Debt (Tables)

9 Months Ended

Sep. 30, 2012

Text Block [Abstract]

Long-Term Debt

Our long-term debt consisted of the following as of September 30, 2012 and December 31, 2011:

	September 30, 2012			December 31, 2011
	($ in millions)
Term loans due 2017(a)	$	4,000		$	—
7.625% senior notes due 2013(b)	464			464
9.5% senior notes due 2015	1,265			1,265
6.25% euro-denominated senior notes due 2017(c)	442			446
6.5% senior notes due 2017	660			660
6.875% senior notes due 2018	474			474
7.25% senior notes due 2018	669			669
6.625% senior notes due 2019(d)	650			650
6.775% senior notes due 2019	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	1,785			1,719
Midstream revolving bank credit facility	—			1
Oilfield services revolving bank credit facility	336			29
Discount on senior notes and term loans(f)	(559		)	(490		)
Interest rate derivatives(g)	21			28
Total debt, net	16,218			10,626
Less current maturities of long-term debt, net(b)	(463		)	—
Total long-term debt, net	$	15,755		$	10,626

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(a) Subsequent to September 30, 2012, we used approximately $2.8 billion in proceeds from asset sales and $1.2 billion in partial proceeds from our new term loan (see Note 16) to fully repay the Term Loans due 2017.

(b) These senior notes are due in July 2013. There is $1 million of discount associated with these notes.

(c) The principal amount shown is based on the exchange rate of $1.2856 to €1.00 and $1.2973 to €1.00 as of September 30, 2012 and December 31, 2011, respectively. See Note 7 for information on our related foreign currency derivatives.

(d) 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.

(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 specified period in a fiscal quarter. Convertibility based on common stock price is measured quarterly. In the third quarter of 2012, the price of our common stock was below the threshold level for each series of the contingent convertible senior notes during the specified period and, as a result, the holders do not have the option to convert their notes into cash and common stock in the fourth quarter of 2012 under this provision. The notes are also convertible, at the holder’s option, during specified five-day periods if the trading price of the notes is below certain levels determined by reference to the trading price of our common stock. In general, upon conversion of a contingent convertible senior note, the holder will receive cash equal to the principal amount of the note and common stock for the note’s conversion value in excess of such principal amount. We will pay contingent interest on the convertible senior notes after they have been outstanding at least ten years, under certain conditions. We may redeem the convertible senior notes once they have been outstanding for ten years at a redemption price of 100% of the principal amount of the notes, payable in cash. The optional repurchase dates, the common stock price conversion threshold amounts and the ending date of the first six-month period in which contingent interest may be payable for the contingent convertible senior notes are as follows:

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	$	48.51	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	$	107.27	June 14, 2019

(f) Discount as of September 30, 2012 and December 31, 2011 included $393 million and $444 million, respectively, associated with the equity component of our contingent convertible senior notes. This discount is based on an effective yield method. Also includes $114 million associated with our Term Loans due 2017 that were fully repaid subsequent to September 30, 2012.

(g) See Note 7 for further discussion related to these instruments.

Senior Notes and Contingent Convertible Senior Notes Purchased

During the Current Period, we issued $1.3 billion of 6.775% Senior Notes due 2019 in a registered public offering. We used the net proceeds of $1.263 billion from the offering to repay indebtedness outstanding under our corporate revolving bank credit facility. At any time from and including November 15, 2012 to and including March 15, 2013, we may redeem some or all of the notes at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any, to the redemption date; provided that upon any redemption of the notes in part (and not in whole) pursuant to this redemption provision, at least $250 million aggregate principal amount of the notes remains outstanding.

During the Prior Period, we completed and settled tender offers to purchase the following senior notes and contingent convertible senior notes. We funded the purchase of the notes with a portion of the net proceeds we received from the sale of our Fayetteville Shale assets. See Note 8 for further discussion of our Fayetteville Shale asset sale.

	Principal Amount Purchased
	($ in millions)
7.625% senior notes due 2013	$	36
9.5% senior notes due 2015	160
6.25% euro-denominated senior notes due 2017(a)	380
6.5% senior notes due 2017	440
6.875% senior notes due 2018	126
7.25% senior notes due 2018	131
6.625% senior notes due 2020	100
Total senior notes	1,373
2.75% contingent convertible senior notes due 2035	55
2.5% contingent convertible senior notes due 2037	210
2.25% contingent convertible senior notes due 2038	266
Total contingent convertible senior notes	531
Total	$	1,904

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(a) We purchased €256 million in aggregate principal amount of our euro-denominated senior notes which had a value of $380 million based on the exchange rate of $1.4821 to €1.00. Simultaneously with our purchase of the euro-denominated senior notes, we unwound cross currency swaps for the same principal amount. See Note 7 for additional information.

Bank Credit Facilities

In June 2012, we paid off and terminated our midstream credit facility. Our two remaining revolving bank credit facilities are described below.

	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 September 30, 2012	$	1,785	$	336
Letters of credit outstanding as of September 30, 2012	$	31	$	—

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(a) Borrower is Chesapeake Exploration, L.L.C.

(b) Borrower is COO.