EX-12 3 dex12.htm COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES Computation of Ratios of Earnings to Combined Fixed Charges

Exhibit 12

 

CHESAPEAKE ENERGY CORPORATION

RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS

(dollars in 000’s)

 

     Year Ended
December 31,
2000
    Year Ended
December 31,
2001
    Year Ended
December 31,
2002
    Year Ended
December 31,
2003
    Year Ended
December 31,
2004
     Nine Months
Ended
September 30,
2005
  

EARNINGS:

                                             

Income before income taxes and cumulative effect of accounting change

    $ 196,162    $ 361,698    $ 67,140    $ 500,952    $ 804,926     $ 780,754  

Interest expense (a)

      86,256      98,321      111,280      147,817      161,990       157,570  

(Gain)/loss on investment in equity investees in excess of distributed earnings

      —        —        —        409      (606 )     (594 )

Amortization of capitalized interest

      1,226      1,784      1,804      2,519      4,620       6,615  

Bond discount amortization (b)

      —        —        —        —        —         —    

Loan cost amortization

      3,669      4,022      4,962      4,254      5,728       6,368  
    
  
  
  
  
 

Earnings

    $ 287,313    $ 465,825    $ 185,186    $ 655,951    $ 976,658     $ 950,713  
    
  
  
  
  
 

FIXED CHARGES:

                                             

Interest expense

    $ 86,256    $ 98,321    $ 111,280    $ 147,817    $ 161,990     $ 157,570  

Capitalized interest

      2,452      4,719      4,976      13,041      36,240       54,758  

Bond discount amortization (b)

      —        —        —        —        —         —    

Loan cost amortization

      3,669      4,022      4,962      4,254      5,728       6,368  
    
  
  
  
  
 

Fixed Charges

    $ 92,377    $ 107,062    $ 121,218    $ 165,112    $ 203,958     $ 218,696  
    
  
  
  
  
 

Preferred Stock Dividends

                                             

Preferred Dividend Requirements

    $ 8,484    $ 2,050    $ 10,117    $ 22,469    $ 39,506     $ 25,526  

Ratio of income before provision for taxes to net income (c)

      N/A      1.66      1.67      1.61      1.56       1.57  
    
  
  
  
  
 

Subtotal – Preferred Dividends

    $ 8,484    $ 3,411    $ 16,861    $ 36,240    $ 61,629     $ 40,076  

Combined Fixed Charges and Preferred Dividends

    $ 100,861    $ 110,473    $ 138,079    $ 201,352    $ 265,587     $ 258,772  

Ratio of Earnings to Fixed Charges

      3.1      4.4      1.5      4.0      4.8       4.3  

Insufficient coverage

    $ —      $ —      $ —      $ —      $ —       $ —    

Ratio of Earnings to Combined Fixed Charges and Preferred Dividends

      2.8      4.2      1.3      3.3      3.7       3.7  

Insufficient coverage

    $ —      $ —      $ —      $ —      $ —       $ —    
(a) Excludes the effect on unrealized gains or losses on interest rate derivatives.

 

(b) Amortization of bond discount is excluded since it is included in interest expense.

 

(c) Amounts of income before provision for taxes and of net income exclude the cumulative effect of accounting change.