Condensed Consolidating Financial Information

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 100% owned subsidiaries on a senior unsecured basis. Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries are non-guarantors. Our former oilfield services subsidiaries were separately capitalized and were not guarantors of our debt obligations.

The tables 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, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014. This financial information may not necessarily be indicative of our results of operations, cash flows or financial position had these subsidiaries operated as independent entities.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2015

($ in millions)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	2,940		$	1		$	42	$	(76	)	$	2,907
Restricted cash	—			—			38		—			38
Other	61			2,322			70		—			2,453
Intercompany receivable, net	24,490			—			358		(24,848		)	—
Total Current Assets	27,491			2,323			508		(24,924		)	5,398
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, at cost based on full cost accounting, net	—			24,187			920		899			26,006
Other property and equipment, net	—			2,285			1		—			2,286
Property and equipment held for sale, net	—			93			—		—			93
Total Property and Equipment, Net	—			26,565			921		899			28,385
LONG-TERM ASSETS:
Other assets	138			446			26		(20		)	590
Investments in subsidiaries and intercompany advances	(2,514		)	321			—		2,193			—
TOTAL ASSETS	$	25,115		$	29,655		$	1,455	$	(21,852	)	$	34,373
CURRENT LIABILITIES:
Current liabilities	$	1,263		$	4,121		$	58	$	(76	)	$	5,366
Intercompany payable, net	—			24,618			—		(24,618		)	—
Total Current Liabilities	1,263			28,739			58		(24,694		)	5,366
LONG-TERM LIABILITIES:
Long-term debt, net	10,623			—			—		—			10,623
Deferred income tax liabilities	—			2,526			158		133			2,817
Other long-term liabilities	151			904			139		—			1,194
Total Long-Term Liabilities	10,774			3,430			297		133			14,634
EQUITY:
Chesapeake stockholders’ equity	13,078			(2,514		)	1,100		1,414			13,078
Noncontrolling interests	—			—			—		1,295			1,295
Total Equity	13,078			(2,514		)	1,100		2,709			14,373
TOTAL LIABILITIES AND EQUITY	$	25,115		$	29,655		$	1,455	$	(21,852	)	$	34,373

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2014

($ in millions)



	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	4,100	$	2	$	84	$	(78	)	$	4,108
Restricted cash	—		—		38		—			38
Other	55		3,174		93		—			3,322
Intercompany receivable, net	24,527		—		341		(24,868		)	—
Total Current Assets	28,682		3,176		556		(24,946		)	7,468
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, at cost based on full cost accounting, net	—		28,358		1,112		673			30,143
Other property and equipment, net	—		2,276		3		—			2,279
Property and equipment held for sale, net	—		93		—		—			93
Total Property and Equipment, Net	—		30,727		1,115		673			32,515
LONG-TERM ASSETS:
Other assets	153		618		26		(29		)	768
Investments in subsidiaries and intercompany advances	126		467		—		(593		)	—
TOTAL ASSETS	$	28,961	$	34,988	$	1,697	$	(24,895	)	$	40,751
CURRENT LIABILITIES:
Current liabilities	$	792	$	5,081	$	68	$	(78	)	$	5,863
Intercompany payable, net	—		24,940		—		(24,940		)	—
Total Current Liabilities	792		30,021		68		(25,018		)	5,863
LONG-TERM LIABILITIES:
Long-term debt, net	11,154		—		—		—			11,154
Deferred income tax liabilities	—		3,751		234		200			4,185
Other long-term liabilities	112		1,090		142		—			1,344
Total Long-Term Liabilities	11,266		4,841		376		200			16,683
EQUITY:
Chesapeake stockholders’ equity	16,903		126		1,253		(1,379		)	16,903
Noncontrolling interests	—		—		—		1,302			1,302
Total Equity	16,903		126		1,253		(77		)	18,205
TOTAL LIABILITIES AND EQUITY	$	28,961	$	34,988	$	1,697	$	(24,895	)	$	40,751

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2015

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	1,035		$	50		$	—		$	1,085
Marketing, gathering and compression	—			1,675			—			—			1,675
Total Revenues	—			2,710			50			—			2,760
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			288			11			—			299
Production taxes	—			27			1			—			28
Marketing, gathering and compression	—			1,700			—			—			1,700
General and administrative	1			54			1			—			56
Restructuring and other termination costs	—			(10		)	—			—			(10		)
Provision for legal contingencies	—			25			—			—			25
Oil, natural gas and NGL depreciation, depletion and amortization	—			664			31			(11		)	684
Depreciation and amortization of other assets	—			35			—			—			35
Impairment of oil and natural gas properties	—			4,976			215			(215		)	4,976
Impairments of fixed assets and other	—			4			—			—			4
Net losses on sales of fixed assets	—			3			—			—			3
Total Operating Expenses	1			7,766			259			(226		)	7,800
LOSS FROM OPERATIONS	(1		)	(5,056		)	(209		)	226			(5,040		)
OTHER INCOME (EXPENSE):
Interest expense	(170		)	(38		)	—			157			(51		)
Losses on investments	—			(7		)	—			—			(7		)
Other income (expense)	(121		)	284			—			(157		)	6
Equity in net earnings (losses) of subsidiary	(3,528		)	(172		)	—			3,700			—
Total Other Income (Expense)	(3,819		)	67			—			3,700			(52		)
LOSS BEFORE INCOME TAXES	(3,820		)	(4,989		)	(209		)	3,926			(5,092		)
INCOME TAX BENEFIT	(81		)	(1,296		)	(56		)	61			(1,372		)
NET LOSS	(3,739		)	(3,693		)	(153		)	3,865			(3,720		)
Net income attributable to noncontrolling interests	—			—			—			(19		)	(19		)
NET LOSS ATTRIBUTABLE TO CHESAPEAKE	(3,739		)	(3,693		)	(153		)	3,846			(3,739		)
Other comprehensive income (loss)	(2		)	11			—			—			9
COMPREHENSIVE LOSS ATTRIBUTABLE TO CHESAPEAKE	$	(3,741	)	$	(3,682	)	$	(153	)	$	3,846		$	(3,730	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2014

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	1,664		$	103		$	(1	)	$	1,766
Marketing, gathering and compression	—			3,014			1			—			3,015
Oilfield services	—			16			485			(236		)	265
Total Revenues	—			4,694			589			(237		)	5,046
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			277			11			—			288
Production taxes	—			49			1			—			50
Marketing, gathering and compression	—			2,979			1			—			2,980
Oilfield services	—			31			395			(206		)	220
General and administrative	—			57			22			—			79
Restructuring and other termination costs	—			(7		)	—			—			(7		)
Oil, natural gas and NGL depreciation, depletion and amortization	—			587			43			(2		)	628
Depreciation and amortization of other assets	—			40			72			(34		)	78
Impairment of oil and natural gas properties	—			—			59			(59		)	—
Impairments of fixed assets and other	—			—			20			—			20
Net gains (losses) on sales of fixed assets	—			(24		)	1			—			(23		)
Total Operating Expenses	—			3,989			625			(301		)	4,313
INCOME (LOSS) FROM OPERATIONS	—			705			(36		)	64			733
OTHER INCOME (EXPENSE):
Interest expense	(192		)	—			(21		)	174			(39		)
Losses on investments	—			(23		)	—			2			(21		)
Net loss on sales of investments	—			67			—			—			67
Other income (expense)	343			(143		)	1			(195		)	6
Equity in net earnings (losses) of subsidiary	331			(76		)	—			(255		)	—
Total Other Income (Expense)	482			(175		)	(20		)	(274		)	13
INCOME (LOSS) BEFORE INCOME TAXES	482			530			(56		)	(210		)	746
INCOME TAX EXPENSE (BENEFIT)	57			227			(21		)	17			280
NET INCOME (LOSS)	425			303			(35		)	(227		)	466
Net income attributable to noncontrolling interests	—			—			—			(41		)	(41		)
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	425			303			(35		)	(268		)	425
Other comprehensive income	2			7			—			—			9
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	$	427		$	310		$	(35	)	$	(268	)	$	434

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2015

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES	$	—		$	360		$	63		$	—		$	423
CASH FLOWS FROM INVESTING ACTIVITIES:
Drilling and completion costs	—			(1,236		)	(70		)	—			(1,306		)
Acquisitions of proved and unproved properties	—			(128		)	—			—			(128		)
Proceeds from divestitures of proved and unproved properties	—			21			—			—			21
Additions to other property and equipment	—			(58		)	—			—			(58		)
Other investing activities	—			(1		)	—			—			(1		)
Net Cash Provided By (Used In) Investing Activities	—			(1,402		)	(70		)	—			(1,472		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Other financing activities	(123		)	4			(35		)	2			(152		)
Intercompany advances, net	(1,037		)	1,037			—			—			—
Net Cash Used In Financing Activities	(1,160		)	1,041			(35		)	2			(152		)
Net decrease in cash and cash equivalents	(1,160		)	(1		)	(42		)	2			(1,201		)
Cash and cash equivalents, beginning of period	4,100			2			84			(78		)	4,108
Cash and cash equivalents, end of period	$	2,940		$	1		$	42		$	(76	)	$	2,907

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2014

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES	$	—		$	1,135		$	156		$	—		$	1,291
CASH FLOWS FROM INVESTING ACTIVITIES:
Drilling and completion costs	—			(875		)	(22		)	—			(897		)
Acquisitions of proved and unproved properties	—			(186		)	(1		)	—			(187		)
Proceeds from divestitures of proved and unproved properties	—			48			1			—			49
Additions to other property and equipment	—			(319		)	(118		)	—			(437		)
Other investing activities	—			461			5			7			473
Net Cash Used In Investing Activities	—			(871		)	(135		)	7			(999		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facilities borrowings	—			140			281			—			421
Payments on credit facilities borrowings	—			(140		)	(222		)	—			(362		)
Other financing activities	(116		)	25			(42		)	(51		)	(184		)
Intercompany advances, net	291			(289		)	(2		)	—			—
Net Cash Provided By (Used In) Financing Activities	175			(264		)	15			(51		)	(125		)
Net increase in cash and cash equivalents	175			—			36			(44		)	167
Cash and cash equivalents, beginning of period	799			—			39			(1		)	837
Cash and cash equivalents, end of period	$	974		$	—		$	75		$	(45	)	$	1,004