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.

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 December 31, 2017 and for the year ended December 31, 2017. 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 DECEMBER 31, 2017

($ in millions)



	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	5		$	1		$	2		$	(3	)	$	5
Other current assets	154			1,364			3			(1		)	1,520
Intercompany receivable, net	8,697			436			—			(9,133		)	—
Total Current Assets	8,856			1,801			5			(9,137		)	1,525
PROPERTY AND EQUIPMENT:
Oil and natural gas properties at cost, based on full cost accounting, net	435			8,888			27			—			9,350
Other property and equipment, net	—			1,314			—			—			1,314
Property and equipment held for sale, net	—			16			—			—			16
Total Property and Equipment, Net	435			10,218			27			—			10,680
LONG-TERM ASSETS:
Other long-term assets	52			168			—			—			220
Investments in subsidiaries and intercompany advances	806			(146		)	—			(660		)	—
TOTAL ASSETS	$	10,149		$	12,041		$	32		$	(9,797	)	$	12,425

CURRENT LIABILITIES:
Current liabilities	$	190		$	2,168		$	2		$	(4	)	$	2,356
Intercompany payable, net	433			8,648			52			(9,133		)	—
Total Current Liabilities	623			10,816			54			(9,137		)	2,356
LONG-TERM LIABILITIES:
Long-term debt, net	9,921			—			—			—			9,921
Other long-term liabilities	101			419			—			—			520
Total Long-Term Liabilities	10,022			419			—			—			10,441
EQUITY:
Chesapeake stockholders’ equity (deficit)	(496		)	806			(146		)	(660		)	(496		)
Noncontrolling interests	—			—			124			—			124
Total Equity (Deficit)	(496		)	806			(22		)	(660		)	(372		)
TOTAL LIABILITIES AND EQUITY	$	10,149		$	12,041		$	32		$	(9,797	)	$	12,425

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2017

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	4,962		$	23		$	—		$	4,985
Marketing, gathering and compression	—			4,511			—			—			4,511
Total Revenues	—			9,473			23			—			9,496
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			562			—			—			562
Oil, natural gas and NGL gathering, processing and transportation	—			1,463			8			—			1,471
Production taxes	—			88			1			—			89
Marketing, gathering and compression	—			4,598			—			—			4,598
General and administrative	1			259			2			—			262
Restructuring and other termination costs	—			—			—			—			—
Provision for legal contingencies, net	(79		)	41			—			—			(38		)
Oil, natural gas and NGL depreciation, depletion and amortization	—			909			4			—			913
Depreciation and amortization of other assets	—			82			—			—			82
Impairments of fixed assets and other	—			421			—			—			421
Net gains on sales of fixed assets	—			(3		)	—			—			(3		)
Total Operating Expenses	(78		)	8,420			15			—			8,357
INCOME FROM OPERATIONS	78			1,053			8			—			1,139
OTHER INCOME (EXPENSE):
Interest expense	(424		)	(2		)	—			—			(426		)
Gains on purchases or exchanges of debt	233			—			—			—			233
Other income	1			8			—			—			9
Equity in net earnings (losses) of subsidiary	1,063			4			—			(1,067		)	—
Total Other Income (Expense)	873			10			—			(1,067		)	(184		)
INCOME BEFORE INCOME TAXES	951			1,063			8			(1,067		)	955
INCOME TAX EXPENSE (BENEFIT)	2			—			—			—			2
NET INCOME	949			1,063			8			(1,067		)	953
Net income attributable to noncontrolling interests	—			—			(4		)	—			(4		)
NET INCOME ATTRIBUTABLE TO CHESAPEAKE	949			1,063			4			(1,067		)	949
Other comprehensive income	—			39			—			—			39
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE	$	949		$	1,102		$	4		$	(1,067	)	$	988

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2017

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash Provided By Operating Activities	$	5		$	736		$	14		$	(10	)	$	745

CASH FLOWS FROM INVESTING ACTIVITIES:
Drilling and completion costs	—			(2,186		)	—			—			(2,186		)
Acquisitions of proved and unproved properties	—			(285		)	—			—			(285		)
Proceeds from divestitures of proved and unproved properties	—			1,249			—			—			1,249
Additions to other property and equipment	—			(21		)	—			—			(21		)
Other investing activities	—			55			—			—			55
Net Cash Used In Investing Activities	—			(1,188		)	—			—			(1,188		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility borrowings	7,771			—			—			—			7,771
Payments on revolving credit facility borrowings	(6,990		)	—			—			—			(6,990		)
Proceeds from issuance of senior notes, net	1,585			—			—			—			1,585
Cash paid to purchase debt	(2,592		)	—			—			—			(2,592		)
Cash paid for preferred stock dividends	(183		)	—			—			—			(183		)
Other financing activities	(39		)	(5		)	(13		)	32			(25		)
Intercompany advances, net	(456		)	456			—			—			—
Net Cash Provided by (Used In) Financing Activities	(904		)	451			(13		)	32			(434		)
Net increase (decrease) in cash and cash equivalents	(899		)	(1		)	1			22			(877		)
Cash and cash equivalents, beginning of period	904			2			1			(25		)	882
Cash and cash equivalents, end of period	$	5		$	1		$	2		$	(3	)	$	5