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)



	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

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2017

($ in millions)



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

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

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2018

($ in millions)



	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

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2017

($ in millions)



	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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2018

($ in millions)



	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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2017

($ in millions)



	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