Basis of Presentation

The accompanying condensed consolidated financial statements of Chesapeake Energy Corporation (“Chesapeake” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which Chesapeake has a controlling financial interest. Intercompany accounts and balances have been eliminated. These financial statements were prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with U.S. GAAP.

This Form 10-Q relates to the three months ended March 31, 2017 (the “Current Quarter”) and the three months ended March 31, 2016 (the “Prior Quarter”). Chesapeake’s annual report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”) includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. All material adjustments (consisting solely of normal recurring adjustments) which, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been reflected. The results for the Current Quarter are not necessarily indicative of the results to be expected for the full year.

Risks and Uncertainties

Our ability to grow, make capital expenditures and service our debt depends primarily upon the prices we receive for the oil, natural gas and natural gas liquids (NGL) we sell. Substantial expenditures are required to replace reserves, sustain production and fund our business plans. Historically, oil and natural gas prices have been very volatile, and may be subject to wide fluctuations in the future. The substantial decline in oil, natural gas and NGL prices from 2014 levels has negatively affected the amount of liquidity we have available for capital expenditures and debt service. A substantial or extended decline in oil, natural gas and NGL prices could have a material impact on our financial position, results of operations, cash flows and on the quantities of reserves that we may economically produce. Other risks and uncertainties that could affect us in a low commodity price environment include, but are not limited to, counterparty credit risk for our receivables, access to capital markets, regulatory risks and our ability to meet financial ratios and covenants in our financing agreements.

Revision of Prior Quarter

During the fourth quarter of 2016, we identified certain errors to the basis price differentials used in calculating the impairment of oil and natural gas properties and oil, natural gas and NGL depreciation, depletion and amortization for each of the first three interim periods in 2016. As disclosed within our 2016 Form 10-K, it was determined that these errors were not material to our previously issued 2016 interim financial statements. Accordingly, the correction of these errors and another immaterial previously identified error was reflected in the quarterly unaudited financial data included within our 2016 Form 10-K. These revisions have been reflected in the comparative 2016 condensed consolidated financial statements presented herein. See Evaluation of Disclosure Controls and Procedures in Item 4 of this Form 10-Q. The following table reconciles the amounts as previously reported in the applicable financial statement to the corresponding revised amounts:



	Three Months Ended March 31, 2016
	As Previously Reported			Revision Adjustment			As Revised
	($ in millions)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Provision for legal contingencies	$	22		$	11		$	33
Oil, natural gas and NGL depreciation, depletion and amortization	$	271		$	(8	)	$	263
Impairment of oil and natural gas properties	$	853		$	144		$	997
Total operating expenses	$	2,905		$	147		$	3,052
Loss from operations	$	(952	)	$	(147	)	$	(1,099	)
Loss before income taxes	$	(921	)	$	(147	)	$	(1,068	)
Net loss	$	(921	)	$	(147	)	$	(1,068	)
Net loss attributable to Chesapeake	$	(921	)	$	(147	)	$	(1,068	)
Net loss available to common stockholders	$	(964	)	$	(147	)	$	(1,111	)
Earnings (loss) per common share basic	$	(1.44	)	$	(0.22	)	$	(1.66	)
Earnings (loss) per common share diluted	$	(1.44	)	$	(0.22	)	$	(1.66	)



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$	(921	)	$	(147	)	$	(1,068	)
Comprehensive loss	$	(921	)	$	(147	)	$	(1,068	)
Comprehensive loss attributable to Chesapeake	$	(921	)	$	(147	)	$	(1,068	)



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Net loss	$	(921	)	$	(147	)	$	(1,068	)
Depreciation, depletion and amortization	$	300		$	(8	)	$	292
Impairment of oil and natural gas properties	$	853		$	144		$	997
Provision for legal contingencies	$	22		$	11		$	33
Net cash used in operating activities	$	(421	)	$	—		$	(421	)