Equity

Common Stock

A summary of the changes in our common shares issued for the years ended December 31, 2017, 2016 and 2015 is detailed below:



	Years Ended December 31,
	2017	2016	2015
	(in thousands)
Shares issued as of January 1	896,279	664,796	664,944
Exchange of convertible notes	—	55,428	—
Exchange of senior notes	—	53,924	—
Exchange/conversion of preferred stock	9,966	120,186	—
Restricted stock issuances (net of forfeitures and cancellations)	2,488	1,945	(163	)
Stock option exercises	—	—	15
Shares issued as of December 31	908,733	896,279	664,796

During the year ended December 31, 2017, our shareholders approved an amendment to our certificate of incorporation to increase our authorized common stock to 2,000,000,000 shares, par value $0.01 per share.

Preferred Stock

Following is a summary of our preferred stock, including the primary conversion terms as of December 31, 2017:



Preferred Stock Series	Issue Date	Liquidation Preference per Share		Holder's Conversion Right	Conversion Rate	Conversion Price		Company's Conversion Right From	Company's Market Conversion Trigger^(a)
5.75% cumulative convertible non-voting	May and June 2010	$	1,000	Any time	39.6858	$	25.1979	May 17, 2015	$	32.7573

5.75% (series A) cumulative convertible non-voting	May 2010	$	1,000	Any time	38.3508	$	26.0751	May 17, 2015	$	33.8976

4.50% cumulative convertible	September 2005	$	100	Any time	2.4561	$	40.7152	September 15, 2010	$	52.9298

5.00% cumulative convertible (series 2005B)	November 2005	$	100	Any time	2.7745	$	36.0431	November 15, 2010	$	46.8560

___________________________________________


(a)	Convertible at the Company's option if the trading price of the Company's common stock equals or exceeds the trigger price for a specified time period or after the applicable conversion date if there are less than 250,000 shares of 4.50% or 5.00% (Series 2005B) preferred stock outstanding or 25,000 shares of 5.75% or 5.75% (Series A) preferred stock outstanding.

Outstanding shares of our preferred stock for the years ended December 31, 2017, 2016 and 2015 are detailed below:



	5.75%		5.75% (A)		4.50%	5.00% (2005B)
	(in thousands)
Shares outstanding as of January 1, 2017	843		476		2,559	1,962
Preferred stock conversions/exchanges^(a)	(73	)	(13	)	—	(151	)
Shares outstanding as of December 31, 2017	770		463		2,559	1,811

Shares outstanding as of January 1, 2016	1,497		1,100		2,559	2,096
Preferred stock conversions/exchanges^(b)	(654	)	(624	)	—	(134	)
Shares outstanding as of December 31, 2016	843		476		2,559	1,962

Shares outstanding as of January 1, 2015 and December 31, 2015	1,497		1,100		2,559	2,096

____________________________________________

(a)

During 2017, holders of our 5.75% Cumulative Convertible Preferred Stock exchanged 72,600 shares into 7,442,156 shares of common stock, holders of our 5.75% (Series A) Cumulative Convertible Preferred Stock exchanged 12,500 shares into 1,205,923 shares of common stock and holders of our 5.00% (Series 2005B) Cumulative Convertible Preferred Stock exchanged 150,948 shares into 1,317,756 shares of common stock. In connection with the exchanges, we recognized a loss equal to the excess of the fair value of all common stock issued in exchange for the preferred stock over the fair value of the common stock issuable pursuant to the original terms of the preferred stock. The loss of $41 million is reflected as a reduction to net income available to common stockholders for the purpose of calculating earnings per common share.

(b)

During 2016, holders of our 5.75% Cumulative Convertible Preferred Stock converted 653,872 shares into 59,141,429 shares of common stock, holders of our 5.75% (Series A) Cumulative Convertible Preferred Stock converted 624,137 shares into 60,032,734 shares of common stock and holders of our 5.00% (Series 2005B) Cumulative Convertible Preferred Stock exchanged or converted 134,000 shares into 1,012,032 shares of common stock. In connection with the exchanges noted above, we recognized a loss equal to the excess of the fair value of all common stock issued in exchange for the preferred stock over the fair value of the common stock issuable pursuant to the original terms of the preferred stock. The loss of $428 million is reflected as a reduction to net income available to common stockholders for the purpose of calculating earnings per common share.

Dividends

Dividends declared on our preferred stock are reflected as adjustments to retained earnings to the extent a surplus of retained earnings exists after giving effect to the dividends. To the extent retained earnings are insufficient to fund the distributions, payments are reflected in our financial statements as a return of contributed capital rather than earnings and are accounted for as a reduction to paid-in capital.

Dividends on our outstanding preferred stock are payable quarterly. We may pay dividends on our 5.00% Cumulative Convertible Preferred Stock (Series 2005B) and our 4.50% Cumulative Convertible Preferred Stock in cash, common stock or a combination thereof, at our option. Dividends on both series of our 5.75% Cumulative Convertible Non-Voting Preferred Stock are payable only in cash.

In January 2016, we suspended dividend payments on our convertible preferred stock to provide additional liquidity in the depressed commodity price environment. In the first quarter of 2017, we reinstated the payment of dividends on each series of our outstanding convertible preferred stock and paid our dividends in arrears.

Accumulated Other Comprehensive Income (Loss)

For the years ended December 31, 2017 and 2016, changes in accumulated other comprehensive income (loss) for cash flow hedges, net of tax, are detailed below:



	Years Ended December 31,
	2017			2016
	($ in millions)
Balance, as of January 1	$	(96	)	$	(99	)
Other comprehensive income (loss) before reclassifications	5			(13		)
Amounts reclassified from accumulated other comprehensive income	34			16
Net other comprehensive income (loss)	39			3
Balance, as of December 31	$	(57	)	$	(96	)

For the years ended December 31, 2017 and 2016, net losses on cash flow hedges for commodity contracts reclassified from accumulated other comprehensive income (loss), net of tax, to oil, natural gas and NGL revenues in the consolidated statements of operations were $34 million and $16 million, respectively.

Noncontrolling Interests

Chesapeake Granite Wash Trust. In 2011, Chesapeake Granite Wash Trust (the Trust) sold 23,000,000 common units representing beneficial interests in the Trust to the public. Prior to June 30, 2017, we owned 12,062,500 common units and as well as 11,687,500 subordinated units representing a 51% beneficial interest in the Trust. On June 30, 2017, the Trust’s subordinated units, all of which were held by us, converted to common units. The Trust has a total of 46,750,000 units outstanding.

Prior to their conversion on June 30, 2017, as holder of the subordinated units, we were entitled to receive pro rata distributions from the Trust each quarter if and to the extent there was sufficient cash. We were also entitled to receive, prior to their termination on June 30, 2017, incentive distributions, to the extent of sufficient cash, as defined. No subordinated unit or incentive distributions were made by the Trust.

During our review of the carrying amount of the Trust’s noncontrolling interests, we identified errors related to the allocation of impairment expense between Chesapeake and the Trust’s noncontrolling interests during previously reported periods. We have determined that these errors are immaterial to previously issued financial statements and therefore, have revised the previously reported financial statements below. We have also determined that these errors did not relate to periods prior to 2015.



	December 31, 2016
CONSOLIDATED BALANCE SHEETS	As Previously Reported			Revision Adjustment			As Revised
	($ in millions except per share data)
Accumulated deficit	$	(17,603	)	$	129		$	(17,474	)
Total Chesapeake stockholders’ equity (deficit)	$	(1,460	)	$	129		$	(1,331	)
Noncontrolling interests	$	257		$	(129	)	$	128



	Year Ended December 31, 2016
CONSOLIDATED STATEMENTS OF OPERATIONS	As Previously Reported			Revision Adjustment		As Revised
	($ in millions except per share data)
Net (income) loss attributable to noncontrolling interest	$	(2	)	$	11	$	9
Net income (loss) attributable to Chesapeake	$	(4,401	)	$	11	$	(4,390	)
Net income (loss) available to common stockholders	$	(4,926	)	$	11	$	(4,915	)
Loss per common share basic	$	(6.45	)	$	0.02	$	(6.43	)
Loss per common share diluted	$	(6.45	)	$	0.02	$	(6.43	)

	Year Ended December 31, 2015
CONSOLIDATED STATEMENTS OF OPERATIONS	As Previously Reported			Revision Adjustment		As Revised
	($ in millions except per share data)
Net (income) loss attributable to noncontrolling interest	$	(50	)	$	118	$	68
Net income (loss) attributable to Chesapeake	$	(14,685	)	$	118	$	(14,567	)
Net income (loss) available to common stockholders	$	(14,856	)	$	118	$	(14,738	)
Loss per common share basic	$	(22.43	)	$	0.17	$	(22.26	)
Loss per common share diluted	$	(22.43	)	$	0.17	$	(22.26	)



	Year Ended December 31, 2016
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	As Previously Reported			Revision Adjustment		As Revised
	($ in millions except per share data)
Comprehensive (income) loss attributable to noncontrolling interests	$	(2	)	$	11	$	9
Comprehensive income (loss) attributable to Chesapeake	$	(4,398	)	$	11	$	(4,387	)

	Year Ended December 31, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	As Previously Reported			Revision Adjustment		As Revised
	($ in millions except per share data)
Comprehensive (income) loss attributable to noncontrolling interests	$	(50	)	$	118	$	68
Comprehensive income (loss) attributable to Chesapeake	$	(14,641	)	$	118	$	(14,523	)



	Year Ended December 31, 2016
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	As Previously Reported			Revision Adjustment			As Revised
	($ in millions except per share data)
Accumulated deficit	$	(17,603	)	$	129		$	(17,474	)
Noncontrolling interests	$	257		$	(129	)	$	128

	Year Ended December 31, 2015
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	As Previously Reported			Revision Adjustment			As Revised
	($ in millions except per share data)
Accumulated deficit	$	(13,202	)	$	118		$	(13,084	)
Noncontrolling interests	$	259		$	(118	)	$	141

We have determined that the Trust is a VIE and that we are the primary beneficiary. As a result, the Trust is included in our consolidated financial statements. As of December 31, 2017 and 2016, we had $124 million and $128 million, respectively, of noncontrolling interests on our consolidated balance sheets attributable to the Trust. Net income attributable to the Trust’s noncontrolling interest was $4 million for the year ended December 31, 2017 and net loss attributable to the Trust’s noncontrolling interest was $9 million and $68 million for the years ended December 31, 2016 and 2015, respectively.

The Trust’s 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. 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.

Cleveland Tonkawa Financial Transaction. We formed CHK C-T in 2012 to continue development of a portion of our oil and natural gas assets in our Cleveland and Tonkawa plays, in which third-party investors contributed $1.25 billion in cash to CHK C-T in exchange for (i) 1.25 million preferred shares, and (ii) our obligation to deliver a 3.75% overriding royalty interest (ORRI) in the existing wells and up to 1,000 future net wells to be drilled on the contributed play leasehold.

During 2015, CHK C-T sold all of its oil and natural gas properties to FourPoint Energy, LLC. See Note 12 for further discussion of this transaction. In connection with this transaction, we eliminated all related future drilling and ORRI commitments attributable to CHK C-T.

Net income attributable to the noncontrolling interests of CHK C-T was $50 million for the year ended December 31, 2015.