oil and NGL production	868			(36		)	(h)	832
Production taxes	185			(20		)	(j)	165
Marketing, gathering and compression	9,515			(187		)	(i)	9,328
Oilfield services	431			—				431
General and administrative	229			—				229
Restructuring and other termination costs	12			—				12
Provision for legal contingencies	100			—				100
Natural gas, oil and NGL depreciation, depletion and amortization	1,977			(40		)	(k)	1,937
Depreciation and amortization of other assets	194			(1		)	(l)	193
Impairments of fixed assets and other	75			—				75
Net gains on sales of fixed assets	(201		)	—				(201		)
Total Operating Expenses	13,385			(284		)		13,101
INCOME FROM OPERATIONS	2,516			(251		)		2,265
OTHER EXPENSE:
Interest expense	(82		)	(38		)	(m)	(120		)
Losses on investments	(72		)	—				(72		)
Other expense	(116		)	—				(116		)
Total Other Expense	(270		)	(38		)		(308		)
INCOME BEFORE INCOME TAXES	2,246			(289		)		1,957
INCOME TAX EXPENSE:
Current income taxes	10			—				10
Deferred income taxes	849			(109		)	(n)	740
Total Income Tax Expense	859			(109		)		750
NET INCOME	1,387			(180		)		1,207
Net income attributable to noncontrolling interests	(110		)	—				(110		)
NET INCOME ATTRIBUTABLE TO CHESAPEAKE	1,277			(180		)		1,097
Preferred stock dividends	(128		)	—				(128		)
Redemption on purchase of preferred shares of a subsidiary	(447		)	—				(447		)
Earnings allocated to participating securities	(15		)	4			(o)	(11		)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	687		$	(176	)		$	511
EARNINGS PER COMMON SHARE:
Basic	$	1.04						$	0.78
Diluted	$	1.04						$	0.77
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions):
Basic	659							659
Diluted	659							659

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

2

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2013

	Historical			Pro Forma Adjustments				Pro Forma
	($ in millions)
REVENUES:
Natural gas, oil and NGL	$	7,052		$	(349	)	(h)	$	6,703
Marketing, gathering and compression	9,559			(172		)	(i)	9,387
Oilfield services	895			—				895
Total Revenues	17,506			(521		)		16,985
OPERATING EXPENSES:
Natural gas, oil and NGL production	1,159			(44		)	(h)	1,115
Production taxes	229			(21		)	(j)	208
Marketing, gathering and compression	9,461			(170		)	(i)	9,291
Oilfield services	736			—				736
General and administrative	457			—				457
Restructuring and other termination costs	248			—				248
Natural gas, oil and NGL depreciation, depletion and amortization	2,589			(56		)	(k)	2,533
Depreciation and amortization of other assets	314			(1		)	(l)	313
Impairments of fixed assets and other	546			—				546
Net gains on sales of fixed assets	(302		)	—				(302		)
Total Operating Expenses	15,437			(292		)		15,145
INCOME FROM OPERATIONS	2,069			(229		)		1,840
OTHER EXPENSE:
Interest expense	(227		)	(58		)	(m)	(285		)
Losses on investments	(226		)	—				(226		)
Other expense	(174		)	—				(174		)
Total Other Expense	(627		)	(58		)		(685		)
INCOME BEFORE INCOME TAXES	1,442			(287		)		1,155
INCOME TAX EXPENSE:
Current income taxes	22			—				22
Deferred income taxes	526			(108		)	(n)	418
Total Income Tax Expense	548			(108		)		440
NET INCOME	894			(179		)		715
Net income attributable to noncontrolling interests	(170		)	—				(170		)
NET INCOME ATTRIBUTABLE TO CHESAPEAKE	724			(179		)		545
Preferred stock dividends	(171		)	—				(171		)
Redemption on purchase of preferred shares of a subsidiary	(69		)	—				(69		)
Earnings allocated to participating securities	(10		)	4			(o)	(6		)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	474		$	(175	)		$	299
EARNINGS PER COMMON SHARE:
Basic	$	0.73						$	0.46
Diluted	$	0.73						$	0.46
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions):
Basic	653							653
Diluted	653							653

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

3

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(a) Adjustment to reflect the $4.975 billion in cash from the sale of the Company’s divested southern Marcellus and eastern Utica Shale assets.

(b) Adjustment to reduce the full cost pool for the estimated fair market value of $4.969 billion attributable to the Company’s divested southern Marcellus and eastern Utica Shale natural gas and oil proved reserves. The Company follows the full cost method of accounting. Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in proved reserves and significantly alter the relationship between costs and proved reserves. The sale of the Company's southern Marcellus and eastern Utica Shale natural gas and oil properties did not involve a significant change in proved reserves for the Company and as such no gain was recognized on this sale.

(c) Adjustment to reflect the elimination of $23 million of asset retirement obligations associated with the Company’s divested southern Marcellus and eastern Utica Shale assets and the associated asset retirement cost capitalized in the full cost pool.

(d) Adjustment to reclassify $1.0 billion of the historical cost basis of unproved natural gas and oil properties associated with the sale of the Company’s divested southern Marcellus and eastern Utica Shale assets into the Company's amortization base.

(e) Adjustment to reduce other property and equipment by $9 million for the sale of the Company’s divested southern Marcellus and eastern Utica Shale other property and equipment and the associated accumulated depreciation of $3 million.

(f) Adjustment to reflect the change in the current income taxes payable, non-current income taxes payable, and deferred income tax liability associated with the sale of the Company's divested southern Marcellus and eastern Utica Shale assets.

(g) No gain or loss is expected to result on the sale of the Company’s other property and equipment based on the preliminary estimated fair market value relative to the proceeds received.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(h) Adjustment to eliminate revenue and direct operating expenses of the divested southern Marcellus and eastern Utica Shale assets.

(i) Adjustment to reflect the reduction of marketing revenue and expenses the Company generates through marketing activities with joint operating agreement partners relating to the divested southern Marcellus and eastern Utica Shale assets.

(j) Adjustment to reduce production taxes for the production of natural gas, oil and NGL relating to the divested southern Marcellus and eastern Utica Shale properties.

(k) Adjustment to reflect the reduction in depreciation, depletion and amortization (DD&A) expense based on the production volumes attributable to the properties sold and revision to the Company’s DD&A rate reflecting the reserve volumes sold. DD&A is calculated using the unit of production method under full cost accounting.

(l) Adjustment to reflect the reduction in DD&A attributable to the sale of the Company’s divested southern Marcellus and eastern Utica Shale other property and equipment.

(m) Adjustment to reflect the increased interest expense associated with the change in the amount of interest capitalized on the Company's divested southern Marcellus and eastern Utica Share natural gas and oil properties. The reclassification of the historical cost basis of unproved natural gas and oil properties changed the amount of interest capitalized.

(n) Adjustment to reflect income tax expense based on the Company’s historical statutory tax rate applied to the cumulative effect of changes referenced within the unaudited pro forma condensed consolidated statement of operations.

(o) Adjustment to reflect the change in earnings allocated to participating securities associated with the sale of the Company's divested southern Marcellus and eastern Utica Shale assets. Participating securities consist of unvested restricted stock issued to the Company's employees and non-employee directors that provide dividend rights.