Oklahoma | 73-1395733 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
6100 North Western Avenue, Oklahoma City, Oklahoma | 73118 | |
(Address of principal executive offices) | (Zip Code) | |
(405) 848-8000 | ||
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] | ||||
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ] | ||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act. | ||||
Large Accelerated Filer [X] Accelerated Filer [ ] Non-accelerated Filer [ ] Smaller Reporting Company [ ] Emerging Growth Company [ ] | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] | ||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X] |
PART I. FINANCIAL INFORMATION | Page | |||
Item 1. | ||||
March 31, 2018 and December 31, 2017 | ||||
for the Three Months Ended March 31, 2018 and 2017 | ||||
for the Three Months Ended March 31, 2018 and 2017 | ||||
for the Three Months Ended March 31, 2018 and 2017 | ||||
for the Three Months Ended March 31, 2018 and 2017 | ||||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
PART II. OTHER INFORMATION | ||||
Item 1. | ||||
Item 1A. | ||||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
Item 5. | ||||
Item 6. | ||||
ITEM 1. | Condensed Consolidated Financial Statements |
March 31, 2018 | December 31, 2017 | |||||||
($ in millions) | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents ($1 and $2 attributable to our VIE) | $ | 4 | $ | 5 | ||||
Accounts receivable, net | 1,082 | 1,322 | ||||||
Short-term derivative assets | 3 | 27 | ||||||
Other current assets | 135 | 171 | ||||||
Total Current Assets | 1,224 | 1,525 | ||||||
PROPERTY AND EQUIPMENT: | ||||||||
Oil and natural gas properties, at cost based on full cost accounting: | ||||||||
Proved oil and natural gas properties ($488 and $488 attributable to our VIE) | 69,284 | 68,858 | ||||||
Unproved properties | 3,326 | 3,484 | ||||||
Other property and equipment | 1,869 | 1,986 | ||||||
Total Property and Equipment, at Cost | 74,479 | 74,328 | ||||||
Less: accumulated depreciation, depletion and amortization (($462) and ($461) attributable to our VIE) | (63,903 | ) | (63,664 | ) | ||||
Property and equipment held for sale, net | 16 | 16 | ||||||
Total Property and Equipment, Net | 10,592 | 10,680 | ||||||
LONG-TERM ASSETS: | ||||||||
Other long-term assets | 270 | 220 | ||||||
TOTAL ASSETS | $ | 12,086 | $ | 12,425 | ||||
March 31, 2018 | December 31, 2017 | |||||||
($ in millions) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 657 | $ | 654 | ||||
Current maturities of long-term debt, net | 52 | 52 | ||||||
Accrued interest | 139 | 137 | ||||||
Short-term derivative liabilities | 149 | 58 | ||||||
Other current liabilities ($3 and $3 attributable to our VIE) | 1,357 | 1,455 | ||||||
Total Current Liabilities | 2,354 | 2,356 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Long-term debt, net | 9,325 | 9,921 | ||||||
Long-term derivative liabilities | 6 | 4 | ||||||
Asset retirement obligations, net of current portion | 153 | 162 | ||||||
Other long-term liabilities | 345 | 354 | ||||||
Total Long-Term Liabilities | 9,829 | 10,441 | ||||||
CONTINGENCIES AND COMMITMENTS (Note 4) | ||||||||
EQUITY: | ||||||||
Chesapeake Stockholders’ Equity: | ||||||||
Preferred stock, $0.01 par value, 20,000,000 shares authorized: 5,603,458 shares outstanding | 1,671 | 1,671 | ||||||
Common stock, $0.01 par value, 2,000,000,000 shares authorized: 911,794,424 and 908,732,809 shares issued | 9 | 9 | ||||||
Additional paid-in capital | 14,419 | 14,437 | ||||||
Accumulated deficit | (16,240 | ) | (16,525 | ) | ||||
Accumulated other comprehensive loss | (47 | ) | (57 | ) | ||||
Less: treasury stock, at cost; 3,416,465 and 2,240,394 common shares | (32 | ) | (31 | ) | ||||
Total Chesapeake Stockholders’ Equity (Deficit) | (220 | ) | (496 | ) | ||||
Noncontrolling interests | 123 | 124 | ||||||
Total Equity (Deficit) | (97 | ) | (372 | ) | ||||
TOTAL LIABILITIES AND EQUITY | $ | 12,086 | $ | 12,425 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions except per share data) | ||||||||
REVENUES: | ||||||||
Oil, natural gas and NGL | $ | 1,243 | $ | 1,469 | ||||
Marketing | 1,246 | 1,284 | ||||||
Total Revenues | 2,489 | 2,753 | ||||||
OPERATING EXPENSES: | ||||||||
Oil, natural gas and NGL production | 147 | 135 | ||||||
Oil, natural gas and NGL gathering, processing and transportation | 356 | 355 | ||||||
Production taxes | 31 | 22 | ||||||
Marketing | 1,268 | 1,328 | ||||||
General and administrative | 72 | 65 | ||||||
Restructuring and other termination costs | 38 | — | ||||||
Provision for legal contingencies, net | 5 | (2 | ) | |||||
Oil, natural gas and NGL depreciation, depletion and amortization | 268 | 197 | ||||||
Depreciation and amortization of other assets | 18 | 21 | ||||||
Other operating expense | — | 391 | ||||||
Net losses on sales of fixed assets | 8 | — | ||||||
Total Operating Expenses | 2,211 | 2,512 | ||||||
INCOME FROM OPERATIONS | 278 | 241 | ||||||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense | (123 | ) | (95 | ) | ||||
Gains on investments | 139 | — | ||||||
Losses on purchases or exchanges of debt | — | (7 | ) | |||||
Other income | — | 3 | ||||||
Total Other Income (Expense) | 16 | (99 | ) | |||||
INCOME BEFORE INCOME TAXES | 294 | 142 | ||||||
Income tax expense | — | 1 | ||||||
NET INCOME | 294 | 141 | ||||||
Net income attributable to noncontrolling interests | (1 | ) | (1 | ) | ||||
NET INCOME ATTRIBUTABLE TO CHESAPEAKE | 293 | 140 | ||||||
Preferred stock dividends | (23 | ) | (23 | ) | ||||
Loss on exchange of preferred stock | — | (41 | ) | |||||
Earnings allocated to participating securities | (2 | ) | (1 | ) | ||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 268 | $ | 75 | ||||
EARNINGS PER COMMON SHARE: | ||||||||
Basic | $ | 0.30 | $ | 0.08 | ||||
Diluted | $ | 0.29 | $ | 0.08 | ||||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): | ||||||||
Basic | 907 | 906 | ||||||
Diluted | 1,053 | 907 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
NET INCOME | $ | 294 | $ | 141 | ||||
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX: | ||||||||
Unrealized gains on derivative instruments, net of income tax expense of $0 and $0 | — | 4 | ||||||
Reclassification of losses on settled derivative instruments, net of income tax expense of $0 and $0 | 10 | 10 | ||||||
Other Comprehensive Income | 10 | 14 | ||||||
COMPREHENSIVE INCOME | 304 | 155 | ||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (1 | ) | (1 | ) | ||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE | $ | 303 | $ | 154 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
NET INCOME | $ | 294 | $ | 141 | ||||
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: | ||||||||
Depreciation, depletion and amortization | 286 | 218 | ||||||
Derivative (gains) losses, net | 117 | (322 | ) | |||||
Cash receipts (payments) on derivative settlements, net | 13 | (34 | ) | |||||
Stock-based compensation | 9 | 11 | ||||||
Net losses on sales of fixed assets | 8 | — | ||||||
Gains on investments | (139 | ) | — | |||||
Losses on purchases or exchanges of debt | — | 6 | ||||||
Other | (36 | ) | (34 | ) | ||||
Changes in assets and liabilities | 104 | 113 | ||||||
Net Cash Provided By Operating Activities | 656 | 99 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Drilling and completion costs | (442 | ) | (433 | ) | ||||
Acquisitions of proved and unproved properties | (63 | ) | (95 | ) | ||||
Proceeds from divestitures of proved and unproved properties | 319 | 892 | ||||||
Additions to other property and equipment | (3 | ) | (3 | ) | ||||
Proceeds from sales of other property and equipment | 68 | 19 | ||||||
Proceeds from sales of investments | 74 | — | ||||||
Net Cash Provided By (Used In) Investing Activities | (47 | ) | 380 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from revolving credit facility borrowings | 2,904 | 50 | ||||||
Payments on revolving credit facility borrowings | (3,485 | ) | (50 | ) | ||||
Cash paid to purchase debt | — | (982 | ) | |||||
Cash paid for preferred stock dividends | (23 | ) | (114 | ) | ||||
Distributions to noncontrolling interest owners | (2 | ) | (2 | ) | ||||
Other | (4 | ) | (14 | ) | ||||
Net Cash Used In Financing Activities | (610 | ) | (1,112 | ) | ||||
Net decrease in cash and cash equivalents | (1 | ) | (633 | ) | ||||
Cash and cash equivalents, beginning of period | 5 | 882 | ||||||
Cash and cash equivalents, end of period | $ | 4 | $ | 249 | ||||
Supplemental disclosures to the consolidated statements of cash flows are presented below: | ||||||||
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Interest paid, net of capitalized interest | $ | 131 | $ | 92 | ||||
Income taxes paid, net of refunds received | $ | — | $ | 1 | ||||
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Change in accrued drilling and completion costs | $ | 103 | $ | 68 | ||||
Change in accrued acquisitions of proved and unproved properties | $ | — | $ | 8 | ||||
Change in divested proved and unproved properties | $ | (12 | ) | $ | (8 | ) |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
PREFERRED STOCK: | ||||||||
Balance, beginning of period | $ | 1,671 | $ | 1,771 | ||||
Exchange/conversions of 0 and 236,048 shares of preferred stock for common stock | — | (100 | ) | |||||
Balance, end of period | 1,671 | 1,671 | ||||||
COMMON STOCK: | ||||||||
Balance, beginning and end of period | 9 | 9 | ||||||
ADDITIONAL PAID-IN CAPITAL: | ||||||||
Balance, beginning of period | 14,437 | 14,486 | ||||||
Stock-based compensation | 5 | 10 | ||||||
Exchange of preferred stock for 0 and 9,965,835 shares of common stock | — | 100 | ||||||
Equity component of contingent convertible notes repurchased, net of tax | — | (20 | ) | |||||
Dividends on preferred stock | (23 | ) | (137 | ) | ||||
Balance, end of period | 14,419 | 14,439 | ||||||
RETAINED EARNINGS (ACCUMULATED DEFICIT): | ||||||||
Balance, beginning of period | (16,525 | ) | (17,603 | ) | ||||
Net income attributable to Chesapeake | 293 | 140 | ||||||
Cumulative effect of accounting change | (8 | ) | — | |||||
Balance, end of period | (16,240 | ) | (17,463 | ) | ||||
ACCUMULATED OTHER COMPREHENSIVE LOSS: | ||||||||
Balance, beginning of period | (57 | ) | (96 | ) | ||||
Hedging activity | 10 | 14 | ||||||
Balance, end of period | (47 | ) | (82 | ) | ||||
TREASURY STOCK – COMMON: | ||||||||
Balance, beginning of period | (31 | ) | (27 | ) | ||||
Purchase of 1,451,478 and 1,185,517 shares for company benefit plans | (4 | ) | (7 | ) | ||||
Release of 275,407 and 38,013 shares from company benefit plans | 3 | 1 | ||||||
Balance, end of period | (32 | ) | (33 | ) | ||||
TOTAL CHESAPEAKE STOCKHOLDERS’ EQUITY (DEFICIT) | (220 | ) | (1,459 | ) | ||||
NONCONTROLLING INTERESTS: | ||||||||
Balance, beginning of period | 124 | 257 | ||||||
Net income attributable to noncontrolling interests | 1 | 1 | ||||||
Distributions to noncontrolling interest owners | (2 | ) | (2 | ) | ||||
Balance, end of period | 123 | 256 | ||||||
TOTAL EQUITY (DEFICIT) | $ | (97 | ) | $ | (1,203 | ) |
1. | Basis of Presentation |
2. | Earnings Per Share |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(in millions, except per share data) | ||||||||
Net income available to common stockholders | $ | 268 | $ | 75 | ||||
Effect of dilutive securities | 36 | — | ||||||
Diluted income per share | $ | 304 | $ | 75 | ||||
Weighted average common and common equivalent shares outstanding - basic | 907 | 906 | ||||||
Effect of dilutive securities | 146 | 1 | ||||||
Weighted average common and common equivalent shares outstanding - diluted | 1,053 | 907 | ||||||
Net income per share attributable to Chesapeake: | ||||||||
Basic | $ | 0.30 | $ | 0.08 | ||||
Diluted | $ | 0.29 | $ | 0.08 | ||||
Shares of common stock for the following dilutive securities were excluded from the calculation of diluted EPS as the effect was antidilutive: | ||||||||
Common stock equivalent of our preferred stock outstanding | 60 | 60 | ||||||
Common stock equivalent of our convertible senior notes outstanding | — | 146 | ||||||
Common stock equivalent of our preferred stock outstanding prior to exchange | — | 1 | ||||||
Participating securities | — | 1 |
3. | Debt |
March 31, 2018 | December 31, 2017 | ||||||||||||||
Principal Amount | Carrying Amount | Principal Amount | Carrying Amount | ||||||||||||
($ in millions) | |||||||||||||||
7.25% senior notes due 2018 | $ | 44 | $ | 44 | $ | 44 | $ | 44 | |||||||
Floating rate senior notes due 2019 | 380 | 380 | 380 | 380 | |||||||||||
6.625% senior notes due 2020 | 437 | 437 | 437 | 437 | |||||||||||
6.875% senior notes due 2020 | 227 | 227 | 227 | 227 | |||||||||||
6.125% senior notes due 2021 | 548 | 548 | 548 | 548 | |||||||||||
5.375% senior notes due 2021 | 267 | 267 | 267 | 267 | |||||||||||
4.875% senior notes due 2022 | 451 | 451 | 451 | 451 | |||||||||||
8.00% senior secured second lien notes due 2022 | 1,416 | 1,870 | 1,416 | 1,895 | |||||||||||
5.75% senior notes due 2023 | 338 | 338 | 338 | 338 | |||||||||||
8.00% senior notes due 2025 | 1,300 | 1,290 | 1,300 | 1,290 | |||||||||||
5.5% convertible senior notes due 2026(a)(b) | 1,250 | 844 | 1,250 | 837 | |||||||||||
8.00% senior notes due 2027 | 1,300 | 1,298 | 1,300 | 1,298 | |||||||||||
2.25% contingent convertible senior notes due 2038(a) | 9 | 8 | 9 | 8 | |||||||||||
Term loan due 2021 | 1,233 | 1,233 | 1,233 | 1,233 | |||||||||||
Revolving credit facility | 200 | 200 | 781 | 781 | |||||||||||
Debt issuance costs | — | (60 | ) | — | (63 | ) | |||||||||
Interest rate derivatives | — | 2 | — | 2 | |||||||||||
Total debt, net | 9,400 | 9,377 | 9,981 | 9,973 | |||||||||||
Less current maturities of long-term debt, net(c) | (53 | ) | (52 | ) | (53 | ) | (52 | ) | |||||||
Total long-term debt, net | $ | 9,347 | $ | 9,325 | $ | 9,928 | $ | 9,921 |
(a) | We are required to account for the liability and equity components of our convertible debt instruments separately and to reflect interest expense through the first demand repurchase date, as applicable, at the interest rate of similar nonconvertible debt at the time of issuance. The applicable rates for our 2.25% Contingent Convertible Senior Notes due 2038 and our 5.5% Convertible Senior Notes due 2026 are 8.0% and 11.5%, respectively. |
(b) | Prior to maturity under certain circumstances and at the holder’s option, the notes are convertible. During the first quarter of 2018, the price of our common stock was below the threshold level for conversion and, as a result, the holders do not have the option to convert their notes in the second quarter of 2018. |
(c) | As of March 31, 2018, current maturities of long-term debt, net includes our 7.25% Senior Notes due December 2018 and our 2.25% Contingent Convertible Notes due December 2038. |
March 31, 2018 | December 31, 2017 | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
Short-term debt (Level 1) | $ | 52 | $ | 53 | $ | 52 | $ | 53 | ||||||||
Long-term debt (Level 1) | $ | 2,635 | $ | 2,603 | $ | 2,633 | $ | 2,629 | ||||||||
Long-term debt (Level 2) | $ | 6,690 | $ | 6,582 | $ | 7,286 | $ | 7,301 |
4. | Contingencies and Commitments |
March 31, 2018 | ||||
($ in millions) | ||||
2018 | $ | 815 | ||
2019 | 1,052 | |||
2020 | 980 | |||
2021 | 884 | |||
2022 | 772 | |||
2023 – 2035 | 4,406 | |||
Total | $ | 8,909 |
5. | Other Liabilities |
March 31, 2018 | December 31, 2017 | |||||||
($ in millions) | ||||||||
Revenues and royalties due others | $ | 584 | $ | 612 | ||||
Accrued drilling and production costs | 297 | 216 | ||||||
Joint interest prepayments received | 76 | 74 | ||||||
Accrued compensation and benefits | 125 | 214 | ||||||
Accrued restructuring and other termination costs | 27 | — | ||||||
Other accrued taxes | 41 | 43 | ||||||
Other | 207 | 296 | ||||||
Total other current liabilities | $ | 1,357 | $ | 1,455 |
March 31, 2018 | December 31, 2017 | |||||||
($ in millions) | ||||||||
CHK Utica ORRI conveyance obligation(a) | $ | 153 | $ | 156 | ||||
Unrecognized tax benefits | 98 | 101 | ||||||
Other | 94 | 97 | ||||||
Total other long-term liabilities | $ | 345 | $ | 354 |
(a) | The CHK Utica, L.L.C. investors’ right to receive proportionately an overriding royalty interest (ORRI) in the first 1,500 net wells drilled on certain of our Utica Shale leasehold runs through 2023. We have the right to repurchase the ORRIs in the remaining net wells once we have drilled a minimum of 1,300 net wells. As of March 31, 2018, we had drilled 584 net wells. The obligation to deliver future ORRIs, which has been recorded as a liability, will be settled through the future conveyance of the underlying ORRIs to the investors on a net-well basis. As of March 31, 2018 and December 31, 2017, approximately $30 million of the total ORRI obligations are recorded in other current liabilities. |
6. | Income Taxes |
7. | Share-Based Compensation |
Shares of Unvested Restricted Stock | Weighted Average Grant Date Fair Value | ||||||
(in thousands) | |||||||
Unvested restricted stock as of January 1, 2018 | 13,178 | $ | 6.37 | ||||
Granted | 2,805 | $ | 3.02 | ||||
Vested | (4,651 | ) | $ | 7.64 | |||
Forfeited | (465 | ) | $ | 6.24 | |||
Unvested restricted stock as of March 31, 2018 | 10,867 | $ | 4.97 |
Expected option life – years | 6.0 | ||
Volatility | 63.55 | % | |
Risk-free interest rate | 2.72 | % | |
Dividend yield | — | % |
Number of Shares Underlying Options | Weighted Average Exercise Price Per Share | Weighted Average Contract Life in Years | Aggregate Intrinsic Value(a) | ||||||||||
(in thousands) | ($ in millions) | ||||||||||||
Outstanding as of January 1, 2018 | 16,285 | $ | 8.25 | 7.73 | $ | 1 | |||||||
Granted | 3,611 | $ | 3.01 | ||||||||||
Exercised | — | $ | — | $ | — | ||||||||
Expired | (64 | ) | $ | 20.77 | |||||||||
Forfeited | (267 | ) | $ | 5.45 | |||||||||
Outstanding as of March 31, 2018 | 19,565 | $ | 7.28 | 7.93 | $ | — | |||||||
Exercisable as of March 31, 2018 | 8,776 | $ | 10.88 | 6.52 | $ | — |
(a) | The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option. |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
General and administrative expenses | $ | 7 | $ | 8 | ||||
Oil and natural gas properties | 2 | 4 | ||||||
Oil, natural gas and NGL production expenses | 2 | 3 | ||||||
Total restricted stock and stock option compensation | $ | 11 | $ | 15 |
Grant Date Assumptions | ||||||
Assumption | 2017 Awards | 2016 Awards | ||||
Volatility | 80.65 | % | 49.74 | % | ||
Risk-free interest rate | 1.54 | % | 1.13 | % | ||
Dividend yield for value of awards | — | % | — | % |
Reporting Period Assumptions | ||||||
Assumption | 2017 Awards | 2016 Awards | ||||
Volatility | 55.89 | % | 53.77 | % | ||
Risk-free interest rate | 2.23 | % | 2.01 | % | ||
Dividend yield for value of awards | — | % | — | % |
Grant Date Fair Value | March 31, 2018 | ||||||||||||||
Units | Fair Value | Vested Liability | |||||||||||||
($ in millions) | ($ in millions) | ||||||||||||||
2018 PSU Awards: | |||||||||||||||
Payable 2019, 2020 and 2021 | 4,031,011 | $ | 12 | $ | 12 | $ | — | ||||||||
2017 PSU Awards: | |||||||||||||||
Payable 2020 | 1,217,774 | $ | 8 | $ | 4 | $ | 2 | ||||||||
2016 PSU Awards: | |||||||||||||||
Payable 2019 | 2,348,893 | $ | 10 | $ | 8 | $ | 7 | ||||||||
2018 CRSU Awards: | |||||||||||||||
Payable 2019, 2020 and 2021 | 16,976,014 | $ | 52 | $ | 52 | $ | — |
8. | Derivative and Hedging Activities |
• | Swaps: We receive a fixed price and pay a floating market price to the counterparty for the hedged commodity. In exchange for higher fixed prices on certain of our swap trades, we may sell call options and call swaptions. |
• | Options: We sell, and occasionally buy, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, we pay the counterparty the excess on sold call options and we receive the excess on bought call options. If the market price settles below the fixed price of the call option, no payment is due from either party. |
• | Call Swaptions: We sell call swaptions to counterparties that allow the counterparty, on a specific date, to extend an existing fixed-price swap for a certain period of time. |
• | Collars: These instruments contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the put and the call strike prices, no payments are due from either party. Three-way collars include the sale by us of an additional put option in exchange for a more favorable strike price on the call option. This eliminates the counterparty’s downside exposure below the second put option strike price. |
• | Basis Protection Swaps: These instruments are arrangements that guarantee a fixed price differential to NYMEX from a specified delivery point. We receive the fixed price differential and pay the floating market price differential to the counterparty for the hedged commodity. |
March 31, 2018 | December 31, 2017 | |||||||||||||
Notional Volume | Fair Value | Notional Volume | Fair Value | |||||||||||
($ in millions) | ($ in millions) | |||||||||||||
Oil (mmbbl): | ||||||||||||||
Fixed-price swaps | 24 | $ | (180 | ) | 21 | $ | (151 | ) | ||||||
Three-way collars | 1 | (12 | ) | 2 | (10 | ) | ||||||||
Call swaptions | 2 | (19 | ) | 2 | (13 | ) | ||||||||
Basis protection swaps | 7 | 5 | 11 | (9 | ) | |||||||||
Total oil | 34 | (206 | ) | 36 | (183 | ) | ||||||||
Natural gas (bcf): | ||||||||||||||
Fixed-price swaps | 358 | 44 | 532 | 149 | ||||||||||
Three-way collars | 88 | — | — | — | ||||||||||
Collars | 36 | 8 | 47 | 11 | ||||||||||
Call options | 93 | (1 | ) | 110 | (3 | ) | ||||||||
Basis protection swaps | 41 | 3 | 65 | (7 | ) | |||||||||
Total natural gas | 616 | 54 | 754 | 150 | ||||||||||
NGL (mmgal): | ||||||||||||||
Fixed-price swaps | 47 | — | 33 | (2 | ) | |||||||||
Total estimated fair value | $ | (152 | ) | $ | (35 | ) |
Balance Sheet Classification | Gross Fair Value | Amounts Netted in the Consolidated Balance Sheets | Net Fair Value Presented in the Consolidated Balance Sheet | |||||||||
($ in millions) | ||||||||||||
As of March 31, 2018 | ||||||||||||
Commodity Contracts: | ||||||||||||
Short-term derivative asset | $ | 60 | $ | (57 | ) | $ | 3 | |||||
Long-term derivative asset | 5 | (5 | ) | — | ||||||||
Short-term derivative liability | (206 | ) | 57 | (149 | ) | |||||||
Long-term derivative liability | (11 | ) | 5 | (6 | ) | |||||||
Total derivatives | $ | (152 | ) | $ | — | $ | (152 | ) | ||||
As of December 31, 2017 | ||||||||||||
Commodity Contracts: | ||||||||||||
Short-term derivative asset | $ | 157 | $ | (130 | ) | $ | 27 | |||||
Short-term derivative liability | (188 | ) | 130 | (58 | ) | |||||||
Long-term derivative liability | (4 | ) | — | (4 | ) | |||||||
Total derivatives | $ | (35 | ) | $ | — | $ | (35 | ) |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Oil, natural gas and NGL revenues | $ | 1,360 | $ | 1,147 | ||||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | (107 | ) | 332 | |||||
Losses on terminated cash flow hedges | (10 | ) | (10 | ) | ||||
Total oil, natural gas and NGL revenues | $ | 1,243 | $ | 1,469 |
Three Months Ended March 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Before Tax | After Tax | Before Tax | After Tax | |||||||||||||
($ in millions) | ||||||||||||||||
Balance, beginning of period | $ | (114 | ) | $ | (57 | ) | $ | (153 | ) | $ | (96 | ) | ||||
Net change in fair value | — | — | 4 | 4 | ||||||||||||
Losses reclassified to income | 10 | 10 | 10 | 10 | ||||||||||||
Balance, end of period | $ | (104 | ) | $ | (47 | ) | $ | (139 | ) | $ | (82 | ) |
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
As of March 31, 2018 | ||||||||||||||||
Derivative Assets (Liabilities): | ||||||||||||||||
Commodity assets | $ | — | $ | 53 | $ | 12 | $ | 65 | ||||||||
Commodity liabilities | — | (181 | ) | (36 | ) | (217 | ) | |||||||||
Total derivatives | $ | — | $ | (128 | ) | $ | (24 | ) | $ | (152 | ) | |||||
As of December 31, 2017 | ||||||||||||||||
Derivative Assets (Liabilities): | ||||||||||||||||
Commodity assets | $ | — | $ | — | $ | 8 | $ | 8 | ||||||||
Commodity liabilities | — | (20 | ) | (23 | ) | (43 | ) | |||||||||
Total derivatives | $ | — | $ | (20 | ) | $ | (15 | ) | $ | (35 | ) |
Commodity Derivatives | ||||
($ in millions) | ||||
Balance, as of January 1, 2018 | $ | (15 | ) | |
Total gains (losses) (realized/unrealized): | ||||
Included in earnings(a) | (8 | ) | ||
Total purchases, issuances, sales and settlements: | ||||
Settlements | (1 | ) | ||
Balance, as of March 31, 2018 | $ | (24 | ) | |
Balance, as of January 1, 2017 | $ | (10 | ) | |
Total gains (losses) (realized/unrealized): | ||||
Included in earnings(a) | 12 | |||
Total purchases, issuances, sales and settlements: | ||||
Settlements | 1 | |||
Balance, as of March 31, 2017 | $ | 3 |
(a) | Commodity Derivatives | ||||||||
2018 | 2017 | ||||||||
($ in millions) | |||||||||
Total gains (losses) included in earnings for the period | $ | (8 | ) | $ | 12 | ||||
Change in unrealized gains (losses) related to assets still held at reporting date | $ | (10 | ) | $ | 5 |
Instrument Type | Unobservable Input | Range | Weighted Average | Fair Value March 31, 2018 | ||||||
($ in millions) | ||||||||||
Oil trades | Oil price volatility curves | 19.20% – 30.57% | 27.29% | $ | (31 | ) | ||||
Natural gas trades | Natural gas price volatility curves | 14.74% – 40.22% | 20.73% | $ | 7 |
9. | Oil and Natural Gas Property Transactions |
Volume Sold | ||||||||||||||||||||
VPP # | Date of VPP | Location | Proceeds | Oil | Natural Gas | NGL | Total | |||||||||||||
($ in millions) | (mmbbl) | (bcf) | (mmbbl) | (bcfe) | ||||||||||||||||
9 | May 2011 | Mid-Continent | $ | 853 | 1.7 | 138 | 4.8 | 177 |
Volume Remaining as of March 31, 2018 | ||||||||||||||
VPP # | Term Remaining | Oil | Natural Gas | NGL | Total | |||||||||
(in months) | (mmbbl) | (bcf) | (mmbbl) | (bcfe) | ||||||||||
9 | 35 | 0.4 | 31.3 | 0.8 | 38.2 |
10. | Revenue Recognition |
Before adoption of ASC 606 | Adjustments | As Reported | ||||||||||
($ in millions) | ||||||||||||
Balance Sheet as of March 31, 2018 | ||||||||||||
Other current liabilities | $ | 1,355 | $ | 2 | $ | 1,357 | ||||||
Other long-term liabilities | $ | 339 | $ | 6 | $ | 345 | ||||||
Accumulated deficit | $ | (16,232 | ) | $ | (8 | ) | $ | (16,240 | ) | |||
Statement of Operations for the Three Months Ended March 31, 2018 | ||||||||||||
Marketing revenues | $ | 1,361 | $ | (115 | ) | $ | 1,246 | |||||
Marketing operating expenses | $ | 1,383 | $ | (115 | ) | $ | 1,268 |
Three Months Ended March 31, 2018 | ||||||||||||||||
Oil | Natural Gas | NGL | Total | |||||||||||||
($ in millions) | ||||||||||||||||
Marcellus | $ | — | $ | 294 | $ | — | $ | 294 | ||||||||
Haynesville | — | 210 | — | 210 | ||||||||||||
Eagle Ford | 364 | 42 | 40 | 446 | ||||||||||||
Utica | 60 | 116 | 52 | 228 | ||||||||||||
Mid-Continent | 73 | 32 | 17 | 122 | ||||||||||||
Powder River Basin | 40 | 12 | 8 | 60 | ||||||||||||
Revenue from contracts with customers | 537 | 706 | 117 | 1,360 | ||||||||||||
Gains (losses) on oil, natural gas and NGL derivatives | (86 | ) | (32 | ) | 1 | (117 | ) | |||||||||
Oil, natural gas and NGL revenue | $ | 451 | $ | 674 | $ | 118 | $ | 1,243 | ||||||||
Marketing revenue from contracts with customers | $ | 686 | $ | 293 | $ | 110 | $ | 1,089 | ||||||||
Other marketing revenue | 117 | 40 | — | 157 | ||||||||||||
Marketing revenue | $ | 803 | $ | 333 | $ | 110 | $ | 1,246 |
March 31, 2018 | December 31, 2017 | |||||||
($ in millions) | ||||||||
Oil, natural gas and NGL sales | $ | 829 | $ | 959 | ||||
Joint interest | 166 | 209 | ||||||
Other | 101 | 184 | ||||||
Allowance for doubtful accounts | (14 | ) | (30 | ) | ||||
Total accounts receivable, net | $ | 1,082 | $ | 1,322 |
11. | Investments |
12. | Other Operating Expenses |
13. | Restructuring and Other Termination Costs |
Other Current Liabilities | ||||
($ in millions) | ||||
Balance as of December 31, 2017 | $ | — | ||
Initial restructuring recognition on January 30, 2018 | 38 | |||
Termination benefits paid | (11 | ) | ||
Balance as of March 31, 2018(a) | $ | 27 |
14. | Fair Value Measurements |
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
As of March 31, 2018 | ||||||||||||||||
Financial Assets (Liabilities): | ||||||||||||||||
Other current assets | $ | 52 | $ | — | $ | — | $ | 52 | ||||||||
Other current liabilities | (52 | ) | — | — | (52 | ) | ||||||||||
Total | $ | — | $ | — | $ | — | $ | — | ||||||||
As of December 31, 2017 | ||||||||||||||||
Financial Assets (Liabilities): | ||||||||||||||||
Other current assets | $ | 57 | $ | — | $ | — | $ | 57 | ||||||||
Other current liabilities | (60 | ) | — | — | (60 | ) | ||||||||||
Total | $ | (3 | ) | $ | — | $ | — | $ | (3 | ) |
15. | Condensed Consolidating Financial Information |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 34 | $ | 1 | $ | 1 | $ | (32 | ) | $ | 4 | |||||||||
Other current assets | 73 | 1,147 | 2 | (2 | ) | 1,220 | ||||||||||||||
Intercompany receivable, net | 7,987 | 29 | 173 | (8,189 | ) | — | ||||||||||||||
Total Current Assets | 8,094 | 1,177 | 176 | (8,223 | ) | 1,224 | ||||||||||||||
PROPERTY AND EQUIPMENT: | ||||||||||||||||||||
Oil and natural gas properties at cost, based on full cost accounting, net | 478 | 8,847 | 27 | — | 9,352 | |||||||||||||||
Other property and equipment, net | — | 1,224 | — | — | 1,224 | |||||||||||||||
Property and equipment held for sale, net | — | 16 | — | — | 16 | |||||||||||||||
Total Property and Equipment, Net | 478 | 10,087 | 27 | — | 10,592 | |||||||||||||||
LONG-TERM ASSETS: | ||||||||||||||||||||
Other long-term assets | 49 | 221 | — | — | 270 | |||||||||||||||
Investments in subsidiaries and intercompany advances | 807 | 77 | — | (884 | ) | — | ||||||||||||||
TOTAL ASSETS | $ | 9,428 | $ | 11,562 | $ | 203 | $ | (9,107 | ) | $ | 12,086 | |||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Current liabilities | $ | 197 | $ | 2,188 | $ | 3 | $ | (34 | ) | $ | 2,354 | |||||||||
Intercompany payable, net | 28 | 8,161 | — | (8,189 | ) | — | ||||||||||||||
Total Current Liabilities | 225 | 10,349 | 3 | (8,223 | ) | 2,354 | ||||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||||||
Long-term debt, net | 9,325 | — | — | — | 9,325 | |||||||||||||||
Other long-term liabilities | 98 | 406 | — | — | 504 | |||||||||||||||
Total Long-Term Liabilities | 9,423 | 406 | — | — | 9,829 | |||||||||||||||
EQUITY: | ||||||||||||||||||||
Chesapeake stockholders’ equity (deficit) | (220 | ) | 807 | 77 | (884 | ) | (220 | ) | ||||||||||||
Noncontrolling interests | — | — | 123 | — | 123 | |||||||||||||||
Total Equity (Deficit) | (220 | ) | 807 | 200 | (884 | ) | (97 | ) | ||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 9,428 | $ | 11,562 | $ | 203 | $ | (9,107 | ) | $ | 12,086 |
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 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUES: | ||||||||||||||||||||
Oil, natural gas and NGL | $ | — | $ | 1,238 | $ | 5 | $ | — | $ | 1,243 | ||||||||||
Marketing | — | 1,246 | — | — | 1,246 | |||||||||||||||
Total Revenues | — | 2,484 | 5 | — | 2,489 | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Oil, natural gas and NGL production | — | 147 | — | — | 147 | |||||||||||||||
Oil, natural gas and NGL gathering, processing and transportation | — | 355 | 1 | — | 356 | |||||||||||||||
Production taxes | — | 31 | — | — | 31 | |||||||||||||||
Marketing | — | 1,268 | — | — | 1,268 | |||||||||||||||
General and administrative | — | 72 | — | — | 72 | |||||||||||||||
Restructuring and other termination costs | — | 38 | — | — | 38 | |||||||||||||||
Provision for legal contingencies, net | — | 5 | — | — | 5 | |||||||||||||||
Oil, natural gas and NGL depreciation, depletion and amortization | — | 267 | 1 | — | 268 | |||||||||||||||
Depreciation and amortization of other assets | — | 18 | — | — | 18 | |||||||||||||||
Net losses on sales of fixed assets | — | 8 | — | — | 8 | |||||||||||||||
Total Operating Expenses | — | 2,209 | 2 | — | 2,211 | |||||||||||||||
INCOME FROM OPERATIONS | — | 275 | 3 | — | 278 | |||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Interest expense | (123 | ) | — | — | — | (123 | ) | |||||||||||||
Gains on investments | — | 139 | — | — | 139 | |||||||||||||||
Equity in net earnings (losses) of subsidiary | 416 | 2 | — | (418 | ) | — | ||||||||||||||
Total Other Income (Expense) | 293 | 141 | — | (418 | ) | 16 | ||||||||||||||
INCOME BEFORE INCOME TAXES | 293 | 416 | 3 | (418 | ) | 294 | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) | — | — | — | — | — | |||||||||||||||
NET INCOME | 293 | 416 | 3 | (418 | ) | 294 | ||||||||||||||
Net income attributable to noncontrolling interests | — | — | (1 | ) | — | (1 | ) | |||||||||||||
NET INCOME ATTRIBUTABLE TO CHESAPEAKE | 293 | 416 | 2 | (418 | ) | 293 | ||||||||||||||
Other comprehensive income | — | 10 | — | — | 10 | |||||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE | $ | 293 | $ | 426 | $ | 2 | $ | (418 | ) | $ | 303 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUES: | ||||||||||||||||||||
Oil, natural gas and NGL | $ | — | $ | 1,463 | $ | 6 | $ | — | $ | 1,469 | ||||||||||
Marketing | — | 1,284 | — | — | 1,284 | |||||||||||||||
Total Revenues | — | 2,747 | 6 | — | 2,753 | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Oil, natural gas and NGL production | — | 135 | — | — | 135 | |||||||||||||||
Oil, natural gas and NGL gathering, processing and transportation | — | 353 | 2 | — | 355 | |||||||||||||||
Production taxes | — | 22 | — | — | 22 | |||||||||||||||
Marketing | — | 1,328 | — | — | 1,328 | |||||||||||||||
General and administrative | — | 64 | 1 | — | 65 | |||||||||||||||
Provision for legal contingencies, net | — | (2 | ) | — | — | (2 | ) | |||||||||||||
Oil, natural gas and NGL depreciation, depletion and amortization | — | 195 | 2 | — | 197 | |||||||||||||||
Depreciation and amortization of other assets | — | 21 | — | — | 21 | |||||||||||||||
Other operating expenses | — | 391 | — | — | 391 | |||||||||||||||
Total Operating Expenses | — | 2,507 | 5 | — | 2,512 | |||||||||||||||
INCOME FROM OPERATIONS | — | 240 | 1 | — | 241 | |||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Interest expense | (95 | ) | — | — | — | (95 | ) | |||||||||||||
Losses on purchases or exchanges of debt | (7 | ) | — | — | — | (7 | ) | |||||||||||||
Other income | — | 3 | — | — | 3 | |||||||||||||||
Equity in net earnings (losses) of subsidiary | 243 | — | — | (243 | ) | — | ||||||||||||||
Total Other Income (Expense) | 141 | 3 | — | (243 | ) | (99 | ) | |||||||||||||
INCOME BEFORE INCOME TAXES | 141 | 243 | 1 | (243 | ) | 142 | ||||||||||||||
INCOME TAX EXPENSE | 1 | — | — | — | 1 | |||||||||||||||
NET INCOME | 140 | 243 | 1 | (243 | ) | 141 | ||||||||||||||
Net income attributable to noncontrolling interests | — | — | (1 | ) | — | (1 | ) | |||||||||||||
NET INCOME ATTRIBUTABLE TO CHESAPEAKE | 140 | 243 | — | (243 | ) | 140 | ||||||||||||||
Other comprehensive income | — | 14 | — | — | 14 | |||||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE | $ | 140 | $ | 257 | $ | — | $ | (243 | ) | $ | 154 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
Net Cash Provided By Operating Activities | $ | 78 | $ | 577 | $ | 5 | $ | (4 | ) | $ | 656 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Drilling and completion costs | — | (442 | ) | — | — | (442 | ) | |||||||||||||
Acquisitions of proved and unproved properties | — | (63 | ) | — | — | (63 | ) | |||||||||||||
Proceeds from divestitures of proved and unproved properties | — | 319 | — | — | 319 | |||||||||||||||
Additions to other property and equipment | — | (3 | ) | — | — | (3 | ) | |||||||||||||
Other investing activities | — | 142 | — | — | 142 | |||||||||||||||
Net Cash Used In Investing Activities | — | (47 | ) | — | — | (47 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from revolving credit facility borrowings | 2,904 | — | — | — | 2,904 | |||||||||||||||
Payments on revolving credit facility borrowings | (3,485 | ) | — | — | — | (3,485 | ) | |||||||||||||
Cash paid for preferred stock dividends | (23 | ) | — | — | — | (23 | ) | |||||||||||||
Other financing activities | 25 | (2 | ) | (4 | ) | (25 | ) | (6 | ) | |||||||||||
Intercompany advances, net | 530 | (528 | ) | (2 | ) | — | — | |||||||||||||
Net Cash Used In Financing Activities | (49 | ) | (530 | ) | (6 | ) | (25 | ) | (610 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 29 | — | (1 | ) | (29 | ) | (1 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 5 | 1 | 2 | (3 | ) | 5 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 34 | $ | 1 | $ | 1 | $ | (32 | ) | $ | 4 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
Net Cash Provided By (Used In) Operating Activities | $ | 1 | $ | 96 | $ | 4 | $ | (2 | ) | $ | 99 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Drilling and completion costs | — | (433 | ) | — | — | (433 | ) | |||||||||||||
Acquisitions of proved and unproved properties | — | (95 | ) | — | — | (95 | ) | |||||||||||||
Proceeds from divestitures of proved and unproved properties | — | 892 | — | — | 892 | |||||||||||||||
Additions to other property and equipment | — | (3 | ) | — | — | (3 | ) | |||||||||||||
Other investing activities | — | 19 | — | — | 19 | |||||||||||||||
Net Cash Provided By Investing Activities | — | 380 | — | — | 380 | |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from revolving credit facility borrowings | 50 | — | — | — | 50 | |||||||||||||||
Payments on revolving credit facility borrowings | (50 | ) | — | — | — | (50 | ) | |||||||||||||
Cash paid to purchase debt | (982 | ) | — | — | — | (982 | ) | |||||||||||||
Cash paid for preferred stock dividends | (114 | ) | — | — | — | (114 | ) | |||||||||||||
Other financing activities | (24 | ) | (1 | ) | (3 | ) | 12 | (16 | ) | |||||||||||
Intercompany advances, net | 476 | (475 | ) | (1 | ) | — | — | |||||||||||||
Net Cash Provided by (Used In) Financing Activities | (644 | ) | (476 | ) | (4 | ) | 12 | (1,112 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | (643 | ) | — | — | 10 | (633 | ) | |||||||||||||
Cash and cash equivalents, beginning of period | 904 | 2 | 1 | (25 | ) | 882 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 261 | $ | 2 | $ | 1 | $ | (15 | ) | $ | 249 |
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | reduce total debt by $2 - $3 billion; |
• | increase net cash provided by operating activities to fund capital expenditures; and |
• | improve margins through financial discipline and operating efficiencies. |
• | sold properties in the Mid-Continent, including our Mississippian Lime assets, for aggregate proceeds of approximately $500 million; |
• | received net proceeds of approximately $74 million from the sale of approximately 4.3 million shares of FTS International, Inc. (NYSE: FTSI). FTSI is a provider of hydraulic fracturing services in North America and a company in which Chesapeake has owned a significant stake since 2006. FTSI completed its initial public offering of common shares on February 6, 2018. We currently own approximately 22.0 million shares of FTSI; and |
• | reduced our workforce by approximately 13% as part of an overall plan to reduce costs and better align our workforce to the needs of our business, resulting in an expected reduction of annual cash costs of approximately $70 million. |
Three Months Ended March 31, | |||||||||||
2018 | % Change(c) | 2017 | |||||||||
($ in millions) | |||||||||||
Net income available to common stockholders | $ | 268 | n/m | $ | 75 | ||||||
Net earnings per diluted common share | $ | 0.29 | n/m | $ | 0.08 | ||||||
Adjusted production(a) (mboe per day) | 540 | 11 | % | 485 | |||||||
Total production (mboe per day) | 554 | 5 | % | 528 | |||||||
Average sales price (per boe) | $ | 27.27 | 13 | % | $ | 24.13 | |||||
Oil, natural gas and NGL production expenses | $ | 147 | 9 | % | $ | 135 | |||||
Oil, natural gas and NGL gathering, processing and transportation expenses | $ | 356 | — | % | $ | 355 | |||||
General and administrative expenses | $ | 72 | 11 | % | $ | 65 | |||||
Total debt (principal amount)(b) | $ | 9,400 | (6 | )% | $ | 9,981 |
(a) | Adjusted for assets sold. |
Oil Derivatives(a) | |||||||||
Year | Type of Derivative Instrument | Notional Volume | % of Forecasted Production (if applicable) | Average NYMEX Price | |||||
(mbbls) | |||||||||
2018 | Swaps | 17,110 | 72% | $53.78 | |||||
2018 | Three-way collars | 1,375 | 6% | $39.15/$47.00/$55.00 | |||||
2018 | Calls | 1,840 | 8% | $52.87 | |||||
2018 | Basis protection swaps | 8,159 | 34% | $3.35 | |||||
2019 | Swaps | 11,661 | Not disclosed | $57.87 | |||||
Natural Gas Derivatives(a) | |||||||||
Year | Type of Derivative Instrument | Notional Volume | % of Forecasted Production (if applicable) | Average NYMEX Price | |||||
(bcf) | |||||||||
2018 | Swaps | 358 | 57% | $2.95 | |||||
2018 | Two-way collars | 36 | 6% | $3.00/$3.25 | |||||
2018 | Calls | 50 | 8% | $6.27 | |||||
2018 | Basis protection swaps | 41 | 7% | ($0.77) | |||||
2019 | Three-way collars | 87 | Not disclosed | $2.50/$2.80/$3.10 | |||||
2019 | Basis protection swaps | 4 | Not disclosed | $2.24 | |||||
2019 | Calls | 22 | Not disclosed | $12.00 | |||||
2020 | Calls | 22 | Not disclosed | $12.00 | |||||
NGL Derivatives(a) | |||||||||
Year | Type of Derivative Instrument | Notional Volume | % of Forecasted Production (if applicable) | Average NYMEX Price | |||||
(mmgal) | |||||||||
2018 | Butane swaps | 4 | 5% | $0.88 | |||||
2018 | Butane % of WTI swaps | 4 | 5% | 70.5% of WTI | |||||
2018 | Propane swaps | 42 | 19% | $0.79 | |||||
2018 | Ethane swaps | 4 | 1% | $0.28 | |||||
2018 | Isobutane swaps | 10 | 21% | $0.92 | |||||
2018 | Natural gasoline | 33 | 44% | $1.42 |
(a) | Includes amounts settled in April 2018. |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Cash provided by operating activities | $ | 656 | $ | 99 | ||||
Proceeds from divestitures of proved and unproved properties, net | 319 | 892 | ||||||
Proceeds from sales of other property and equipment, net | 68 | 19 | ||||||
Proceeds from sales of investments | 74 | — | ||||||
Total sources of cash and cash equivalents | $ | 1,117 | $ | 1,010 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Oil and Natural Gas Expenditures: | ||||||||
Drilling and completion costs | $ | 442 | $ | 433 | ||||
Acquisitions of proved and unproved properties | 22 | 46 | ||||||
Interest capitalized on unproved leasehold | 41 | 49 | ||||||
Total oil and natural gas expenditures | 505 | 528 | ||||||
Other Uses of Cash and Cash Equivalents: | ||||||||
Payments on revolving credit facility borrowings, net | 581 | — | ||||||
Cash paid to repurchase debt | — | 982 | ||||||
Additions to other property and equipment | 3 | 3 | ||||||
Dividends paid | 23 | 114 | ||||||
Other | 6 | 16 | ||||||
Total other uses of cash and cash equivalents | 613 | 1,115 | ||||||
Total uses of cash and cash equivalents | $ | 1,118 | $ | 1,643 |
Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||
Oil | Natural Gas | NGL | Total | ||||||||||||||||||||||||
mbbl per day | $/bbl | mmcf per day | $/mcf | mbbl per day | $/bbl | mboe per day | % | $/boe | |||||||||||||||||||
Marcellus | — | — | 873 | 3.74 | — | — | 146 | 26 | 22.46 | ||||||||||||||||||
Haynesville | — | — | 833 | 2.80 | — | — | 139 | 25 | 16.86 | ||||||||||||||||||
Eagle Ford | 61 | 66.16 | 141 | 3.30 | 18 | 24.72 | 102 | 19 | 48.22 | ||||||||||||||||||
Utica | 11 | 59.82 | 440 | 2.94 | 23 | 25.03 | 107 | 19 | 23.39 | ||||||||||||||||||
Mid-Continent | 9 | 62.04 | 87 | 2.70 | 5 | 26.15 | 28 | 5 | 32.46 | ||||||||||||||||||
Powder River Basin | 7 | 62.86 | 47 | 2.82 | 3 | 28.77 | 18 | 3 | 37.68 | ||||||||||||||||||
Retained assets(a) | 88 | 64.66 | 2,421 | 3.19 | 49 | 25.24 | 540 | 97 | 27.10 | ||||||||||||||||||
Divested assets | 4 | 63.60 | 45 | 2.81 | 2 | 30.07 | 14 | 3 | 33.53 | ||||||||||||||||||
Total | 92 | 64.61 | 2,466 | 3.18 | 51 | 25.45 | 554 | 100 | % | 27.27 | |||||||||||||||||
Three Months Ended March 31, 2017 | |||||||||||||||||||||||||||
Oil | Natural Gas | NGL | Total | ||||||||||||||||||||||||
mbbl per day | $/bbl | mmcf per day | $/mcf | mbbl per day | $/bbl | mboe per day | % | $/boe | |||||||||||||||||||
Marcellus | — | — | 837 | 3.01 | — | — | 139 | 27 | 18.04 | ||||||||||||||||||
Haynesville | — | — | 682 | 2.98 | — | — | 114 | 22 | 17.86 | ||||||||||||||||||
Eagle Ford | 56 | 50.90 | 135 | 3.40 | 17 | 21.38 | 96 | 18 | 38.52 | ||||||||||||||||||
Utica | 8 | 45.42 | 380 | 3.50 | 25 | 25.65 | 96 | 18 | 24.16 | ||||||||||||||||||
Mid-Continent | 7 | 49.64 | 92 | 3.04 | 6 | 22.45 | 28 | 5 | 26.73 | ||||||||||||||||||
Powder River Basin | 5 | 49.70 | 29 | 3.33 | 2 | 25.58 | 12 | 2 | 32.67 | ||||||||||||||||||
Retained assets(a) | 76 | 50.16 | 2,155 | 3.11 | 50 | 23.81 | 485 | 92 | 24.13 | ||||||||||||||||||
Divested assets | 8 | 50.96 | 187 | 2.88 | 4 | 23.43 | 43 | 8 | 24.06 | ||||||||||||||||||
Total | 84 | 50.24 | 2,342 | 3.10 | 54 | 23.78 | 528 | 100 | % | 24.13 | |||||||||||||||||
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions) | |||||||||||
Oil | $ | 537 | 42 | % | $ | 378 | |||||
Natural gas | 706 | 8 | % | 653 | |||||||
NGL | 117 | 1 | % | 116 | |||||||
Oil, natural gas and NGL sales | $ | 1,360 | 19 | % | $ | 1,147 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Oil derivatives – realized gains (losses) | $ | (64 | ) | $ | 11 | |||
Oil derivatives – unrealized gains (losses) | (22 | ) | 94 | |||||
Total gains (losses) on oil derivatives | (86 | ) | 105 | |||||
Natural gas derivatives – realized gains (losses) | 67 | (16 | ) | |||||
Natural gas derivatives – unrealized gains (losses) | (99 | ) | 231 | |||||
Total gains (losses) on natural gas derivatives | (32 | ) | 215 | |||||
NGL derivatives – realized gains (losses) | (1 | ) | 1 | |||||
NGL derivatives – unrealized gains | 2 | 1 | ||||||
Total gains (losses) on NGL derivatives | 1 | 2 | ||||||
Total gains (losses) on oil, natural gas and NGL derivatives | $ | (117 | ) | $ | 322 |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions) | |||||||||||
Marketing revenues | $ | 1,246 | (3 | )% | $ | 1,284 | |||||
Marketing expenses | 1,268 | (5 | )% | 1,328 | |||||||
Marketing gross margin | $ | (22 | ) | 50 | % | $ | (44 | ) |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
Oil, natural gas and NGL production expenses | ($ in millions) | ||||||||||
Marcellus | $ | 8 | 60 | % | $ | 5 | |||||
Haynesville | 16 | 60 | % | 10 | |||||||
Eagle Ford | 48 | 14 | % | 42 | |||||||
Utica | 11 | 22 | % | 9 | |||||||
Mid-Continent | 29 | — | % | 29 | |||||||
Powder River Basin | 12 | 71 | % | 7 | |||||||
Retained Assets(a) | 124 | 22 | % | 102 | |||||||
Divested Assets | 11 | (45 | )% | 20 | |||||||
Total | 135 | 11 | % | 122 | |||||||
Ad valorem tax(b) | 12 | (8 | )% | 13 | |||||||
Total oil, natural gas and NGL production expenses | $ | 147 | 9 | % | $ | 135 | |||||
Oil, natural gas and NGL production expenses | ($ per boe) | ||||||||||
Marcellus | $ | 0.62 | 63 | % | $ | 0.38 | |||||
Haynesville | $ | 1.28 | 35 | % | $ | 0.95 | |||||
Eagle Ford | $ | 5.17 | 7 | % | $ | 4.84 | |||||
Utica | $ | 1.19 | 16 | % | $ | 1.03 | |||||
Mid-Continent | $ | 11.36 | (1 | )% | $ | 11.46 | |||||
Powder River Basin | $ | 7.17 | 5 | % | $ | 6.86 | |||||
Retained Assets(a) | $ | 2.55 | 10 | % | $ | 2.32 | |||||
Divested Assets | $ | 8.44 | 64 | % | $ | 5.15 | |||||
Total | $ | 2.69 | 5 | % | $ | 2.55 | |||||
Ad valorem tax(b) | $ | 0.25 | (14 | )% | $ | 0.29 | |||||
Total oil, natural gas and NGL production expenses per boe | $ | 2.94 | 4 | % | $ | 2.84 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions, except per unit) | ||||||||
Oil, natural gas and NGL gathering, processing and transportation expenses | $ | 356 | $ | 355 | ||||
Oil ($ per bbl) | $ | 4.18 | $ | 3.85 | ||||
Natural gas ($ per mcf) | $ | 1.27 | $ | 1.35 | ||||
NGL ($ per bbl) | $ | 8.83 | $ | 8.47 | ||||
Total ($ per boe) | $ | 7.15 | $ | 7.47 |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions, except per unit) | |||||||||||
Production taxes | $ | 31 | 41 | % | $ | 22 | |||||
Production taxes per boe | $ | 0.62 | 32 | % | $ | 0.47 |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions, except per unit) | |||||||||||
Gross overhead | $ | 188 | (6 | )% | $ | 201 | |||||
Allocated to production expenses | (40 | ) | (11 | )% | (45 | ) | |||||
Allocated to marketing expenses | (6 | ) | (25 | )% | (8 | ) | |||||
Capitalized | (32 | ) | (11 | )% | (36 | ) | |||||
Reimbursed from third parties | (38 | ) | (19 | )% | (47 | ) | |||||
General and administrative expenses, net | $ | 72 | 11 | % | $ | 65 | |||||
General and administrative expenses, net per boe | $ | 1.44 | 7 | % | $ | 1.35 |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions, except per unit) | |||||||||||
Oil, natural gas and NGL depreciation, depletion and amortization | $ | 268 | 36 | % | $ | 197 | |||||
Oil, natural gas and NGL depreciation, depletion and amortization per boe | $ | 5.38 | 30 | % | $ | 4.15 |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions, except per unit) | |||||||||||
Depreciation and amortization of other assets | $ | 18 | (14 | )% | $ | 21 | |||||
Depreciation and amortization of other assets per boe | $ | 0.36 | (18 | )% | $ | 0.44 |
Three Months Ended March 31, | |||||||||||
2018 | % Change | 2017 | |||||||||
($ in millions) | |||||||||||
Other operating expense | $ | — | (100 | )% | $ | 391 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Interest expense on senior notes | $ | 144 | $ | 136 | ||||
Interest expense on term loan | 28 | 32 | ||||||
Amortization of loan discount, issuance costs and other | 8 | 9 | ||||||
Amortization of premium | (24 | ) | (41 | ) | ||||
Interest expense on revolving credit facility | 10 | 9 | ||||||
Realized gains on interest rate derivatives(a) | (1 | ) | (1 | ) | ||||
Unrealized (gains) losses on interest rate derivatives(b) | 1 | 2 | ||||||
Capitalized interest | (43 | ) | (51 | ) | ||||
Total interest expense | $ | 123 | $ | 95 | ||||
Average senior notes borrowings | $ | 7,967 | $ | 7,689 | ||||
Average credit facilities borrowings | $ | 598 | $ | — | ||||
Average term loan borrowings | $ | 1,233 | $ | 1,500 |
(a) | Includes settlements related to the interest accrual for the period and the effect of (gains) losses on early-terminated trades. Settlements of early-terminated trades are reflected in realized (gains) losses over the original life of the hedged item. |
(b) | Includes changes in the fair value of interest rate derivatives offset by amounts reclassified to realized (gains) losses during the period. |
• | the volatility of oil, natural gas and NGL prices; |
• | uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; |
• | our ability to replace reserves and sustain production; |
• | drilling and operating risks and resulting liabilities; |
• | our ability to generate profits or achieve targeted results in drilling and well operations; |
• | the limitations our level of indebtedness may have on our financial flexibility; |
• | our inability to access the capital markets on favorable terms; |
• | the availability of cash flows from operations and other funds to finance reserve replacement costs or satisfy our debt obligations; |
• | adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; |
• | effects of environmental protection laws and regulation on our business; |
• | terrorist activities and/or cyber-attacks adversely impacting our operations; |
• | effects of acquisitions and dispositions; and |
• | other factors that are described under Risk Factors in Item 1A of our 2017 Form 10-K. |
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk |
• | Swaps: We receive a fixed price and pay a floating market price to the counterparty for the hedged commodity. In exchange for higher fixed prices on certain of our swap trades, we may sell call options and call swaptions. |
• | Options: We sell, and occasionally buy, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, we pay the counterparty the excess on sold call options, and we receive the excess on bought call options. If the market price settles below the fixed price of the call option, no payment is due from either party. |
• | Call Swaptions: We sell call swaptions to counterparties that allow the counterparty, on a specific date, to extend an existing fixed-price swap for a certain period of time |
• | Collars: These instruments contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the put and the call strike prices, no payments are due from either party. Three-way collars include the sale by us of an additional put option in exchange for a more favorable strike price on the call option. This eliminates the counterparty’s downside exposure below the second put option strike price. |
• | Basis Protection Swaps: These instruments are arrangements that guarantee a fixed price differential to NYMEX from a specified delivery point. We receive the fixed price differential and pay the floating market price differential to the counterparty for the hedged commodity. |
Weighted Average Price | Fair Value | ||||||||||||||||||||||
Volume | Fixed | Call | Put | Differential | Asset (Liability) | ||||||||||||||||||
(mmbbl) | ($ per bbl) | ($ in millions) | |||||||||||||||||||||
Oil: | |||||||||||||||||||||||
Swaps: | |||||||||||||||||||||||
Short-term | 18 | $ | 53.46 | $ | — | $ | — | $ | — | $ | (172 | ) | |||||||||||
Long-term | 6 | $ | 56.84 | $ | — | $ | — | $ | — | (8 | ) | ||||||||||||
Three Way Collars: | |||||||||||||||||||||||
Short-term | 1 | $ | — | $ | 55.00 | $39.15/$47.00 | $ | — | $ | (12 | ) | ||||||||||||
Call Swaptions: | |||||||||||||||||||||||
Short-term | 2 | $ | 52.87 | $ | — | $ | — | $ | — | $ | (19 | ) | |||||||||||
Basis Protection Swaps: | |||||||||||||||||||||||
Short-term | 7 | $ | — | $ | — | $ | — | $ | 3.38 | 5 | |||||||||||||
Total Oil | (206 | ) | |||||||||||||||||||||
(bcf) | ($ per mcf) | ||||||||||||||||||||||
Natural Gas: | |||||||||||||||||||||||
Swaps(a): | |||||||||||||||||||||||
Short-term | 358 | $ | 2.95 | $ | — | $ | — | $ | — | 44 | |||||||||||||
Three Way Collars: | |||||||||||||||||||||||
Short-term | 22 | — | $ | 3.10 | $2.50/$2.80 | — | (1 | ) | |||||||||||||||
Long-term | 66 | — | $ | 3.10 | $2.50/$2.80 | — | 1 | ||||||||||||||||
Collars: | |||||||||||||||||||||||
Short-term | 36 | $ | — | $ | 3.25 | $ | 3.00 | $ | — | 8 | |||||||||||||
Call Options (sold): | |||||||||||||||||||||||
Short-term | 55 | $ | — | $ | 6.83 | $ | — | $ | — | (1 | ) | ||||||||||||
Long-term | 38 | $ | — | $ | 12.00 | $ | — | $ | — | — | |||||||||||||
Basis Protection Swaps: | |||||||||||||||||||||||
Short-term | 41 | $ | — | $ | — | $ | — | $ | (0.77 | ) | 3 | ||||||||||||
Total Natural Gas | 54 | ||||||||||||||||||||||
(mmgal) | ($ per gal) | ||||||||||||||||||||||
NGL: | |||||||||||||||||||||||
Propane Swaps | |||||||||||||||||||||||
Short-term | 12 | $ | 0.73 | $ | — | $ | — | $ | — | (1 | ) | ||||||||||||
Butane Swaps | |||||||||||||||||||||||
Short-term | 4 | $ | 0.88 | $ | — | $ | — | $ | — | — | |||||||||||||
Short-term % of WTI | 4 | 70.5% | $ | — | $ | — | $ | — | 1 | ||||||||||||||
Ethane Swaps | |||||||||||||||||||||||
Short-term | 4 | $ | 0.28 | $ | — | $ | — | $ | — | — | |||||||||||||
Natural Gasoline Swaps | |||||||||||||||||||||||
Short-term | 23 | $ | 1.42 | $ | — | $ | — | $ | — | — | |||||||||||||
Total NGL | — | ||||||||||||||||||||||
Total Estimated Fair Value | $ | (152 | ) |
(a) | This amount includes a sold option to enhance the swap price at an average price of $3.40/mcf covering 33 bcf, included in the sold call options. |
March 31, 2018 | ||||
($ in millions) | ||||
Short-term | $ | (24 | ) | |
Long-term | (50 | ) | ||
Total | $ | (74 | ) |
March 31, 2018 | ||||
($ in millions) | ||||
Fair value of contracts outstanding, as of January 1, 2018 | $ | (35 | ) | |
Change in fair value of contracts | (126 | ) | ||
Contracts realized or otherwise settled | 9 | |||
Fair value of contracts outstanding, as of March 31, 2018 | $ | (152 | ) |
Years of Maturity | |||||||||||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | |||||||||||||||||||||
($ in millions) | |||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||
Debt – fixed rate | $ | 53 | $ | — | $ | 664 | $ | 815 | $ | 1,867 | $ | 4,188 | $ | 7,587 | |||||||||||||
Average interest rate | 6.42 | % | — | % | 6.71 | % | 5.88 | % | 7.25 | % | 7.07 | % | 6.95 | % | |||||||||||||
Debt – variable rate | $ | — | $ | 580 | $ | — | $ | 1,233 | $ | — | $ | — | $ | 1,813 | |||||||||||||
Average interest rate | — | % | 4.70 | % | — | % | 8.95 | % | — | % | — | % | 7.60 | % |
ITEM 4. | Controls and Procedures |
ITEM 1. | Legal Proceedings |
ITEM 1A. | Risk Factors |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased(a) | Average Price Paid Per Share(a) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(b) | ||||||||||
($ in millions) | ||||||||||||||
January 1, 2018 through January 31, 2018 | 12,101 | $ | 4.11 | — | $ | 1,000 | ||||||||
February 1, 2018 through February 28, 2018 | 1,439,377 | $ | 2.88 | — | $ | 1,000 | ||||||||
March 1, 2018 through March 31, 2018 | — | $ | — | — | $ | 1,000 | ||||||||
Total | 1,451,478 | $ | 2.89 | — |
(a) | Includes shares of common stock purchased on behalf of our deferred compensation plan related to Company matching contributions. |
(b) | In December 2014, our Board of Directors authorized the repurchase of up to $1 billion of our common stock from time to time. The repurchase program does not have an expiration date. As of March 31, 2018, there have been no repurchases under the program. |
ITEM 3. | Defaults Upon Senior Securities |
ITEM 4. | Mine Safety Disclosures |
ITEM 5. | Other Information |
ITEM 6. | Exhibits |
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Description | Form | SEC File Number | Exhibit | Filing Date | Filed or Furnished Herewith | ||||||
3.1.1 | 10-Q | 001-13726 | 3.1.1 | 8/3/2017 | ||||||||
3.1.2 | 10-Q | 001-13726 | 3.1.4 | 11/10/2008 | ||||||||
3.1.3 | 10-Q | 001-13726 | 3.1.6 | 8/11/2008 | ||||||||
3.1.4 | 8-K | 001-13726 | 3.2 | 5/20/2010 | ||||||||
3.1.5 | 10-Q | 001-13726 | 3.1.5 | 8/9/2010 | ||||||||
3.2 | 8-K | 001-13726 | 3.2 | 6/19/2014 | ||||||||
12 | X | |||||||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
32.2 | X | |||||||||||
101 INS | XBRL Instance Document. | X | ||||||||||
101 SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101 CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101 DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||
101 LAB | XBRL Taxonomy Extension Labels Linkbase Document. | X | ||||||||||
101 PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
CHESAPEAKE ENERGY CORPORATION | |||
Date: May 2, 2018 | By: | /s/ ROBERT D. LAWLER | |
Robert D. Lawler President and Chief Executive Officer |
Date: May 2, 2018 | By: | /s/ DOMENIC J. DELL’OSSO, JR. | |
Domenic J. Dell’Osso, Jr. Executive Vice President and Chief Financial Officer |
EXHIBIT 12 |
Years Ended December 31, | Three Months Ended March 31, | |||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||
EARNINGS: | ||||||||||||||||||||||||
Income (loss) before income taxes and cumulative effect of accounting change | $ | 1,442 | $ | 3,200 | $ | (19,098 | ) | $ | (4,589 | ) | $ | 954 | $ | 293 | ||||||||||
Interest expense(a) | 207 | 172 | 322 | 275 | 421 | 122 | ||||||||||||||||||
Loss on investment in equity investees in excess of distributed earnings | 219 | 75 | 96 | 8 | — | — | ||||||||||||||||||
Amortization of capitalized interest | 440 | 438 | 483 | 729 | 487 | 105 | ||||||||||||||||||
Loan cost amortization | 37 | 32 | 31 | 24 | 25 | 6 | ||||||||||||||||||
Less: (Income) loss attributable to noncontrolling interests | 68 | 9 | (4 | ) | (1 | ) | ||||||||||||||||||
Earnings (losses) | $ | 2,345 | $ | 3,917 | $ | (18,098 | ) | $ | (3,544 | ) | $ | 1,883 | $ | 525 | ||||||||||
FIXED CHARGES: | ||||||||||||||||||||||||
Interest Expense | $ | 207 | $ | 172 | $ | 322 | $ | 275 | $ | 421 | $ | 122 | ||||||||||||
Capitalized interest | 815 | 604 | 410 | 242 | 193 | 43 | ||||||||||||||||||
Loan cost amortization | 37 | 32 | 31 | 24 | 25 | 6 | ||||||||||||||||||
Fixed Charges | $ | 1,059 | $ | 808 | $ | 763 | $ | 541 | $ | 639 | $ | 171 | ||||||||||||
PREFERRED STOCK DIVIDENDS: | ||||||||||||||||||||||||
Preferred dividend requirements | $ | 171 | $ | 171 | $ | 171 | $ | 97 | $ | 84 | $ | 23 | ||||||||||||
Ratio of income (loss) before provision for taxes to net income (loss)(b) | 1.61 | 1.56 | 1.30 | 1.04 | 1.00 | 1.00 | ||||||||||||||||||
Preferred Dividends | $ | 275 | $ | 266 | $ | 222 | $ | 101 | $ | 84 | $ | 23 | ||||||||||||
COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS | $ | 1,334 | $ | 1,074 | $ | 985 | $ | 642 | $ | 723 | $ | 194 | ||||||||||||
RATIO OF EARNINGS TO FIXED CHARGES | 2.2 | 4.8 | — | — | 2.9 | 3.1 | ||||||||||||||||||
INSUFFICIENT COVERAGE | $ | — | $ | — | $ | 18,861 | $ | 4,085 | $ | — | $ | — | ||||||||||||
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS | 1.8 | 3.6 | — | — | 2.6 | 2.7 | ||||||||||||||||||
INSUFFICIENT COVERAGE | $ | — | $ | — | $ | 19,083 | $ | 4,186 | $ | — | $ | — |
(a) | Excludes the effect of unrealized gains or losses on interest rate derivatives and includes amortization of bond discount. |
(b) | Amounts of income (loss) before provision for taxes and of net income (loss) exclude the cumulative effect of accounting change. |
Exhibit 31.1 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Chesapeake Energy Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
May 2, 2018 | By: | /s/ ROBERT D. LAWLER |
Robert D. Lawler | ||
President and Chief Executive Officer |
Exhibit 31.2 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Chesapeake Energy Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
May 2, 2018 | By: | /s/ DOMENIC J. DELL’OSSO, JR. |
Domenic J. Dell’Osso, Jr. | ||
Executive Vice President and Chief Financial Officer |
Exhibit 32.1 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 2, 2018 | By: | /s/ ROBERT D. LAWLER |
Robert D. Lawler President and Chief Executive Officer |
Exhibit 32.2 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 2, 2018 | By: | /s/ DOMENIC J. DELL’OSSO, JR. |
Domenic J. Dell’Osso, Jr. | ||
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2018 |
Apr. 23, 2018 |
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Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | CHK | |
Entity Registrant Name | CHESAPEAKE ENERGY CORPORATION | |
Entity Central Index Key | 0000895126 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 911,815,100 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 20,000,000 | 20,000,000 |
Preferred stock, shares outstanding (shares) | 5,603,458 | 5,603,458 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 2,000,000,000 | 2,000,000,000 |
Common stock, shares issued | 911,794,424 | 908,732,809 |
Treasury stock, common shares | 3,416,465 | 2,240,394 |
VIE, cash and cash equivalents | $ 4 | $ 5 |
VIE. proved oil and natural gas properties | 69,284 | 68,858 |
VIE. accumulated depreciation, depletion and amortization | (63,903) | (63,664) |
VIE. other current liabilities | 1,357 | 1,455 |
Variable Interest Entities, Primary Beneficiary [Member] | ||
VIE, cash and cash equivalents | 1 | 2 |
VIE. proved oil and natural gas properties | 488 | 488 |
VIE. accumulated depreciation, depletion and amortization | (462) | (461) |
VIE. other current liabilities | $ 3 | $ 3 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Statement of Comprehensive Income [Abstract] | ||
NET INCOME | $ 294 | $ 141 |
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX: | ||
Unrealized gains on derivative instruments, net of income tax expense of $0 and $0 | 0 | 4 |
Reclassification of losses on settled derivative instruments, net of income tax expense of $0 and $0 | 10 | 10 |
Other Comprehensive Income | 10 | 14 |
COMPREHENSIVE INCOME | 304 | 155 |
Net income attributable to noncontrolling interests | (1) | (1) |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE | $ 303 | $ 154 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Statement of Comprehensive Income [Abstract] | ||
Unrealized gains on derivative instruments, tax expense | $ 0 | $ 0 |
Reclassification of losses on settled derivative instruments, tax expense | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - shares |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
|
Treasury Stock - Common [Member] | ||
Purchase of shares for company benefit plans (in shares) | 1,451,478 | 1,185,517 |
Release of shares from company benefit plans (in shares) | 275,407 | 38,013 |
Preferred Stock, Exchanged for Shares of Common Stock [Member] | Preferred Stock [Member] | ||
Conversion of stock, shares converted (in shares) | 0 | 236,048 |
Preferred Stock, Exchanged for Shares of Common Stock [Member] | Additional Paid-in Capital [Member] | ||
Exchange of preferred stock (in shares) | 0 | 9,965,835 |
Basis of Presentation and Summary of Significant Accounting Policies |
3 Months Ended |
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Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies Disclosure | Basis of Presentation Basis of Presentation The accompanying condensed consolidated financial statements of Chesapeake were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted. This Form 10-Q relates to the three months ended March 31, 2018 (the “Current Quarter”) and the three months ended March 31, 2017 (the “Prior Quarter”). Our annual report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”) should be read in conjunction with this Form 10-Q. The accompanying condensed consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been eliminated. Recently Issued Accounting Standards The Financial Accounting Standards Board (FASB) issued Revenue from Contracts with Customers (Topic 606) superseding virtually all existing revenue recognition guidance. We adopted this new standard in the first quarter of 2018 using the modified retrospective approach. We applied the new standard to all contracts that were not completed as of January 1, 2018 and reflected the aggregate effect of all modifications in determining and allocating the transaction price. See Note 10 for further details regarding our adoption of Topic 606. In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new standard allows for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) previously recognized in accumulated other comprehensive income to be reclassified to retained earnings. For public business entities, the amendments are effective for annual periods, including interim periods within the annual periods, beginning after December 15, 2018. Early adoption is permitted in any interim or annual period, but we do not plan to early adopt. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), which makes significant changes to the current hedge accounting guidance. The new standard eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The new standard also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. The new standard update is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but we do not plan to early adopt. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which updated lease accounting guidance requiring lessees to recognize most leases, including operating leases, on the balance sheet as a right-of-use asset and lease liability for leases with terms in excess of 12 months. In January 2018, the FASB issued an update permitting an entity to elect an optional transition practical expedient to not evaluate land easements that existed or expired before the adoption of Topic 842 and were not previously accounted for as leases. Currently the guidance would be applied using a modified retrospective transition method, which requires applying the new guidance to leases that exist or are entered into after the beginning of the earliest period in the financial statements. However, the FASB recently issued Proposed ASU No. 2018-200, Leases (Topic 842), Targeted Improvements which would allow entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the consolidated financial statements. The proposed ASU will allow entities to continue to apply the legacy guidance in Topic 840, including its disclosure requirements, in the comparative periods presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. Early adoption is permitted, but we do not plan to early adopt. The standard will not apply to our leases of mineral rights. We are continuing to evaluate the impact of this standard on our consolidated financial statements and related disclosures. |
Earnings Per Share |
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Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic earnings per share (EPS) is calculated using the weighted average number of common shares outstanding during the period and includes the effect of any participating securities as appropriate. Participating securities consist of unvested restricted stock issued to our employees and non-employee directors that provide dividend rights. Diluted EPS is calculated assuming the issuance of common shares for all potentially dilutive securities, provided the effect is not antidilutive. For all periods presented, our contingent convertible senior notes did not have a dilutive effect and, therefore, were excluded from the calculation of diluted EPS. See Note 3 for further discussion of our convertible senior notes and contingent convertible senior notes. A reconciliation of basic EPS and diluted EPS for the Current Quarter and the Prior Quarter is as follows:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Our long-term debt consisted of the following as of March 31, 2018 and December 31, 2017:
Debt Retirements In the Prior Quarter, we retired $908 million principal amount of our outstanding senior notes and contingent convertible notes through purchases in the open market, tender offers or repayment upon maturity for $982 million. For the open market repurchases and tender offers, we recorded an aggregate net loss of approximately $7 million. Revolving Credit Facility We have a senior secured revolving credit facility currently subject to a $3.8 billion borrowing base that matures in December 2019. As of March 31, 2018, we had outstanding borrowings of $200 million under the revolving credit facility and had used $157 million of the revolving credit facility for various letters of credit. Borrowings under the revolving credit facility bear interest at a variable rate. The terms of the revolving credit facility include covenants limiting, among other things, our ability to incur additional indebtedness, make investments or loans, create liens, consummate mergers and similar fundamental changes, make restricted payments, make investments in unrestricted subsidiaries and enter into transactions with affiliates. Our next borrowing base redetermination is scheduled for the second quarter of 2018. Our revolving credit facility is subject to various financial and other covenants. As of March 31, 2018, we were in compliance with all applicable financial covenants under the credit agreement and we were able to borrow up to the full availability under the revolving credit facility. Fair Value of Debt We estimate the fair value of our senior notes based on the market value of our publicly traded debt as determined based on the yield of our senior notes (Level 1). The fair value of all other debt is based on a market approach using estimates provided by an independent investment financial data services firm (Level 2). Fair value is compared to the carrying value, excluding the impact of interest rate derivatives, in the table below:
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Contingencies and Commitments |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies and Commitments | Contingencies and Commitments There have been no material developments in previously reported legal or environmental contingencies or commitments other than the items discussed below. For a discussion of commitments and contingencies, see “Contingencies and Commitments,” Note 4 to the Consolidated Financial Statements in our 2017 Form 10-K. Contingencies Regulatory and Related Proceedings. We have previously disclosed receiving U.S. Postal Service and state subpoenas seeking information on our royalty payment practices. The U.S. Postal Service inquiry and all outstanding state subpoenas have been resolved. We have also previously disclosed defending lawsuits alleging various violations of the Sherman Antitrust Act and state antitrust laws. In 2016, putative class action lawsuits were filed in the U.S. District Court for the Western District of Oklahoma and in Oklahoma state courts, and an individual lawsuit was filed in the U.S. District Court of Kansas, in each case against us and other defendants. The lawsuits generally allege that, since 2007 and continuing through April 2013, the defendants conspired to rig bids and depress the market for the purchases of oil and natural gas leasehold interests and properties in the Anadarko Basin containing producing oil and natural gas wells. The lawsuits seek damages, attorney’s fees, costs and interest, as well as enjoinment from adopting practices or plans that would restrain competition in a similar manner as alleged in the lawsuits. On April 12, 2018, we reached a tentative settlement to resolve substantially all Oklahoma civil class action antitrust cases for an immaterial amount. We recently received a demand letter from the Healthcare of Ontario Pension Plan (HOOPP) regarding HOOPP’s purchase of our interest in Chaparral Energy, Inc. stock for $215 million on January 5, 2014. HOOPP claims that the Company engaged in material misrepresentations and fraud, and that we violated the Exchange Act and Oklahoma Uniform Securities Act. HOOPP seeks $215 million in monetary damages, plus interest, attorney’s fees, disgorgement and punitive damages. We expect a lawsuit will be filed, and we intend to vigorously defend it. Commitments Gathering, Processing and Transportation Agreements We have contractual commitments with midstream service companies and pipeline carriers for future gathering, processing and transportation of oil, natural gas and NGL to move certain of our production to market. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related to gathering, processing and transportation agreements are not recorded as obligations in the accompanying consolidated balance sheets; however, they are reflected in our estimates of proved reserves. The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners, credits for third-party volumes or future costs under cost-of-service agreements, are presented below:
In addition, we have entered into long-term agreements for certain natural gas gathering and related services within specified acreage dedication areas in exchange for cost-of-service based fees redetermined annually, or tiered fees based on volumes delivered relative to scheduled volumes. Future gathering fees may vary with the applicable agreement. |
Other Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities | Other Liabilities Other current liabilities as of March 31, 2018 and December 31, 2017 are detailed below:
Other long-term liabilities as of March 31, 2018 and December 31, 2017 are detailed below:
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Income Taxes |
3 Months Ended |
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Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We estimate our annual effective tax rate for continuing operations in recording our quarterly income tax provision (or benefit) for the various jurisdictions in which we operate. The tax effects of statutory rate changes, significant unusual or infrequent items, and certain changes in the assessment of the realizability of deferred tax assets are excluded from the determination of our annual effective tax rate as such items are recognized as discrete items in the quarter in which they occur. For the Current Quarter, our effective tax rate remains nominal as a result of maintaining a valuation allowance against substantially all of our net deferred tax asset. Based on our projected operating results for the subsequent 2018 quarters, we project remaining in a net deferred tax asset position as of December 31, 2018. Based on all available positive and negative evidence, including estimates of future taxable income, we believe it is more-likely-than-not that these deferred tax assets will not be realized. A significant piece of objective negative evidence evaluated is the projected cumulative loss incurred over the rolling three-year period ending March 31, 2018, which limits our ability to consider other subjective positive evidence, such as our projections for future growth and earnings. A valuation allowance was recorded against substantially all of our net deferred tax asset as of both December 31, 2017 and March 31, 2018. We are subject to U.S. federal income tax as well as income and capital taxes in various state jurisdictions. During the Current Quarter, the federal tax examination by the Internal Revenue Service (IRS) of taxable years 2010 through 2013 was settled. Based on new information available in the Current Quarter and the expectation that certain statute of limitations should expire during 2018, we anticipate a $14 million estimated reduction to the liability for state unrecognized tax benefits resulting in an $11 million estimated income tax benefit being recorded as early as the next quarter. On December 22, 2017, the President of the United States signed into law the Tax Act, which substantially revised numerous areas of U.S. federal income tax law, including reducing the tax rate for corporations from a maximum rate of 35% to a flat rate of 21% and eliminating the corporate alternative minimum tax (AMT). The various estimates included in determining our tax provision as of December 31, 2017 remain provisional through the three months ended March 31, 2018 and may be adjusted through subsequent events such as the filing of the 2017 consolidated federal income tax return and the issuance of additional guidance such as new Treasury Regulations. Moreover, we are still in the process of evaluating the full impact of the Tax Act both at the federal and state level. |
Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation Our share-based compensation program consists of restricted stock, stock options, performance share units (PSUs) and cash restricted stock units (CRSUs) granted to employees and restricted stock granted to non-employee directors under our long term incentive plans. The restricted stock and stock options are equity-classified awards and the PSUs and CRSUs are liability-classified awards. Equity-Classified Awards Restricted Stock. We grant restricted stock units to employees and non-employee directors. A summary of the changes in unvested restricted stock during the Current Quarter is presented below:
The aggregate intrinsic value of restricted stock that vested during the Current Quarter was approximately $15 million based on the stock price at the time of vesting. As of March 31, 2018, there was approximately $40 million of total unrecognized compensation expense related to unvested restricted stock. The expense is expected to be recognized over a weighted average period of approximately 2.02 years. Stock Options. In the Current Quarter and the Prior Quarter, we granted members of management stock options that vest ratably over a three-year period. Each stock option award has an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expire seven years to ten years from the date of grant. We utilize the Black-Scholes option pricing model to measure the fair value of stock options. The expected life of an option is determined using the simplified method. Volatility assumptions are estimated based on an average of historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant over the expected life of the option. The dividend yield is based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option. We used the following weighted average assumptions to estimate the grant date fair value of the stock options granted in the Current Quarter:
The following table provides information related to stock option activity in the Current Quarter:
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As of March 31, 2018, there was $23 million of total unrecognized compensation expense related to stock options. The expense is expected to be recognized over a weighted average period of approximately 2.14 years. Restricted Stock and Stock Option Compensation. We recognized the following compensation costs related to restricted stock and stock options for the Current Quarter and the Prior Quarter:
Liability-Classified Awards Performance Share Units. We granted PSUs to senior management that vest ratably over a three-year performance period and are settled in cash. The ultimate amount earned is based on achievement of performance metrics established by the Compensation Committee of the Board of Directors. Compensation expense associated with PSU awards is recognized over the service period based on the graded-vesting method. The value of the PSU awards at the end of each reporting period is dependent upon our estimates of the underlying performance measures. For PSUs granted in 2017 and 2016, performance metrics include a total shareholder return (TSR) component, which can range from 0% to 100% and an operational performance component based on finding and development costs, which can range from 0% to 100%, resulting in a maximum payout of 200%. The payout percentage for the 2016 and 2017 PSU awards is capped at 100% if our absolute TSR is less than zero. The PSUs are settled in cash on the third anniversary of the awards. We utilized a Monte Carlo simulation for the TSR performance measure and the following assumptions to determine the grant date fair value of the PSUs.
The PSUs are subsequently adjusted, based on adjustments to the above assumptions through the end of each subsequent reporting period, through the end of the performance period. For PSUs granted in 2018, performance metrics include an operational performance component based on a ratio of cumulative earnings before interest expense, income taxes, and depreciation, depletion and amortization expense (EBITDA) to capital expenditures, for which payout can range from 0% to 200%. The vested PSUs are settled in cash on each of the three annual vesting dates. We used the closing price of our common stock on the grant date to determine the grant date fair value of the PSUs. The PSUs are subsequently adjusted, based on changes in our stock price through the end of each subsequent reporting period, through the end of the performance period. Cash Restricted Stock Units. We granted CRSUs to employees that vest straight-line over a three-year period and are settled in cash on each of the three annual vesting dates. The ultimate amount earned is based on the closing price of our common stock on each of the vesting dates. We used the closing price of our common stock on the grant date to determine the grant date fair value of the CRSUs. The CRSUs are subsequently adjusted, based on changes in our stock price through the end of each subsequent reporting period, through the end of each vesting period. The following table presents a summary of our liability-classified awards:
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Derivative and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative and Hedging Activities | Derivative and Hedging Activities We use derivative instruments to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility. All of our oil, natural gas and NGL derivative instruments are net settled based on the difference between the fixed-price payment and the floating-price payment, resulting in a net amount due to or from the counterparty. None of our oil, natural gas and NGL derivative instruments were designated for hedge accounting as of March 31, 2018 or December 31, 2017. Oil, Natural Gas and NGL Derivatives As of March 31, 2018 and December 31, 2017, our oil, natural gas and NGL derivative instruments consisted of the following types of instruments:
The estimated fair values of our oil, natural gas and NGL derivative instrument assets (liabilities) as of March 31, 2018 and December 31, 2017 are provided below:
We have terminated certain commodity derivative contracts that were previously designated as cash flow hedges for which the original contract months are yet to occur. See further discussion below under Effect of Derivative Instruments – Accumulated Other Comprehensive Income (Loss). Effect of Derivative Instruments – Condensed Consolidated Balance Sheets The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 on a gross basis and after same-counterparty netting:
As of March 31, 2018 and December 31, 2017, we did not have any cash collateral balances for our derivatives. Effect of Derivative Instruments – Condensed Consolidated Statements of Operations The components of oil, natural gas and NGL revenues for the Current Quarter and the Prior Quarter are presented below:
Effect of Derivative Instruments – Accumulated Other Comprehensive Income (Loss) A reconciliation of the changes in accumulated other comprehensive income (loss) in our consolidated statements of stockholders’ equity related to our cash flow hedges is presented below:
The accumulated other comprehensive loss as of March 31, 2018 represents the net deferred loss associated with commodity derivative contracts that were previously designated as cash flow hedges for which the original contract months are yet to occur. Remaining deferred gain or loss amounts will be recognized in earnings in the month for which the original contract months are to occur. As of March 31, 2018, we expect to transfer approximately $33 million of net loss included in accumulated other comprehensive income to net income (loss) during the next 12 months. The remaining amounts will be transferred by December 31, 2022. Credit Risk Considerations Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we enter into derivative contracts only with counterparties that are highly rated or deemed by us to have acceptable credit strength and deemed by management to be competent and competitive market-makers, and we attempt to limit our exposure to non-performance by any single counterparty. As of March 31, 2018, our oil, natural gas and NGL derivative instruments were spread among 11 counterparties. Hedging Arrangements Certain of our hedging arrangements are with counterparties that are also lenders (or affiliates of lenders) under our revolving credit facility. The contracts entered into with these counterparties are secured by the same collateral that secures our revolving credit facility, which allows us to reduce any letters of credit posted as security with those counterparties. In addition, we enter into bilateral hedging agreements with other counterparties. The counterparties’ and our obligations under the bilateral hedging agreements must be secured by cash or letters of credit to the extent that any mark-to-market amounts owed to us or by us exceed defined thresholds. Fair Value The fair value of our derivatives is based on third-party pricing models which utilize inputs that are either readily available in the public market, such as oil, natural gas and NGL forward curves and discount rates, or can be corroborated from active markets or broker quotes. These values are compared to the values given by our counterparties for reasonableness. Since oil, natural gas and NGL swaps do not include optionality and therefore generally have no unobservable inputs, they are classified as Level 2. All other derivatives have some level of unobservable input, such as volatility curves, and are therefore classified as Level 3. Derivatives are also subject to the risk that either party to a contract will be unable to meet its obligations. We factor non-performance risk into the valuation of our derivatives using current published credit default swap rates. To date, this has not had a material impact on the values of our derivatives. The following table provides information for financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during the Current Quarter and the Prior Quarter is presented below:
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Qualitative and Quantitative Disclosures about Unobservable Inputs for Level 3 Fair Value Measurements The significant unobservable inputs for Level 3 derivative contracts include unpublished forward prices of natural gas, market volatility and credit risk of counterparties. Changes in these inputs impact the fair value measurement of our derivative contracts, which is based on an estimate derived from option models. For example, an increase or decrease in the forward prices and volatility of oil and natural gas prices decreases or increases the fair value of oil and natural gas derivatives, and adverse changes to our counterparties’ creditworthiness decreases the fair value of our derivatives. The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts at fair value as of March 31, 2018:
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Oil and Natural Gas Property Transactions |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil and Natural Gas Property Transactions | Oil and Natural Gas Property Transactions Under full cost accounting rules, we accounted for the sales of oil and natural gas properties discussed below as adjustments to capitalized costs, with no recognition of gain or loss as the sales did not involve a significant change in proved reserves or significantly alter the relationship between costs and proved reserves. In the Current Quarter, we sold portions of our acreage, producing properties and other related property and equipment in the Mid-Continent, including our Mississippian Lime assets, for approximately $420 million, subject to certain customary closing adjustments. Included in the sales were approximately 171,000 net acres and interests in 2,150 wells. Also, in the Current Quarter, we received proceeds of approximately $18 million, subject to customary closing adjustments, for the sale of other oil and natural gas properties covering various operating areas. In the Prior Quarter, we sold portions of our acreage and producing properties in our Haynesville Shale operating area in northern Louisiana for approximately $915 million, subject to certain customary closing adjustments. Included in the sales were approximately 119,500 net acres and interests in 576 wells that were producing approximately 80 mmcf of gas per day at the time of closing. Also in the Prior Quarter, we received proceeds of approximately $20 million, net of post-closing adjustments, for the sale of other oil and natural gas properties covering various operating areas. Volumetric Production Payments A VPP is a limited-term overriding royalty interest in oil and natural gas reserves that (i) entitles the purchaser to receive scheduled production volumes over a period of time from specific lease interests; (ii) is free and clear of all associated future production costs and capital expenditures; (iii) is non-recourse to the seller (i.e., the purchaser’s only recourse is to the reserves acquired); (iv) transfers title of the reserves to the purchaser; and (v) allows the seller to retain all production beyond the specified volumes, if any, after the scheduled production volumes have been delivered. If contractually scheduled volumes exceed the actual volumes produced from the VPP wellbores that are attributable to the ORRI conveyed, either the shortfall will be made up from future production from these wellbores (or, at our option, from our retained interest in the wellbores) through an adjustment mechanism, or the initial term of the VPP will be extended until all scheduled volumes, to the extent produced, are delivered from the VPP wellbores to the VPP buyer. We retain drilling rights on the properties below currently producing intervals and outside of producing wellbores. As the operator of the properties from which the VPP volumes have been sold, we bear the cost of producing the reserves attributable to these interests, which we include as a component of production expenses and production taxes in our consolidated statements of operations in the periods these costs are incurred. As with all non-expense-bearing royalty interests, volumes conveyed in a VPP transaction are excluded from our estimated proved reserves; however, the estimated production expenses and taxes associated with VPP volumes expected to be delivered in future periods are included as a reduction of the future net cash flows attributable to our proved reserves for purposes of determining our full cost ceiling test for impairment purposes and in determining our standardized measure. Our commitment to bear the costs on any future production of VPP volumes is not reflected as a liability on our balance sheet. Future costs will depend on the actual production volumes as well as the production costs and taxes in effect during the periods in which the production actually occurs, which could differ materially from our current and historical costs, and production may not occur at the times or in the quantities projected, or at all. We have committed to purchase natural gas and liquids associated with our VPP transactions. Production purchased under these arrangements is based on market prices at the time of production, and the purchased natural gas and liquids are resold at market prices. As of March 31, 2018, we had the following VPP outstanding:
The volumes remaining to be delivered on behalf of our VPP buyers as of March 31, 2018 were as follows:
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition The FASB issued Revenue from Contracts with Customers (Topic 606) superseding virtually all existing revenue recognition guidance. We adopted this new standard in the first quarter of 2018 using the modified retrospective approach. We applied the new standard to all contracts that were not completed as of January 1, 2018 and reflected the aggregate effect of all modifications in determining and allocating the transaction price. The cumulative effect of adoption of $8 million did not have a material impact on our condensed consolidated financial statements. However, the adoption did result in certain purchase and sale contracts being recorded on a net basis, as an agent, rather than on a gross basis, as principal, due to management’s evaluation under new considerations within Topic 606 that indicated we do not have control over the specified commodity in purchase and sale contracts with the same counterparty. Such presentation change did not have an impact on income (loss) from operations, earnings per share or cash flows, but did reduce marketing revenue and marketing expenses in the condensed consolidated financial statements by approximately $115 million for the Current Quarter as compared to what would have been recognized using the revenue recognition guidance that was in affect before the adoption of Topic 606. In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated balance sheet and condensed consolidated statement of operations was as follows:
Revenue from the sale of oil, natural gas and NGL is recognized upon the transfer of control of the products, which is typically when the products are delivered to customers. Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration we expect to receive in exchange for those products. Revenue from contracts with customers includes the sale of our oil, natural gas and NGL production (recorded as oil, natural gas and NGL revenues in the condensed consolidated statements of operations) as well as the sale of certain of our joint interest holders’ production which we purchase under joint operating arrangements (recorded in marketing revenues in the condensed consolidated statements of operations). In connection with the marketing of these products, we obtain control of the oil, natural gas and NGL we purchase from other interest owners at defined delivery points and deliver the product to third parties, at which time revenues are recorded. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. There are no significant judgments that significantly affect the amount or timing of revenue from contracts with customers. We also earn revenue from other sources, including from a variety of derivative and hedging activities to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility, (recorded within oil, natural gas and NGL revenues in the condensed consolidated statements of operations) as well as a variety of oil, natural gas and NGL purchase and sale contracts with third parties for various commercial purposes, including credit risk mitigation and satisfaction of our pipeline delivery commitments (recorded within marketing revenues in the condensed consolidated statements of operations). In circumstances where we act as an agent rather than a principal, our results of operations related to oil, natural gas and NGL marketing activities are presented on a net basis. These purchase and sales contracts were accounted for as derivatives under Derivatives and Hedging (Topic 815) and were not elected as normal purchase or normal sales. We considered the principal versus agent guidance in Topic 606 in determining whether the gains and losses on these derivatives should be reported on a gross or net basis. The following table shows revenue disaggregated by operating area and product type, for the Current Quarter:
Accounts Receivable Our accounts receivable are primarily from purchasers of oil, natural gas and NGL and from exploration and production companies that own interests in properties we operate. This industry concentration could affect our overall exposure to credit risk, either positively or negatively, because our purchasers and joint working interest owners may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all our counterparties and we generally require letters of credit or parent guarantees for receivables from parties deemed to have sub-standard credit, unless the credit risk can otherwise be mitigated. We utilize an allowance method in accounting for bad debt based on historical trends in addition to specifically identifying receivables that we believe may be uncollectible. Accounts receivable as of March 31, 2018 and December 31, 2017 are detailed below:
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Investments |
3 Months Ended |
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Mar. 31, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments | Investments In the Current Quarter, FTS International, Inc. (NYSE: FTSI) completed an initial public offering. Due to the offering, the ownership percentage of our equity method investment in FTSI decreased from approximately 29% to 24% and resulted in a gain of $78 million. In addition, we sold approximately 4.3 million shares of FTSI in the offering for net proceeds of approximately $74 million and recognized a gain of $61 million decreasing our ownership percentage to approximately 20%. We continue to hold approximately 22.0 million shares in the publicly traded company. |
Other Operating Expenses |
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Mar. 31, 2018 | |
Asset Impairment Charges [Abstract] | |
Other Operating Expenses | Other Operating Expenses In the Prior Quarter, we terminated future natural gas transportation commitments related to divested assets for cash payments of $103 million. In addition, we paid $290 million to assign an oil transportation agreement to a third party. |
Restructuring and Other Termination Costs |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Restructuring and Other Termination Costs | Restructuring and Other Termination Costs Workforce Reduction On January 30, 2018, we underwent a reduction in workforce impacting approximately 13% of employees across all functions, primarily on our Oklahoma City campus. In connection with the reduction, we incurred a total charge in the Current Quarter of approximately $38 million for one-time termination benefits. The following table summarizes our restructuring liabilities:
___________________________________________ (a) Remaining accrued amounts are expected to be paid by the end of the 2018 second quarter. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements Recurring Fair Value Measurements Other Current Assets. Assets related to our deferred compensation plan are included in other current assets. The fair value of these assets is determined using quoted market prices, as they consist of exchange-traded securities. Other Current Liabilities. Liabilities related to our deferred compensation plan are included in other current liabilities. The fair values of these liabilities are determined using quoted market prices, as the plan consists of exchange-traded mutual funds. Financial Assets (Liabilities). The following table provides fair value measurement information for the above-noted financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
See Note 3 for information regarding fair value measurement of our debt instruments. See Note 8 for information regarding fair value measurement of our derivatives. |
Condensed Consolidating Financial Information |
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Financial Information | 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, contingent convertible senior notes, term loan and revolving credit facility listed in Note 3 are fully and unconditionally guaranteed, jointly and severally, by certain of our 100% owned subsidiaries. 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 March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 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 MARCH 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2017 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2017 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2017 ($ in millions)
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Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of Chesapeake were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards The Financial Accounting Standards Board (FASB) issued Revenue from Contracts with Customers (Topic 606) superseding virtually all existing revenue recognition guidance. We adopted this new standard in the first quarter of 2018 using the modified retrospective approach. We applied the new standard to all contracts that were not completed as of January 1, 2018 and reflected the aggregate effect of all modifications in determining and allocating the transaction price. See Note 10 for further details regarding our adoption of Topic 606. In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new standard allows for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) previously recognized in accumulated other comprehensive income to be reclassified to retained earnings. For public business entities, the amendments are effective for annual periods, including interim periods within the annual periods, beginning after December 15, 2018. Early adoption is permitted in any interim or annual period, but we do not plan to early adopt. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), which makes significant changes to the current hedge accounting guidance. The new standard eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The new standard also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. The new standard update is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but we do not plan to early adopt. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which updated lease accounting guidance requiring lessees to recognize most leases, including operating leases, on the balance sheet as a right-of-use asset and lease liability for leases with terms in excess of 12 months. In January 2018, the FASB issued an update permitting an entity to elect an optional transition practical expedient to not evaluate land easements that existed or expired before the adoption of Topic 842 and were not previously accounted for as leases. Currently the guidance would be applied using a modified retrospective transition method, which requires applying the new guidance to leases that exist or are entered into after the beginning of the earliest period in the financial statements. However, the FASB recently issued Proposed ASU No. 2018-200, Leases (Topic 842), Targeted Improvements which would allow entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the consolidated financial statements. The proposed ASU will allow entities to continue to apply the legacy guidance in Topic 840, including its disclosure requirements, in the comparative periods presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. Early adoption is permitted, but we do not plan to early adopt. The standard will not apply to our leases of mineral rights. We are continuing to evaluate the impact of this standard on our consolidated financial statements and related disclosures. |
Earnings Per Share (Tables) |
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Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of basic EPS and diluted EPS | A reconciliation of basic EPS and diluted EPS for the Current Quarter and the Prior Quarter is as follows:
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Reconciliation of basic EPS and diluted EPS | A reconciliation of basic EPS and diluted EPS for the Current Quarter and the Prior Quarter is as follows:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | Our long-term debt consisted of the following as of March 31, 2018 and December 31, 2017:
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Schedule of fair value of debt | Fair value is compared to the carrying value, excluding the impact of interest rate derivatives, in the table below:
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Contingencies and Commitments (Tables) |
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gathering, processing and transportation commitments | The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners, credits for third-party volumes or future costs under cost-of-service agreements, are presented below:
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Other Liabilities (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other current liabilities | Other current liabilities as of March 31, 2018 and December 31, 2017 are detailed below:
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Other long-term liabilities | Other long-term liabilities as of March 31, 2018 and December 31, 2017 are detailed below:
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Share-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the changes in unvested restricted stock | A summary of the changes in unvested restricted stock during the Current Quarter is presented below:
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Weighted average assumptions to estimate grant date fair value of the stock options granted | We utilized a Monte Carlo simulation for the TSR performance measure and the following assumptions to determine the grant date fair value of the PSUs.
used the following weighted average assumptions to estimate the grant date fair value of the stock options granted in the Current Quarter:
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Schedule of stock option activity | The following table provides information related to stock option activity in the Current Quarter:
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Restricted stock and stock option compensation | We recognized the following compensation costs related to restricted stock and stock options for the Current Quarter and the Prior Quarter:
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Assumptions and TSR performance measure to determine grant date fair value of PSUs | We utilized a Monte Carlo simulation for the TSR performance measure and the following assumptions to determine the grant date fair value of the PSUs.
used the following weighted average assumptions to estimate the grant date fair value of the stock options granted in the Current Quarter:
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Schedule of PSU awards | The following table presents a summary of our liability-classified awards:
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PSU compensation | We recognized the following compensation costs related to restricted stock and stock options for the Current Quarter and the Prior Quarter:
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Derivative and Hedging Activities (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair values of oil, natural gas and NGL derivative instruments | The estimated fair values of our oil, natural gas and NGL derivative instrument assets (liabilities) as of March 31, 2018 and December 31, 2017 are provided below:
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Schedule of effect of derivative instruments, condensed consolidated balance sheets | The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 on a gross basis and after same-counterparty netting:
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Schedule of effect of derivative instruments, condensed consolidated statements of operations | The components of oil, natural gas and NGL revenues for the Current Quarter and the Prior Quarter are presented below:
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Schedule of effect of derivative instruments, accumulated other comprehensive income (loss) | A reconciliation of the changes in accumulated other comprehensive income (loss) in our consolidated statements of stockholders’ equity related to our cash flow hedges is presented below:
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Schedule of financial assets (liabilities) | The following table provides information for financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during the Current Quarter and the Prior Quarter is presented below:
___________________________________________
The following table provides fair value measurement information for the above-noted financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
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Schedule of quantitative information about level 3 inputs used | The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts at fair value as of March 31, 2018:
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Oil and Natural Gas Property Transactions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VPP Transactions | As of March 31, 2018, we had the following VPP outstanding:
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VPP Volumes Remaining to Be Delivered | The volumes remaining to be delivered on behalf of our VPP buyers as of March 31, 2018 were as follows:
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Revenue Recognition (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption of new revenue standard | In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated balance sheet and condensed consolidated statement of operations was as follows:
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Disaggregation of revenue | The following table shows revenue disaggregated by operating area and product type, for the Current Quarter:
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Accounts receivable | Accounts receivable as of March 31, 2018 and December 31, 2017 are detailed below:
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Restructuring and Other Termination Costs (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Summary of restructuring liabilities | The following table summarizes our restructuring liabilities:
___________________________________________ (a) Remaining accrued amounts are expected to be paid by the end of the 2018 second quarter. |
Fair Value Measurements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value measurement of financial assets (liabilities) measured at fair value on a recurring basis | The following table provides information for financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during the Current Quarter and the Prior Quarter is presented below:
___________________________________________
The following table provides fair value measurement information for the above-noted financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
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Condensed Consolidating Financial Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Balance Sheets | CONDENSED CONSOLIDATING BALANCE SHEET AS OF MARCH 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2017 ($ in millions)
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Condensed Consolidated Income Statements | CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2017 ($ in millions)
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Condensed Consolidated Cash Flow Statements |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2017 ($ in millions)
|
Debt - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
|
Long-Term Debt Instrument [Line Items] | |||
Cash paid to purchase debt | $ 0 | $ 982 | |
Gains (losses) on restructuring of debt | 0 | $ 7 | $ (7) |
Debt instrument, face amount | 9,400 | 9,981 | |
Senior Notes, Sr. Secured Notes, Contingent Convertible Notes [Member] | |||
Long-Term Debt Instrument [Line Items] | |||
Debt instrument, repurchased face amount | 908 | ||
Cash paid to purchase debt | 982 | ||
Revolving credit facility [Member] | |||
Long-Term Debt Instrument [Line Items] | |||
Line of credit facility, current borrowing capacity | 3,800 | ||
Letters of credit outstanding, amount | 157 | ||
Revolving credit facility [Member] | Line of Credit [Member] | |||
Long-Term Debt Instrument [Line Items] | |||
Debt instrument, face amount | $ 200 | $ 781 |
Contingencies - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Chaparral Energy, Inc. [Member] | Healthcare of Ontario Pension Plan (HOOPP) [Member] | Pending litigation [Member] | |
Loss Contingencies [Line Items] | |
Loss contingency, damages sought, value | $ 215 |
Commitments - Gathering Processing and Transportation Commitments Table (Details) - Gathering, processing and transportation agreement [Member] $ in Millions |
Mar. 31, 2018
USD ($)
|
---|---|
Other Commitments [Line Items] | |
Gathering, processing and transportation commitment, 2018 | $ 815 |
Gathering, processing and transportation commitment, 2019 | 1,052 |
Gathering, processing and transportation commitment, 2020 | 980 |
Gathering, processing and transportation commitment, 2021 | 884 |
Gathering, processing and transportation commitment, 2022 | 772 |
Gathering, processing and transportation commitment, 2023-2035 | 4,406 |
Gathering, processing and transportation commitment, total | $ 8,909 |
Other Liabilities - Current Table (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Revenues and royalties due others | $ 584 | $ 612 |
Accrued drilling and production costs | 297 | 216 |
Joint interest prepayments received | 76 | 74 |
Accrued compensation and benefits | 125 | 214 |
Accrued restructuring and other termination costs | 27 | 0 |
Other accrued taxes | 41 | 43 |
Other | 207 | 296 |
Current liabilities | $ 1,357 | $ 1,455 |
Other Liabilities - Long-Term Table (Details) $ in Millions |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018
USD ($)
well
|
Dec. 31, 2017
USD ($)
well
|
|
Other Long-Term Liabilities [Line Items] | ||
CHK Utica ORRI conveyance obligation | $ 153 | $ 156 |
Unrecognized tax benefits | 98 | 101 |
Other | 94 | 97 |
Total other long-term liabilities | 345 | 354 |
Current revenues and royalties due others | $ 584 | 612 |
Noncontrolling Interest, Chesapeake Utica L L C [Member] | ORRI [Member] | ||
Other Long-Term Liabilities [Line Items] | ||
Number of wells | well | 1,500 | |
Current revenues and royalties due others | $ 30 | $ 30 |
Minimum [Member] | Noncontrolling Interest, Chesapeake Utica L L C [Member] | ORRI [Member] | ||
Other Long-Term Liabilities [Line Items] | ||
Number of wells | well | 1,300 | |
Wells, drilled wells [Member] | Noncontrolling Interest, Chesapeake Utica L L C [Member] | ORRI [Member] | ||
Other Long-Term Liabilities [Line Items] | ||
Number of wells | well | 584 |
Income Taxes Income Taxes - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Taxes Summary [Line Items] | |||
Income tax expense (benefit) | $ 0 | $ 1 | |
Scenario, forecast [Member] | |||
Income Taxes Summary [Line Items] | |||
Unrecognized tax benefit | $ 14 | ||
Income tax expense (benefit) | $ (11) |
Share-Based Compensation - Equity-Classified Valuation Table (Details) - Stock option [Member] |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected option life – years | 6 years |
Volatility | 63.55% |
Risk-free interest rate | 2.72% |
Dividend yield | 0.00% |
Share-Based Compensation - Equity-Classified Compensation Table (Details) - Restricted stock and stock options [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 11 | $ 15 |
General and administrative expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | 7 | 8 |
Oil and natural gas properties [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | 2 | 4 |
Oil, natural gas and NGL production expenses [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 2 | $ 3 |
Share-Based Compensation - Liability Classified Valuation Table (Details) - Performance Share Units [Member] |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Grant Date Assumptions [Member] | 2017 Awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Volatility | 80.65% |
Risk-free interest rate | 1.54% |
Dividend yield | 0.00% |
Grant Date Assumptions [Member] | 2016 Awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Volatility | 49.74% |
Risk-free interest rate | 1.13% |
Dividend yield | 0.00% |
Reporting Period Assumptions [Member] | 2017 Awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Volatility | 55.89% |
Risk-free interest rate | 2.23% |
Dividend yield | 0.00% |
Reporting Period Assumptions [Member] | 2016 Awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Volatility | 53.77% |
Risk-free interest rate | 2.01% |
Dividend yield | 0.00% |
Share-Based Compensation - Performance Share Unit Breakout (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Jan. 01, 2018 |
---|---|---|
Performance Share Units [Member] | Award Year 2018, Payable 2019, 2020 and 2021 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 4,031,011 | |
Fair Value | $ 12 | $ 12 |
Vested Liability | $ 0 | |
Performance Share Units [Member] | Award Year 2017, Payable 2020 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 1,217,774 | |
Fair Value | $ 4 | 8 |
Vested Liability | $ 2 | |
Performance Share Units [Member] | Award Year 2016, Payable 2019 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 2,348,893 | |
Fair Value | $ 8 | 10 |
Vested Liability | $ 7 | |
Cash Restricted Stock Units [Member] | Award Year 2018, Payable 2019, 2020 and 2021 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 16,976,014 | |
Fair Value | $ 52 | $ 52 |
Vested Liability | $ 0 |
Derivative and Hedging Activities Derivative and Hedging Activities - Oil, Natural Gas and NGL Revenues Table (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Derivative [Line Items] | ||
Oil, natural gas and NGL revenues | $ 1,360 | $ 1,147 |
Gains (losses) on undesignated oil, natural gas and NGL derivatives | (117) | |
Oil, natural gas and NGL | 1,243 | 1,469 |
Oil, Natural Gas and NGL Sales [Member] | ||
Derivative [Line Items] | ||
Losses on terminated cash flow hedges | (10) | (10) |
Oil, Natural Gas and NGL Sales [Member] | Commodity contract [Member] | Not designated as hedging instrument [Member] | ||
Derivative [Line Items] | ||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | $ (107) | $ 332 |
Derivative and Hedging Activities - Cash Flow Hedges Components of AOCI Table (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
AOCI, after tax, beginning of period | $ (57) | |
Net change in fair value, after tax | 0 | $ 4 |
Losses reclassified to income, after tax | 10 | 10 |
AOCI, after tax, end of period | (47) | |
Cash flow hedging [Member] | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
AOCI, before tax, beginning of period | (114) | (153) |
AOCI, after tax, beginning of period | (57) | (96) |
Net change in fair value, before tax | 0 | 4 |
Net change in fair value, after tax | 0 | 4 |
Losses reclassified to income, before tax | 10 | 10 |
Losses reclassified to income, after tax | 10 | 10 |
AOCI, before tax, end of period | (104) | (139) |
AOCI, after tax, end of period | $ (47) | $ (82) |
Derivative and Hedging Activities - Narrative (Details) |
Mar. 31, 2018
USD ($)
Derivatives
counterparty
|
Dec. 31, 2017
USD ($)
Derivatives
|
---|---|---|
Derivative [Line Items] | ||
Number of interest rate derivatives held | Derivatives | 0 | 0 |
Cash collateral balances for derivatives | $ | $ 0 | $ 0 |
Expected amount to be transferred of during the next 12 months | $ | $ 33,000,000 | |
Designated as Hedging Instrument [Member] | ||
Derivative [Line Items] | ||
Derivative, number of instruments held | Derivatives | 0 | 0 |
Credit Risk [Member] | ||
Derivative [Line Items] | ||
Number of counterparties in hedge facility | counterparty | 11 |
Oil and Natural Gas Property Transactions - VPP Transactions Table (Details) - VPP 9 Mid-Continent [Member] MMBbls in Millions, $ in Millions, Bcfe in Billions, Bcf in Billions |
May 31, 2011
USD ($)
Bcfe
Bcf
MMBbls
|
---|---|
VPP Transactions [Line Items] | |
Cash proceeds from Volumetric Production Payment (VPP) | $ | $ 853 |
Proved Developed Reserves (Energy) | Bcfe | 177 |
Oil [Member] | |
VPP Transactions [Line Items] | |
Proved developed reserves (volume) | 1.7 |
Natural gas [Member] | |
VPP Transactions [Line Items] | |
Proved developed reserves (volume) | Bcf | 138 |
NGL [Member] | |
VPP Transactions [Line Items] | |
Proved developed reserves (volume) | 4.8 |
Oil and Natural Gas Property Transactions - Narrative (Details) MMcf in Millions, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018
USD ($)
a
well
|
Dec. 31, 2017
USD ($)
a
well
MMcf
|
Mar. 31, 2017
USD ($)
|
|
Business Acquisition [Line Items] | |||
Proceeds from divestitures of proved and unproved properties | $ 319 | $ 892 | |
Mid-Continent [Member] | |||
Business Acquisition [Line Items] | |||
Proceeds from divestitures of proved and unproved properties | $ 420 | ||
Number of net acres | a | 171,000 | ||
Productive gas wells, number of wells, net | well | 2,150 | ||
Haynesville Shale [Member] | |||
Business Acquisition [Line Items] | |||
Proceeds from divestitures of proved and unproved properties | $ 915 | ||
Number of net acres | a | 119,500 | ||
Productive gas wells, number of wells, net | well | 576 | ||
Haynesville Shale [Member] | Natural gas [Member] | |||
Business Acquisition [Line Items] | |||
Proved developed reserves (volume) | MMcf | 80 | ||
Other properties [Member] | |||
Business Acquisition [Line Items] | |||
Proceeds from divestitures of proved and unproved properties | $ 18 | $ 20 |
Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Marketing | $ 1,246 | $ 1,284 |
ASU 2014-09 [Member] | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Cumulative effect of accounting change | 8 | |
Difference between revenue guidance in effect before and after Topic 606 [Member] | ASU 2014-09 [Member] | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Marketing | $ (115) |
Revenue Recognition - Accounts Receivable (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Disaggregation of Revenue [Line Items] | ||
Allowance for doubtful accounts | $ (14) | $ (30) |
Accounts receivable, net | 1,082 | 1,322 |
Oil, Natural Gas and NGL Sales [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable, gross | 829 | 959 |
Joint Interest [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable, gross | 166 | 209 |
Other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable, gross | $ 101 | $ 184 |
Investments Narrative (Details) - FTS International, Inc. [Member] - USD ($) shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Schedule of Equity Method Investments [Line Items] | ||
Investment, ownership percentage | 20.00% | 29.00% |
Investment, realized gain (loss) | $ 61 | |
Number of shares sold | 4.3 | |
Proceeds from sale of equity method investments | $ 74 | |
Shares held (in shares) | 22.0 | |
IPO [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Investment, ownership percentage | 24.00% | |
Investment, realized gain (loss) | $ 78 |
Other Operating Expenses - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Natural gas [Member] | |
Property, Plant and Equipment [Line Items] | |
Loss on contract termination | $ 103 |
Oil [Member] | |
Property, Plant and Equipment [Line Items] | |
Loss on contract termination | $ 290 |
Restructuring and Other Termination Costs Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Jan. 30, 2018 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Restructuring Cost and Reserve [Line Items] | |||
Restructuring and other termination costs, number of positions eliminated, period percent | 13.00% | ||
Restructuring Reserve [Roll Forward] | |||
Restructuring reserve, beginning balance | $ 0 | ||
Initial restructuring recognition on January 30, 2018 | 38 | $ 0 | |
Termination benefits paid | (11) | ||
Restructuring reserve, ending balance | 27 | ||
One-time termination benefits [Member] | |||
Restructuring Reserve [Roll Forward] | |||
Initial restructuring recognition on January 30, 2018 | $ 38 | $ 38 |
Condensed Consolidating Financial Information Narrative (Details) |
Mar. 31, 2018 |
---|---|
Senior notes [Member] | |
Condensed Financial Statements, Captions [Line Items] | |
Noncontrolling interest, ownership percentage by parent | 100.00% |
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