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Variable Interest Entities (Notes)
12 Months Ended
Dec. 31, 2016
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]  
Variable Interest Entities Disclosure
Variable Interest Entities
We consolidate the activities of VIEs for which we are the primary beneficiary. In order to determine whether we own a variable interest in a VIE, we perform qualitative analysis of the entity’s design, organizational structure, primary decision makers and relevant agreements.
Consolidated VIE
Chesapeake Granite Wash Trust (the Trust) is considered a VIE due to the lack of voting or similar decision-making rights by its equity holders regarding activities that have a significant effect on the economic success of the Trust and because the royalty interest owners, other than Chesapeake, do not have the ability to exercise substantial liquidation rights. Our ownership in the Trust and our previous obligations under the development agreement constitute variable interests. We have determined that we are the primary beneficiary of the Trust because (i) we have the power to direct the activities that most significantly impact the economic performance of the Trust via our operation of the majority of the producing wells and the completed development wells, and (ii) as a result of the subordination and incentive thresholds applicable to the subordinated units we hold in the Trust, we have the obligation to absorb losses and the right to receive residual returns that potentially could be significant to the Trust. As a result, we consolidate the Trust in our financial statements, and the common units of the Trust owned by third parties are reflected as a noncontrolling interest.
The Trust is a consolidated entity whose legal existence is separate from Chesapeake and our other consolidated subsidiaries, and the Trust is not a guarantor of any of Chesapeake’s debt. The creditors or beneficial holders of the Trust have no recourse to the general credit of Chesapeake. In consolidation, as of December 31, 2016, $1 million of cash and cash equivalents, $488 million of proved oil and natural gas properties, $458 million of accumulated depreciation, depletion and amortization and $3 million of other current liabilities were attributable to the Trust. We have presented parenthetically on the face of the consolidated balance sheets the assets of the Trust that can be used only to settle obligations of the Trust and the liabilities of the Trust for which creditors do not have recourse to the general credit of Chesapeake.
Unconsolidated VIE
Mineral Acquisition Company I, L.P. In 2012, MAC-LP, L.L.C., a wholly owned non-guarantor unrestricted subsidiary of Chesapeake, entered into a partnership agreement with KKR Royalty Aggregator LLC (KKR) to form Mineral Acquisition Company I, L.P. The purpose of the partnership was to acquire mineral interests, or royalty interests carved out of mineral interests, in oil and natural gas basins in the continental United States. The partnership was an unconsolidated VIE and the carrying value of our equity investment was $10 million as of December 31, 2015. During 2016, we sold certain mineral interests held outside the partnership for approximately $9 million, and assigned our interest in the partnership to KKR, which eliminated our future commitments to acquire additional mineral interests. As a result of the transaction, we wrote off our equity investment and recognized a $10 million loss which is included in net gain (loss) on sales of investments in our consolidated statements of operations.