CHESAPEAKE ENERGY CORPORATION | |||||||
(Exact name of Registrant as specified in its Charter) | |||||||
Oklahoma | 1-13726 | 73-1395733 | |||||
(State or other jurisdiction of incorporation) | (Commission File No.) | (IRS 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) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). | ||
Emerging growth company | o | |
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. | o |
Securities Registered Pursuant to Section 12(b) of the Act: | ||||
Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered | ||
Common Stock, par value $0.01 | CHK | New York Stock Exchange | ||
6.625% Senior Notes due 2020 | CHK20A | New York Stock Exchange | ||
6.875% Senior Notes due 2020 | CHK20 | New York Stock Exchange | ||
6.125% Senior Notes due 2021 | CHK21 | New York Stock Exchange | ||
5.375% Senior Notes due 2021 | CHK21A | New York Stock Exchange | ||
4.875% Senior Notes due 2022 | CHK22 | New York Stock Exchange | ||
5.75% Senior Notes due 2023 | CHK23 | New York Stock Exchange | ||
4.5% Cumulative Convertible Preferred Stock | CHK Pr D | New York Stock Exchange |
• | Part II, Item 6. Selected Financial Data, |
• | Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and |
• | Part II, Item 8. Financial Statements and Supplementary Data. |
Exhibit No. | Document Description | |
Consent of PricewaterhouseCoopers LLP. | ||
Selected Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2018. | ||
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Schema Document. | |
101.CAL | XBRL Calculation Linkbase Document. | |
101.DEF | XBRL Definition Linkbase Document. | |
101.LAB | XBRL Label Linkbase Document. | |
101.PRE | XBRL Presentation Linkbase Document. |
CHESAPEAKE ENERGY CORPORATION | |
By: | /s/ JAMES R. WEBB |
James R. Webb | |
Executive Vice President - General Counsel and Corporate Secretary |
Exhibit 23.1 |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-126191, 333-135949, 333-143990, 333-151762, 333-160350, 333-171468, 333-178067, 333-187018, 333-189651, 333-192175, 333-196977 and 333-214683) and Form S-3 (File No. 333-219649) of Chesapeake Energy Corporation of our report dated February 27, 2019, except with respect to our opinion on the consolidated financial statements insofar as it relates to the change in the manner in which the Company accounts for oil and natural gas exploration and development activities discussed in Notes 1 and 2, as to which the date is May 9, 2019, relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Current Report on Form 8‑K. | ||||
/s/ PricewaterhouseCoopers LLP | ||||
Oklahoma City, Oklahoma | ||||
May 9, 2019 |
ITEM 6. | Selected Financial Data |
Years Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||
STATEMENT OF OPERATIONS DATA: | ||||||||||||||||||||
Total revenues | $ | 10,030 | $ | 10,039 | $ | 8,705 | $ | 13,794 | $ | 26,936 | ||||||||||
Net income (loss) available to common stockholders(a) | $ | 133 | $ | (631 | ) | $ | (4,018 | ) | $ | (11,383 | ) | $ | 1,372 | |||||||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||||||||||||||
Basic | $ | 0.15 | $ | (0.70 | ) | $ | (5.26 | ) | $ | (17.18 | ) | $ | 2.08 | |||||||
Diluted | $ | 0.15 | $ | (0.70 | ) | $ | (5.26 | ) | $ | (17.18 | ) | $ | 2.00 | |||||||
CASH DIVIDEND DECLARED PER COMMON SHARE | $ | — | $ | — | $ | — | $ | 0.0875 | $ | 0.35 | ||||||||||
BALANCE SHEET DATA (AT END OF PERIOD): | ||||||||||||||||||||
Total assets | $ | 12,735 | $ | 14,925 | $ | 17,048 | $ | 21,432 | $ | 41,562 | ||||||||||
Long-term debt, net of current maturities | $ | 7,341 | $ | 9,921 | $ | 9,938 | $ | 10,311 | $ | 11,058 | ||||||||||
Total equity (deficit) | $ | 2,133 | $ | 1,943 | $ | 2,565 | $ | 5,256 | $ | 17,705 |
(a) | Includes $131 million, $814 million, $563 million, $11.590 billion and $1.380 billion of impairments of oil and gas properties and other fixed assets for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively. |
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | acquired WildHorse, an oil and gas company with operations in the Eagle Ford Shale and Austin Chalk formations in southeast Texas, for approximately 717.3 million shares of our common stock and $381 million in cash, and the assumption of WildHorse’s debt of $1.4 billion as of February 1, 2019. We anticipate the acquisition to materially increase our oil production and enhance our oil production mix as well as significantly reduce costs due to operational synergies that we believe the combined company will achieve. We expect that the WildHorse Merger will provide substantial cost savings with $200 million to $280 million in projected average annual savings, totaling $1 billion to $1.5 billion by 2023, due to operational and capital efficiencies as a result of Chesapeake’s significant expertise with unconventional assets and technical and operational excellence; |
• | sold our interests in the Utica Shale operating area located in Ohio for approximately $1.9 billion, and used the proceeds to reduce outstanding debt by approximately $1.8 billion, including our senior secured second lien notes; |
• | retired our secured term loan due 2021 and significantly extended our debt maturity profile by issuing at par $850 million of 7.00% Senior Notes due 2024 and $400 million of 7.50% Senior Notes due 2026 for net proceeds of $1.2 billion, reducing our annual cash interest by approximately $30 million based on interest rates at the time of retirement; |
• | continued to simplify our balance sheet, by repurchasing the CHK Utica, L.L.C. investors’ overriding royalty interests (ORRI) for $199 million; |
• | improved liquidity by amending and restating our Chesapeake revolving credit facility, extending its maturity date by approximately four years; |
• | improved cash flow from operations by $1.3 billion; |
• | improved our cost structure by reducing our production, general and administrative, and gathering, processing and transportation expenses by $94 million, or 4%; and |
• | generated approximately $528 million in proceeds from the disposition of certain non-core assets and other property sales in addition to the sale of our Utica Shale properties. |
• | reduce total leverage to achieve long term net debt/EBITDAX of 2x; |
• | increase net cash provided by operating activities to fund capital expenditures; |
• | improve margins through financial discipline and operating efficiencies; and |
• | maintain industry leading environmental and safety performance. |
Oil Derivatives(a) | |||||||
Year | Type of Derivative Instrument | Notional Volume | Average NYMEX Price | ||||
(mmbbls) | |||||||
2019 | Swaps | 17 | $57.16 | ||||
2019 | Two-way collars | 6 | $58.00/$67.75 | ||||
2019 | Basis protection swaps | 7 | $6.01 | ||||
2019 | Puts | 2 | $53.83 | ||||
2020 | Swaps | 7 | $58.28 | ||||
2020 | Two-way collars | 2 | $65.00/$83.25 | ||||
Natural Gas Derivatives(a) | |||||||
Year | Type of Derivative Instrument | Notional Volume | Average NYMEX Price | ||||
(bcf) | |||||||
2019 | Swaps | 453 | $2.87 | ||||
2019 | Two-way collars | 55 | $2.75/$3.02 | ||||
2019 | Three-way collars | 88 | $2.50/$2.80/$3.10 | ||||
2019 | Calls | 22 | $12.00 | ||||
2019 | Basis protection swaps | 50 | ($0.56) | ||||
2020 | Swaps | 217 | $2.75 | ||||
2020 | Call swaptions | 106 | $2.77 | ||||
2020 | Calls | 22 | $12.00 |
(a) | Includes amounts settled in January and February 2019. |
Payments Due By Period | ||||||||||||||||||||
Total | 2019 | 2020-2021 | 2022-2023 | 2024 and Beyond | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Long-term debt:(a) | ||||||||||||||||||||
Principal(b) | $ | 8,168 | $ | 381 | $ | 1,479 | $ | 1,208 | $ | 5,100 | ||||||||||
Interest | 3,058 | 523 | 942 | 793 | 800 | |||||||||||||||
Capital lease obligation(c) | 30 | 10 | 20 | — | — | |||||||||||||||
Operating lease obligations(d) | 4 | 3 | 1 | — | — | |||||||||||||||
Operating commitments(e) | 5,786 | 837 | 1,467 | 1,051 | 2,431 | |||||||||||||||
Unrecognized tax benefits(f) | 53 | — | — | 53 | — | |||||||||||||||
Standby letters of credit | 107 | 107 | — | — | — | |||||||||||||||
VPP obligation(g) | 122 | 59 | 63 | — | — | |||||||||||||||
Other | 18 | 4 | 8 | 6 | — | |||||||||||||||
Total contractual cash obligations(h) | $ | 17,346 | $ | 1,924 | $ | 3,980 | $ | 3,111 | $ | 8,331 |
(a) | We assumed $1.4 billion of debt with the completion of the WildHorse acquisition on February 1, 2019 that is not included in the table above. |
(b) | See Note 4 of the notes to our consolidated financial statements included in Item 8 of this report for a description |
(c) | See Note 7 of the notes to our consolidated financial statements included in Item 8 of this report for a description of our capital lease obligation. |
(d) | See Note 5 of the notes to our consolidated financial statements included in Item 8 of this report for a description of our operating lease obligations. |
(e) | See Note 5 of the notes to our consolidated financial statements included in Item 8 of this report for a description of our gathering, processing and transportation agreements and service contract commitments. |
(f) | See Note 9 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of unrecognized tax benefits. |
(g) | See Note 6 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of our VPP obligation. |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Cash provided by (used in) operating activities | $ | 1,730 | $ | 475 | $ | (980 | ) | |||||
Proceeds from issuances of debt, net | 1,236 | 1,585 | 3,686 | |||||||||
Proceeds from revolving credit facility borrowings, net | — | 781 | — | |||||||||
Proceeds from divestitures of proved and unproved properties, net | 2,231 | 1,249 | 1,406 | |||||||||
Proceeds from sales of other property and equipment, net | 147 | 55 | 131 | |||||||||
Proceeds from sales of investments | 74 | — | — | |||||||||
Total sources of cash and cash equivalents | $ | 5,418 | $ | 4,145 | $ | 4,243 |
Years Ended December 31, | ||||||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||||||
Principal Amount of Debt Issued | Net Proceeds | Principal Amount of Debt Issued | Net Proceeds | Principal Amount of Debt Issued | Net Proceeds | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Senior notes | $ | 1,250 | $ | 1,236 | $ | 1,600 | $ | 1,585 | $ | 1,000 | $ | 975 | ||||||||||||
Convertible senior notes | — | — | — | — | 1,250 | 1,235 | ||||||||||||||||||
Term loans | — | — | — | — | 1,500 | 1,476 | ||||||||||||||||||
Total | $ | 1,250 | $ | 1,236 | $ | 1,600 | $ | 1,585 | $ | 3,750 | $ | 3,686 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Oil and Natural Gas Expenditures: | ||||||||||||
Drilling and completion costs | $ | 1,848 | $ | 2,113 | $ | 1,192 | ||||||
Acquisitions of proved and unproved properties | 128 | 88 | 115 | |||||||||
Total oil and natural gas expenditures | 1,976 | 2,201 | 1,307 | |||||||||
Other Uses of Cash and Cash Equivalents: | ||||||||||||
Cash paid to purchase debt | 2,813 | 2,592 | 2,734 | |||||||||
Payments on revolving credit facility borrowings, net | 362 | — | — | |||||||||
Extinguishment of other financing | 122 | — | — | |||||||||
Additions to other property and equipment | 21 | 21 | 37 | |||||||||
Cash paid for preferred stock dividends | 92 | 183 | — | |||||||||
Distributions to noncontrolling interest owners | 6 | 8 | 10 | |||||||||
Other | 27 | 17 | 98 | |||||||||
Total other uses of cash and cash equivalents | 3,443 | 2,821 | 2,879 | |||||||||
Total uses of cash and cash equivalents | $ | 5,419 | $ | 5,022 | $ | 4,186 |
2018 | |||||||||||||||||||||||||||
Oil | Natural Gas | NGL | Total | ||||||||||||||||||||||||
mbbl per day | $/bbl | mmcf per day | $/mcf | mbbl per day | $/bbl | mboe per day | % | $/boe | |||||||||||||||||||
Marcellus | — | — | 828 | 3.06 | — | — | 138 | 26 | 18.38 | ||||||||||||||||||
Haynesville | — | — | 789 | 2.90 | — | — | 131 | 25 | 17.43 | ||||||||||||||||||
Eagle Ford | 60 | 69.01 | 137 | 3.46 | 20 | 25.57 | 103 | 20 | 49.93 | ||||||||||||||||||
Powder River Basin | 11 | 63.38 | 64 | 2.91 | 4 | 26.83 | 25 | 5 | 38.20 | ||||||||||||||||||
Mid-Continent | 9 | 63.93 | 64 | 2.76 | 5 | 26.43 | 25 | 5 | 36.23 | ||||||||||||||||||
Retained assets(a) | 80 | 67.67 | 1,882 | 3.01 | 29 | 25.88 | 422 | 81 | 27.98 | ||||||||||||||||||
Divested assets(b) | 10 | 63.72 | 396 | 2.90 | 23 | 27.26 | 99 | 19 | 24.26 | ||||||||||||||||||
Total | 90 | 67.25 | 2,278 | 2.99 | 52 | 26.50 | 521 | 100 | % | 27.27 | |||||||||||||||||
2017 | |||||||||||||||||||||||||||
Oil | Natural Gas | NGL | Total | ||||||||||||||||||||||||
mbbl per day | $/bbl | mmcf per day | $/mcf | mbbl per day | $/bbl | mboe per day | % | $/boe | |||||||||||||||||||
Marcellus | — | — | 804 | 2.45 | — | — | 134 | 24 | 14.67 | ||||||||||||||||||
Haynesville | — | — | 784 | 2.85 | — | — | 131 | 24 | 17.10 | ||||||||||||||||||
Eagle Ford | 59 | 52.34 | 142 | 3.30 | 18 | 22.95 | 100 | 18 | 39.24 | ||||||||||||||||||
Powder River Basin | 6 | 49.97 | 37 | 3.01 | 3 | 27.33 | 15 | 3 | 32.57 | ||||||||||||||||||
Mid-Continent | 8 | 49.24 | 69 | 2.79 | 5 | 22.99 | 25 | 5 | 28.77 | ||||||||||||||||||
Retained assets(a) | 73 | 51.78 | 1,836 | 2.71 | 26 | 23.37 | 405 | 74 | 23.07 | ||||||||||||||||||
Divested assets(b) | 17 | 47.87 | 570 | 2.92 | 31 | 23.02 | 143 | 26 | 22.34 | ||||||||||||||||||
Total | 90 | 51.03 | 2,406 | 2.76 | 57 | 23.18 | 548 | 100 | % | 22.88 | |||||||||||||||||
2016 | |||||||||||||||||||||||||||
Oil | Natural Gas | NGL | Total | ||||||||||||||||||||||||
mbbl per day | $/bbl | mmcf per day | $/mcf | mbbl per day | $/bbl | mboe per day | % | $/boe | |||||||||||||||||||
Marcellus | — | — | 730 | 1.56 | — | — | 121 | 19 | 9.31 | ||||||||||||||||||
Haynesville | — | — | 681 | 2.31 | — | — | 114 | 18 | 13.87 | ||||||||||||||||||
Eagle Ford | 56 | 42.19 | 140 | 2.61 | 17 | 14.85 | 97 | 15 | 30.97 | ||||||||||||||||||
Powder River Basin | 6 | 39.58 | 37 | 2.36 | 3 | 17.27 | 15 | 3 | 24.78 | ||||||||||||||||||
Mid-Continent | 5 | 42.47 | 39 | 2.27 | 3 | 16.71 | 14 | 2 | 23.55 | ||||||||||||||||||
Retained assets(a) | 67 | 41.98 | 1,627 | 2.00 | 23 | 15.26 | 361 | 57 | 17.76 | ||||||||||||||||||
Divested assets(b) | 24 | 36.89 | 1,240 | 2.13 | 44 | 14.50 | 274 | 43 | 15.13 | ||||||||||||||||||
Total | 91 | 40.65 | 2,867 | 2.05 | 67 | 14.76 | 635 | 100 | % | 16.63 |
(b) | Divested assets include Barnett, Devonian and certain Mid-Continent assets in 2016, certain Haynesville assets in 2017 and Utica assets in Ohio in 2018. |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions) | ||||||||||||||||||
Oil | $ | 2,201 | 32 | % | $ | 1,668 | 23 | % | $ | 1,351 | ||||||||
Natural gas | 2,486 | 3 | % | 2,422 | 12 | % | 2,155 | |||||||||||
NGL | 502 | 4 | % | 484 | 34 | % | 360 | |||||||||||
Oil, natural gas and NGL sales | $ | 5,189 | 13 | % | $ | 4,574 | 18 | % | $ | 3,866 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Oil derivatives – realized gains (losses) | $ | (321 | ) | $ | 70 | $ | 97 | |||||
Oil derivatives – unrealized gains (losses) | 445 | (134 | ) | (318 | ) | |||||||
Total gains (losses) on oil derivatives | 124 | (64 | ) | (221 | ) | |||||||
Natural gas derivatives – realized gains (losses) | 7 | (9 | ) | 151 | ||||||||
Natural gas derivatives – unrealized gains (losses) | (154 | ) | 489 | (500 | ) | |||||||
Total gains (losses) on natural gas derivatives | (147 | ) | 480 | (349 | ) | |||||||
NGL derivatives – realized gains (losses) | (13 | ) | (4 | ) | (8 | ) | ||||||
NGL derivatives – unrealized gains (losses) | 2 | (1 | ) | — | ||||||||
Total gains (losses) on NGL derivatives | (11 | ) | (5 | ) | (8 | ) | ||||||
Total gains (losses) on oil, natural gas and NGL derivatives | $ | (34 | ) | $ | 411 | $ | (578 | ) |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions) | ||||||||||||||||||
Marketing revenues | $ | 5,076 | 13 | % | $ | 4,511 | (2 | )% | $ | 4,584 | ||||||||
Marketing expenses | 5,158 | 12 | % | 4,598 | (4 | )% | 4,778 | |||||||||||
Marketing gross margin | $ | (82 | ) | 6 | % | $ | (87 | ) | 55 | % | $ | (194 | ) |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Other revenue | $ | 63 | $ | 67 | $ | 207 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Gains (losses) on sales of assets | $ | (264 | ) | $ | 476 | $ | 626 |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions) | ||||||||||||||||||
Oil, natural gas and NGL production expenses | ||||||||||||||||||
Marcellus | $ | 34 | 21 | % | $ | 28 | — | % | $ | 28 | ||||||||
Haynesville | 57 | 8 | % | 53 | 33 | % | 40 | |||||||||||
Eagle Ford | 183 | (3 | )% | 188 | 27 | % | 148 | |||||||||||
Powder River Basin | 49 | 63 | % | 30 | 36 | % | 22 | |||||||||||
Mid-Continent | 102 | (8 | )% | 111 | 21 | % | 92 | |||||||||||
Retained Assets(a) | 425 | 4 | % | 410 | 24 | % | 330 | |||||||||||
Divested Assets | 49 | (54 | )% | 107 | (67 | )% | 325 | |||||||||||
Total | 474 | (8 | )% | 517 | (21 | )% | 655 | |||||||||||
Ad valorem tax | 65 | 44 | % | 45 | (18 | )% | 55 | |||||||||||
Total oil, natural gas and NGL production expenses | $ | 539 | (4 | )% | $ | 562 | (21 | )% | $ | 710 | ||||||||
($ per boe) | ||||||||||||||||||
Oil, natural gas and NGL production expenses | ||||||||||||||||||
Marcellus | $ | 0.68 | 17 | % | $ | 0.58 | (8 | )% | $ | 0.63 | ||||||||
Haynesville | $ | 1.20 | 9 | % | $ | 1.10 | 13 | % | $ | 0.97 | ||||||||
Eagle Ford | $ | 4.88 | (5 | )% | $ | 5.15 | 23 | % | $ | 4.18 | ||||||||
Powder River Basin | $ | 5.36 | (3 | )% | $ | 5.53 | 34 | % | $ | 4.14 | ||||||||
Mid-Continent | $ | 11.26 | (7 | )% | $ | 12.12 | (30 | )% | $ | 17.31 | ||||||||
Retained Assets(a) | $ | 2.76 | (1 | )% | $ | 2.78 | 11 | % | $ | 2.50 | ||||||||
Divested Assets | $ | 1.34 | (34 | )% | $ | 2.04 | (37 | )% | $ | 3.23 | ||||||||
Total | $ | 2.50 | (3 | )% | $ | 2.59 | (8 | )% | $ | 2.81 | ||||||||
Ad valorem tax | $ | 0.34 | 55 | % | $ | 0.22 | (8 | )% | $ | 0.24 | ||||||||
Total oil, natural gas and NGL production expenses per boe | $ | 2.84 | 1 | % | $ | 2.81 | (8 | )% | $ | 3.05 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions, except per unit) | ||||||||||||
Oil, natural gas and NGL gathering, processing and transportation expenses | $ | 1,398 | $ | 1,471 | $ | 1,855 | ||||||
Oil ($ per bbl) | $ | 4.30 | $ | 3.94 | $ | 3.61 | ||||||
Natural gas ($ per mcf) | $ | 1.32 | $ | 1.34 | $ | 1.47 | ||||||
NGL ($ per bbl) | $ | 8.37 | $ | 7.88 | $ | 7.83 | ||||||
Total ($ per boe) | $ | 7.35 | $ | 7.36 | $ | 7.98 |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions, except per unit) | ||||||||||||||||||
Production taxes | $ | 124 | 39 | % | $ | 89 | 20 | % | $ | 74 | ||||||||
Production taxes per boe | $ | 0.65 | 48 | % | $ | 0.44 | 38 | % | $ | 0.32 |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions, except per unit) | ||||||||||||||||||
Impairments of unproved properties | $ | 59 | (72 | )% | $ | 214 | (85 | )% | $ | 1,387 | ||||||||
Dry hole expense | 37 | — | % | — | — | % | — | |||||||||||
Geological and geophysical expense and other | 66 | 214 | % | 21 | (69 | )% | 68 | |||||||||||
Exploration expense | $ | 162 | (31 | )% | $ | 235 | (84 | )% | $ | 1,455 |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions, except per unit) | ||||||||||||||||||
Gross overhead | $ | 714 | (10 | )% | $ | 791 | (12 | )% | $ | 900 | ||||||||
Allocated to production expenses | (141 | ) | (20 | )% | (177 | ) | (15 | )% | (209 | ) | ||||||||
Allocated to marketing expenses | (20 | ) | (31 | )% | (29 | ) | (47 | )% | (55 | ) | ||||||||
Allocated to exploration expenses | (10 | ) | 67 | % | (6 | ) | 200 | % | (2 | ) | ||||||||
Capitalized general and administrative expenses | (54 | ) | (10 | )% | (60 | ) | (8 | )% | (65 | ) | ||||||||
Reimbursed from third parties | (154 | ) | (17 | )% | (186 | ) | (25 | )% | (247 | ) | ||||||||
General and administrative expenses, net | $ | 335 | 1 | % | $ | 333 | 3 | % | $ | 322 | ||||||||
General and administrative expenses, net per boe | $ | 1.76 | 5 | % | $ | 1.67 | 21 | % | $ | 1.38 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Provision for legal contingencies, net | $ | 26 | $ | (38 | ) | $ | 123 |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions, except per unit) | ||||||||||||||||||
Depreciation, depletion and amortization | $ | 1,737 | 2 | % | $ | 1,697 | — | % | $ | 1,698 | ||||||||
Depreciation, depletion and amortization per boe | $ | 9.13 | 8 | % | $ | 8.49 | 16 | % | $ | 7.30 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Impairments due to lower forecasted commodity prices | $ | 23 | $ | 27 | $ | 73 | ||||||
Impairments due to reduction in future development(a) | — | 560 | — | |||||||||
Impairments due to anticipated sale | 55 | 222 | 29 | |||||||||
Total impairments of oil and natural gas properties | 78 | 809 | 102 | |||||||||
Impairments of other fixed assets | 53 | 5 | 461 | |||||||||
Total impairments | $ | 131 | $ | 814 | $ | 563 |
Years Ended December 31, | ||||||||||||||||||
2018 | change | 2017 | change | 2016 | ||||||||||||||
($ in millions) | ||||||||||||||||||
Other operating expense | $ | — | (100 | )% | $ | 416 | 10 | % | $ | 377 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Interest expense on senior notes | $ | 591 | $ | 551 | $ | 588 | ||||||
Interest expense on term loan | 86 | 127 | 46 | |||||||||
Amortization of loan discount, issuance costs and other | 24 | 40 | 33 | |||||||||
Amortization of premium | (88 | ) | (138 | ) | (165 | ) | ||||||
Interest expense on revolving credit facility | 37 | 39 | 35 | |||||||||
Realized gains on interest rate derivatives | (3 | ) | (3 | ) | (11 | ) | ||||||
Unrealized losses on interest rate derivatives | 2 | 4 | 21 | |||||||||
Capitalized interest | (16 | ) | (19 | ) | (19 | ) | ||||||
Total interest expense | $ | 633 | $ | 601 | $ | 528 | ||||||
Interest expense per boe(a) | $ | 3.33 | $ | 3.01 | $ | 2.27 | ||||||
Average senior notes borrowings | $ | 8,160 | $ | 7,714 | $ | 8,749 | ||||||
Average credit facilities borrowings | $ | 505 | $ | 443 | $ | 195 | ||||||
Average term loan borrowings | $ | 911 | $ | 1,446 | $ | 537 |
(a) | Includes the effects of realized (gains) losses from interest rate derivatives, excludes the effects of unrealized (gains) losses from interest rate derivatives and is shown net of amounts capitalized. |
• | taxable income projections in future years; |
• | reversal of existing deferred tax liabilities against deferred tax assets and whether the carryforward period is so brief that it would limit realization of the tax benefit; |
• | future sales and operating cost projections that will produce more than enough taxable income to realize the deferred tax asset based on existing sales prices and cost structures; and |
• | our earnings history exclusive of the loss that created the future deductible amount coupled with evidence indicating that the loss is an aberration rather than a continuing condition. |
INDEX TO FINANCIAL STATEMENTS CHESAPEAKE ENERGY CORPORATION | ||||
Page | ||||
Consolidated Financial Statements: | ||||
Consolidated Balance Sheets as of December 31, 2018 and 2017 | ||||
for the Years Ended December 31, 2018, 2017 and 2016 | ||||
for the Years Ended December 31, 2018, 2017 and 2016 | ||||
for the Years Ended December 31, 2018, 2017 and 2016 | ||||
for the Years Ended December 31, 2018, 2017 and 2016 | ||||
Notes to the Consolidated Financial Statements: | ||||
Supplementary Information: | ||||
December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents ($1 and $2 attributable to our VIE) | $ | 4 | $ | 5 | ||||
Accounts receivable, net | 1,247 | 1,322 | ||||||
Short-term derivative assets | 209 | 27 | ||||||
Other current assets | 138 | 172 | ||||||
Total Current Assets | 1,598 | 1,526 | ||||||
PROPERTY AND EQUIPMENT: | ||||||||
Oil and natural gas properties, at cost based on successful efforts accounting: | ||||||||
Proved oil and natural gas properties ($755 and $755 attributable to our VIE) | 25,407 | 27,932 | ||||||
Unproved properties | 1,561 | 2,024 | ||||||
Other property and equipment | 1,721 | 1,986 | ||||||
Total Property and Equipment, at Cost | 28,689 | 31,942 | ||||||
Less: accumulated depreciation, depletion and amortization (($707) and ($700) attributable to our VIE) | (17,886 | ) | (18,907 | ) | ||||
Property and equipment held for sale, net | 15 | 144 | ||||||
Total Property and Equipment, Net | 10,818 | 13,179 | ||||||
LONG-TERM ASSETS: | ||||||||
Long-term derivative assets | 76 | — | ||||||
Other long-term assets | 243 | 220 | ||||||
TOTAL ASSETS | $ | 12,735 | $ | 14,925 | ||||
December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 763 | $ | 654 | ||||
Current maturities of long-term debt, net | 381 | 52 | ||||||
Accrued interest | 141 | 137 | ||||||
Short-term derivative liabilities | 3 | 58 | ||||||
Other current liabilities ($2 and $3 attributable to our VIE) | 1,599 | 1,518 | ||||||
Total Current Liabilities | 2,887 | 2,419 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Long-term debt, net | 7,341 | 9,921 | ||||||
Long-term derivative liabilities | — | 4 | ||||||
Asset retirement obligations, net of current portion | 155 | 162 | ||||||
Other long-term liabilities | 219 | 476 | ||||||
Total Long-Term Liabilities | 7,715 | 10,563 | ||||||
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: 913,715,512 and 908,732,809 shares issued | 9 | 9 | ||||||
Additional paid-in capital | 14,378 | 14,437 | ||||||
Accumulated deficit | (13,912 | ) | (14,130 | ) | ||||
Accumulated other comprehensive loss | (23 | ) | (57 | ) | ||||
Less: treasury stock, at cost; 3,246,553 and 2,240,394 common shares | (31 | ) | (31 | ) | ||||
Total Chesapeake Stockholders’ Equity | 2,092 | 1,899 | ||||||
Noncontrolling interests | 41 | 44 | ||||||
Total Equity | 2,133 | 1,943 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 12,735 | $ | 14,925 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions except per share data) | ||||||||||||
REVENUES AND OTHER: | ||||||||||||
Oil, natural gas and NGL | $ | 5,155 | $ | 4,985 | $ | 3,288 | ||||||
Marketing | 5,076 | 4,511 | 4,584 | |||||||||
Total Revenues | 10,231 | 9,496 | 7,872 | |||||||||
Other | 63 | 67 | 207 | |||||||||
Gains (losses) on sales of assets | (264 | ) | 476 | 626 | ||||||||
Total Revenues and Other | 10,030 | 10,039 | 8,705 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Oil, natural gas and NGL production | 539 | 562 | 710 | |||||||||
Oil, natural gas and NGL gathering, processing and transportation | 1,398 | 1,471 | 1,855 | |||||||||
Production taxes | 124 | 89 | 74 | |||||||||
Exploration | 162 | 235 | 1,455 | |||||||||
Marketing | 5,158 | 4,598 | 4,778 | |||||||||
General and administrative | 335 | 333 | 322 | |||||||||
Restructuring and other termination costs | 38 | — | 6 | |||||||||
Provision for legal contingencies, net | 26 | (38 | ) | 123 | ||||||||
Depreciation, depletion and amortization | 1,737 | 1,697 | 1,698 | |||||||||
Impairments | 131 | 814 | 563 | |||||||||
Other operating expenses | — | 416 | 377 | |||||||||
Total Operating Expenses | 9,648 | 10,177 | 11,961 | |||||||||
INCOME (LOSS) FROM OPERATIONS | 382 | (138 | ) | (3,256 | ) | |||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest expense | (633 | ) | (601 | ) | (528 | ) | ||||||
Gains (losses) on investments | 139 | — | (137 | ) | ||||||||
Gains on purchases or exchanges of debt | 263 | 233 | 236 | |||||||||
Other income | 67 | 6 | 5 | |||||||||
Total Other Expense | (164 | ) | (362 | ) | (424 | ) | ||||||
INCOME (LOSS) BEFORE INCOME TAXES | 218 | (500 | ) | (3,680 | ) | |||||||
INCOME TAX EXPENSE (BENEFIT): | ||||||||||||
Current income taxes | — | (9 | ) | (19 | ) | |||||||
Deferred income taxes | (10 | ) | 11 | (171 | ) | |||||||
Total Income Tax Expense (Benefit) | (10 | ) | 2 | (190 | ) | |||||||
NET INCOME (LOSS) | 228 | (502 | ) | (3,490 | ) | |||||||
Net income attributable to noncontrolling interests | (2 | ) | (3 | ) | (3 | ) | ||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | 226 | (505 | ) | (3,493 | ) | |||||||
Preferred stock dividends | (92 | ) | (85 | ) | (97 | ) | ||||||
Loss on exchange of preferred stock | — | (41 | ) | (428 | ) | |||||||
Earnings allocated to participating securities | (1 | ) | — | — | ||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS | $ | 133 | $ | (631 | ) | $ | (4,018 | ) | ||||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||||||
Basic | $ | 0.15 | $ | (0.70 | ) | $ | (5.26 | ) | ||||
Diluted | $ | 0.15 | $ | (0.70 | ) | $ | (5.26 | ) | ||||
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions): | ||||||||||||
Basic | 909 | 906 | 764 | |||||||||
Diluted | 909 | 906 | 764 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
NET INCOME (LOSS) | $ | 228 | $ | (502 | ) | $ | (3,490 | ) | ||||
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX: | ||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax benefit of $0, $0, and ($14) | — | 5 | (13 | ) | ||||||||
Reclassification of losses on settled derivative instruments, net of income tax expense of $0, $0 and $18 | 34 | 34 | 16 | |||||||||
Other Comprehensive Income | 34 | 39 | 3 | |||||||||
COMPREHENSIVE INCOME (LOSS) | 262 | (463 | ) | (3,487 | ) | |||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (2 | ) | (3 | ) | (3 | ) | ||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | $ | 260 | $ | (466 | ) | $ | (3,490 | ) |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
NET INCOME (LOSS) | $ | 228 | $ | (502 | ) | $ | (3,490 | ) | ||||
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: | ||||||||||||
Depreciation, depletion and amortization | 1,737 | 1,697 | 1,698 | |||||||||
Deferred income tax expense (benefit) | (10 | ) | 11 | (171 | ) | |||||||
Derivative (gains) losses, net | 26 | (409 | ) | 739 | ||||||||
Cash receipts (payments) on derivative settlements, net | (345 | ) | (18 | ) | 448 | |||||||
Stock-based compensation | 32 | 49 | 52 | |||||||||
(Gains) losses on sales of assets | 264 | (476 | ) | (212 | ) | |||||||
Impairments | 131 | 814 | 563 | |||||||||
Exploratory dry hole expense and leasehold impairments | 96 | 214 | 1,387 | |||||||||
(Gains) losses on investments | (139 | ) | — | 137 | ||||||||
Gains on purchases or exchanges of debt | (263 | ) | (235 | ) | (236 | ) | ||||||
Other | (118 | ) | (132 | ) | (127 | ) | ||||||
(Increase) decrease in accounts receivable and other assets | 16 | (163 | ) | (4 | ) | |||||||
(Decrease) increase in accounts payable, accrued liabilities and other | 75 | (375 | ) | (1,764 | ) | |||||||
Net Cash Provided By (Used In) Operating Activities | 1,730 | 475 | (980 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Drilling and completion costs | (1,848 | ) | (2,113 | ) | (1,192 | ) | ||||||
Acquisitions of proved and unproved properties | (128 | ) | (88 | ) | (115 | ) | ||||||
Proceeds from divestitures of proved and unproved properties | 2,231 | 1,249 | 1,406 | |||||||||
Additions to other property and equipment | (21 | ) | (21 | ) | (37 | ) | ||||||
Proceeds from sales of other property and equipment | 147 | 55 | 131 | |||||||||
Proceeds from sales of investments | 74 | — | — | |||||||||
Other | — | — | (77 | ) | ||||||||
Net Cash Provided By (Used In) Investing Activities | 455 | (918 | ) | 116 | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Proceeds from revolving credit facility borrowings | 11,697 | 7,771 | 5,146 | |||||||||
Payments on revolving credit facility borrowings | (12,059 | ) | (6,990 | ) | (5,146 | ) | ||||||
Proceeds from issuance of senior notes, net | 1,236 | 1,585 | 2,210 | |||||||||
Proceeds from issuance of term loan, net | — | — | 1,476 | |||||||||
Cash paid to purchase debt | (2,813 | ) | (2,592 | ) | (2,734 | ) | ||||||
Extinguishment of other financing | (122 | ) | — | — | ||||||||
Cash paid for preferred stock dividends | (92 | ) | (183 | ) | — | |||||||
Distributions to noncontrolling interest owners | (6 | ) | (8 | ) | (10 | ) | ||||||
Other | (27 | ) | (17 | ) | (21 | ) | ||||||
Net Cash Provided By (Used In) Financing Activities | (2,186 | ) | (434 | ) | 921 | |||||||
Net increase (decrease) in cash and cash equivalents | (1 | ) | (877 | ) | 57 | |||||||
Cash and cash equivalents, beginning of period | 5 | 882 | 825 | |||||||||
Cash and cash equivalents, end of period | $ | 4 | $ | 5 | $ | 882 | ||||||
Supplemental disclosures to the consolidated statements of cash flows are presented below: | ||||||||||||
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||
Interest paid, net of capitalized interest | $ | 664 | $ | 667 | $ | 576 | ||||||
Income taxes paid, net of refunds received | $ | (3 | ) | $ | (16 | ) | $ | (27 | ) | |||
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||
Change in accrued drilling and completion costs | $ | 174 | $ | 14 | $ | (23 | ) | |||||
Change in accrued acquisitions of proved and unproved properties | $ | 7 | $ | 9 | $ | (13 | ) | |||||
Change in divested proved and unproved properties | $ | (21 | ) | $ | (57 | ) | $ | 52 | ||||
Acquisition of other property and equipment including assets under capital lease | $ | 27 | $ | — | $ | — | ||||||
Debt exchanged for common stock | $ | — | $ | — | $ | 471 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
PREFERRED STOCK: | ||||||||||||
Balance, beginning of period | $ | 1,671 | $ | 1,771 | $ | 3,062 | ||||||
Exchange/conversions of 0, 236,048 and 1,412,009 shares of preferred stock for common stock | — | (100 | ) | (1,291 | ) | |||||||
Balance, end of period | 1,671 | 1,671 | 1,771 | |||||||||
COMMON STOCK: | ||||||||||||
Balance, beginning of period | 9 | 9 | 7 | |||||||||
Exchange of senior notes, contingent convertible notes and preferred stock | — | — | 1 | |||||||||
Conversion of preferred stock | — | — | 1 | |||||||||
Balance, end of period | 9 | 9 | 9 | |||||||||
ADDITIONAL PAID-IN CAPITAL: | ||||||||||||
Balance, beginning of period | 14,437 | 14,486 | 12,403 | |||||||||
Stock-based compensation | 33 | 54 | 64 | |||||||||
Exchange of contingent convertible notes for 0, 0 and 55,427,782 shares of common stock | — | — | 241 | |||||||||
Exchange of senior notes for 0, 0 and 53,923,925 shares of common stock | — | — | 229 | |||||||||
Exchange/conversion of preferred stock for 0, 9,965,835, and 120,186,195 shares of common stock | — | 100 | 1,290 | |||||||||
Issuance of 5.5% convertible senior notes due 2026 | — | — | 445 | |||||||||
Tax effect on the issuance of 5.5% convertible senior notes due 2026 | — | — | (165 | ) | ||||||||
Equity component of contingent convertible notes repurchased, net of tax | — | (20 | ) | (16 | ) | |||||||
Dividends on preferred stock | (92 | ) | (183 | ) | — | |||||||
Issuance costs | — | — | (5 | ) | ||||||||
Balance, end of period | 14,378 | 14,437 | 14,486 | |||||||||
RETAINED EARNINGS (ACCUMULATED DEFICIT): | ||||||||||||
Balance, beginning of period | (14,130 | ) | (13,625 | ) | (13,084 | ) | ||||||
Net income (loss) attributable to Chesapeake | 226 | (505 | ) | (3,493 | ) | |||||||
Cumulative effect of change in accounting principle | (8 | ) | — | 2,952 | ||||||||
Balance, end of period | (13,912 | ) | (14,130 | ) | (13,625 | ) | ||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS: | ||||||||||||
Balance, beginning of period | (57 | ) | (96 | ) | (99 | ) | ||||||
Hedging activity | 34 | 39 | 3 | |||||||||
Balance, end of period | (23 | ) | (57 | ) | (96 | ) |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
TREASURY STOCK – COMMON: | ||||||||||||
Balance, beginning of period | (31 | ) | (27 | ) | (33 | ) | ||||||
Purchase of 1,510,022, 1,206,419, and 37,871 shares for company benefit plans | (4 | ) | (7 | ) | — | |||||||
Release of 503,863, 186,529 and 255,091 shares from company benefit plans | 4 | 3 | 6 | |||||||||
Balance, end of period | (31 | ) | (31 | ) | (27 | ) | ||||||
TOTAL CHESAPEAKE STOCKHOLDERS’ EQUITY | 2,092 | 1,899 | 2,518 | |||||||||
NONCONTROLLING INTERESTS: | ||||||||||||
Balance, beginning of period | 44 | 49 | 141 | |||||||||
Net income attributable to noncontrolling interests | 2 | 3 | 3 | |||||||||
Distributions to noncontrolling interest owners | (5 | ) | (8 | ) | (4 | ) | ||||||
Cumulative effect of change in accounting principle | — | — | (91 | ) | ||||||||
Balance, end of period | 41 | 44 | 49 | |||||||||
TOTAL EQUITY | $ | 2,133 | $ | 1,943 | $ | 2,567 |
1. | Basis of Presentation and Summary of Significant Accounting Policies |
2. | Change in Accounting Principle |
December 31, 2018 | ||||||||||||
CONSOLIDATED BALANCE SHEETS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Proved oil and natural gas properties ($488 and $755 attributable to our VIE) | $ | 69,642 | $ | (44,235 | ) | $ | 25,407 | |||||
Unproved properties | $ | 2,337 | $ | (776 | ) | $ | 1,561 | |||||
Total Property and Equipment, at Cost | $ | 73,700 | $ | (45,011 | ) | $ | 28,689 | |||||
Less: accumulated depreciation, depletion and amortization (($461) and ($707) attributable to our VIE) | $ | (64,685 | ) | $ | 46,799 | $ | (17,886 | ) | ||||
Total Property and Equipment, Net | $ | 9,030 | $ | 1,788 | $ | 10,818 | ||||||
Total Assets | $ | 10,947 | $ | 1,788 | $ | 12,735 | ||||||
Other current liabilities | $ | 1,540 | $ | 59 | $ | 1,599 | ||||||
Other long-term liabilities | $ | 156 | $ | 63 | $ | 219 | ||||||
Total long-term liabilities | $ | 7,652 | $ | 63 | $ | 7,715 | ||||||
Accumulated deficit | $ | (15,660 | ) | $ | 1,748 | $ | (13,912 | ) | ||||
Total Chesapeake Stockholders’ Equity | $ | 344 | $ | 1,748 | $ | 2,092 | ||||||
Noncontrolling interests | $ | 123 | $ | (82 | ) | $ | 41 | |||||
Total Equity | $ | 467 | $ | 1,666 | $ | 2,133 | ||||||
Total Liabilities and Equity | $ | 10,947 | $ | 1,788 | $ | 12,735 |
December 31, 2017 | ||||||||||||
CONSOLIDATED BALANCE SHEETS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Other current assets | $ | 171 | $ | 1 | $ | 172 | ||||||
Proved oil and natural gas properties ($488 and $755 attributable to our VIE) | $ | 68,858 | $ | (40,926 | ) | $ | 27,932 | |||||
Unproved properties | $ | 3,484 | $ | (1,460 | ) | $ | 2,024 | |||||
Total Property and Equipment, at Cost | $ | 74,328 | $ | (42,386 | ) | $ | 31,942 | |||||
Less: accumulated depreciation, depletion and amortization (($461) and ($700) attributable to our VIE) | $ | (63,664 | ) | $ | 44,757 | $ | (18,907 | ) | ||||
Property and equipment held for sale, net | $ | 16 | $ | 128 | $ | 144 | ||||||
Total Property and Equipment, Net | $ | 10,680 | $ | 2,499 | $ | 13,179 | ||||||
Total Assets | $ | 12,425 | $ | 2,500 | $ | 14,925 | ||||||
Other current liabilities | $ | 1,455 | $ | 63 | $ | 1,518 | ||||||
Other long-term liabilities | $ | 354 | $ | 122 | $ | 476 | ||||||
Total long-term liabilities | $ | 10,441 | $ | 122 | $ | 10,563 | ||||||
Accumulated deficit | $ | (16,525 | ) | $ | 2,395 | $ | (14,130 | ) | ||||
Total Chesapeake Stockholders’ Equity (Deficit) | $ | (496 | ) | $ | 2,395 | $ | 1,899 | |||||
Noncontrolling interests | $ | 124 | $ | (80 | ) | $ | 44 | |||||
Total Equity (Deficit) | $ | (372 | ) | $ | 2,315 | $ | 1,943 | |||||
Total Liabilities and Equity | $ | 12,425 | $ | 2,500 | $ | 14,925 |
Year Ended December 31, 2018 | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Other revenues | $ | — | $ | 63 | $ | 63 | ||||||
Loss on sale of assets | $ | — | $ | (264 | ) | $ | (264 | ) | ||||
Total revenues | $ | 10,231 | $ | (201 | ) | $ | 10,030 | |||||
Exploration expense | $ | — | $ | 162 | $ | 162 | ||||||
General and administrative | $ | 280 | $ | 55 | $ | 335 | ||||||
Depreciation, depletion and amortization | $ | 1,145 | $ | 592 | $ | 1,737 | ||||||
Loss on sale of oil and natural gas properties | $ | 578 | $ | (578 | ) | $ | — | |||||
Impairments | $ | 53 | $ | 78 | $ | 131 | ||||||
Other operating expenses | $ | 10 | $ | (10 | ) | $ | — | |||||
Total operating expenses | $ | 9,349 | $ | 299 | $ | 9,648 | ||||||
Income (loss) from operations | $ | 882 | $ | (500 | ) | $ | 382 | |||||
Interest expense | $ | (487 | ) | $ | (146 | ) | $ | (633 | ) | |||
Other income | $ | 70 | $ | (3 | ) | $ | 67 | |||||
Total other expense | $ | (15 | ) | $ | (149 | ) | $ | (164 | ) | |||
Income (loss) before income taxes | $ | 867 | $ | (649 | ) | $ | 218 | |||||
Net income (loss) | $ | 877 | $ | (649 | ) | $ | 228 | |||||
Net (income) loss attributable to noncontrolling interest | $ | (4 | ) | $ | 2 | $ | (2 | ) | ||||
Net income (loss) attributable to Chesapeake | $ | 873 | $ | (647 | ) | $ | 226 | |||||
Earnings allocated to participating securities | $ | (6 | ) | $ | 5 | $ | (1 | ) | ||||
Net income (loss) available to common stockholders | $ | 775 | $ | (642 | ) | $ | 133 | |||||
Earnings (loss) per common share basic | $ | 0.85 | $ | (0.70 | ) | $ | 0.15 | |||||
Earnings (loss) per common share diluted | $ | 0.85 | $ | (0.70 | ) | $ | 0.15 | |||||
Year Ended December 31, 2017 | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Other revenues | $ | — | $ | 67 | $ | 67 | ||||||
Gain on sales of assets | $ | — | $ | 476 | $ | 476 | ||||||
Total revenues | $ | 9,496 | $ | 543 | $ | 10,039 | ||||||
Exploration expense | $ | — | $ | 235 | $ | 235 | ||||||
General and administrative | $ | 262 | $ | 71 | $ | 333 | ||||||
Depreciation, depletion and amortization | $ | 995 | $ | 702 | $ | 1,697 | ||||||
Impairments | $ | 5 | $ | 809 | $ | 814 | ||||||
Other operating expenses | $ | 413 | $ | 3 | $ | 416 | ||||||
Total operating expenses | $ | 8,357 | $ | 1,820 | $ | 10,177 | ||||||
Income (loss) from operations | $ | 1,139 | $ | (1,277 | ) | $ | (138 | ) | ||||
Interest expense | $ | (426 | ) | $ | (175 | ) | $ | (601 | ) | |||
Other income | $ | 9 | $ | (3 | ) | $ | 6 | |||||
Total other expense | $ | (184 | ) | $ | (178 | ) | $ | (362 | ) | |||
Income (loss) before income taxes | $ | 955 | $ | (1,455 | ) | $ | (500 | ) | ||||
Net income (loss) | $ | 953 | $ | (1,455 | ) | $ | (502 | ) | ||||
Net (income) loss attributable to noncontrolling interest | $ | (4 | ) | $ | 1 | $ | (3 | ) | ||||
Net income (loss) attributable to Chesapeake | $ | 949 | $ | (1,454 | ) | $ | (505 | ) | ||||
Earnings allocated to participating securities | $ | (10 | ) | $ | 10 | $ | — | |||||
Net income (loss) available to common stockholders | $ | 813 | $ | (1,444 | ) | $ | (631 | ) | ||||
Earnings (loss) per common share basic | $ | 0.90 | $ | (1.60 | ) | $ | (0.70 | ) | ||||
Earnings (loss) per common share diluted | $ | 0.90 | $ | (1.60 | ) | $ | (0.70 | ) | ||||
Year Ended December 31, 2016 | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Other revenues | $ | — | $ | 207 | $ | 207 | ||||||
Gain on sales of assets | $ | — | $ | 626 | $ | 626 | ||||||
Total revenues | $ | 7,872 | $ | 833 | $ | 8,705 | ||||||
Exploration expense | $ | — | $ | 1,455 | $ | 1,455 | ||||||
General and administrative | $ | 240 | $ | 82 | $ | 322 | ||||||
Depreciation, depletion and amortization | $ | 1,107 | $ | 591 | $ | 1,698 | ||||||
Impairments | $ | 3,025 | $ | (2,462 | ) | $ | 563 | |||||
Other operating expenses | $ | 365 | $ | 12 | $ | 377 | ||||||
Total operating expenses | $ | 12,283 | $ | (322 | ) | $ | 11,961 | |||||
Income (loss) from operations | $ | (4,411 | ) | $ | 1,155 | $ | (3,256 | ) | ||||
Interest expense | $ | (296 | ) | $ | (232 | ) | $ | (528 | ) | |||
Other income | $ | 19 | $ | (14 | ) | $ | 5 | |||||
Total other expense | $ | (178 | ) | $ | (246 | ) | $ | (424 | ) | |||
Income (loss) before income taxes | $ | (4,589 | ) | $ | 909 | $ | (3,680 | ) | ||||
Net income (loss) | $ | (4,399 | ) | $ | 909 | $ | (3,490 | ) | ||||
Net (income) loss attributable to noncontrolling interest | $ | 9 | $ | (12 | ) | $ | (3 | ) | ||||
Net income (loss) attributable to Chesapeake | $ | (4,390 | ) | $ | 897 | $ | (3,493 | ) | ||||
Net income (loss) available to common stockholders | $ | (4,915 | ) | $ | 897 | $ | (4,018 | ) | ||||
Earnings (loss) per common share basic | $ | (6.43 | ) | $ | 1.17 | $ | (5.26 | ) | ||||
Earnings (loss) per common share diluted | $ | (6.43 | ) | $ | 1.17 | $ | (5.26 | ) |
Year Ended December 31, 2018 | ||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net income (loss) | $ | 877 | $ | (649 | ) | $ | 228 | |||||
Comprehensive income (loss) | $ | 911 | $ | (649 | ) | $ | 262 | |||||
Comprehensive (income) loss attributable to noncontrolling interests | $ | (4 | ) | $ | 2 | $ | (2 | ) | ||||
Comprehensive income (loss) attributable to Chesapeake | $ | 907 | $ | (647 | ) | $ | 260 | |||||
Year Ended December 31, 2017 | ||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net income (loss) | $ | 953 | $ | (1,455 | ) | $ | (502 | ) | ||||
Comprehensive income (loss) | $ | 992 | $ | (1,455 | ) | $ | (463 | ) | ||||
Comprehensive (income) loss attributable to noncontrolling interests | $ | (4 | ) | $ | 1 | $ | (3 | ) | ||||
Comprehensive income (loss) attributable to Chesapeake | $ | 988 | $ | (1,454 | ) | $ | (466 | ) | ||||
Year Ended December 31, 2016 | ||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net income (loss) | $ | (4,399 | ) | $ | 909 | $ | (3,490 | ) | ||||
Comprehensive income (loss) | $ | (4,396 | ) | $ | 909 | $ | (3,487 | ) | ||||
Comprehensive (income) loss attributable to noncontrolling interests | $ | 9 | $ | (12 | ) | $ | (3 | ) | ||||
Comprehensive income (loss) attributable to Chesapeake | $ | (4,387 | ) | $ | 897 | $ | (3,490 | ) |
Year Ended December 31, 2018 | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net income | $ | 877 | $ | (649 | ) | $ | 228 | |||||
Depreciation, depletion and amortization | $ | 1,145 | $ | 592 | $ | 1,737 | ||||||
Loss on sale of oil and gas properties | $ | 578 | $ | (578 | ) | $ | — | |||||
Losses on sales of assets | $ | — | $ | 264 | $ | 264 | ||||||
Impairments | $ | 53 | $ | 78 | $ | 131 | ||||||
Exploratory dry hole expense and leasehold impairments | $ | — | $ | 96 | $ | 96 | ||||||
Other | $ | (108 | ) | $ | (10 | ) | $ | (118 | ) | |||
Increase in accounts payable, accrued liabilities and other | $ | 138 | $ | (63 | ) | $ | 75 | |||||
Net cash provided by operating activities | $ | 2,000 | $ | (270 | ) | $ | 1,730 | |||||
Drilling and completion costs | $ | (1,958 | ) | $ | 110 | $ | (1,848 | ) | ||||
Acquisition of proved and unproved properties | $ | (288 | ) | $ | 160 | $ | (128 | ) | ||||
Net cash provided by investing activities | $ | 185 | $ | 270 | $ | 455 | ||||||
Year Ended December 31, 2017 | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net income (loss) | $ | 953 | $ | (1,455 | ) | $ | (502 | ) | ||||
Depreciation, depletion and amortization | $ | 995 | $ | 702 | $ | 1,697 | ||||||
Gains on sales of assets | $ | — | $ | (476 | ) | $ | (476 | ) | ||||
Impairments | $ | 5 | $ | 809 | $ | 814 | ||||||
Exploratory dry hole expense and leasehold impairments | $ | — | $ | 214 | $ | 214 | ||||||
Other | $ | (135 | ) | $ | 3 | $ | (132 | ) | ||||
Decrease in accounts payable, accrued liabilities and other | $ | (308 | ) | $ | (67 | ) | $ | (375 | ) | |||
Net cash provided by operating activities | $ | 745 | $ | (270 | ) | $ | 475 | |||||
Drilling and completion costs | $ | (2,186 | ) | $ | 73 | $ | (2,113 | ) | ||||
Acquisition of proved and unproved properties | $ | (285 | ) | $ | 197 | $ | (88 | ) | ||||
Net cash used in investing activities | $ | (1,188 | ) | $ | 270 | $ | (918 | ) | ||||
Year Ended December 31, 2016 | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net loss | $ | (4,399 | ) | $ | 909 | $ | (3,490 | ) | ||||
Depreciation, depletion and amortization | $ | 1,107 | $ | 591 | $ | 1,698 | ||||||
Gain on sales of assets | $ | — | $ | (212 | ) | $ | (212 | ) | ||||
Impairments | $ | 3,025 | $ | (2,462 | ) | $ | 563 | |||||
Exploratory dry hole expense and leasehold impairments | $ | — | $ | 1,387 | $ | 1,387 | ||||||
Other | $ | (145 | ) | $ | 18 | $ | (127 | ) | ||||
Decrease in accounts payable, accrued liabilities and other | $ | (757 | ) | $ | (1,007 | ) | $ | (1,764 | ) | |||
Net cash used in operating activities | $ | (204 | ) | $ | (776 | ) | $ | (980 | ) | |||
Drilling and completion costs | $ | (1,295 | ) | $ | 103 | $ | (1,192 | ) | ||||
Acquisition of proved and unproved properties | $ | (788 | ) | $ | 673 | $ | (115 | ) | ||||
Net cash provided by (used in) investing activities | $ | (660 | ) | $ | 776 | $ | 116 |
Year Ended December 31, 2018 | ||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Accumulated deficit, beginning of period | $ | (16,525 | ) | $ | 2,395 | $ | (14,130 | ) | ||||
Net income attributable to Chesapeake | $ | 873 | $ | (647 | ) | $ | 226 | |||||
Accumulated deficit, end of period | $ | (15,660 | ) | $ | 1,748 | $ | (13,912 | ) | ||||
Total Chesapeake stockholders’ equity (deficit) | $ | 344 | $ | 1,748 | $ | 2,092 | ||||||
Noncontrolling interests, beginning of period | $ | 124 | $ | (80 | ) | $ | 44 | |||||
Net income (loss) attributable to noncontrolling interests | $ | 4 | $ | (2 | ) | $ | 2 | |||||
Noncontrolling interests, end of period | $ | 123 | $ | (82 | ) | $ | 41 | |||||
Total equity (deficit) | $ | 467 | $ | 1,666 | $ | 2,133 | ||||||
Year Ended December 31, 2017 | ||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Accumulated deficit, beginning of period | $ | (17,474 | ) | $ | 3,849 | $ | (13,625 | ) | ||||
Net income attributable to Chesapeake | $ | 949 | $ | (1,454 | ) | $ | (505 | ) | ||||
Accumulated deficit, end of period | $ | (16,525 | ) | $ | 2,395 | $ | (14,130 | ) | ||||
Total Chesapeake stockholders’ equity (deficit) | $ | (496 | ) | $ | 2,395 | $ | 1,899 | |||||
Noncontrolling interests, beginning of period | $ | 128 | $ | (79 | ) | $ | 49 | |||||
Net income (loss) attributable to noncontrolling interests | $ | 4 | $ | (1 | ) | $ | 3 | |||||
Noncontrolling interests, end of period | $ | 124 | $ | (80 | ) | $ | 44 | |||||
Total equity (deficit) | $ | (372 | ) | $ | 2,315 | $ | 1,943 | |||||
Year Ended December 31, 2016 | ||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | As Previously Reported Under Full Cost | Adjustment | As Revised Under Successful Efforts | |||||||||
($ in millions except per share data) | ||||||||||||
Net income attributable to Chesapeake | $ | (4,390 | ) | $ | 897 | $ | (3,493 | ) | ||||
Cumulative effect of change in accounting principle | $ | — | $ | 2,952 | $ | 2,952 | ||||||
Accumulated deficit, end of period | $ | (17,474 | ) | $ | 3,849 | $ | (13,625 | ) | ||||
Total Chesapeake stockholders’ equity (deficit) | $ | (1,331 | ) | $ | 3,849 | $ | 2,518 | |||||
Noncontrolling interests, beginning of period | $ | 141 | $ | — | $ | 141 | ||||||
Net income (loss) attributable to noncontrolling interests | $ | (9 | ) | $ | 12 | $ | 3 | |||||
Cumulative effect of change in accounting principle | $ | — | $ | (91 | ) | $ | (91 | ) | ||||
Noncontrolling interests, end of period | $ | 128 | $ | (79 | ) | $ | 49 | |||||
Total equity (deficit) | $ | (1,203 | ) | $ | 3,770 | $ | 2,567 | |||||
3. | Earnings Per Share |
Years Ended December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
(in millions) | |||||||||
Common stock equivalent of our preferred stock outstanding | 60 | 60 | 63 | ||||||
Common stock equivalent of our convertible senior notes outstanding | 146 | 146 | 146 | ||||||
Common stock equivalent of our preferred stock outstanding prior to exchange | — | 1 | 37 | ||||||
Participating securities | 1 | 1 | 1 |
4. | Debt |
December 31, 2018 | December 31, 2017 | ||||||||||||||
Principal Amount | Carrying Amount | Principal Amount | Carrying Amount | ||||||||||||
($ in millions) | |||||||||||||||
7.25% senior notes due 2018 | — | — | 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(a) | — | — | 1,416 | 1,895 | |||||||||||
5.75% senior notes due 2023 | 338 | 338 | 338 | 338 | |||||||||||
7.00% senior notes due 2024 | 850 | 850 | — | — | |||||||||||
8.00% senior notes due 2025 | 1,300 | 1,291 | 1,300 | 1,290 | |||||||||||
5.5% convertible senior notes due 2026(b)(c)(d) | 1,250 | 866 | 1,250 | 837 | |||||||||||
7.5% senior notes due 2026 | 400 | 400 | — | — | |||||||||||
8.00% senior notes due 2027 | 1,300 | 1,299 | 1,300 | 1,298 | |||||||||||
2.25% contingent convertible senior notes due 2038(b)(d) | 1 | 1 | 9 | 8 | |||||||||||
Term loan due 2021 | — | — | 1,233 | 1,233 | |||||||||||
Revolving credit facility | 419 | 419 | 781 | 781 | |||||||||||
Debt issuance costs | — | (53 | ) | — | (63 | ) | |||||||||
Interest rate derivatives | — | 1 | — | 2 | |||||||||||
Total debt, net | 8,168 | 7,722 | 9,981 | 9,973 | |||||||||||
Less current maturities of long-term debt, net(e) | (381 | ) | (381 | ) | (53 | ) | (52 | ) | |||||||
Total long-term debt, net | $ | 7,787 | $ | 7,341 | $ | 9,928 | $ | 9,921 |
(a) | The carrying amount as of December 31, 2017 included a premium amount of $479 million associated with a troubled debt restructuring. The premium was being amortized based on the effective yield method. |
(b) | 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. |
(c) | The conversion and redemption provisions of our convertible senior notes are as follows: |
(d) | The carrying amounts as of December 31, 2018 and 2017, are reflected net of discounts of $384 million and $414 million, respectively, associated with the equity component of our convertible and contingent convertible senior notes. This amount is being amortized based on the effective yield method through the first demand repurchase date as applicable. |
(e) | As of December 31, 2018, net current maturities of long-term debt includes our Floating Rate Senior Notes due April 2019 and our 2.25% Contingent Convertible Senior Notes due 2038. |
Principal Amount of Debt Securities | ||||
($ in millions) | ||||
2019 | $ | 381 | ||
2020 | 664 | |||
2021 | 815 | |||
2022 | 451 | |||
2023 | 757 | |||
Thereafter | 5,100 | |||
Total | $ | 8,168 |
December 31, 2018 | December 31, 2017 | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
($ in millions) | ||||||||||||||||
Short-term debt (Level 1) | $ | 381 | $ | 379 | $ | 52 | $ | 53 | ||||||||
Long-term debt (Level 1) | $ | 3,495 | $ | 3,173 | $ | 2,633 | $ | 2,629 | ||||||||
Long-term debt (Level 2) | $ | 3,846 | $ | 3,644 | $ | 7,286 | $ | 7,301 |
5. | Contingencies and Commitments |
December 31, 2018 | ||||
($ in millions) | ||||
2019 | $ | 3 | ||
2020 | 1 | |||
Total | $ | 4 |
December 31, 2018 | ||||
($ in millions) | ||||
2019 | $ | 832 | ||
2020 | 774 | |||
2021 | 683 | |||
2022 | 581 | |||
2023 | 470 | |||
2024 – 2034 | 2,431 | |||
Total | $ | 5,771 |
December 31, 2018 | ||||
($ in millions) | ||||
2019 | $ | 5 | ||
2020 | 5 | |||
2021 | 5 | |||
Total | $ | 15 |
6. | Other Liabilities |
December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Revenues and royalties due others | $ | 687 | $ | 612 | ||||
Accrued drilling and production costs | 258 | 216 | ||||||
Joint interest prepayments received | 73 | 74 | ||||||
VPP deferred revenue(a) | 59 | 63 | ||||||
Accrued compensation and benefits | 202 | 214 | ||||||
Other accrued taxes | 108 | 43 | ||||||
Other | 212 | 296 | ||||||
Total other current liabilities | $ | 1,599 | $ | 1,518 |
December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
VPP deferred revenue(a) | $ | 63 | $ | 122 | ||||
CHK Utica ORRI conveyance obligation(b) | — | 156 | ||||||
Unrecognized tax benefits | 53 | 101 | ||||||
Other | 103 | 97 | ||||||
Total other long-term liabilities | $ | 219 | $ | 476 |
(a) | At the inception of our volumetric production payment (VPP) agreements, we (i) removed the proved reserves associated with the VPP, (ii) recognized VPP proceeds as deferred revenue which are being amortized on a unit-of-production basis to other revenue over the term of the VPP, (iii) retained responsibility for the production costs and capital costs related to VPP interests and (iv) ceased recognizing production associated with the VPP volumes. The remaining deferred revenue balance will be recognized in other revenues in the consolidated statement of operations through 2021, assuming the related VPP production volumes are delivered as scheduled. |
(b) | In 2018, we repurchased a previously conveyed ORRI from the CHK Utica, L.L.C. investors and extinguished our obligation to convey future ORRIs to the CHK Utica, L.L.C. investors for combined consideration of $199 million. The total CHK Utica ORRI conveyance obligation extinguished in 2018 was $183 million, of which $30 million was recorded in current liabilities and $153 million was recorded in long-term liabilities. The fair value of the consideration allocated to the extinguishment of liability, $122 million, was less than the carrying amount of the conveyance obligation and resulted in a gain of $61 million recognized in other income on our consolidated statement of operations. The fair value of the consideration allocated to the purchase of ORRIs on proved producing properties was $77 million and recorded in proved oil and natural gas properties in our consolidated balance sheet. |
7. | Capital Lease Obligation |
December 31, 2018 | ||||
($ in millions) | ||||
2019 | $ | 10 | ||
2020 | 10 | |||
2021 | 10 | |||
Total minimum lease payments | 30 | |||
Less imputed interest | (3 | ) | ||
Present value of minimum lease payments | 27 | |||
Less current maturities | (10 | ) | ||
Present value of minimum lease payment, less current maturities | $ | 17 |
8. | Revenue Recognition |
Before adoption of ASC 606 | Adjustments | As Reported | ||||||||||
($ in millions) | ||||||||||||
Statement of Operations for the Year Ended December 31, 2018 | ||||||||||||
Marketing revenues | $ | 5,871 | $ | (795 | ) | $ | 5,076 | |||||
Marketing operating expenses | $ | 5,953 | $ | (795 | ) | $ | 5,158 |
Year Ended December 31, 2018 | ||||||||||||||||
Oil | Natural Gas | NGL | Total | |||||||||||||
($ in millions) | ||||||||||||||||
Marcellus | $ | — | $ | 924 | $ | — | $ | 924 | ||||||||
Haynesville | 2 | 836 | — | 838 | ||||||||||||
Eagle Ford | 1,514 | 173 | 185 | 1,872 | ||||||||||||
Powder River Basin | 244 | 68 | 38 | 350 | ||||||||||||
Mid-Continent | 246 | 84 | 55 | 385 | ||||||||||||
Utica | 195 | 401 | 224 | 820 | ||||||||||||
Revenue from contracts with customers | 2,201 | 2,486 | 502 | 5,189 | ||||||||||||
Gains (losses) on oil, natural gas and NGL derivatives | 124 | (147 | ) | (11 | ) | (34 | ) | |||||||||
Oil, natural gas and NGL revenue | $ | 2,325 | $ | 2,339 | $ | 491 | $ | 5,155 | ||||||||
Marketing revenue from contracts with customers | $ | 2,740 | $ | 1,194 | $ | 456 | $ | 4,390 | ||||||||
Other marketing revenue | 457 | 229 | — | 686 | ||||||||||||
Marketing revenue | $ | 3,197 | $ | 1,423 | $ | 456 | $ | 5,076 |
December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Oil, natural gas and NGL sales | $ | 976 | $ | 959 | ||||
Joint interest billings | 211 | 209 | ||||||
Other | 77 | 184 | ||||||
Allowance for doubtful accounts | (17 | ) | (30 | ) | ||||
Total accounts receivable, net | $ | 1,247 | $ | 1,322 |
9. | Income Taxes |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Current | ||||||||||||
Federal | $ | — | $ | (14 | ) | $ | (14 | ) | ||||
State | — | 5 | (5 | ) | ||||||||
Current Income Taxes | — | (9 | ) | (19 | ) | |||||||
Deferred | ||||||||||||
Federal | 3 | 13 | (147 | ) | ||||||||
State | (13 | ) | (2 | ) | (24 | ) | ||||||
Deferred Income Taxes | (10 | ) | 11 | (171 | ) | |||||||
Total | $ | (10 | ) | $ | 2 | $ | (190 | ) |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Income tax expense (benefit) at the federal statutory rate (21%, 35%, 35%) | $ | 45 | $ | (175 | ) | $ | (1,288 | ) | ||||
State income taxes (net of federal income tax benefit) | 27 | 5 | 33 | |||||||||
Remeasurement of deferred tax assets and liabilities | — | 931 | — | |||||||||
Change in valuation allowance | (97 | ) | (771 | ) | 1,042 | |||||||
Other | 15 | 12 | 23 | |||||||||
Total | $ | (10 | ) | $ | 2 | $ | (190 | ) |
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | $ | (976 | ) | $ | (580 | ) | ||
Volumetric production payments | (86 | ) | (83 | ) | ||||
Carrying value of debt | (95 | ) | — | |||||
Derivative instruments | (56 | ) | — | |||||
Other | (7 | ) | (20 | ) | ||||
Deferred tax liabilities | (1,220 | ) | (683 | ) | ||||
Deferred tax assets: | ||||||||
Net operating loss carryforwards | 2,737 | 2,248 | ||||||
Carrying value of debt | — | 161 | ||||||
Disallowed business interest carryforward | 194 | — | ||||||
Asset retirement obligations | 40 | 42 | ||||||
Investments | 111 | 140 | ||||||
Derivative instruments | — | 18 | ||||||
Accrued liabilities | 89 | 125 | ||||||
Other | 60 | 71 | ||||||
Deferred tax assets | 3,231 | 2,805 | ||||||
Valuation allowance | (2,011 | ) | (2,119 | ) | ||||
Deferred tax assets after valuation allowance | 1,220 | 686 | ||||||
Net deferred tax assets | $ | — | $ | 3 |
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Unrecognized tax benefits at beginning of period | $ | 106 | $ | 202 | $ | 280 | ||||||
Additions based on tax positions related to the current year | — | — | — | |||||||||
Additions to tax positions of prior years | — | 4 | 33 | |||||||||
Settlements | — | (100 | ) | (111 | ) | |||||||
Expiration of the applicable statute of limitations | (23 | ) | — | — | ||||||||
Reductions to tax positions of prior years | (4 | ) | — | — | ||||||||
Unrecognized tax benefits at end of period | $ | 79 | $ | 106 | $ | 202 |
10. | Related Party Transactions |
11. | Equity |
Years Ended December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
(in thousands) | |||||||||
Shares issued as of January 1 | 908,733 | 896,279 | 664,796 | ||||||
Restricted stock issuances (net of forfeitures and cancellations) | 4,983 | 2,488 | 1,945 | ||||||
Exchange/conversion of preferred stock | — | 9,966 | 120,186 | ||||||
Exchange of convertible notes | — | — | 55,428 | ||||||
Exchange of senior notes | — | — | 53,924 | ||||||
Shares issued as of December 31 | 913,716 | 908,733 | 896,279 |
Preferred Stock Series | Issue Date | Liquidation Preference per Share | Holder's Conversion Right | Conversion Rate | Conversion Price | Company's Conversion Right From | Company's Market Conversion Trigger(a) | |||||||||||||
5.75% cumulative convertible non-voting | May and June 2010 | $ | 1,000 | Any time | 39.6858 | $ | 25.1979 | May 17, 2015 | $ | 32.7573 | ||||||||||
5.75% (series A) cumulative convertible non-voting | May 2010 | $ | 1,000 | Any time | 38.3508 | $ | 26.0751 | May 17, 2015 | $ | 33.8976 | ||||||||||
4.50% cumulative convertible | September 2005 | $ | 100 | Any time | 2.4561 | $ | 40.7152 | September 15, 2010 | $ | 52.9298 | ||||||||||
5.00% cumulative convertible (series 2005B) | November 2005 | $ | 100 | Any time | 2.7745 | $ | 36.0431 | November 15, 2010 | $ | 46.8560 |
(a) | Convertible at the Company's option if the trading price of the Company's common stock equals or exceeds the trigger price for a specified time period or after the applicable conversion date if there are less than 250,000 shares of 4.50% or 5.00% (Series 2005B) preferred stock outstanding or 25,000 shares of 5.75% or 5.75% (Series A) preferred stock outstanding. |
5.75% | 5.75% (Series A) | 4.50% | 5.00% (Series 2005B) | |||||||||
(in thousands) | ||||||||||||
Shares outstanding as of January 1, 2018 and December 31, 2018 | 770 | 463 | 2,559 | 1,811 | ||||||||
Shares outstanding as of January 1, 2017 | 843 | 476 | 2,559 | 1,962 | ||||||||
Preferred stock conversions/exchanges(a) | (73 | ) | (13 | ) | — | (151 | ) | |||||
Shares outstanding as of December 31, 2017 | 770 | 463 | 2,559 | 1,811 | ||||||||
Shares outstanding as of January 1, 2016 | 1,497 | 1,100 | 2,559 | 2,096 | ||||||||
Preferred stock conversions/exchanges(b) | (654 | ) | (624 | ) | — | (134 | ) | |||||
Shares outstanding as of December 31, 2016 | 843 | 476 | 2,559 | 1,962 |
(a) | During 2017, holders of our 5.75% Cumulative Convertible Preferred Stock exchanged 72,600 shares into 7,442,156 shares of common stock, holders of our 5.75% (Series A) Cumulative Convertible Preferred Stock exchanged 12,500 shares into 1,205,923 shares of common stock and holders of our 5.00% (Series 2005B) Cumulative Convertible Preferred Stock exchanged 150,948 shares into 1,317,756 shares of common stock. In connection with the exchanges, we recognized a loss equal to the excess of the fair value of all common stock issued in exchange for the preferred stock over the fair value of the common stock issuable pursuant to the original terms of the preferred stock. The loss of $41 million is reflected as a reduction to net income available to common stockholders for the purpose of calculating earnings per common share. |
(b) | During 2016, holders of our 5.75% Cumulative Convertible Preferred Stock converted 653,872 shares into 59,141,429 shares of common stock, holders of our 5.75% (Series A) Cumulative Convertible Preferred Stock converted 624,137 shares into 60,032,734 shares of common stock and holders of our 5.00% (Series 2005B) Cumulative Convertible Preferred Stock exchanged or converted 134,000 shares into 1,012,032 shares of common stock. In connection with the exchanges noted above, we recognized a loss equal to the excess of the fair value of all common stock issued in exchange for the preferred stock over the fair value of the common stock issuable pursuant to the original terms of the preferred stock. The loss of $428 million is reflected as a reduction to net income available to common stockholders for the purpose of calculating earnings per common share. |
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Balance, as of January 1 | $ | (57 | ) | $ | (96 | ) | ||
Other comprehensive income before reclassifications | — | 5 | ||||||
Amounts reclassified from accumulated other comprehensive income(a) | 34 | 34 | ||||||
Net other comprehensive income | 34 | 39 | ||||||
Balance, as of December 31 | $ | (23 | ) | $ | (57 | ) |
(a) | Net losses on cash flow hedges for commodity contracts reclassified from accumulated other comprehensive income (loss), net of tax, to oil, natural gas and NGL revenues in the consolidated statements of operations. |
12. | 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 | 6,067 | $ | 3.73 | ||||
Vested | (5,808 | ) | $ | 7.67 | |||
Forfeited | (1,579 | ) | $ | 6.02 | |||
Unvested restricted stock as of December 31, 2018 | 11,858 | $ | 4.43 | ||||
Unvested restricted stock as of January 1, 2017 | 9,092 | $ | 11.39 | ||||
Granted | 9,872 | $ | 5.40 | ||||
Vested | (4,573 | ) | $ | 13.73 | |||
Forfeited | (1,213 | ) | $ | 8.32 | |||
Unvested restricted stock as of December 31, 2017 | 13,178 | $ | 6.37 | ||||
Unvested restricted stock as of January 1, 2016 | 10,455 | $ | 17.31 | ||||
Granted | 4,604 | $ | 4.58 | ||||
Vested | (4,692 | ) | $ | 17.23 | |||
Forfeited | (1,275 | ) | $ | 13.91 | |||
Unvested restricted stock as of December 31, 2016 | 9,092 | $ | 11.39 |
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 | (602 | ) | $ | 13.83 | |||||||||
Forfeited | (1,198 | ) | $ | 5.45 | |||||||||
Outstanding as of December 31, 2018 | 18,096 | $ | 7.20 | 7.15 | $ | — | |||||||
Exercisable as of December 31, 2018 | 8,250 | $ | 10.73 | 5.73 | $ | — | |||||||
Outstanding as of January 1, 2017 | 8,593 | $ | 11.88 | 7.22 | $ | 14 | |||||||
Granted | 9,226 | $ | 5.45 | ||||||||||
Exercised | — | $ | — | $ | — | ||||||||
Expired | (435 | ) | $ | 18.50 | |||||||||
Forfeited | (1,099 | ) | $ | 9.12 | |||||||||
Outstanding as of December 31, 2017 | 16,285 | $ | 8.25 | 7.73 | $ | 1 | |||||||
Exercisable as of December 31, 2017 | 4,474 | $ | 15.15 | 5.26 | $ | — | |||||||
Outstanding as of January 1, 2016 | 5,377 | $ | 19.37 | 5.80 | $ | — | |||||||
Granted | 4,932 | $ | 3.71 | ||||||||||
Exercised | — | $ | — | $ | — | ||||||||
Expired | (771 | ) | $ | 19.46 | |||||||||
Forfeited | (945 | ) | $ | 5.66 | |||||||||
Outstanding as of December 31, 2016 | 8,593 | $ | 11.88 | 7.22 | $ | 14 | |||||||
Exercisable as of December 31, 2016 | 2,844 | $ | 19.60 | 5.53 | $ | — |
(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. |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
General and administrative expenses | $ | 31 | $ | 43 | $ | 48 | ||||||
Oil and natural gas properties | 2 | 5 | 6 | |||||||||
Oil, natural gas and NGL production expenses | 5 | 12 | 13 | |||||||||
Exploration expenses | 1 | 1 | — | |||||||||
Marketing expenses | — | — | 1 | |||||||||
Total restricted stock and stock option compensation | $ | 39 | $ | 61 | $ | 68 |
Grant Date Assumptions | |||
Assumption | 2017 Awards | ||
Volatility | 80.65 | % | |
Risk-free interest rate | 1.54 | % | |
Dividend yield for value of awards | — | % |
Reporting Date Assumptions | |||
Assumption | 2017 Awards | ||
Volatility | 64.69 | % | |
Risk-free interest rate | 2.63 | % | |
Dividend yield for value of awards | — | % |
Grant Date Fair Value | December 31, 2018 | ||||||||||||||
Units | Fair Value | Vested Liability | |||||||||||||
($ in millions) | ($ in millions) | ||||||||||||||
2018 PSU Awards: | |||||||||||||||
Payable 2019, 2020 and 2021 | 3,959,647 | $ | 12 | $ | 11 | $ | — | ||||||||
2017 PSU Awards: | |||||||||||||||
Payable 2020 | 1,217,774 | $ | 8 | $ | 3 | $ | 1 | ||||||||
2016 PSU Awards: | |||||||||||||||
Payable 2019 | 2,348,893 | $ | 10 | $ | 6 | $ | 4 | ||||||||
2018 CRSU Awards: | |||||||||||||||
Payable 2019, 2020 and 2021 | 15,189,197 | $ | 46 | $ | 32 | $ | — |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
General and administrative expenses | $ | 9 | $ | (4 | ) | $ | 14 | |||||
Oil and natural gas properties | 1 | — | — | |||||||||
Oil, natural gas and NGL production expenses | 2 | — | — | |||||||||
Restructuring and other termination costs | — | — | 1 | |||||||||
Total liability-classified awards compensation | $ | 12 | $ | (4 | ) | $ | 15 |
14. | 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 in exchange for a premium 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. |
December 31, 2018 | December 31, 2017 | |||||||||||||
Notional Volume | Fair Value | Notional Volume | Fair Value | |||||||||||
($ in millions) | ($ in millions) | |||||||||||||
Oil (mmbbl): | ||||||||||||||
Fixed-price swaps | 12 | $ | 157 | 21 | $ | (151 | ) | |||||||
Collars | 8 | 98 | — | — | ||||||||||
Three-way collars | — | — | 2 | (10 | ) | |||||||||
Call swaptions | — | — | 2 | (13 | ) | |||||||||
Basis protection swaps | 7 | 5 | 11 | (9 | ) | |||||||||
Total oil | 27 | 260 | 36 | (183 | ) | |||||||||
Natural gas (bcf): | ||||||||||||||
Fixed-price swaps | 623 | 26 | 532 | 149 | ||||||||||
Three-way collars | 88 | 1 | — | — | ||||||||||
Collars | 55 | (3 | ) | 47 | 11 | |||||||||
Call options | 44 | — | 110 | (3 | ) | |||||||||
Call swaptions | 106 | (9 | ) | — | — | |||||||||
Basis protection swaps | 50 | — | 65 | (7 | ) | |||||||||
Total natural gas | 966 | 15 | 754 | 150 | ||||||||||
NGL (mmgal): | ||||||||||||||
Fixed-price swaps | — | — | 33 | (2 | ) | |||||||||
Contingent Consideration: | ||||||||||||||
Utica divestiture | 7 | — | ||||||||||||
Total estimated fair value | $ | 282 | $ | (35 | ) |
Balance Sheet Classification | Gross Fair Value | Amounts Netted in the Consolidated Balance Sheets | Net Fair Value Presented in the Consolidated Balance Sheets | |||||||||
($ in millions) | ||||||||||||
As of December 31, 2018 | ||||||||||||
Commodity Contracts: | ||||||||||||
Short-term derivative asset | $ | 306 | $ | (104 | ) | $ | 202 | |||||
Long-term derivative asset | 117 | (41 | ) | 76 | ||||||||
Short-term derivative liability | (107 | ) | 104 | (3 | ) | |||||||
Long-term derivative liability | (41 | ) | 41 | — | ||||||||
Contingent Consideration: | ||||||||||||
Short-term derivative asset | 7 | — | 7 | |||||||||
Total derivatives | $ | 282 | $ | — | $ | 282 | ||||||
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 | ) |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Oil, natural gas and NGL revenues | $ | 5,189 | $ | 4,574 | $ | 3,866 | ||||||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | — | 445 | (545 | ) | ||||||||
Losses on terminated cash flow hedges | (34 | ) | (34 | ) | (33 | ) | ||||||
Total oil, natural gas and NGL revenues | $ | 5,155 | $ | 4,985 | $ | 3,288 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Marketing revenues | $ | 5,069 | $ | 4,511 | $ | 4,881 | ||||||
Gains on undesignated marketing natural gas derivatives | 7 | — | — | |||||||||
Losses on undesignated supply contract derivatives | — | — | (297 | ) | ||||||||
Total marketing revenues | $ | 5,076 | $ | 4,511 | $ | 4,584 |
Years Ended December 31, | ||||||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||||||
Before Tax | After Tax | Before Tax | After Tax | Before Tax | After Tax | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Balance, beginning of period | $ | (114 | ) | $ | (57 | ) | $ | (153 | ) | $ | (96 | ) | $ | (160 | ) | $ | (99 | ) | ||||||
Net change in fair value | — | — | 5 | 5 | (27 | ) | (13 | ) | ||||||||||||||||
Losses reclassified to income | 34 | 34 | 34 | 34 | 34 | 16 | ||||||||||||||||||
Balance, end of period | $ | (80 | ) | $ | (23 | ) | $ | (114 | ) | $ | (57 | ) | $ | (153 | ) | $ | (96 | ) |
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 December 31, 2018 | ||||||||||||||||
Derivative Assets (Liabilities): | ||||||||||||||||
Commodity assets | $ | — | $ | 319 | $ | 103 | $ | 422 | ||||||||
Commodity liabilities | — | (131 | ) | (16 | ) | (147 | ) | |||||||||
Utica divestiture contingent consideration | — | — | 7 | 7 | ||||||||||||
Total derivatives | $ | — | $ | 188 | $ | 94 | $ | 282 | ||||||||
As of December 31, 2017 | ||||||||||||||||
Derivative Assets (Liabilities): | ||||||||||||||||
Commodity assets | $ | — | $ | — | $ | 8 | $ | 8 | ||||||||
Commodity liabilities | — | (20 | ) | (23 | ) | (43 | ) | |||||||||
Total derivatives | $ | — | $ | (20 | ) | $ | (15 | ) | $ | (35 | ) |
Commodity Derivatives | Utica Contingent Consideration | |||||||
($ in millions) | ||||||||
Balance, as of January 1, 2018 | $ | (15 | ) | $ | — | |||
Total gains (losses) (realized/unrealized): | ||||||||
Included in earnings(a) | 77 | 7 | ||||||
Total purchases, issuances, sales and settlements: | ||||||||
Settlements | 25 | — | ||||||
Balance, as of December 31, 2018 | $ | 87 | $ | 7 | ||||
Balance, as of January 1, 2017 | $ | (10 | ) | $ | — | |||
Total gains (losses) (realized/unrealized): | ||||||||
Included in earnings(a) | 2 | — | ||||||
Total purchases, issuances, sales and settlements: | ||||||||
Settlements | (7 | ) | — | |||||
Balance, as of December 31, 2017 | $ | (15 | ) | $ | — |
(a) | Commodity Derivatives | Utica Contingent Consideration | |||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
($ in millions) | |||||||||||||||||
Total gains included in earnings for the period | $ | 77 | $ | 2 | $ | 7 | $ | — | |||||||||
Change in unrealized gains (losses) related to assets still held at reporting date | $ | 86 | $ | (14 | ) | $ | 7 | $ | — |
Instrument Type | Unobservable Input | Range | Weighted Average | Fair Value December 31, 2018 | ||||||
($ in millions) | ||||||||||
Oil trades | Oil price volatility curves | 23.70% – 42.17% | 32.51% | $ | 98 | |||||
Natural gas trades | Natural gas price volatility curves | 12.88% – 90.93% | 24.93% | $ | (11 | ) | ||||
Utica contingent consideration | Natural gas price volatility curves | 10.36% – 57.66% | — | $ | 7 |
15. | Capitalized Exploratory Well Costs |
2018 | 2017 | 2016 | ||||||||||
(in millions) | ||||||||||||
Balance as of January 1 | $ | 36 | $ | 41 | $ | 48 | ||||||
Additions pending the determination of proved reserves | 74 | 14 | 15 | |||||||||
Divestitures and other | — | — | — | |||||||||
Reclassifications to proved properties | (40 | ) | (19 | ) | (22 | ) | ||||||
Charges to exploration expense | (34 | ) | — | — | ||||||||
Balance as of December 31 | $ | 36 | $ | 36 | $ | 41 |
2018 | 2017 | 2016 | ||||||||||
(in millions) | ||||||||||||
Exploratory well costs capitalized for a period of one year or less | $ | 34 | $ | 4 | $ | 2 | ||||||
Exploratory well costs capitalized for a period greater than one year | 2 | 32 | 39 | |||||||||
Balance as of December 31 | $ | 36 | $ | 36 | $ | 41 | ||||||
Number of projects with exploratory well costs capitalized for a period greater than one year | 7 | 6 | 5 |
16. | Oil and Natural Gas Property Transactions |
17. | Other Property and Equipment |
December 31, | Estimated Useful Life | |||||||||
2018 | 2017 | |||||||||
($ in millions) | (in years) | |||||||||
Buildings and improvements | $ | 1,053 | $ | 1,093 | 10 – 39 | |||||
Computer equipment | 353 | 345 | 5 | |||||||
Natural gas compressors(a) | 48 | 235 | 3 – 20 | |||||||
Land | 106 | 126 | ||||||||
Other | 161 | 187 | 5 – 20 | |||||||
Total other property and equipment, at cost | 1,721 | 1,986 | ||||||||
Less: accumulated depreciation | (630 | ) | (672 | ) | ||||||
Total other property and equipment, net | $ | 1,091 | $ | 1,314 |
18. | Investments |
19. | Impairments |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Impairments due to lower forecasted commodity prices | $ | 23 | $ | 27 | $ | 73 | ||||||
Impairments due to reduction in future development(a) | — | 560 | — | |||||||||
Impairments due to anticipated sale | 55 | 222 | 29 | |||||||||
Total impairments of oil and natural gas properties | $ | 78 | $ | 809 | $ | 102 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Natural gas compressors | $ | 45 | $ | — | $ | 21 | ||||||
Barnett Shale exit costs | — | — | 284 | |||||||||
Devonian Shale exit costs | — | — | 142 | |||||||||
Gathering systems | — | — | 3 | |||||||||
Buildings and land | 4 | 5 | 11 | |||||||||
Other | 4 | — | — | |||||||||
Total impairments of fixed assets and other | $ | 53 | $ | 5 | $ | 461 |
20. | Other Operating Expense |
21. | 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 | (38 | ) | ||
Balance as of December 31, 2018 | $ | — |
22. | 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 December 31, 2018 | ||||||||||||||||
Financial Assets (Liabilities): | ||||||||||||||||
Other current assets | $ | 50 | $ | — | $ | — | $ | 50 | ||||||||
Other current liabilities | (51 | ) | — | — | (51 | ) | ||||||||||
Total | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||
As of December 31, 2017 | ||||||||||||||||
Financial Assets (Liabilities): | ||||||||||||||||
Other current assets | $ | 57 | $ | — | $ | — | $ | 57 | ||||||||
Other current liabilities | (60 | ) | — | — | (60 | ) | ||||||||||
Total | $ | (3 | ) | $ | — | $ | — | $ | (3 | ) |
23. | Asset Retirement Obligations |
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Asset retirement obligations, beginning of period | $ | 177 | $ | 261 | ||||
Additions | 3 | 5 | ||||||
Revisions | 11 | (34 | ) | |||||
Settlements and disposals | (35 | ) | (70 | ) | ||||
Accretion expense | 10 | 15 | ||||||
Asset retirement obligations, end of period | 166 | 177 | ||||||
Less current portion | 11 | 15 | ||||||
Asset retirement obligation, long-term | $ | 155 | $ | 162 |
24. | Major Customers |
25. | Condensed Consolidating Financial Information |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 4 | $ | 1 | $ | 1 | $ | (2 | ) | $ | 4 | |||||||||
Other current assets | 60 | 1,532 | 2 | — | 1,594 | |||||||||||||||
Intercompany receivable, net | 6,671 | — | — | (6,671 | ) | — | ||||||||||||||
Total Current Assets | 6,735 | 1,533 | 3 | (6,673 | ) | 1,598 | ||||||||||||||
PROPERTY AND EQUIPMENT: | ||||||||||||||||||||
Oil and natural gas properties at cost, based on successful efforts accounting, net | — | 9,664 | 48 | — | 9,712 | |||||||||||||||
Other property and equipment, net | — | 1,091 | — | — | 1,091 | |||||||||||||||
Property and equipment held for sale, net | — | 15 | — | — | 15 | |||||||||||||||
Total Property and Equipment, Net | — | 10,770 | 48 | — | 10,818 | |||||||||||||||
LONG-TERM ASSETS: | ||||||||||||||||||||
Other long-term assets | 26 | 293 | — | — | 319 | |||||||||||||||
Investments in subsidiaries and intercompany advances | 3,248 | 9 | — | (3,257 | ) | — | ||||||||||||||
TOTAL ASSETS | $ | 10,009 | $ | 12,605 | $ | 51 | $ | (9,930 | ) | $ | 12,735 | |||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Current liabilities | $ | 523 | $ | 2,365 | $ | 1 | $ | (2 | ) | $ | 2,887 | |||||||||
Intercompany payable, net | — | 6,671 | — | (6,671 | ) | — | ||||||||||||||
Total Current Liabilities | 523 | 9,036 | 1 | (6,673 | ) | 2,887 | ||||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||||||
Long-term debt, net | 7,341 | — | — | — | 7,341 | |||||||||||||||
Other long-term liabilities | 53 | 321 | — | — | 374 | |||||||||||||||
Total Long-Term Liabilities | 7,394 | 321 | — | — | 7,715 | |||||||||||||||
EQUITY: | ||||||||||||||||||||
Chesapeake stockholders’ equity | 2,092 | 3,248 | 9 | (3,257 | ) | 2,092 | ||||||||||||||
Noncontrolling interests | — | — | 41 | — | 41 | |||||||||||||||
Total Equity | 2,092 | 3,248 | 50 | (3,257 | ) | 2,133 | ||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 10,009 | $ | 12,605 | $ | 51 | $ | (9,930 | ) | $ | 12,735 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 5 | $ | 1 | $ | 2 | $ | (3 | ) | $ | 5 | |||||||||
Other current assets | 154 | 1,365 | 3 | (1 | ) | 1,521 | ||||||||||||||
Intercompany receivable, net | 8,699 | 434 | — | (9,133 | ) | — | ||||||||||||||
Total Current Assets | 8,858 | 1,800 | 5 | (9,137 | ) | 1,526 | ||||||||||||||
PROPERTY AND EQUIPMENT: | ||||||||||||||||||||
Oil and natural gas properties at cost, based on successful efforts accounting, net | — | 11,666 | 55 | — | 11,721 | |||||||||||||||
Other property and equipment, net | — | 1,314 | — | — | 1,314 | |||||||||||||||
Property and equipment held for sale, net | — | 144 | — | — | 144 | |||||||||||||||
Total Property and Equipment, Net | — | 13,124 | 55 | — | 13,179 | |||||||||||||||
LONG-TERM ASSETS: | ||||||||||||||||||||
Other long-term assets | 52 | 168 | — | — | 220 | |||||||||||||||
Investments in subsidiaries and intercompany advances | 3,201 | (38 | ) | — | (3,163 | ) | — | |||||||||||||
TOTAL ASSETS | $ | 12,111 | $ | 15,054 | $ | 60 | $ | (12,300 | ) | $ | 14,925 | |||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Current liabilities | $ | 190 | $ | 2,231 | $ | 2 | $ | (4 | ) | $ | 2,419 | |||||||||
Intercompany payable, net | — | 9,081 | 52 | (9,133 | ) | — | ||||||||||||||
Total Current Liabilities | 190 | 11,312 | 54 | (9,137 | ) | 2,419 | ||||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||||||
Long-term debt, net | 9,921 | — | — | — | 9,921 | |||||||||||||||
Other long-term liabilities | 101 | 541 | — | — | 642 | |||||||||||||||
Total Long-Term Liabilities | 10,022 | 541 | — | — | 10,563 | |||||||||||||||
EQUITY: | ||||||||||||||||||||
Chesapeake stockholders’ equity (deficit) | 1,899 | 3,201 | (38 | ) | (3,163 | ) | 1,899 | |||||||||||||
Noncontrolling interests | — | — | 44 | — | 44 | |||||||||||||||
Total Equity | 1,899 | 3,201 | 6 | (3,163 | ) | 1,943 | ||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 12,111 | $ | 15,054 | $ | 60 | $ | (12,300 | ) | $ | 14,925 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUES AND OTHER: | ||||||||||||||||||||
Oil, natural gas and NGL | $ | — | $ | 5,136 | $ | 19 | $ | — | $ | 5,155 | ||||||||||
Marketing | — | 5,076 | — | — | 5,076 | |||||||||||||||
Total Revenues | — | 10,212 | 19 | 10,231 | ||||||||||||||||
Other | — | 63 | — | — | 63 | |||||||||||||||
Losses on sales of assets | — | (264 | ) | — | — | (264 | ) | |||||||||||||
Total Revenues and Other | — | 10,011 | 19 | — | 10,030 | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Oil, natural gas and NGL production | — | 539 | — | — | 539 | |||||||||||||||
Oil, natural gas and NGL gathering, processing and transportation | — | 1,391 | 7 | — | 1,398 | |||||||||||||||
Production taxes | — | 123 | 1 | — | 124 | |||||||||||||||
Exploration | — | 162 | — | — | 162 | |||||||||||||||
Marketing | — | 5,158 | — | — | 5,158 | |||||||||||||||
General and administrative | 2 | 332 | 1 | — | 335 | |||||||||||||||
Restructuring and other termination costs | — | 38 | — | — | 38 | |||||||||||||||
Provision for legal contingencies, net | — | 26 | — | — | 26 | |||||||||||||||
Depreciation, depletion and amortization | — | 1,730 | 7 | — | 1,737 | |||||||||||||||
Impairments | — | 131 | — | — | 131 | |||||||||||||||
Total Operating Expenses | 2 | 9,630 | 16 | — | 9,648 | |||||||||||||||
INCOME (LOSS) FROM OPERATIONS | (2 | ) | 381 | 3 | — | 382 | ||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Interest expense | (631 | ) | (2 | ) | — | — | (633 | ) | ||||||||||||
Gains on investments | — | 139 | — | — | 139 | |||||||||||||||
Gains on purchases or exchanges of debt | 263 | — | — | — | 263 | |||||||||||||||
Other income | 3 | 64 | — | — | 67 | |||||||||||||||
Equity in net earnings of subsidiary | 583 | 1 | — | (584 | ) | — | ||||||||||||||
Total Other Income (Expense) | 218 | 202 | — | (584 | ) | (164 | ) | |||||||||||||
INCOME BEFORE INCOME TAXES | 216 | 583 | 3 | (584 | ) | 218 | ||||||||||||||
INCOME TAX BENEFIT | (10 | ) | — | — | — | (10 | ) | |||||||||||||
NET INCOME | 226 | 583 | 3 | (584 | ) | 228 | ||||||||||||||
Net income attributable to noncontrolling interests | — | — | (2 | ) | — | (2 | ) | |||||||||||||
NET INCOME ATTRIBUTABLE TO CHESAPEAKE | 226 | 583 | 1 | (584 | ) | 226 | ||||||||||||||
Other comprehensive income | — | 34 | — | — | 34 | |||||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE | $ | 226 | $ | 617 | $ | 1 | $ | (584 | ) | $ | 260 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUES AND OTHER: | ||||||||||||||||||||
Oil, natural gas and NGL | $ | — | $ | 4,962 | $ | 23 | $ | — | $ | 4,985 | ||||||||||
Marketing | — | 4,511 | — | — | 4,511 | |||||||||||||||
Total Revenues | — | 9,473 | 23 | — | 9,496 | |||||||||||||||
Other | — | 67 | — | — | 67 | |||||||||||||||
Gains on sales of assets | — | 476 | — | — | 476 | |||||||||||||||
Total Revenues and Other | — | 10,016 | 23 | — | 10,039 | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Oil, natural gas and NGL production | — | 562 | — | — | 562 | |||||||||||||||
Oil, natural gas and NGL gathering, processing and transportation | — | 1,463 | 8 | — | 1,471 | |||||||||||||||
Production taxes | — | 88 | 1 | — | 89 | |||||||||||||||
Exploration | — | 235 | — | — | 235 | |||||||||||||||
Marketing | — | 4,598 | — | — | 4,598 | |||||||||||||||
General and administrative | 1 | 330 | 2 | — | 333 | |||||||||||||||
Provision for legal contingencies, net | (79 | ) | 41 | — | — | (38 | ) | |||||||||||||
Depreciation, depletion and amortization | — | 1,688 | 9 | — | 1,697 | |||||||||||||||
Impairments | — | 814 | — | — | 814 | |||||||||||||||
Other operating expense | — | 416 | — | — | 416 | |||||||||||||||
Total Operating Expenses | (78 | ) | 10,235 | 20 | — | 10,177 | ||||||||||||||
INCOME (LOSS) FROM OPERATIONS | 78 | (219 | ) | 3 | — | (138 | ) | |||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Interest expense | (599 | ) | (2 | ) | — | — | (601 | ) | ||||||||||||
Gains on purchases or exchanges of debt | 233 | — | — | — | 233 | |||||||||||||||
Other income | 1 | 5 | — | — | 6 | |||||||||||||||
Equity in net earnings of subsidiary | (216 | ) | — | — | 216 | — | ||||||||||||||
Total Other Income (Expense) | (581 | ) | 3 | — | 216 | (362 | ) | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (503 | ) | (216 | ) | 3 | 216 | (500 | ) | ||||||||||||
INCOME TAX EXPENSE | 2 | — | — | — | 2 | |||||||||||||||
NET INCOME (LOSS) | (505 | ) | (216 | ) | 3 | 216 | (502 | ) | ||||||||||||
Net income attributable to noncontrolling interests | — | — | (3 | ) | — | (3 | ) | |||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | (505 | ) | (216 | ) | — | 216 | (505 | ) | ||||||||||||
Other comprehensive income | — | 39 | — | — | 39 | |||||||||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | $ | (505 | ) | $ | (177 | ) | $ | — | $ | 216 | $ | (466 | ) |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
Net Cash Provided By Operating Activities | $ | 85 | $ | 1,642 | $ | 10 | $ | (7 | ) | $ | 1,730 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Drilling and completion costs | — | (1,848 | ) | — | — | (1,848 | ) | |||||||||||||
Acquisitions of proved and unproved properties | — | (128 | ) | — | — | (128 | ) | |||||||||||||
Proceeds from divestitures of proved and unproved properties | — | 2,231 | — | — | 2,231 | |||||||||||||||
Additions to other property and equipment | — | (21 | ) | — | — | (21 | ) | |||||||||||||
Proceeds from sales of other property and equipment | — | 147 | — | — | 147 | |||||||||||||||
Proceeds from sales of investments | — | 74 | — | — | 74 | |||||||||||||||
Net Cash Provided by Investing Activities | — | 455 | — | — | 455 | |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from revolving credit facility borrowings | 11,697 | — | — | — | 11,697 | |||||||||||||||
Payments on revolving credit facility borrowings | (12,059 | ) | — | — | — | (12,059 | ) | |||||||||||||
Proceeds from issuance of senior notes, net | 1,236 | — | — | — | 1,236 | |||||||||||||||
Cash paid to purchase debt | (2,813 | ) | — | — | — | (2,813 | ) | |||||||||||||
Cash paid for preferred stock dividends | (92 | ) | — | — | — | (92 | ) | |||||||||||||
Other financing activities | (26 | ) | (123 | ) | (13 | ) | 7 | (155 | ) | |||||||||||
Intercompany advances, net | 1,971 | (1,974 | ) | 2 | 1 | — | ||||||||||||||
Net Cash Used In Financing Activities | (86 | ) | (2,097 | ) | (11 | ) | 8 | (2,186 | ) | |||||||||||
Net decrease in cash and cash equivalents | (1 | ) | — | (1 | ) | 1 | (1 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 5 | 1 | 2 | (3 | ) | 5 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 4 | $ | 1 | $ | 1 | $ | (2 | ) | $ | 4 |
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
Net Cash Provided By Operating Activities | $ | 5 | $ | 466 | $ | 14 | $ | (10 | ) | $ | 475 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Drilling and completion costs | — | (2,113 | ) | — | — | (2,113 | ) | |||||||||||||
Acquisitions of proved and unproved properties | — | (88 | ) | — | — | (88 | ) | |||||||||||||
Proceeds from divestitures of proved and unproved properties | — | 1,249 | — | — | 1,249 | |||||||||||||||
Additions to other property and equipment | — | (21 | ) | — | — | (21 | ) | |||||||||||||
Other investing activities | — | 55 | — | — | 55 | |||||||||||||||
Net Cash Used In Investing Activities | — | (918 | ) | — | — | (918 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Proceeds from revolving credit facility borrowings | 7,771 | — | — | — | 7,771 | |||||||||||||||
Payments on revolving credit facility borrowings | (6,990 | ) | — | — | — | (6,990 | ) | |||||||||||||
Proceeds from issuance of senior notes, net | 1,585 | — | — | — | 1,585 | |||||||||||||||
Cash paid to purchase debt | (2,592 | ) | — | — | — | (2,592 | ) | |||||||||||||
Cash paid for preferred stock dividends | (183 | ) | — | — | — | (183 | ) | |||||||||||||
Other financing activities | (39 | ) | (5 | ) | (13 | ) | 32 | (25 | ) | |||||||||||
Intercompany advances, net | (456 | ) | 456 | — | — | — | ||||||||||||||
Net Cash Provided by (Used In) Financing Activities | (904 | ) | 451 | (13 | ) | 32 | (434 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (899 | ) | (1 | ) | 1 | 22 | (877 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 904 | 2 | 1 | (25 | ) | 882 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 5 | $ | 1 | $ | 2 | $ | (3 | ) | $ | 5 |
26. | Subsequent Events |
2018 First Quarter | 2018 Second Quarter | 2018 Third Quarter | 2018 Fourth Quarter | |||||||||||||
($ in millions except per share data) | ||||||||||||||||
Total revenues | $ | 2,524 | $ | 2,289 | $ | 2,424 | $ | 2,793 | ||||||||
Income (loss) from operations | $ | 42 | $ | (160 | ) | $ | 82 | $ | 418 | |||||||
Net income (loss) attributable to Chesapeake | $ | 17 | $ | (249 | ) | $ | (146 | ) | $ | 604 | ||||||
Net income (loss) available to common stockholders | $ | (6 | ) | $ | (272 | ) | $ | (169 | ) | $ | 576 | |||||
Net income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.01 | ) | $ | (0.30 | ) | $ | (0.19 | ) | $ | 0.63 | |||||
Diluted | $ | (0.01 | ) | $ | (0.30 | ) | $ | (0.19 | ) | $ | 0.57 |
2017 First Quarter | 2017 Second Quarter | 2017 Third Quarter | 2017 Fourth Quarter | |||||||||||||
($ in millions except per share data) | ||||||||||||||||
Total revenues | $ | 3,076 | $ | 2,333 | $ | 2,028 | $ | 2,602 | ||||||||
Income from operations | $ | 244 | $ | 207 | $ | (620 | ) | $ | 31 | |||||||
Net income (loss) attributable to Chesapeake | $ | 93 | $ | 257 | $ | (775 | ) | $ | (80 | ) | ||||||
Net income (loss) available to common stockholders | $ | 29 | $ | 237 | $ | (798 | ) | $ | (103 | ) | ||||||
Net income (loss) per common share: | ||||||||||||||||
Basic | $ | 0.03 | $ | 0.26 | $ | (0.88 | ) | $ | (0.11 | ) | ||||||
Diluted | $ | 0.03 | $ | 0.26 | $ | (0.88 | ) | $ | (0.11 | ) |
December 31, | ||||||||
2018 | 2017 | |||||||
($ in millions) | ||||||||
Oil and oil and natural gas properties: | ||||||||
Proved | $ | 25,407 | $ | 27,932 | ||||
Unproved | 1,561 | 2,024 | ||||||
Total | 26,968 | 29,956 | ||||||
Less accumulated depreciation, depletion and amortization | (17,256 | ) | (18,235 | ) | ||||
Net capitalized costs(a) | $ | 9,712 | $ | 11,721 |
(a) | Net capitalized costs does not include $128 million of oil and natural gas assets held for sale net of depreciation, depletion and amortization as of December 31, 2017. |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Acquisition of Properties: | ||||||||||||
Proved properties | $ | 80 | $ | 23 | $ | 403 | ||||||
Unproved properties | 56 | 74 | 117 | |||||||||
Exploratory costs | 80 | 22 | 38 | |||||||||
Development costs | 1,954 | 2,075 | 1,230 | |||||||||
Costs incurred(a) | $ | 2,170 | $ | 2,194 | $ | 1,788 |
(a) | Includes capitalized interest and asset retirement obligations as follows: |
Capitalized interest | $ | 16 | $ | 19 | $ | 10 | ||||||
Asset retirement obligations(b) | $ | 8 | $ | (34 | ) | $ | (57 | ) |
(b) | Activity in 2017 and 2016 primarily reflects revisions as the result of decreased plugging and abandonment costs in certain of our operating areas. |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Oil, natural gas and NGL sales | $ | 5,155 | $ | 4,985 | $ | 3,288 | ||||||
Other revenue | 63 | 67 | 207 | |||||||||
Oil, natural gas and NGL production expenses | (539 | ) | (562 | ) | (710 | ) | ||||||
Oil, natural gas and NGL gathering, processing and transportation expenses | (1,398 | ) | (1,471 | ) | (1,855 | ) | ||||||
Production taxes | (124 | ) | (89 | ) | (74 | ) | ||||||
Exploration | (162 | ) | (235 | ) | (1,455 | ) | ||||||
Impairment of oil and natural gas properties | (78 | ) | (809 | ) | (102 | ) | ||||||
Depletion and depreciation | (1,665 | ) | (1,615 | ) | (1,594 | ) | ||||||
Imputed income tax provision(a) | (326 | ) | (107 | ) | 808 | |||||||
Results of operations from oil, natural gas and NGL producing activities | $ | 926 | $ | 164 | $ | (1,487 | ) |
(a) | The imputed income tax provision is hypothetical (at the statutory tax rate) and determined without regard to our deduction for general and administrative expenses, interest costs and other income tax credits and deductions, nor whether the hypothetical tax provision (benefit) will be payable (receivable). |
Oil | Gas | NGL | Total | |||||||||
(mmbbl) | (bcf) | (mmbbl) | (mmboe) | |||||||||
December 31, 2018 | ||||||||||||
Proved reserves, beginning of period | 260.2 | 8,600 | 218.6 | 1,912 | ||||||||
Extensions, discoveries and other additions | 56.3 | 1,162 | 19.8 | 270 | ||||||||
Revisions of previous estimates | (30.5 | ) | 242 | 5.4 | 15 | |||||||
Production | (32.7 | ) | (832 | ) | (18.9 | ) | (190 | ) | ||||
Sale of reserves-in-place | (37.8 | ) | (2,395 | ) | (121.6 | ) | (559 | ) | ||||
Purchase of reserves-in-place | — | — | — | — | ||||||||
Proved reserves, end of period(a) | 215.5 | 6,777 | 103.3 | 1,448 | ||||||||
Proved developed reserves: | ||||||||||||
Beginning of period | 150.9 | 4,980 | 134.9 | 1,116 | ||||||||
End of period | 127.6 | 3,314 | 67.9 | 748 | ||||||||
Proved undeveloped reserves: | ||||||||||||
Beginning of period | 109.3 | 3,620 | 83.6 | 796 | ||||||||
End of period(b) | 87.9 | 3,463 | 35.4 | 700 | ||||||||
Oil | Gas | NGL | Total | |||||||||
(mmbbl) | (bcf) | (mmbbl) | (mmboe) | |||||||||
December 31, 2017 | ||||||||||||
Proved reserves, beginning of period | 399.1 | 6,496 | 226.4 | 1,708 | ||||||||
Extensions, discoveries and other additions | 62.7 | 3,694 | 44.9 | 723 | ||||||||
Revisions of previous estimates | (168.1 | ) | (315 | ) | (31.0 | ) | (252 | ) | ||||
Production | (32.7 | ) | (878 | ) | (20.9 | ) | (200 | ) | ||||
Sale of reserves-in-place | (0.9 | ) | (418 | ) | (0.8 | ) | (71 | ) | ||||
Purchase of reserves-in-place | 0.1 | 21 | — | 4 | ||||||||
Proved reserves, end of period(c) | 260.2 | 8,600 | 218.6 | 1,912 | ||||||||
Proved developed reserves: | ||||||||||||
Beginning of period | 200.4 | 5,126 | 134.1 | 1,189 | ||||||||
End of period | 150.9 | 4,980 | 134.9 | 1,116 | ||||||||
Proved undeveloped reserves: | ||||||||||||
Beginning of period | 198.7 | 1,370 | 92.2 | 519 | ||||||||
End of period(b) | 109.3 | 3,620 | 83.6 | 796 | ||||||||
December 31, 2016 | ||||||||||||
Proved reserves, beginning of period | 313.7 | 6,041 | 183.5 | 1,504 | ||||||||
Extensions, discoveries and other additions | 191.2 | 1,798 | 89.0 | 580 | ||||||||
Revisions of previous estimates | (58.9 | ) | 598 | 2.8 | 43 | |||||||
Production | (33.2 | ) | (1,050 | ) | (24.4 | ) | (233 | ) | ||||
Sale of reserves-in-place | (14.7 | ) | (1,190 | ) | (28.1 | ) | (241 | ) | ||||
Purchase of reserves-in-place | 1.0 | 299 | 3.6 | 55 | ||||||||
Proved reserves, end of period(d) | 399.1 | 6,496 | 226.4 | 1,708 | ||||||||
Proved developed reserves: | ||||||||||||
Beginning of period | 215.6 | 5,329 | 158.0 | 1,262 | ||||||||
End of period | 200.4 | 5,126 | 134.1 | 1,189 | ||||||||
Proved undeveloped reserves: | ||||||||||||
Beginning of period | 98.1 | 712 | 25.5 | 242 | ||||||||
End of period(b) | 198.7 | 1,370 | 92.2 | 519 |
(a) | Includes 1 mmbbl of oil, 17 bcf of natural gas and 2 mmbbls of NGL reserves owned by the Chesapeake Granite Wash Trust, of which 1 mmbbl of oil, 8 bcf of natural gas and 1 mmbbl of NGL are attributable to noncontrolling interest holders. |
(b) | As of December 31, 2018, 2017 and 2016, there were no PUDs that had remained undeveloped for five years or more. |
(c) | Includes 1 mmbbl of oil, 20 bcf of natural gas and 2 mmbbls of NGL reserves owned by the Chesapeake Granite Wash Trust, of which 1 mmbbl of oil, 10 bcf of natural gas and 1 mmbbl of NGL are attributable to the noncontrolling interest holders. |
(d) | Includes 1 mmbbl of oil, 23 bcf of natural gas and 2 mmbbls of NGL reserves owned by the Chesapeake Granite Wash Trust, of which 1 mmbbl of oil, 12 bcf of natural gas and 1 mmbbl of NGL are attributable to the noncontrolling interest holders. |
Years Ended December 31, | |||||||||||||
2018 | 2017 | 2016 | |||||||||||
($ in millions) | |||||||||||||
Future cash inflows | $ | 27,312 | (a) | $ | 26,412 | (b) | $ | 19,835 | (c) | ||||
Future production costs | (5,946 | ) | (7,044 | ) | (6,800 | ) | |||||||
Future development costs | (4,032 | ) | (4,977 | ) | (3,621 | ) | |||||||
Future income tax provisions | (331 | ) | — | (79 | ) | ||||||||
Future net cash flows | 17,003 | 14,391 | 9,335 | ||||||||||
Less effect of a 10% discount factor | (7,508 | ) | (6,901 | ) | (4,956 | ) | |||||||
Standardized measure of discounted future net cash flows(d) | $ | 9,495 | $ | 7,490 | $ | 4,379 |
(a) | Calculated using prices of $65.56 per bbl of oil and $3.10 per mcf of natural gas, before field differentials. |
(b) | Calculated using prices of $51.34 per bbl of oil and $2.98 per mcf of natural gas, before field differentials. |
(c) | Calculated using prices of $42.75 per bbl of oil and $2.49 per mcf of natural gas, before field differentials. |
(d) | Excludes discounted future net cash inflows attributable to production volumes sold to VPP buyers. See Note 6. |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
($ in millions) | ||||||||||||
Standardized measure, beginning of period(a) | $ | 7,490 | $ | 4,379 | $ | 4,693 | ||||||
Sales of oil and natural gas produced, net of production costs and gathering, processing and transportation(b) | (3,128 | ) | (2,452 | ) | (1,227 | ) | ||||||
Net changes in prices and production costs | 3,317 | 3,977 | (1,210 | ) | ||||||||
Extensions and discoveries, net of production and development costs | 1,666 | 1,951 | 1,042 | |||||||||
Changes in estimated future development costs | 1,113 | 614 | 323 | |||||||||
Previously estimated development costs incurred during the period | 973 | 775 | 664 | |||||||||
Revisions of previous quantity estimates | 47 | (1,255 | ) | 145 | ||||||||
Purchase of reserves-in-place | — | 3 | 394 | |||||||||
Sales of reserves-in-place | (2,052 | ) | (116 | ) | 13 | |||||||
Accretion of discount | 749 | 441 | 473 | |||||||||
Net change in income taxes | (32 | ) | 26 | (8 | ) | |||||||
Changes in production rates and other | (648 | ) | (853 | ) | (923 | ) | ||||||
Standardized measure, end of period(a)(c) | $ | 9,495 | $ | 7,490 | $ | 4,379 |
(a) | The impact of cash flow hedges has not been included in any of the periods presented. |
(b) | Excludes gains and losses on derivatives. |
(c) | Effect of noncontrolling interest of the Chesapeake Granite Wash Trust is immaterial. |
Document and Entity Information |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Document and Entity Information [Abstract] | |
Document Type | 8-K |
Amendment Flag | false |
Document Period End Date | Dec. 31, 2018 |
Entity Registrant Name | CHESAPEAKE ENERGY CORPORATION |
Entity Central Index Key | 0000895126 |
Entity Emerging Growth Company | false |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
NET INCOME (LOSS) | $ 228 | $ (502) | $ (3,490) |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX: | |||
Unrealized gains (losses) on derivative instruments, net of income tax benefit of $0, $0, and ($14) | 0 | 5 | (13) |
Reclassification of losses on settled derivative instruments, net of income tax expense of $0, $0 and $18 | 34 | 34 | 16 |
Net other comprehensive income | 34 | 39 | 3 |
COMPREHENSIVE INCOME (LOSS) | 262 | (463) | (3,487) |
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (2) | (3) | (3) |
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE | $ 260 | $ (466) | $ (3,490) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
Income tax expense (benefit) of $0,$0, $0 and ($1) on unrealized gains (losses) on derivative instruments | $ 0 | $ 0 | $ (14) |
Income tax expense (benefit) of $0, $0, $0 and $3 on reclassification of losses on settled derivative instruments | $ 0 | $ 0 | $ 18 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Treasury Stock - Common [Member] | |||
Purchase of shares for company benefit plans (in shares) | 1,510,022 | 1,206,419 | 37,871 |
Release of shares from company benefit plans (in shares) | 503,863 | 186,529 | 255,091 |
Preferred stock exchanged for shares of common stock [Member] | Preferred stock [Member] | |||
Preferred stock conversions/exchanges (in shares) | 0 | 236,048 | 1,412,009 |
Preferred stock exchanged for shares of common stock [Member] | Additional Paid-in Capital [Member] | |||
Stock issued, conversion (in shares) | 0 | 9,965,835 | 120,186,195 |
Convertible notes exchanged for shares of common stock [Member] | Additional Paid-in Capital [Member] | |||
Stock issued, conversion (in shares) | 0 | 0 | 55,427,782 |
Senior notes exchanged for shares of common stock [Member] | Additional Paid-in Capital [Member] | |||
Stock issued, conversion (in shares) | 0 | 0 | 53,923,925 |
Basis of Presentation and Summary of Significant Accounting Policies |
12 Months Ended |
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Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Description of Company Chesapeake Energy Corporation ("Chesapeake", “we,” “our”, “us” or the "Company") is an oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of oil, natural gas and natural gas liquids (NGL) from underground reservoirs. Our operations are located onshore in the United States. Basis of Presentation The accompanying consolidated financial statements of Chesapeake were prepared in accordance with GAAP and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which Chesapeake has a controlling financial interest. Intercompany accounts and balances have been eliminated. Recast Financial Information for Change in Accounting Principle In the first quarter of 2019, we voluntarily changed our method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods presented herein has been recast to reflect retrospective application of the successful efforts method. Although the full cost method of accounting for oil and natural gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the generally preferred method of the SEC and, because it is more widely used in the industry, we expect the change to improve the comparability of our financial statements to our peers. We also believe the successful efforts method provides a more representational depiction of assets and operating results and provides for our investments in oil and natural gas properties to be assessed for impairment in accordance with Accounting Standards Codification (ASC) Topic 360, Property Plant and Equipment, rather than valuations based on prices and costs prescribed under the full cost method as of the balance sheet date. For detailed information regarding the effects of the change to the successful efforts method, see Note 2. Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures in the financial statements. Management evaluates its estimates and related assumptions regularly, including those related to the impairment of oil and natural gas properties, oil and natural gas reserves, derivatives, income taxes, unevaluated properties not subject to evaluation, impairment of other property and equipment, environmental remediation costs, asset retirement obligations, litigation and regulatory proceedings and fair values. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ significantly from these estimates. Consolidation We consolidate entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights and variable interest entities (VIEs) in which we are the primary beneficiary. We consolidate a VIE when we are the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to determine whether we own a variable interest in a VIE, we perform a qualitative analysis of the entity’s design, organizational structure, primary decision makers and relevant agreements. We continually monitor our consolidated VIE to determine if any events have occurred that could cause the primary beneficiary to change. See Note 11 for further discussion of our VIE. We use the equity method of accounting to record our net interests where we have the ability to exercise significant influence through our investment but lack a controlling financial interest. Under the equity method, our share of net income (loss) is included in our consolidated statements of operations according to our equity ownership or according to the terms of the applicable governing instrument. Undivided interests in oil and natural gas properties are consolidated on a proportionate basis. Segments Operating segments are defined as components of an enterprise that engage in activities from which it may earn revenues and incur expenses for which separate operational financial information is available and is regularly evaluated by the chief operating decision maker for the purpose of allocating an enterprise’s resources and assessing its operating performance. We have concluded that we have only one reportable operating segment, which is exploration and production because our marketing activities are ancillary to our operations. Noncontrolling Interests Noncontrolling interests represent third-party equity ownership in certain of our consolidated subsidiaries and are presented as a component of equity. See Note 11 for further discussion of noncontrolling interests. Cash and Cash Equivalents For purposes of the consolidated financial statements, we consider investments in all highly liquid instruments with original maturities of three months or less at the date of purchase to be cash equivalents. 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. See Note 8 for further discussion of our accounts receivable. Oil and Natural Gas Properties We follow the successful efforts method of accounting for our oil and natural gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals and exploration overhead are expensed as incurred. All costs related to production, general corporate overhead and similar activities are also expensed as incurred. All property acquisition costs and development costs are capitalized when incurred. Exploratory drilling costs are initially capitalized, or suspended, pending the determination of proved reserves. If proved reserves are found, drilling costs remain capitalized and are classified as proved properties. Costs of unsuccessful wells are charged to exploration expense. For exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operational viability of the project. If we determine that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed. In some instances, this determination may take longer than one year. We review the status of all suspended exploratory drilling costs quarterly. Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of oil and natural gas are capitalized. Costs of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are depreciated using the unit-of-production (UOP) method based on total estimated proved developed oil and gas reserves. Costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties, are depleted using the UOP method based on total estimated proved developed and undeveloped reserves. Proceeds from the sales of individual oil and natural gas properties and the capitalized costs of individual properties sold or abandoned are credited and charged, respectively, to accumulated depreciation, depletion and amortization, if doing so does not materially impact the depletion rate of an amortization base. Generally, no gain or loss is recognized until an entire amortization base is sold. However, a gain or loss is recognized from the sale of less than an entire amortization base if the disposition is significant enough to materially impact the depletion rate of the remaining properties in the amortization base. When circumstances indicate that the carrying value of proved oil and gas properties may not be recoverable, we compare unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on our estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Fair value is generally estimated using the income approach described in the ASC 820, Fair Value Measurements. If applicable, we utilize prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value measurements are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. We have classified these fair value measurements as Level 3 in the fair value hierarchy. Other Property and Equipment Other property and equipment consists primarily of buildings and improvements, land, vehicles, computers, natural gas compressors under capital lease and office equipment. Major renewals and betterments are capitalized while the costs of repairs and maintenance are charged to expense as incurred. Other property and equipment costs, excluding land, are depreciated on a straight-line basis and recorded within depreciation, depletion and amortization in the consolidated statement of operations. Natural gas compressors under capital lease are depreciated over the shorter of their estimated useful lives or the term of the related lease. Realization of the carrying value of other property and equipment is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset, including any disposal value, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. An estimate of fair value is based on the best information available, including prices for similar assets and discounted cash flow. Capitalized Interest Interest from external borrowings is capitalized on significant investments in major development projects until the asset is ready for service using the weighted average borrowing rate of outstanding borrowings. Capitalized interest is determined by multiplying our weighted average borrowing cost on debt by the average amount of qualifying costs incurred. Capitalized interest is depreciated over the useful lives of the assets in the same manner as the depreciation of the underlying asset. Accounts Payable Included in accounts payable as of December 31, 2018 and 2017 are liabilities of approximately $104 million and $92 million, respectively, representing the amount by which checks issued, but not yet presented to our banks for collection, exceeded balances in applicable bank accounts. Debt Issuance Costs Included in other long-term assets are costs associated with the issuance and amendments of the Chesapeake revolving credit facility. The remaining unamortized issuance costs as of December 31, 2018 and 2017, totaled $30 million and $22 million, respectively, and are being amortized over the life of the Chesapeake revolving credit facility using the straight-line method. Included in debt are costs associated with the issuance of our senior notes. The remaining unamortized issuance costs as of December 31, 2018 and 2017, totaled $53 million and $63 million, respectively, and are being amortized over the life of the senior notes using the effective interest method. Litigation Contingencies We are subject to litigation and regulatory proceedings, claims and liabilities that arise in the ordinary course of business. We accrue losses associated with litigation and regulatory claims when such losses are probable and reasonably estimable. If we determine that a loss is probable and cannot estimate a specific amount for that loss but can estimate a range of loss, our best estimate within the range is accrued. Estimates are adjusted as additional information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred. Environmental Remediation Costs We record environmental reserves for estimated remediation costs related to existing conditions from past operations when the responsibility to remediate is probable and the costs can be reasonably estimated. Expenditures that create future benefits or contribute to future revenue generation are capitalized. Asset Retirement Obligations We recognize liabilities for obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction and development of the assets. We recognize the fair value of a liability for a retirement obligation in the period in which the liability is incurred. For oil and natural gas properties, this is the period in which an oil or natural gas well is acquired or drilled. The liability is then accreted each period until the liability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is capitalized as part of the carrying amount of our oil and natural gas properties. See Note 23 for further discussion of asset retirement obligations. Revenue Recognition 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. Prior to the adoption of Revenue from Contracts with Customers (Topic 606) on January 1, 2018, revenue from the sale of oil, natural gas and NGL was recognized when title passed 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 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 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 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 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. Fair Value Measurements Certain financial instruments are reported on a recurring basis at fair value on our consolidated balance sheets. We also use fair value measurements on a nonrecurring basis when a qualitative assessment of our assets indicates a potential impairment. Under fair value measurement accounting guidance, fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants (i.e. an exit price). To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels. Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability and have the lowest priority. The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). The carrying values of financial instruments comprising cash and cash equivalents, accounts payable and accounts receivable approximate fair values due to the short-term maturities of these instruments. Derivatives Derivative instruments are recorded at fair value, and changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are followed. As of December 31, 2018, none of our open derivative instruments were designated as cash flow hedges. Derivative instruments reflected as current in the consolidated balance sheets represent the estimated fair value of derivatives scheduled to settle over the next twelve months based on market prices/rates as of the respective balance sheet dates. Cash settlements of our derivative instruments are generally classified as operating cash flows unless the derivatives are deemed to contain, for accounting purposes, a significant financing element at contract inception, in which case these cash settlements are classified as financing cash flows in the accompanying consolidated statement of cash flows. All of our derivative instruments are subject to master netting arrangements by contract type which provide for the offsetting of asset and liability positions within each contract type, as well as related cash collateral if applicable, by counterparty. Therefore, we net the value of our derivative instruments by contract type with the same counterparty in the accompanying consolidated balance sheets. We have established the fair value of our derivative instruments using established index prices, volatility curves and discount factors. These estimates are compared to our counterparty values for reasonableness. The values we report in our financial statements are as of a point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. Derivative transactions are subject to the risk that counterparties will be unable to meet their obligations. This non-performance risk is considered in the valuation of our derivative instruments, but to date has not had a material impact on the values of our derivatives. See Note 14 for further discussion of our derivative instruments. Share-Based Compensation Our share-based compensation program consists of restricted stock, stock options, performance share units and cash restricted stock units granted to employees and restricted stock granted to non-employee directors under our Long Term Incentive Plan. We recognize the cost of employee services received in exchange for restricted stock and stock options based on the fair value of the equity instruments as of the grant date. For employees, this value is amortized over the vesting period, which is generally three years from the grant date. For directors, although restricted stock grants vest over three years, this value is recognized immediately as there is a non-substantive service condition for vesting. Because performance share units are settled in cash, they are classified as a liability in our consolidated financial statements and are measured at fair value as of the grant date and re-measured at fair value at the end of each reporting period. These fair value adjustments are recognized as general and administrative expense in the consolidated statements of operations. To the extent compensation expense relates to employees directly involved in the acquisition of oil and natural gas leasehold and development activities, these amounts are capitalized to oil and natural gas properties. Amounts not capitalized to oil and natural gas properties are recognized as general and administrative expense, oil, natural gas and NGL production expense, exploration expense, or marketing expense, based on the employees involved in those activities. See Note 12 for further discussion of share-based compensation. Recently Issued Accounting Standards The Financial Accounting Standards Board (FASB) issued 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. See Note 8 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 reform legislation commonly known as the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017 (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. This standard is effective for us beginning on January 1, 2019, and we will elect not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings. 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 plan to adopt this standard on January 1, 2019 and do not expect it to have an impact on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a lease liability and a right-of-use (ROU) asset on the balance sheet for all leases, including operating leases, with terms in excess of 12 months. This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors. The standard will not apply to our leases of mineral rights to explore for or use oil and natural gas resources, including the intangible rights to explore for those natural resources and rights to use the land in which those natural resources are contained. We plan to make certain elections permitting us to not reassess whether any expired or existing contracts contained leases, permitting us to not reassess the lease classification for any expired or existing leases (all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with Topic 840 will be classified as finance leases), and permitting us to not reassess initial direct costs for any existing leases. We will also take an election permitting us to continue applying our current policy for land easements that existed as of, or expired before, the effective date and to not recognize a ROU asset or lease liability for short-term leases. We have completed our assessment of contracts potentially affected by the new standard and have completed our assessment of the accounting treatment for these leases. The adoption will primarily impact other assets and other liabilities and will also impact ongoing disclosures but will not have a material impact on our balance sheet, results of operations or cash flows. We plan to adopt the new standard on January 1, 2019, the effective date, and as permitted by ASU 2018-11 we will not adjust comparative-period financial statements and will continue to apply the guidance in ASC 840, including its disclosure requirements, in the comparative periods presented prior to adoption. Reclassifications Certain reclassifications have been made to the consolidated financial statements for 2017 and 2016 to conform to the presentation used for the 2018 consolidated financial statements. |
Change in Accounting Principle |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Accounting Principle | Change in Accounting Principle In the first quarter of 2019, we voluntarily changed our method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods presented herein has been recast to reflect retrospective application of the successful efforts method. In general, under the successful efforts method, exploration costs such as exploratory dry holes, exploratory geophysical and geological costs, delay rentals, unproved leasehold impairments and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. The successful efforts method also provides for the assessment of potential property impairments by comparing the net carrying value of oil and natural gas properties to associated projected undiscounted pre-tax future net cash flows. If the expected undiscounted pre-tax future net cash flows are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Under the full cost method of accounting, a write-down would be required if the net carrying value of oil and natural gas properties exceeds a full cost ceiling using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are generally recognized on the disposition of oil and natural gas property and equipment under the successful efforts method, as opposed to an adjustment to the net carrying value of the assets remaining under the full cost method. Our consolidated financial statements have been recast to reflect these differences.
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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 4 for further discussion of our convertible senior notes and contingent convertible senior notes. Shares of common stock for the following dilutive securities were excluded from the calculation of diluted EPS as the effect was antidilutive.
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Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Our long-term debt consisted of the following as of December 31, 2018 and 2017:
Optional Conversion by Holders. Prior to maturity under certain circumstances and at the holder’s option, the notes are convertible. The notes may be converted into cash, our common stock, or a combination of cash and common stock, at our election. One triggering circumstance is when the price of our common stock exceeds a threshold amount during a specified period in a fiscal quarter. Convertibility based on common stock price is measured quarterly. During the fourth quarter of 2018, the price of our common stock was below the threshold level and, as a result, the holders do not have the option to convert their notes in the first quarter of 2019 under this provision. The notes are also convertible, at the holder’s option, during specified five-day periods if the trading price of the notes is below certain levels determined by reference to the trading price of our common stock. The notes were not convertible under this provision during the year ended December 31, 2018. Upon conversion of a convertible senior note, the holder will receive cash, common stock or a combination of cash and common stock, at our election, according to the conversion rate specified in the indenture. The common stock price conversion threshold amount for the convertible senior notes is 130% of the conversion price of $8.568. Optional Redemption by the Company. We may redeem the convertible senior notes for cash on or after September 15, 2019, if the price of our common stock exceeds 130% of the conversion price during a specified period at a redemption price of 100% of the principal amount of the notes. Holders’ Demand Repurchase Rights. The holders of our convertible senior notes may require us to repurchase, in cash, all or a portion of their notes at 100% of the principal amount of the notes upon certain fundamental changes.
Debt maturities for the next five years and thereafter are as follows:
Debt Issuances and Retirements 2018 We issued at par $850 million of 7.00% Senior Notes due 2024 (“2024 notes”) and $400 million of 7.50% Senior Notes due 2026 (“2026 notes”) pursuant to a public offering for net proceeds of approximately $1.236 billion. We may redeem some or all of the 2024 notes at any time prior to April 1, 2021 and some or all of the 2026 notes at any time prior to October 1, 2021, in each case at a price equal to 100% of the principal amount of the notes to be redeemed plus a “make-whole” premium. At any time prior to April 1, 2021, with respect to the 2024 notes, and October 1, 2021, with respect to the 2026 notes, we also may redeem up to 35% of the aggregate principal amount of each series of notes with an amount of cash not greater than the net cash proceeds of certain equity offerings at a specified redemption price. In addition, we may redeem some or all of the 2024 notes at any time on or after April 1, 2021 and some or all of the 2026 notes at any time on or after October 1, 2021, in each case at the redemption prices in accordance with the terms of the notes and the indenture and supplemental indenture governing the notes. These senior notes are unsecured obligations of Chesapeake and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and rank senior in right of payment to all of our future subordinated indebtedness. Our obligations under the senior notes are jointly and severally, fully and unconditionally guaranteed by certain of our direct and indirect wholly owned subsidiaries. We used the net proceeds from the 2024 and 2026 notes, together with cash on hand and borrowings under the Chesapeake revolving credit facility, to repay in full $1.233 billion of borrowings under our secured term loan due 2021 for $1.285 billion, which included a $52 million make-whole premium. We recorded a loss of approximately $65 million associated with the repayment of the term loan, including the make-whole premium and the write-off of $13 million of associated deferred charges. We used a portion of the proceeds from the sale of our Utica Shale assets in Ohio to redeem all of the $1.416 billion aggregate principal amount outstanding of our 8.00% Senior Secured Second Lien Notes due 2022 for $1.477 billion. We recorded a gain of approximately $331 million associated with the redemption, including the realization of the remaining $391 million difference in principal and book value due to troubled debt restructuring accounting in 2015, offset by the make-whole premium of $60 million. We repaid upon maturity $44 million principal amount of our 7.25% Senior Notes due 2018. As required by the terms of the indenture for our 2.25% Contingent Convertible Senior Notes due 2038 (“2038 notes”), the holders were provided the option to require us to purchase on December 15, 2018, all or a portion of the holders’ 2038 notes at par plus accrued and unpaid interest up to, but excluding, December 15, 2018. On December 17, 2018, we paid an aggregate of approximately $8 million to purchase all of the 2038 notes that were tendered and not withdrawn. An aggregate of $1 million principal amount of the 2038 notes remained outstanding as of December 31, 2018. Subsequent to December 31, 2018, we redeemed these notes at par and discharged the related indenture. Debt Issuances and Retirements - 2017 We issued through two private placements $1.300 billion aggregate principal amount of unsecured 8.00% Senior Notes due 2027 for net proceeds of approximately $1.285 billion. The first private placement was issued at par and the second private placement was issued at 99.75% of par. Some or all of the notes may be redeemed at any time prior to June 15, 2022, subject to a make-whole premium. We also may redeem some or all of the notes at any time on or after June 15, 2022, at the applicable redemption price in accordance with the terms of the notes and the indenture and supplemental indenture governing the notes. In addition, subject to certain conditions, we may redeem up to 35% of the aggregate principal amount of the notes at any time prior to June 15, 2020, at a price equal to 108% of the principal amount of the notes to be redeemed using the net proceeds of certain equity offerings. We also issued in a private placement $300 million aggregate principal amount of additional 8.00% Senior Notes due 2025 (“new 2025 notes”) at 101.25% of par for net proceeds of $301 million. The new 2025 notes are an additional issuance of our outstanding 8.00% Senior Notes due 2025, which we issued in 2016 in an original aggregate principal amount of $1.0 billion at 98.52% of par. The new 2025 Notes issued and the previously issued senior notes due 2025 will be treated as a single class of notes under the indenture. We retired $2.389 billion principal amount of our outstanding senior notes, senior secured second lien notes, contingent convertible notes and term loan through purchases in the open market, tender offers or repayment upon maturity for $2.592 billion using proceeds from the issuances described above. For the open market repurchases and tender offers, we recorded a net aggregate gain of approximately $233 million, including $374 million of premium associated with our 8.00% Senior Secured Second Lien Notes due 2022. Senior Notes and Convertible Senior Notes Our senior notes and our convertible senior notes are unsecured senior obligations of Chesapeake and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and rank senior in right of payment to all of our future subordinated indebtedness. Our obligations under the senior notes and the convertible senior notes are jointly and severally, fully and unconditionally guaranteed by certain of our direct and indirect wholly owned subsidiaries. See Note 25 for consolidating financial information regarding our guarantor and non-guarantor subsidiaries. We may redeem the senior notes, other than the convertible senior notes, at any time at specified make-whole or redemption prices. Our senior notes are governed by indentures containing covenants that may limit our ability and our subsidiaries’ ability to incur certain secured indebtedness, enter into sale-leaseback transactions, and consolidate, merge or transfer assets. The indentures governing the senior notes and the convertible senior notes do not have any financial or restricted payment covenants. Indentures for the senior notes and convertible senior notes have cross default provisions that apply to other indebtedness Chesapeake or any guarantor subsidiary may have from time to time with an outstanding principal amount of at least $50 million or $75 million, depending on the indenture. Chesapeake Revolving Credit Facility In 2018, we amended and restated our credit agreement dated December 15, 2014. The amended and restated Chesapeake revolving credit facility matures in September 2023 and the aggregate initial commitment of the lenders and borrowing base under the facility is $3.0 billion. The Chesapeake revolving credit facility provides for an accordion feature, pursuant to which the aggregate commitments thereunder may be increased to up to $4.0 billion from time to time, subject to agreement of the participating lenders and certain other customary conditions. Borrowing base redeterminations will continue to occur semiannually and our next borrowing base redetermination is scheduled for the second quarter of 2019. As of December 31, 2018, we had outstanding borrowings of $419 million under the Chesapeake revolving credit facility and had used $107 million of the Chesapeake revolving credit facility for various letters of credit. We recorded a loss of $3 million associated with certain deferred charges related to the Chesapeake revolving credit facility prior to its amendment and restatement. Borrowings under the Chesapeake revolving credit facility bear interest at an alternative base rate (ABR) or LIBOR, at our election, plus an applicable margin ranging from 0.50%-2.00% per annum for ABR loans and 1.50%-3.00% per annum for LIBOR loans, depending on the percentage of the borrowing base then being utilized and whether our leverage ratio exceeds 4.00 to 1. The Chesapeake revolving credit facility is subject to various financial and other covenants. The terms of the revolving credit facility include covenants limiting, among other things, our ability to incur additional indebtedness, make investments or loans, incur liens, consummate mergers and similar fundamental changes, make restricted payments, make investments in unrestricted subsidiaries and enter into transactions with affiliates. The Chesapeake revolving credit facility contains financial covenants that, after the suspension of most of the covenants during the fourth quarter of 2018 as a result of the closing of the sale of certain of our Utica Shale, beginning in the first quarter of 2019, require us to maintain (i) a leverage ratio of not more than 5.50 to 1 through the fiscal quarter ending September 30, 2019, which threshold decreases over time to 4.00 to 1 for the fiscal quarter ending March 31, 2021 and each fiscal quarter thereafter, (ii) a secured leverage ratio of not more than 2.50 to 1 until the later of (x) the fiscal quarter ending March 31, 2021 or (y) the fiscal quarter in when the Company’s leverage ratio does not exceed 4.00 to 1 and (iii) a fixed charge coverage ratio of not less than 2.00 to 1 through the fiscal quarter ending December 31, 2019; not less than 2.25 to 1 through the fiscal quarter ending June 30, 2020; and not less than 2.50 to 1 for the fiscal quarter ended September 30, 2020 and thereafter. For the fiscal quarter ended December 31, 2018, our only applicable financial covenant required us to maintain a leverage ratio of not more than 5.50 to 1. As of December 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 Chesapeake 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 Litigation and Regulatory Proceedings We are involved in a number of litigation and regulatory proceedings including those described below. Many of these proceedings are in early stages, and many of them seek or may seek damages and penalties, the amount of which is indeterminate. Our total accrued liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different. Business Operations. We are involved in various lawsuits and disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. Regarding royalty claims, we and other natural gas producers have been named in various lawsuits alleging royalty underpayment. The suits against us allege, among other things, that we used below-market prices, made improper deductions, utilized improper measurement techniques entered into arrangements with affiliates that resulted in underpayment of royalties in connection with the production and sale of natural gas and NGL, or similar theories. These lawsuits include cases filed by individual royalty owners and putative class actions, some of which seek to certify a statewide class. The lawsuits seek compensatory, consequential, treble, and punitive damages, restitution and disgorgement of profits, declaratory and injunctive relief regarding our royalty payment practices, pre-and post-judgment interest, and attorney’s fees and costs. Plaintiffs have varying royalty provisions in their respective leases, oil and gas law varies from state to state, and royalty owners and producers differ in their interpretation of the legal effect of lease provisions governing royalty calculations. We have resolved a number of these claims through negotiated settlements of past and future royalty obligations and have prevailed in various other lawsuits. We are currently defending numerous lawsuits seeking damages with respect to underpayment of royalties in multiple states where we have operated, including those discussed below. On December 9, 2015, the Commonwealth of Pennsylvania, by the Office of Attorney General, filed a lawsuit in the Bradford County Court of Common Pleas related to royalty underpayment and lease acquisition and accounting practices with respect to properties in Pennsylvania. The lawsuit, which primarily relates to the Marcellus Shale and Utica Shale, alleges that we violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) by making improper deductions and entering into arrangements with affiliates that resulted in underpayment of royalties. The lawsuit includes other UTPCPL claims and antitrust claims, including that a joint exploration agreement to which we are a party established unlawful market allocation for the acquisition of leases. The lawsuit seeks statutory restitution, civil penalties and costs, as well as a temporary injunction from exploration and drilling activities in Pennsylvania until restitution, penalties and costs have been paid, and a permanent injunction from further violations of the UTPCPL. Putative statewide class actions in Pennsylvania and Ohio and purported class arbitrations in Pennsylvania have been filed on behalf of royalty owners asserting various claims for damages related to alleged underpayment of royalties as a result of the divestiture of substantially all of our midstream business and most of our gathering assets in 2012 and 2013. These cases include claims for violation of and conspiracy to violate the federal Racketeer Influenced and Corrupt Organizations Act and for an unlawful market allocation agreement for mineral rights, intentional interference with contractual relations, and violations of antitrust laws related to purported markets for gas mineral rights, operating rights and gas gathering sources. These lawsuits seek in aggregate compensatory, consequential, treble, and punitive damages, restitution and disgorgement of profits, declaratory and injunctive relief regarding our royalty payment practices, pre-and post-judgment interest, and attorney’s fees and costs. On December 20, 2017 and August 9, 2018, we reached tentative settlements to resolve substantially all Pennsylvania civil royalty cases for a total of approximately $35 million. We believe losses are reasonably possible in certain of the pending royalty cases for which we have not accrued a loss contingency, but we are currently unable to estimate an amount or range of loss or the impact the actions could have on our future results of operations or cash flows. Uncertainties in pending royalty cases generally include the complex nature of the claims and defenses, the potential size of the class in class actions, the scope and types of the properties and agreements involved, and the applicable production years. We 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 insignificant amount. The final fairness hearing is set for April 25, 2019. On July 28, 2017, OOGC America LLC (OOGC) filed a demand for arbitration with the American Arbitration Association against Chesapeake Exploration, L.L.C., our wholly owned subsidiary, in connection with OOGC’s purchase of certain oil and gas leases and other assets pursuant to a Purchase and Sale Agreement entered into on October 10, 2010. In connection with the sale, we also entered into a Development Agreement with OOGC, dated November 15, 2010 (the “Development Agreement”), which governs each of our rights and obligations with respect to the sale, including the transportation and marketing of oil and gas. OOGC’s breach of contract, breach of agency and fiduciary duties and other claims generally allege, among other things, that we subjected OOGC to excessive rates for gathering and other services provided for under the Development Agreement and interfered with OOGC’s right to audit the documents that supported those rates. On November 13, 2018, a unanimous panel denied every claim asserted by OOGC other than OOGC being entitled to a declaration clarifying its audit rights. On July 24, 2018, Healthcare of Ontario Pension Plan (HOOPP) filed a demand for arbitration with the American Arbitration Association regarding HOOPP’s purchase of our interest in Chaparral Energy, Inc. stock for $215 million on January 5, 2014. HOOPP claims that we engaged in material misrepresentations and fraud, and that we violated the Exchange Act and Oklahoma Uniform Securities Act. HOOPP seeks either rescission or $215 million in monetary damages, and in either case, interest, attorney’s fees, disgorgement and punitive damages. We intend to vigorously defend these claims. In February 2019, a putative class action lawsuit in the District Court of Dallas County, Texas was filed against FTS International, Inc. (“FTSI”), certain investment banks, FTSI’s directors including certain of our officers and certain shareholders of FTSI including us. The lawsuit alleges various violations of Sections 11 (with respect to certain of our officers in their capacities as directors of FTSI) and 15 (with respect to such officers and us) of the Securities Act of 1933 in connection with public disclosure made during the initial public offering of FTSI. The suit seeks damages in excess of $1,000,000 and attorneys’ fees and other expenses. We intend to vigorously defend these claims. Environmental Contingencies The nature of the oil and gas business carries with it certain environmental risks for us and our subsidiaries. We have implemented various policies, programs, procedures, training and audits to reduce and mitigate such environmental risks. We conduct periodic reviews, on a company-wide basis, to assess changes in our environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. We manage our exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, we may, among other things, exclude a property from the transaction, require the seller to remediate the property to our satisfaction in an acquisition or agree to assume liability for the remediation of the property. We are named as a defendant in numerous lawsuits in Oklahoma alleging that we and other companies have engaged in activities that have caused earthquakes. These lawsuits seek compensation for injury to real and personal property, diminution of property value, economic losses due to business interruption, interference with the use and enjoyment of property, annoyance and inconvenience, personal injury and emotional distress. In addition, they seek the reimbursement of insurance premiums and the award of punitive damages, attorneys’ fees, costs, expenses and interest. Other Matters Based on management’s current assessment, we are of the opinion that no pending or threatened lawsuit or dispute relating to our business operations is likely to have a material adverse effect on our future consolidated financial position, results of operations or cash flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could differ materially from management’s estimates. |
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Contingencies and Commitments | Commitments Operating Leases Future operating lease commitments related to other property and equipment are not recorded as obligations in the accompanying consolidated balance sheets. The aggregate undiscounted minimum future lease payments are presented below:
Operating lease expense for the years ended December 31, 2018, 2017 and 2016, was $4 million, $3 million and $5 million, respectively. 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. Service Contract We have a contract with a third-party contractor to provide maintenance and other services to our natural gas compressors under capital lease. This commitment is not recorded as an obligation in the accompanying consolidated balance sheets. The aggregate undiscounted minimum future payments under this service contract is detailed below.
Other Commitments As part of our normal course of business, we enter into various agreements providing, or otherwise arranging for, financial or performance assurances to third parties on behalf of our wholly owned guarantor subsidiaries. These agreements may include future payment obligations or commitments regarding operational performance that effectively guarantee our subsidiaries’ future performance. In connection with acquisitions and divestitures, our purchase and sale agreements generally provide indemnification to the counterparty for liabilities incurred as a result of a breach of a representation or warranty by the indemnifying party and/or other specified matters. These indemnifications generally have a discrete term and are intended to protect the parties against risks that are difficult to predict or cannot be quantified at the time of entering into or consummating a particular transaction. For divestitures of oil and natural gas properties, our purchase and sale agreements may require the return of a portion of the proceeds we receive as a result of uncured title or environmental defects. While executing our strategic priorities, we have incurred certain cash charges, including contract termination charges, financing extinguishment costs and charges for unused natural gas transportation and gathering capacity. |
Other Liabilities |
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Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities | Other Liabilities Other current liabilities as of December 31, 2018 and 2017 are detailed below:
Other long-term liabilities as of December 31, 2018 and 2017 are detailed below:
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Capital Lease Obligation |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Lease Obligation | Capital Lease Obligation In 2018, we sold our wholly owned subsidiary, Midcon Compression, L.L.C., to a third party and subsequently leased back some natural gas compressors for 38 months. The aggregate undiscounted minimum future lease payments are presented below:
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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 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. In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statements of operations was as follows:
The following table shows revenue disaggregated by operating area and product type, for the year ended December 31, 2018:
Accounts Receivable Accounts receivable as of December 31, 2018 and 2017 are detailed below:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of the income tax provision (benefit) for each of the periods presented below are as follows:
The effective income tax expense (benefit) differed from the computed "expected" federal income tax expense on earnings before income taxes for the following reasons:
We applied the guidance in SAB 118 when accounting for the enactment-date effect of the Tax Act. At December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the Tax Act under ASC 740, Income Taxes, for certain items as we were waiting on additional guidance to be issued. At December 31, 2018, we have now completed our accounting for all of the enactment-date income tax effects of the Tax Act. The adjustments made during 2018 are considered immaterial but nevertheless are included as a component of income tax expense in our consolidated statement of operations for the year ended December 31, 2018, which is fully offset with an adjustment to the valuation allowance against our net deferred tax asset. We reassessed the realizability of our deferred tax assets and continue to maintain a valuation allowance against all or substantially all of our net deferred tax asset. The $97 million net decrease in our valuation allowance is reflected as a component of income tax expense in our consolidated statement of operations for the year ended December 31, 2018. This decrease in the valuation allowance is primarily due to offsetting current year tax expense. Deferred income taxes are provided to reflect temporary differences in the tax basis of assets and liabilities and their reported amounts in the financial statements. The tax-effected temporary differences, tax credits and net operating loss carryforwards that comprise our deferred taxes are as follows:
As of December 31, 2018, we had federal NOL carryforwards of approximately $10.138 billion and state NOL carryforwards of approximately $10.688 billion, which excludes the NOL carryforwards related to unrecognized tax benefits. The associated deferred tax assets related to these federal and state NOL carryforwards were $2.129 billion and $608 million, respectively. The federal NOL carryforwards generated in tax years prior to 2018 expire between 2031 and 2037. As a result of the Tax Act, the 2018 federal NOL carryforward has no expiration. The value of these carryforwards depends on our ability to generate future taxable income. As of December 31, 2018 and 2017, we had deferred tax assets of $3.231 billion and $2.805 billion upon which we had a valuation allowance of $2.011 billion and $2.119 billion, respectively. Of the net change in the valuation allowance of $108 million for both federal and state deferred tax assets, $97 million is reflected as a component of income tax expense in the consolidated statement of operations and the remainder is reflected in components of stockholders’ equity. A valuation allowance against deferred tax assets, including NOL carryforwards and disallowed business interest, is recognized when it is more likely than not that all or some portion of the benefit from the deferred tax assets will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, and we consider the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of existing taxable temporary differences, and tax planning strategies, as well as the current and forecasted business economics of our industry. Management assesses all available evidence, both positive and negative, to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. A significant piece of objectively verifiable negative evidence is the cumulative loss incurred over the three-year period ended December 31, 2018. Such objective negative evidence limits our ability to consider various forms of subjective positive evidence, such as our projections for future income. Accordingly, management has not changed its judgment for the period ended December 31, 2018 with respect to the need for a valuation allowance against all or substantially all of our net deferred tax asset position. The amount of the deferred tax asset considered realizable could be adjusted if projections of future taxable income are increased and/or if objective negative evidence in the form of cumulative losses is no longer present. Based on our current forecast, we may come out of a three-year cumulative loss position in the foreseeable future. Should we return to a level of sustained profitability, consideration will need to be given to future projections of taxable income to determine whether such projections provide an adequate source of taxable income for the realization of our deferred tax assets, namely federal NOL carryforwards and disallowed business interest carryforwards. If so, then all or a portion of the valuation allowance could possibly be released. Our ability to utilize NOL carryforwards and possibly other tax attributes to reduce future federal taxable income and federal income tax is subject to various limitations under Section 382 of the Code. The utilization of these attributes may be limited upon the occurrence of certain ownership changes, including the issuance or exercise of rights to acquire stock, the purchase or sale of stock by 5% stockholders (as such shareholders are defined in Treasury regulations), and the offering of stock by us during any three-year period resulting in an aggregate change of more than 50% in the beneficial ownership of Chesapeake. As of December 31, 2018, we do not believe that an ownership change has occurred that would limit the utilization of our NOL carryforwards and other tax attributes. Certain future transactions involving our equity (including relatively small transactions and transactions beyond our control) could cause an ownership change and therefore a limitation on the annual utilization of NOL carryforwards and possibly other tax attributes. Accounting guidance for recognizing and measuring uncertain tax positions requires a more likely than not threshold condition be met on a tax position, based solely on the technical merits of being sustained, before any benefit of the tax position can be recognized in the financial statements. Guidance is also provided regarding de-recognition, classification and disclosure of uncertain tax positions. As of December 31, 2018 and 2017, the amount of unrecognized tax benefits related to NOL carryforwards and tax liabilities associated with uncertain tax positions was $79 million and $106 million, respectively. Of the 2018 amount, $32 million is related to state tax liabilities, $29 million is related to state tax receivables not expected to be recovered and the remainder is related to NOL carryforwards. Of the 2017 amount, $74 million is related to state tax liabilities, $4 million is related to federal tax liabilities and the remainder is related to NOL carryforwards. If recognized, $61 million of the uncertain tax positions identified would have an effect on the effective tax rate. No material changes to the current uncertain tax positions are expected within the next 12 months. As of December 31, 2018 and 2017, we had accrued liabilities of $20 million and $23 million, respectively, for interest related to these uncertain tax positions. We recognize interest related to uncertain tax positions as a component of interest expense. Penalties, if any, related to uncertain tax positions would be recorded in other expenses. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
Our federal and state income tax returns are subject to examination by federal and state tax authorities. Federal examination cycles 2010 through 2013 and 2014 through 2015 were settled with the Internal Revenue Service (IRS) during the first and third quarters of 2018, respectively. However, certain of these tax years remain open for purposes of adjusting federal net operating loss carryforwards upon utilization. Tax years 2016 through 2018 remain open for all purposes of examination by the IRS. In addition, tax years 2016 through 2018 as well as certain earlier years remain open for examination by state tax authorities. Currently, several state examinations are in progress of various years. We do not anticipate that the outcome of any state audit will have a significant impact on our results of operations or financial position. |
Related Parties Transactions |
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Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Parties Transactions | Related Party Transactions Our equity method investees are considered related parties. Hydraulic fracturing and other services are provided to us in the ordinary course of business by our equity affiliate FTSI. As well operators, we are reimbursed by other working interest owners through the joint interest billing process for their proportionate share of these costs. For the years ended December 31, 2018, 2017 and 2016, our expenditures for hydraulic fracturing services with FTSI were $93 million, $111 million and $3 million, respectively. |
Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity Common Stock A summary of the changes in our common shares issued for the years ended December 31, 2018, 2017 and 2016 is detailed below:
Preferred Stock Following is a summary of our preferred stock, including the primary conversion terms as of December 31, 2018:
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Outstanding shares of our preferred stock for the years ended December 31, 2018, 2017 and 2016 are detailed below:
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Dividends Dividends declared on our preferred stock are reflected as adjustments to retained earnings to the extent a surplus of retained earnings exists after giving effect to the dividends. To the extent retained earnings are insufficient to fund the distributions, payments are reflected in our financial statements as a return of contributed capital rather than earnings and are accounted for as a reduction to paid-in capital. Dividends on our outstanding preferred stock are payable quarterly. We may pay dividends on our 5.00% Cumulative Convertible Preferred Stock (Series 2005B) and our 4.50% Cumulative Convertible Preferred Stock in cash, common stock or a combination thereof, at our option. Dividends on both series of our 5.75% Cumulative Convertible Non-Voting Preferred Stock are payable only in cash. In January 2016, we suspended dividend payments on our convertible preferred stock to provide additional liquidity in the depressed commodity price environment. In the first quarter of 2017, we reinstated the payment of dividends on each series of our outstanding convertible preferred stock and paid our dividends in arrears. Accumulated Other Comprehensive Income (Loss) For the years ended December 31, 2018 and 2017, changes in accumulated other comprehensive income (loss) for cash flow hedges, net of tax, are detailed below:
Noncontrolling Interests Chesapeake Granite Wash Trust. We own 23,750,000 common units in the Chesapeake Granite Wash Trust (the Trust) representing a 51% beneficial interest. We have determined that the Trust is a VIE and that we are the primary beneficiary. As a result, the Trust is included in our consolidated financial statements. As of December 31, 2018 and 2017, we had $41 million and $44 million, respectively, of noncontrolling interests on our consolidated balance sheets attributable to the Trust. Net income attributable to the Trust’s noncontrolling interest was $2 million, $3 million and $3 million for the years ended December 31, 2018, 2017 and 2016, respectively. The Trust’s legal existence is separate from Chesapeake and our other consolidated subsidiaries, and the Trust is not a guarantor of any of Chesapeake’s debt. The creditors or beneficial holders of the Trust have no recourse to the general credit of Chesapeake. We have presented parenthetically on the face of the consolidated balance sheets the assets of the Trust that can be used only to settle obligations of the Trust and the liabilities of the Trust for which creditors do not have recourse to the general credit of Chesapeake. |
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 Plan. The restricted stock and stock options are equity-classified awards and the PSUs and CRSUs are liability-classified awards. Share-Based Compensation Plans 2014 Long Term Incentive Plan. Our 2014 Long Term Incentive Plan (2014 LTIP), which is administered by the Compensation Committee of our Board of Directors, became effective on June 13, 2014 after it was approved by shareholders at our 2014 Annual Meeting. The 2014 LTIP replaced our Amended and Restated Long Term Incentive Plan which was adopted in 2005. The 2014 LTIP provides for up to 71,600,000 shares of common stock that may be issued as long-term incentive compensation to our employees and non-employee directors; provided, however, that the 2014 LTIP uses a fungible share pool under which (i) each share issued pursuant to a stock option or stock appreciation right (SAR) reduces the number of shares available under the 2014 LTIP by 1.0 share; (ii) each share issued pursuant to awards other than options and SARs reduces the number of shares available by 2.12 shares; (iii) if any awards of restricted stock under the 2014 LTIP, or its predecessor plan, are forfeited, expire, are settled for cash, or are tendered by the participant or withheld by us to satisfy any tax withholding obligation, then the shares subject to the award may be used again for awards; and (iv) PSUs and other performance awards which are payable solely in cash are not counted against the aggregate number of shares issuable. In addition, the 2014 LTIP prohibits the reuse of shares withheld or delivered to satisfy the exercise price of, or to satisfy tax withholding requirements for, an option or SAR. The 2014 LTIP also prohibits “net share counting” upon the exercise of options or SARs. The 2014 LTIP authorizes the issuance of the following types of awards: (i) nonqualified and incentive stock options; (ii) SARs; (iii) restricted stock; (iv) performance awards, including PSUs; and (v) other stock-based awards. For both stock options and SARs, the exercise price may not be less than the fair market value of our common stock on the date of grant and the maximum exercise period may not exceed ten years from the date of grant. Awards granted under the plan vest at specified dates and/or upon the satisfaction of certain performance or other criteria, as determined by the Compensation Committee. As of December 31, 2018, 35,389,825 shares of common stock remained issuable under the 2014 LTIP. Equity-Classified Awards Restricted Stock. We grant restricted stock to employees and non-employee directors. A summary of the changes in unvested restricted stock during 2018, 2017 and 2016 is presented below:
The aggregate intrinsic value of restricted stock that vested during 2018 was approximately $20 million based on the stock price at the time of vesting. As of December 31, 2018, there was approximately $33 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 2018, 2017 and 2016, 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 the 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 2018:
The following table provides information related to stock option activity for 2018, 2017 and 2016:
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As of December 31, 2018, there was $13 million of total unrecognized compensation expense related to stock options. The expense is expected to be recognized over a weighted average period of approximately 1.56 years. Restricted Stock and Stock Option Compensation. We recognized the following compensation costs, net of actual forfeitures, related to restricted stock and stock options for the years ended December 31, 2018, 2017 and 2016:
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 and the reporting date fair value of the 2017 awards. The performance period for the 2016 awards ended on December 31, 2018 and the TSR component has been finalized.
As the above assumptions and expected satisfaction of performance metrics change, the PSU liabilities will be adjusted quarterly 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 PSU liability will be adjusted quarterly, based on changes in our stock price and expected satisfaction of performance metrics, through the end of each vesting period. Cash Restricted Stock Units. In 2018, 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 CRSU liability will be adjusted quarterly, based on changes in our stock price, through the end of each vesting period. The following table presents a summary of our liability-classified awards:
We recognized the following compensation costs (credits), net of actual forfeitures, related to our liability-classified awards for the years ended December 31, 2018, 2017 and 2016:
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Employee Benefit Plans |
12 Months Ended |
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Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans Our qualified 401(k) profit sharing plan (401(k) Plan) is the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan, which is open to employees of Chesapeake and all our subsidiaries. Eligible employees may elect to defer compensation through voluntary contributions to their 401(k) Plan accounts, subject to plan limits and those set by the IRS. We match employee contributions dollar for dollar (subject to a maximum contribution of 15% of an employee's base salary and performance bonus) in cash. We contributed $31 million, $35 million and $39 million to the 401(k) Plan in 2018, 2017 and 2016, respectively. We also maintain a nonqualified deferred compensation plan (DC Plan). To be eligible to participate in the DC Plan, an active employee must have a base salary of at least $150,000, have a hire date on or before December 1, immediately preceding the year in which the employee is able to participate, or be designated as eligible to participate. We match 100% of employee contributions up to 15% of base salary and performance bonus in the aggregate for the DC Plan with Chesapeake common stock, and an employee who is at least age 55 may elect for the matching contributions to be made in any one of the DC Plan’s investment options. The maximum compensation that can be deferred by employees under all of our deferred compensation plans, including the Chesapeake 401(k) Plan, is a total of 75% of base salary and 100% of performance bonus. The participant may choose separate deferral election percentages for both plans. We contributed $7 million, $8 million and $9 million to the DC Plan during 2018, 2017 and 2016, respectively, to fund the match. The deferred compensation company match of 15% has a five-year vesting schedule based on years of service. Any participant who is active on December 31 of the plan year will receive the deferred compensation company match which will be awarded on an annual basis. Any assets placed in trust by us to fund future obligations of our DC Plan are subject to the claims of creditors in the event of insolvency or bankruptcy, and participants are general creditors of the Company as to their deferred compensation in the plan. |
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 open oil, natural gas and NGL derivative instruments were designated for hedge accounting as of December 31, 2018 and 2017. Oil, Natural Gas and NGL Derivatives As of December 31, 2018 and 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 December 31, 2018 and 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). Contingent Consideration Arrangements In 2018, we sold our Utica Shale position to Encino. The agreement includes additional contingent payments to us of up to $100 million comprised of $50 million in consideration in each case if, on or prior to December 31, 2019, there is a period of twenty (20) trading days out of a period of thirty (30) consecutive trading days where (i) the average of the NYMEX natural gas strip prices for the months comprising the year 2022 equals or exceeds $3.00/mmbtu as calculated pursuant to the purchase agreement, and (ii) the average of the NYMEX natural gas strip price for the months comprising the year 2023 equals or exceeds $3.25/mmbtu as calculated pursuant to the purchase agreement. See Note 16 for further details regarding the transaction. Foreign Currency Derivatives During 2017, both our 6.25% Euro-denominated Senior Notes due 2017 and cross currency swaps for the same principal amount matured. Upon maturity of the notes, the counterparties paid us €246 million and we paid the counterparties $327 million. The terms of the cross currency swaps were based on the dollar/euro exchange rate on the issuance date of $1.3325 to €1.00. The swaps were designated as cash flow hedges and, because they were entirely effective in having eliminated any potential variability in our expected cash flows related to changes in foreign exchange rates, changes in their fair value did not impact earnings. Supply Contract Derivatives In 2016, we sold a long-term natural gas supply contract to a third party for cash proceeds of $146 million, which is included in marketing revenue as a realized gain. We reversed the cumulative unrealized gains, resulting in an unrealized loss of $297 million. Effect of Derivative Instruments – Consolidated Balance Sheets The following table presents the fair value and location of each classification of derivative instrument included in the consolidated balance sheets as of December 31, 2018 and 2017 on a gross basis and after same-counterparty netting:
As of December 31, 2018 and 2017, we did not have any cash collateral balances for these derivatives. Effect of Derivative Instruments – Consolidated Statements of Operations The components of oil, natural gas and NGL revenues for the years ended December 31, 2018, 2017 and 2016 are presented below:
The components of marketing revenues for the years ended December 31, 2018, 2017 and 2016 are presented below:
Gains as a result of changes in the fair value of our contingent consideration arrangements are recognized in loss on sale of oil and natural gas properties in the consolidated statement of operations. 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 December 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 December 31, 2018, we expect to transfer approximately $34 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 December 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 the Chesapeake revolving credit facility. The contracts entered into with these counterparties are secured by the same collateral that secures the Chesapeake revolving credit facility. 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. As of December 31, 2018, we posted an immaterial amount in letters of credit as collateral for our commodity derivatives. No cash was posted as collateral for our commodity derivatives. 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 December 31, 2018 and 2017:
A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during 2018 and 2017 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 market volatility. Changes in market volatility 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. The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts as of December 31, 2018:
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Capitalized Exploratory Well Costs |
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Extractive Industries [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized Exploratory Well Costs | Capitalized Exploratory Well Costs A summary of the changes in our capitalized well costs for the years ended December 31, 2018, 2017 and 2016 is detailed below. Additions pending the determination of proved reserves excludes amounts capitalized and subsequently charged to expense within the same year.
The following table provides an aging of capitalize costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling.
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Oil and Natural Gas Property Transactions |
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Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Oil and Natural Gas Property Transactions | Oil and Natural Gas Property Transactions 2018 Transactions We sold all of our approximately 1,500,000 gross (900,000 net) acres in Ohio, of which approximately 320,000 net acres are prospective for the Utica Shale with approximately 920 producing wells, along with related property and equipment (collectively, the “Designated Properties”) for net proceeds of $1.868 billion to Encino, with additional contingent payments to us of up to $100 million comprised of $50 million in consideration in each case if, on or prior to December 31, 2019, there is a period of twenty (20) trading days out of a period of thirty (30) consecutive trading days where (i) the average of the NYMEX natural gas strip prices for the months comprising the year 2022 equals or exceeds $3.00/mmbtu as calculated pursuant to the purchase agreement, and (ii) the average of the NYMEX natural gas strip prices for the months comprising the year 2023 equals or exceeds $3.25/mmbtu as calculated pursuant to the purchase agreement. We recognized a loss of approximately $273 million associated with the transaction. In 2018, 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 $491 million, subject to certain customary closing adjustments. Included in the sales were approximately 238,500 net acres and interests in approximately 3,200 wells. We recognized a gain of approximately $12 million associated with the transactions. Also, in 2018, we received proceeds of approximately $37 million subject to customary closing adjustments, for the sale of other oil and natural gas properties covering various operating areas. 2017 Transactions 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, and recognized a gain of approximately $326 million. 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 2017, we received proceeds of approximately $350 million, net of post-closing adjustments, for the sale of other oil and natural gas properties covering various operating areas. 2016 Transactions We conveyed our interests in the Barnett Shale operating area located in north central Texas and received from the buyer aggregate net proceeds of approximately $218 million and recognized a gain of approximately $192 million associated with the transaction. We sold approximately 212,000 net developed and undeveloped acres along with other property and equipment. We simultaneously terminated most of our future commitments associated with this asset. In connection with this disposition, we paid $361 million to terminate certain natural gas gathering and transportation agreements and paid $58 million to restructure a long-term sales agreement. We recognized $361 million of expense for the termination of contracts and deferred charges of $58 million for the restructured contract. The deferred charges will be amortized to marketing, gathering and compression revenue over the life of the agreement. Additionally, we recognized a charge of $284 million in 2016 related to the impairment of other fixed assets sold in the divestiture. We sold the majority of our upstream and midstream assets in the Devonian Shale located in West Virginia, Kentucky and Virginia for proceeds of $140 million. We sold an interest in approximately 1.3 million net acres, retaining all rights below the base of the Kope formation, and approximately 5,300 wells along with related gathering assets, and other property and equipment. Additionally, we recognized an impairment charge of $142 million in 2016 related to other fixed assets sold in the divestiture. In connection with this divestiture, we purchased the underlying interests in one of our remaining VPP transactions for $127 million. All of the acquired interests were conveyed in our divestiture and we no longer have any future obligations related to this VPP. Inclusive of the VPP, we recognized a gain of approximately $47 million associated with the transaction. We acquired oil and natural gas properties in the Haynesville Shale for approximately $85 million. We sold certain of our other noncore oil and natural gas properties for net proceeds of approximately $1.048 billion, after post-closing adjustments. In conjunction with certain of these sales, we purchased oil and natural gas interests previously sold to third parties in connection with four of our VPP transactions for approximately $259 million. Substantially all of the acquired interests were part of the asset divestitures discussed above and we no longer have any further commitments or obligations related to these VPPs. The asset divestitures cover various operating areas. Inclusive of the VPPs, we recognized a gain of approximately $351 million associated with the transactions. Assets Held for Sale As of December 31 2017, we had $128 million of our assets located in the Mid-Continent that satisfied criteria to be considered held for sale. We sold these assets in 2018. |
Other Property and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Property and Equipment | Other Property and Equipment Other Property and Equipment A summary of other property and equipment held for use and the estimated useful lives thereof is as follows:
___________________________________________ (a) Includes assets under capital lease of $27 million, less accumulated depreciation of $1 million, as of December 31, 2018. The related amortization expense for assets under capital lease is included in depreciation, depletion and amortization expense on our consolidated statement of operations. |
Investments |
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Dec. 31, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments | Investments In 2018, 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. In 2016, we recognized an other-than-temporary impairment of $119 million related to our Sundrop investment. |
Impairments |
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Asset Impairment Charges [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairments | Impairments Impairments of Oil and Natural Gas Properties A summary of our impairments of oil and natural gas properties for the years ended December 31, 2018, 2017 and 2016 is as follows:
(a) The impairment was the result of an updated development plan in 2017, which included a removal of PUDs from properties in the process of being divested in the Mid-Continent operating area. Impairments of Fixed Assets A summary of our impairments of fixed assets by asset class and other charges for the years ended December 31, 2018, 2017 and 2016 is as follows:
Natural Gas Compressors. In 2018, we recorded a $45 million impairment related to 890 compressors for the difference between carrying value and the fair value of the assets. In 2016, we recorded a $13 million impairment related to obsolescence of 205 compressors. Additionally in 2016, we recorded an $8 million impairment related to 155 compressors for the difference between the aggregate sales price and carrying value. Barnett Shale Exit Costs. In 2016, we conveyed our interests in the Barnett Shale operating area located in north central Texas and recognized an impairment charge of $284 million related to other fixed assets sold in the divestiture. Devonian Shale Exit Costs. In 2016, we sold the majority of our upstream and midstream assets in the Devonian Shale located in West Virginia and Kentucky. We recognized an impairment charge of $142 million in 2016 related to other fixed assets sold in the divestiture. Nonrecurring Fair Value Measurements. Fair value measurements for certain of the impairments were based on recent sales information for comparable assets. As the fair value was estimated using the market approach based on recent prices from orderly sales transactions for comparable assets between market participants, these values were classified as Level 2 in the fair value hierarchy. Other inputs used were not observable in the market; these values were classified as Level 3 in the fair value hierarchy. |
Other Operating Expenses |
12 Months Ended |
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Dec. 31, 2018 | |
Asset Impairment Charges [Abstract] | |
Other Operating Expenses | Other Operating Expense In 2017, we terminated future natural gas transportation commitments related to divested assets for cash payments of $126 million. Also in 2017, we paid $290 million to assign an oil transportation agreement to a third party. In 2016, we conveyed our interests in the Barnett Shale operating area located in north central Texas and simultaneously terminated most of our future commitments associated with this asset. As a result of this transaction, we recognized $361 million of charges related to the termination of natural gas gathering and transportation agreements. |
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 Reductions In 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 of approximately $38 million for one-time termination benefits. The following table summarizes our restructuring liabilities:
In 2016, we recognized $6 million of charges related to a reduction in workforce in connection with the restructuring of our compressor manufacturing subsidiary and the reductions in workforce resulting from the conveyance of our interests in the Barnett Shale and Devonian Shale operating areas. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 December 31, 2018 and 2017:
See Note 4 for information regarding fair value measurement of our debt instruments. See Note 14 for information regarding fair value measurement of our derivatives. Nonrecurring Fair Value Measurements See Note 19 regarding nonrecurring fair value measurements. |
Asset Retirement Obligations |
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Asset Retirement Obligation Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | Asset Retirement Obligations The components of the change in our asset retirement obligations are shown below:
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Major Customers |
12 Months Ended |
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Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Major Customers | Major Customers Sales to Valero Energy Corporation constituted approximately 10% of our total revenues (before the effects of hedging for the year ended December 31, 2018. Sales to Royal Dutch Shell PLC constituted approximately 10% of our total revenues (before the effects of hedging) for the year ended December 31, 2017. Sales to BP PLC constituted approximately 10% of our total revenues (before the effects of hedging) for the years ended December 31, 2016. |
Condensed Consolidating Financial Information |
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Condensed Financial Information 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 and contingent convertible senior notes listed in Note 4 are fully and unconditionally guaranteed, jointly and severally, by certain of our 100% owned subsidiaries on a senior unsecured basis. Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries are non-guarantors. The tables below are condensed consolidating financial statements for Chesapeake Energy Corporation (parent) on a stand-alone, unconsolidated basis, and its combined guarantor and combined non-guarantor subsidiaries as of December 31, 2018 and 2017 and for the years ended December 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 DECEMBER 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2017 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2017 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 ($ in millions)
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Subsequent Events |
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Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On January 31, 2019, our shareholders approved a proposal to amend our restated certificate of incorporation to increase the number of authorized shares of our stock from 2,000,000,000 shares to 3,000,000,000 shares. On February 1, 2019, we acquired WildHorse Resource Development Corporation (“WildHorse”), an oil and gas company with operations in the Eagle Ford Shale and Austin Chalk formations in southeast Texas for approximately 717.3 million shares of our common stock and $381 million in cash, and the assumption of WildHorse’s debt of $1.4 billion as of February 1, 2019. We funded the cash portion of the consideration through borrowings under our revolving credit facility. On February 1, 2019, we entered into a first amendment (the “Chesapeake facility amendment”) to our Chesapeake revolving credit facility. Among other things, the Chesapeake facility amendment (i) designated Brazos Valley Longhorn and its subsidiaries as unrestricted subsidiaries under the Chesapeake revolving credit facility and (ii) expressly permitted our initial investment in WildHorse under the limitations on investments covenant. As a result of Brazos Valley Longhorn and its subsidiaries being designated as unrestricted subsidiaries under the Chesapeake revolving credit facility, transactions between Brazos Valley Longhorn and its subsidiaries, on the one hand, and Chesapeake and its subsidiaries other than Brazos Valley Longhorn, BVL Finance Corp. and the other BVL Guarantors, on the other hand, are required to be on an arm’s-length basis, subject to certain exceptions, and Chesapeake is limited in the amount of investments it can make in Brazos Valley Longhorn and its subsidiaries. On February 1, 2019, Brazos Valley Longhorn, as successor by merger to WildHorse, entered into a sixth amendment (the “WildHorse facility amendment”) to the Wildhorse revolving credit facility. Among other things, the WildHorse facility amendment (i) amended the merger covenant and the definition of change of control to permit our acquisition of WildHorse and (ii) permits borrowings under the WildHorse revolving credit facility to be used to redeem or repurchase the WildHorse senior notes so long as certain conditions are met. On February 1, 2019, Brazos Valley Longhorn, as successor by merger to WildHorse, and BVL Finance Corp., entered into a fourth supplemental indenture (the “WildHorse supplemental indenture”) to the WildHorse indenture. Pursuant to the Wildhorse supplemental indenture, (i) Brazos Valley Longhorn assumed the rights and obligations of WildHorse as issuer under the WildHorse indenture and (ii) BVL Finance Corp. was named as a co-issuer of the WildHorse senior notes under the WildHorse indenture. We will account for the WildHorse acquisition by applying the acquisition method of accounting, which requires the acquired assets and liabilities to be recorded at fair value as of the acquisition date. |
Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements of Chesapeake were prepared in accordance with GAAP and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which Chesapeake has a controlling financial interest. Intercompany accounts and balances have been eliminated. |
Recast Financial Information for Change in Accounting Principle | Recast Financial Information for Change in Accounting Principle In the first quarter of 2019, we voluntarily changed our method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods presented herein has been recast to reflect retrospective application of the successful efforts method. Although the full cost method of accounting for oil and natural gas exploration and development activities continues to be an accepted alternative, the successful efforts method of accounting is the generally preferred method of the SEC and, because it is more widely used in the industry, we expect the change to improve the comparability of our financial statements to our peers. We also believe the successful efforts method provides a more representational depiction of assets and operating results and provides for our investments in oil and natural gas properties to be assessed for impairment in accordance with Accounting Standards Codification (ASC) Topic 360, Property Plant and Equipment, rather than valuations based on prices and costs prescribed under the full cost method as of the balance sheet date. For detailed information regarding the effects of the change to the successful efforts method, see Note 2. |
Accounting Estimates | Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures in the financial statements. Management evaluates its estimates and related assumptions regularly, including those related to the impairment of oil and natural gas properties, oil and natural gas reserves, derivatives, income taxes, unevaluated properties not subject to evaluation, impairment of other property and equipment, environmental remediation costs, asset retirement obligations, litigation and regulatory proceedings and fair values. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ significantly from these estimates. |
Consolidation | Consolidation We consolidate entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights and variable interest entities (VIEs) in which we are the primary beneficiary. We consolidate a VIE when we are the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to determine whether we own a variable interest in a VIE, we perform a qualitative analysis of the entity’s design, organizational structure, primary decision makers and relevant agreements. We continually monitor our consolidated VIE to determine if any events have occurred that could cause the primary beneficiary to change. See Note 11 for further discussion of our VIE. We use the equity method of accounting to record our net interests where we have the ability to exercise significant influence through our investment but lack a controlling financial interest. Under the equity method, our share of net income (loss) is included in our consolidated statements of operations according to our equity ownership or according to the terms of the applicable governing instrument. Undivided interests in oil and natural gas properties are consolidated on a proportionate basis. |
Segments | Segments Operating segments are defined as components of an enterprise that engage in activities from which it may earn revenues and incur expenses for which separate operational financial information is available and is regularly evaluated by the chief operating decision maker for the purpose of allocating an enterprise’s resources and assessing its operating performance. We have concluded that we have only one reportable operating segment, which is exploration and production because our marketing activities are ancillary to our operations. |
Noncontrolling Interests | Noncontrolling Interests Noncontrolling interests represent third-party equity ownership in certain of our consolidated subsidiaries and are presented as a component of equity. |
Cash and Cash Equivalents and Accounts Payable | Cash and Cash Equivalents For purposes of the consolidated financial statements, we consider investments in all highly liquid instruments with original maturities of three months or less at the date of purchase to be cash equivalents Accounts Payable Included in accounts payable as of December 31, 2018 and 2017 are liabilities of approximately $104 million and $92 million, respectively, representing the amount by which checks issued, but not yet presented to our banks for collection, exceeded balances in applicable bank accounts. |
Accounts Receivable | 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. See Note 8 for further discussion of our accounts receivable. |
Oil and Gas Natural Properties | Oil and Natural Gas Properties We follow the successful efforts method of accounting for our oil and natural gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals and exploration overhead are expensed as incurred. All costs related to production, general corporate overhead and similar activities are also expensed as incurred. All property acquisition costs and development costs are capitalized when incurred. Exploratory drilling costs are initially capitalized, or suspended, pending the determination of proved reserves. If proved reserves are found, drilling costs remain capitalized and are classified as proved properties. Costs of unsuccessful wells are charged to exploration expense. For exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operational viability of the project. If we determine that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed. In some instances, this determination may take longer than one year. We review the status of all suspended exploratory drilling costs quarterly. Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of oil and natural gas are capitalized. Costs of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are depreciated using the unit-of-production (UOP) method based on total estimated proved developed oil and gas reserves. Costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties, are depleted using the UOP method based on total estimated proved developed and undeveloped reserves. Proceeds from the sales of individual oil and natural gas properties and the capitalized costs of individual properties sold or abandoned are credited and charged, respectively, to accumulated depreciation, depletion and amortization, if doing so does not materially impact the depletion rate of an amortization base. Generally, no gain or loss is recognized until an entire amortization base is sold. However, a gain or loss is recognized from the sale of less than an entire amortization base if the disposition is significant enough to materially impact the depletion rate of the remaining properties in the amortization base. When circumstances indicate that the carrying value of proved oil and gas properties may not be recoverable, we compare unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based on our estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Fair value is generally estimated using the income approach described in the ASC 820, Fair Value Measurements. If applicable, we utilize prices and other relevant information generated by market transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future cash flows used for impairment reviews and related fair value measurements are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, and capital investment plans, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections that are then discounted to estimated fair value, using a discount rate believed to be consistent with those applied by market participants. We have classified these fair value measurements as Level 3 in the fair value hierarchy. |
Other Property and Equipment | Other Property and Equipment Other property and equipment consists primarily of buildings and improvements, land, vehicles, computers, natural gas compressors under capital lease and office equipment. Major renewals and betterments are capitalized while the costs of repairs and maintenance are charged to expense as incurred. Other property and equipment costs, excluding land, are depreciated on a straight-line basis and recorded within depreciation, depletion and amortization in the consolidated statement of operations. Natural gas compressors under capital lease are depreciated over the shorter of their estimated useful lives or the term of the related lease. Realization of the carrying value of other property and equipment is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset, including any disposal value, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. An estimate of fair value is based on the best information available, including prices for similar assets and discounted cash flow. |
Capitalized Interest | Capitalized Interest Interest from external borrowings is capitalized on significant investments in major development projects until the asset is ready for service using the weighted average borrowing rate of outstanding borrowings. Capitalized interest is determined by multiplying our weighted average borrowing cost on debt by the average amount of qualifying costs incurred. Capitalized interest is depreciated over the useful lives of the assets in the same manner as the depreciation of the underlying asset. |
Debt Issuance Costs | Debt Issuance Costs Included in other long-term assets are costs associated with the issuance and amendments of the Chesapeake revolving credit facility. The remaining unamortized issuance costs as of December 31, 2018 and 2017, totaled $30 million and $22 million, respectively, and are being amortized over the life of the Chesapeake revolving credit facility using the straight-line method. Included in debt are costs associated with the issuance of our senior notes. The remaining unamortized issuance costs as of December 31, 2018 and 2017, totaled $53 million and $63 million, respectively, and are being amortized over the life of the senior notes using the effective interest method. |
Litigation Contingencies | Litigation Contingencies We are subject to litigation and regulatory proceedings, claims and liabilities that arise in the ordinary course of business. We accrue losses associated with litigation and regulatory claims when such losses are probable and reasonably estimable. If we determine that a loss is probable and cannot estimate a specific amount for that loss but can estimate a range of loss, our best estimate within the range is accrued. Estimates are adjusted as additional information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred. |
Environmental Remediation Costs | Environmental Remediation Costs We record environmental reserves for estimated remediation costs related to existing conditions from past operations when the responsibility to remediate is probable and the costs can be reasonably estimated. Expenditures that create future benefits or contribute to future revenue generation are capitalized. |
Asset Retirement Obligations | Asset Retirement Obligations We recognize liabilities for obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction and development of the assets. We recognize the fair value of a liability for a retirement obligation in the period in which the liability is incurred. For oil and natural gas properties, this is the period in which an oil or natural gas well is acquired or drilled. The liability is then accreted each period until the liability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is capitalized as part of the carrying amount of our oil and natural gas properties. See Note 23 for further discussion of asset retirement obligations |
Revenue Recognition | Revenue Recognition 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. Prior to the adoption of Revenue from Contracts with Customers (Topic 606) on January 1, 2018, revenue from the sale of oil, natural gas and NGL was recognized when title passed 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 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 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 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 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. |
Fair Value Measurement | Fair Value Measurements Certain financial instruments are reported on a recurring basis at fair value on our consolidated balance sheets. We also use fair value measurements on a nonrecurring basis when a qualitative assessment of our assets indicates a potential impairment. Under fair value measurement accounting guidance, fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants (i.e. an exit price). To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels. Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability and have the lowest priority. The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). The carrying values of financial instruments comprising cash and cash equivalents, accounts payable and accounts receivable approximate fair values due to the short-term maturities of these instruments. |
Derivatives | Derivatives Derivative instruments are recorded at fair value, and changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are followed. As of December 31, 2018, none of our open derivative instruments were designated as cash flow hedges. Derivative instruments reflected as current in the consolidated balance sheets represent the estimated fair value of derivatives scheduled to settle over the next twelve months based on market prices/rates as of the respective balance sheet dates. Cash settlements of our derivative instruments are generally classified as operating cash flows unless the derivatives are deemed to contain, for accounting purposes, a significant financing element at contract inception, in which case these cash settlements are classified as financing cash flows in the accompanying consolidated statement of cash flows. All of our derivative instruments are subject to master netting arrangements by contract type which provide for the offsetting of asset and liability positions within each contract type, as well as related cash collateral if applicable, by counterparty. Therefore, we net the value of our derivative instruments by contract type with the same counterparty in the accompanying consolidated balance sheets. We have established the fair value of our derivative instruments using established index prices, volatility curves and discount factors. These estimates are compared to our counterparty values for reasonableness. The values we report in our financial statements are as of a point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. Derivative transactions are subject to the risk that counterparties will be unable to meet their obligations. This non-performance risk is considered in the valuation of our derivative instruments, but to date has not had a material impact on the values of our derivatives. |
Share-Based Compensation | Share-Based Compensation Our share-based compensation program consists of restricted stock, stock options, performance share units and cash restricted stock units granted to employees and restricted stock granted to non-employee directors under our Long Term Incentive Plan. We recognize the cost of employee services received in exchange for restricted stock and stock options based on the fair value of the equity instruments as of the grant date. For employees, this value is amortized over the vesting period, which is generally three years from the grant date. For directors, although restricted stock grants vest over three years, this value is recognized immediately as there is a non-substantive service condition for vesting. Because performance share units are settled in cash, they are classified as a liability in our consolidated financial statements and are measured at fair value as of the grant date and re-measured at fair value at the end of each reporting period. These fair value adjustments are recognized as general and administrative expense in the consolidated statements of operations. To the extent compensation expense relates to employees directly involved in the acquisition of oil and natural gas leasehold and development activities, these amounts are capitalized to oil and natural gas properties. Amounts not capitalized to oil and natural gas properties are recognized as general and administrative expense, oil, natural gas and NGL production expense, exploration expense, or marketing expense, based on the employees involved in those activities. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards The Financial Accounting Standards Board (FASB) issued 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. See Note 8 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 reform legislation commonly known as the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017 (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. This standard is effective for us beginning on January 1, 2019, and we will elect not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings. 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 plan to adopt this standard on January 1, 2019 and do not expect it to have an impact on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a lease liability and a right-of-use (ROU) asset on the balance sheet for all leases, including operating leases, with terms in excess of 12 months. This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors. The standard will not apply to our leases of mineral rights to explore for or use oil and natural gas resources, including the intangible rights to explore for those natural resources and rights to use the land in which those natural resources are contained. We plan to make certain elections permitting us to not reassess whether any expired or existing contracts contained leases, permitting us to not reassess the lease classification for any expired or existing leases (all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with Topic 840 will be classified as finance leases), and permitting us to not reassess initial direct costs for any existing leases. We will also take an election permitting us to continue applying our current policy for land easements that existed as of, or expired before, the effective date and to not recognize a ROU asset or lease liability for short-term leases. We have completed our assessment of contracts potentially affected by the new standard and have completed our assessment of the accounting treatment for these leases. The adoption will primarily impact other assets and other liabilities and will also impact ongoing disclosures but will not have a material impact on our balance sheet, results of operations or cash flows. We plan to adopt the new standard on January 1, 2019, the effective date, and as permitted by ASU 2018-11 we will not adjust comparative-period financial statements and will continue to apply the guidance in ASC 840, including its disclosure requirements, in the comparative periods presented prior to adoption. |
Reclassifications | Reclassifications Certain reclassifications have been made to the consolidated financial statements for 2017 and 2016 to conform to the presentation used for the 2018 consolidated financial statements. |
Change in Accounting Principle (Tables) |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in accounting principles | In the first quarter of 2019, we voluntarily changed our method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods presented herein has been recast to reflect retrospective application of the successful efforts method. In general, under the successful efforts method, exploration costs such as exploratory dry holes, exploratory geophysical and geological costs, delay rentals, unproved leasehold impairments and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. The successful efforts method also provides for the assessment of potential property impairments by comparing the net carrying value of oil and natural gas properties to associated projected undiscounted pre-tax future net cash flows. If the expected undiscounted pre-tax future net cash flows are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Under the full cost method of accounting, a write-down would be required if the net carrying value of oil and natural gas properties exceeds a full cost ceiling using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are generally recognized on the disposition of oil and natural gas property and equipment under the successful efforts method, as opposed to an adjustment to the net carrying value of the assets remaining under the full cost method. Our consolidated financial statements have been recast to reflect these differences.
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statements of operations was as follows:
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Earnings Per Share (Tables) |
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Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of dilutive securities excluded from calculation of diluted EPS | Shares of common stock for the following dilutive securities were excluded from the calculation of diluted EPS as the effect was antidilutive.
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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 December 31, 2018 and 2017:
Optional Conversion by Holders. Prior to maturity under certain circumstances and at the holder’s option, the notes are convertible. The notes may be converted into cash, our common stock, or a combination of cash and common stock, at our election. One triggering circumstance is when the price of our common stock exceeds a threshold amount during a specified period in a fiscal quarter. Convertibility based on common stock price is measured quarterly. During the fourth quarter of 2018, the price of our common stock was below the threshold level and, as a result, the holders do not have the option to convert their notes in the first quarter of 2019 under this provision. The notes are also convertible, at the holder’s option, during specified five-day periods if the trading price of the notes is below certain levels determined by reference to the trading price of our common stock. The notes were not convertible under this provision during the year ended December 31, 2018. Upon conversion of a convertible senior note, the holder will receive cash, common stock or a combination of cash and common stock, at our election, according to the conversion rate specified in the indenture. The common stock price conversion threshold amount for the convertible senior notes is 130% of the conversion price of $8.568. Optional Redemption by the Company. We may redeem the convertible senior notes for cash on or after September 15, 2019, if the price of our common stock exceeds 130% of the conversion price during a specified period at a redemption price of 100% of the principal amount of the notes. Holders’ Demand Repurchase Rights. The holders of our convertible senior notes may require us to repurchase, in cash, all or a portion of their notes at 100% of the principal amount of the notes upon certain fundamental changes.
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Schedule of debt maturities | Debt maturities for the next five years and thereafter are as follows:
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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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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of operating leases | The aggregate undiscounted minimum future lease payments are presented below:
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Schedule of undiscounted 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:
The aggregate undiscounted minimum future payments under this service contract is detailed below.
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Other Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other current liabilities | Other current liabilities as of December 31, 2018 and 2017 are detailed below:
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Other long-term liabilities | Other long-term liabilities as of December 31, 2018 and 2017 are detailed below:
____________________________________________
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Capital Lease Obligation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of capital lease undiscounted minimum future lease payments | The aggregate undiscounted minimum future lease payments are presented below:
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Revenue Recognition (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption of new revenue standard | In the first quarter of 2019, we voluntarily changed our method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods presented herein has been recast to reflect retrospective application of the successful efforts method. In general, under the successful efforts method, exploration costs such as exploratory dry holes, exploratory geophysical and geological costs, delay rentals, unproved leasehold impairments and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. The successful efforts method also provides for the assessment of potential property impairments by comparing the net carrying value of oil and natural gas properties to associated projected undiscounted pre-tax future net cash flows. If the expected undiscounted pre-tax future net cash flows are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Under the full cost method of accounting, a write-down would be required if the net carrying value of oil and natural gas properties exceeds a full cost ceiling using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are generally recognized on the disposition of oil and natural gas property and equipment under the successful efforts method, as opposed to an adjustment to the net carrying value of the assets remaining under the full cost method. Our consolidated financial statements have been recast to reflect these differences.
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statements 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 year ended December 31, 2018:
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Accounts receivable | Accounts receivable as of December 31, 2018 and 2017 are detailed below:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of the income tax provision (benefit) | The components of the income tax provision (benefit) for each of the periods presented below are as follows:
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Schedule of effective income tax expense (benefit) | The effective income tax expense (benefit) differed from the computed "expected" federal income tax expense on earnings before income taxes for the following reasons:
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Schedule of deferred tax assets and liabilities | The tax-effected temporary differences, tax credits and net operating loss carryforwards that comprise our deferred taxes are as follows:
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Reconciliation of unrecognized tax benefits | A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
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Equity (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in common shares issued | A summary of the changes in our common shares issued for the years ended December 31, 2018, 2017 and 2016 is detailed below:
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Summary of preferred stock | Following is a summary of our preferred stock, including the primary conversion terms as of December 31, 2018:
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Outstanding shares of our preferred stock for the years ended December 31, 2018, 2017 and 2016 are detailed below:
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Schedule of Accumulated Other Comprehensive Income (Loss) | For the years ended December 31, 2018 and 2017, changes in accumulated other comprehensive income (loss) for cash flow hedges, net of tax, are detailed below:
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Share-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in unvested restricted stock | A summary of the changes in unvested restricted stock during 2018, 2017 and 2016 is presented below:
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Schedule of share-based payment assumptions | We used the following weighted average assumptions to estimate the grant date fair value of the stock options granted in 2018:
We utilized a Monte Carlo simulation for the TSR performance measure and the following assumptions to determine the grant date fair value and the reporting date fair value of the 2017 awards. The performance period for the 2016 awards ended on December 31, 2018 and the TSR component has been finalized.
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Schedule of information related to stock option activity | The following table provides information related to stock option activity for 2018, 2017 and 2016:
___________________________________________
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Schedule of compensation costs (credit), net of actual forfeitures | We recognized the following compensation costs (credits), net of actual forfeitures, related to our liability-classified awards for the years ended December 31, 2018, 2017 and 2016:
We recognized the following compensation costs, net of actual forfeitures, related to restricted stock and stock options for the years ended December 31, 2018, 2017 and 2016:
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Summary of liability-classified awards | The following table presents a summary of our liability-classified awards:
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Derivative and Hedging Activities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair value of oil, natural gas and NGL derivative instrument asset (liabilities) | The estimated fair values of our oil, natural gas and NGL derivative instrument assets (liabilities) as of December 31, 2018 and 2017 are provided below:
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Schedule of effects of dividend instruments in consolidated balance sheets | The following table presents the fair value and location of each classification of derivative instrument included in the consolidated balance sheets as of December 31, 2018 and 2017 on a gross basis and after same-counterparty netting:
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Schedule of effects of derivative instruments in consolidated statements of operations | The components of marketing revenues for the years ended December 31, 2018, 2017 and 2016 are presented below:
The components of oil, natural gas and NGL revenues for the years ended December 31, 2018, 2017 and 2016 are presented below:
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Schedule of effects of derivative instruments in 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 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 December 31, 2018 and 2017:
A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during 2018 and 2017 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 December 31, 2018 and 2017:
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Schedule of quantitative information about Level 3 inputs used in fair value measurement of commodity contracts | The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts as of December 31, 2018:
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Capitalized Exploratory Well Costs (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Extractive Industries [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in capitalized well costs | A summary of the changes in our capitalized well costs for the years ended December 31, 2018, 2017 and 2016 is detailed below. Additions pending the determination of proved reserves excludes amounts capitalized and subsequently charged to expense within the same year.
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Schedule of aging of capitalize costs and the number of projects for which exploratory well costs have been capitalized | The following table provides an aging of capitalize costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling.
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Other Property and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of other property and equipment held for use and estimated useful lives | A summary of other property and equipment held for use and the estimated useful lives thereof is as follows:
___________________________________________ (a) Includes assets under capital lease of $27 million, less accumulated depreciation of $1 million, as of December 31, 2018. The related amortization expense for assets under capital lease is included in depreciation, depletion and amortization expense on our consolidated statement of operations. |
Impairments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Impairment Charges [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of impairments | A summary of our impairments of fixed assets by asset class and other charges for the years ended December 31, 2018, 2017 and 2016 is as follows:
A summary of our impairments of oil and natural gas properties for the years ended December 31, 2018, 2017 and 2016 is as follows:
(a) The impairment was the result of an updated development plan in 2017, which included a removal of PUDs from properties in the process of being divested in the Mid-Continent operating area. |
Restructuring and Other Termination Costs (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Summary of restructuring liabilities | The following table summarizes our restructuring liabilities:
|
Fair Value Measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 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 December 31, 2018 and 2017:
A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during 2018 and 2017 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 December 31, 2018 and 2017:
|
Asset Retirement Obligations (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of asset retirement obligations | The components of the change in our asset retirement obligations are shown below:
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Condensed Consolidating Financial Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed consolidated balance sheets | CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 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 YEAR ENDED DECEMBER 31, 2017 ($ in millions)
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Condensed consolidated cash flow statements | CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2018 ($ in millions)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 ($ in millions)
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Basis of Presentation and Summary of Significant Accounting Policies - Narrative (Details) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018
USD ($)
segment
|
Dec. 31, 2017
USD ($)
|
|
Summary of Significant Accounting Policies [Table] [Line Items] | ||
Number of reportable segments | segment | 1 | |
Bank overdrafts | $ 104 | $ 92 |
Unamortized issuance costs, senior notes | $ 53 | 63 |
Revenue, payment terms | 30 | |
Employee [Member] | ||
Summary of Significant Accounting Policies [Table] [Line Items] | ||
Vesting period | 3 years | |
Director [Member] | ||
Summary of Significant Accounting Policies [Table] [Line Items] | ||
Vesting period | 3 years | |
Other noncurrent assets [Member] | ||
Summary of Significant Accounting Policies [Table] [Line Items] | ||
Unamortized issuance costs | $ 30 | $ 22 |
Earnings Per Share - Antidilutive Securities Excluded from Computation of EPS Table (Details) - shares shares in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Convertible preferred stock [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities securities (in shares) | 0 | 1 | 37 |
Convertible debt securities [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities securities (in shares) | 146 | 146 | 146 |
Restricted stock [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities securities (in shares) | 1 | 1 | 1 |
Preferred stock [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities securities (in shares) | 60 | 60 | 63 |
Debt - Debt Maturities (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-term Debt, Fiscal Year Maturity [Abstract] | ||
2019 | $ 381 | |
2020 | 664 | |
2021 | 815 | |
2022 | 451 | |
2023 | 757 | |
Thereafter | 5,100 | |
Total | $ 8,168 | $ 9,981 |
Debt - Senior Notes and Convertible Senior Notes (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-Term Debt Instrument [Line Items] | ||
Debt, principal | $ 8,168 | $ 9,981 |
Minimum [Member] | Convertible debt [Member] | ||
Long-Term Debt Instrument [Line Items] | ||
Debt, principal | 50 | |
Maximum [Member] | Convertible debt [Member] | ||
Long-Term Debt Instrument [Line Items] | ||
Debt, principal | $ 75 |
Contingencies - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 20, 2017 |
Dec. 31, 2018 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Settlement amount | $ 35 | |
Chaparral Energy, Inc. [Member] | Healthcare of Ontario Pension Plan (HOOPP) [Member] | Pending litigation [Member] | ||
Loss Contingencies [Line Items] | ||
Damages sought, value | $ 215 |
Commitments - Operating Leases (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Operating Leases, Future Minimum Payments Due [Abstract] | |||
2019 | $ 3 | ||
2020 | 1 | ||
Total | 4 | ||
Operating lease expense | $ 4 | $ 3 | $ 5 |
Commitments - Gathering, Processing and Transportation Agreements and Service Contract (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Gathering, Processing and Transportation Agreement [Member] | |
Other Commitment, Fiscal Year Maturity [Abstract] | |
2019 | $ 832 |
2020 | 774 |
2021 | 683 |
2022 | 581 |
2023 | 470 |
2024 – 2034 | 2,431 |
Total | 5,771 |
Service Contract [Member] | |
Other Commitment, Fiscal Year Maturity [Abstract] | |
2019 | 5 |
2020 | 5 |
2021 | 5 |
Total | $ 15 |
Other Liabilities - Current Table (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Revenues and royalties due others | $ 687 | $ 612 |
Accrued drilling and production costs | 258 | 216 |
Joint interest prepayments received | 73 | 74 |
VPP deferred revenue(a) | 59 | 63 |
Accrued compensation and benefits | 202 | 214 |
Other accrued taxes | 108 | 43 |
Other | 212 | 296 |
Total other current liabilities | $ 1,599 | $ 1,518 |
Other Liabilities - Long-Term Table (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Other Liabilities [Abstract] | |||
VPP deferred revenue(a) | $ 63 | $ 122 | |
CHK Utica ORRI conveyance obligation | 0 | 156 | |
Unrecognized tax benefits | 53 | 101 | |
Other | 103 | 97 | |
Total other long-term liabilities | 219 | 476 | |
Other income | 67 | $ 6 | $ 5 |
ORRI [Member] | |||
Other Liabilities [Abstract] | |||
CHK Utica ORRI conveyance obligation | 183 | ||
Consideration | 199 | ||
Conveyance obligation, noncurrent | 30 | ||
Conveyance obligation, current | 153 | ||
Other income | 61 | ||
ORRI [Member] | Oil and Gas Properties [Member] | |||
Other Liabilities [Abstract] | |||
Capitalized costs, proved properties | 77 | ||
ORRI [Member] | Liability [Member] | |||
Other Liabilities [Abstract] | |||
Extinguishment of liabilities | $ 122 |
Capital Lease Obligation (Details) - Midcon Compression, L.L.C. [Member] - Natural gas compressors [Member] $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Capital Leased Assets [Line Items] | |
Lease terms | 38 months |
Minimum Lease Payments, Sale Leaseback Transactions [Abstract] | |
2019 | $ 10 |
2020 | 10 |
2021 | 10 |
Total minimum lease payments | 30 |
Less imputed interest | (3) |
Present value of minimum lease payments | 27 |
Less current maturities | (10) |
Present value of minimum lease payment, less current maturities | $ 17 |
Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions |
Jan. 01, 2018 |
Jan. 01, 2017 |
Jan. 01, 2016 |
---|---|---|---|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Cumulative effect of change in accounting principle | $ (91) | ||
Retained Earnings [Member] | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Cumulative effect of change in accounting principle | $ (8) | $ 0 | $ 2,952 |
ASU 2014-09 [Member] | Retained Earnings [Member] | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Cumulative effect of change in accounting principle | $ (8) |
Revenue Recognition - Impact of Adoption on Balance Sheet and Statement of Operations (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Revenue from contracts with customers | $ 5,189 | ||
Marketing [Member] | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Revenue from contracts with customers | 5,076 | ||
Marketing | 5,158 | $ 4,598 | $ 4,778 |
Marketing [Member] | Calculated under revenue guidance in effect before Topic 606 [Member] | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Revenue from contracts with customers | 5,871 | ||
Marketing | 5,953 | ||
Marketing [Member] | 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] | |||
Revenue from contracts with customers | (795) | ||
Marketing | $ (795) |
Revenue Recognition - Accounts Receivable (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Disaggregation of Revenue [Line Items] | ||
Allowance for doubtful accounts | $ (17) | $ (30) |
Accounts receivable, net | 1,247 | 1,322 |
Oil, Natural Gas and NGL Sales [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable, gross | 976 | 959 |
Joint interest billings [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable, gross | 211 | 209 |
Other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Accounts receivable, gross | $ 77 | $ 184 |
Income Taxes - Income Tax Provision (Benefit) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Current | |||
Federal | $ 0 | $ (14) | $ (14) |
State | 0 | 5 | (5) |
Current Income Taxes | 0 | (9) | (19) |
Deferred | |||
Federal | 3 | 13 | (147) |
State | (13) | (2) | (24) |
Deferred Income Taxes | (10) | 11 | (171) |
Total | $ (10) | $ 2 | $ (190) |
Income Taxes - Effective Income Tax Expense (Benefit) Table (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Federal statutory rate | 21.00% | 35.00% | 35.00% |
Effective Income Tax Rate Reconciliation, Amount [Abstract] | |||
Income tax expense (benefit) at the federal statutory rate (21%, 35%, 35%) | $ 45 | $ (175) | $ (1,288) |
State income taxes (net of federal income tax benefit) | 27 | 5 | 33 |
Remeasurement of deferred tax assets and liabilities | 0 | 931 | 0 |
Change in valuation allowance | (97) | (771) | 1,042 |
Other | 15 | 12 | 23 |
Total Income Tax Expense (Benefit) | $ (10) | $ 2 | $ (190) |
Income Taxes - Deferred Tax Assets and Liabilities Table (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred tax liabilities: | ||
Property, plant and equipment | $ (976) | $ (580) |
Volumetric production payments | (86) | (83) |
Carrying value of debt | (95) | 0 |
Derivative instruments | (56) | 0 |
Other | (7) | (20) |
Deferred tax liabilities | (1,220) | (683) |
Deferred tax assets: | ||
Net operating loss carryforwards | 2,737 | 2,248 |
Carrying value of debt | 0 | 161 |
Disallowed business interest carryforward | 194 | 0 |
Asset retirement obligations | 40 | 42 |
Investments | 111 | 140 |
Derivative instruments | 0 | 18 |
Accrued liabilities | 89 | 125 |
Other | 60 | 71 |
Deferred tax assets | 3,231 | 2,805 |
Valuation allowance | (2,011) | (2,119) |
Deferred tax assets after valuation allowance | 1,220 | 686 |
Net deferred tax assets | $ 0 | $ 3 |
Income Taxes - Unrecognized Tax Benefits Table (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Reconciliation of Unrecognized Tax Benefits [Roll Forward] | |||
Unrecognized tax benefits at beginning of period | $ 106 | $ 202 | $ 280 |
Additions based on tax positions related to the current year | 0 | 0 | 0 |
Additions to tax positions of prior years | 0 | 4 | 33 |
Settlements | 0 | (100) | (111) |
Expiration of the applicable statute of limitations | (23) | 0 | 0 |
Reductions to tax positions of prior years | (4) | 0 | 0 |
Unrecognized tax benefits at end of period | $ 79 | $ 106 | $ 202 |
Related Parties Transactions - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
FTS International, Inc. [Member] | |||
Related Party Transaction [Line Items] | |||
Related party transaction, expenses | $ 93 | $ 111 | $ 3 |
Equity - AOCI Changes Net of Tax Table (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||
Accumulated other comprehensive income (loss), beginning balance | $ (57) | ||
Net other comprehensive income | 34 | $ 39 | $ 3 |
Accumulated other comprehensive income (loss), ending balance | (23) | (57) | |
Accumulated net gain (loss) from cash flow hedges | |||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||
Accumulated other comprehensive income (loss), beginning balance | (57) | (96) | |
Other comprehensive income before reclassifications | 0 | 5 | |
Amounts reclassified from accumulated other comprehensive income | 34 | 34 | |
Net other comprehensive income | 34 | 39 | |
Accumulated other comprehensive income (loss), ending balance | $ (23) | $ (57) | $ (96) |
Equity - Noncontrolling Interests Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Noncontrolling Interest [Line Items] | |||
Noncontrolling interests | $ 41 | $ 44 | |
Net income attributable to noncontrolling interests | $ 2 | $ 3 | $ 3 |
Noncontrolling Interest, Chesapeake Granite Wash Trust [Member] | |||
Noncontrolling Interest [Line Items] | |||
Common unit, outstanding (in units) | 23,750,000 | ||
Beneficial interest percent | 51.00% |
Share-Based Compensation - Restricted Stock (Details) - Restricted stock [Member] - $ / shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Shares of Unvested Restricted Stock | |||
Unvested restricted stock, beginning balance (in shares) | 13,178 | 9,092 | 10,455 |
Granted (in shares) | 6,067 | 9,872 | 4,604 |
Vested (in shares) | (5,808) | (4,573) | (4,692) |
Forfeited (in shares) | (1,579) | (1,213) | (1,275) |
Unvested restricted stock, ending balance (in shares) | 11,858 | 13,178 | 9,092 |
Weighted Average Grant Date Fair Value | |||
Unvested restricted stock, beginning balance (in usd per share) | $ 6.37 | $ 11.39 | $ 17.31 |
Granted (in usd per share) | 3.73 | 5.40 | 4.58 |
Vested (in usd per share) | 7.67 | 13.73 | 17.23 |
Forfeited (in usd per share) | 6.02 | 8.32 | 13.91 |
Unvested restricted stock, ending balance (in usd per share) | $ 4.43 | $ 6.37 | $ 11.39 |
Share-Based Compensation - Equity-Classified Valuation (Details) - Employee Stock Option [Member] |
12 Months Ended |
---|---|
Dec. 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 - Liability-Classified Awards Assumptions (Details) - 2017 Awards [Member] |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Grant Date Assumptions [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% |
Reporting Period Assumptions [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Volatility | 64.69% |
Risk-free interest rate | 2.63% |
Dividend yield | 0.00% |
Share-Based Compensation - Liability-Classified Awards (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Jan. 01, 2018 |
---|---|---|
Performance Shares [Member] | Award Year 2018, Payable 2019, 2020 and 2021 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 3,959,647 | |
Fair value | $ 11 | $ 12 |
Vested Liability | $ 0 | |
Performance Shares [Member] | Award Year 2017, Payable 2020 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 1,217,774 | |
Fair value | $ 3 | 8 |
Vested Liability | $ 1 | |
Performance Shares [Member] | Award Year 2016, Payable 2019 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Units | 2,348,893 | |
Fair value | $ 6 | 10 |
Vested Liability | $ 4 | |
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 | 15,189,197 | |
Fair value | $ 32 | $ 46 |
Vested Liability | $ 0 |
Share-Based Compensation - Liability-Classified Compensation (Details) - Performance Shares [Member] - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | $ 12 | $ (4) | $ 15 |
General and administrative expense [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | 9 | (4) | 14 |
Oil and natural gas properties [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | 1 | 0 | 0 |
Oil, natural gas and NGL production expenses [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | 2 | 0 | 0 |
Restructuring and other termination costs [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | $ 0 | $ 0 | $ 1 |
Derivative and Hedging Activities - Oil, Natural Gas and NGL Revenues (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Derivative [Line Items] | ||||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | $ (34) | |||
Revenues | 10,030 | $ 10,039 | $ 8,705 | |
Oil, Natural Gas and NGL Sales [Member] | ||||
Derivative [Line Items] | ||||
Losses on terminated cash flow hedges | (34) | (34) | (33) | |
Oil, Natural Gas and NGL [Member] | ||||
Derivative [Line Items] | ||||
Results of Operations, Revenue from Oil and Gas Producing Activities | 5,189 | 4,574 | $ 3,866 | |
Revenues | 5,155 | 4,985 | 3,288 | |
Not designated as hedging instrument [Member] | Oil, Natural Gas and NGL Sales [Member] | Commodity contract [Member] | ||||
Derivative [Line Items] | ||||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | $ 0 | $ 445 | $ (545) |
Derivative and Hedging Actitities - Marketing, Gathering and Compression Revenues (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Derivative [Line Items] | ||||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | $ (34) | |||
Revenue from contracts with customers | 5,189 | |||
Revenues | 10,030 | $ 10,039 | $ 8,705 | |
Marketing, Gathering And Compression [Member] | Supply Contract [Member] | ||||
Derivative [Line Items] | ||||
Gains (losses) on undesignated oil, natural gas and NGL derivatives | 0 | 0 | (297) | |
Marketing [Member] | ||||
Derivative [Line Items] | ||||
Revenues | 5,069 | 4,511 | $ 4,881 | |
Gains (losses) on undesignated oil, natural gas and NGL derivatives | 7 | 0 | 0 | |
Revenue from contracts with customers | 5,076 | |||
Revenues | $ 5,076 | $ 4,511 | $ 4,584 |
Capitalized Exploratory Well Costs - Changes In Capitalized Well Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Changes in Capitalized Well Costs | |||
Beginning balance | $ 36,000 | $ 41,000 | $ 48,000 |
Additions pending the determination of proved reserves | 74,000 | 14,000 | 15,000 |
Divestitures and other | 0 | 0 | 0 |
Reclassifications to proved properties | (40,000) | (19,000) | (22,000) |
Charges to exploration expense | (34,000) | 0 | 0 |
Ending balance | 36,000 | 36,000 | 41,000 |
Exploratory well costs capitalized for a period greater than one year | $ 2,000 | $ 32,000 | $ 39,000 |
Capitalized Exploratory Well Costs - Aging of Capitalized Costs (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
project
|
Dec. 31, 2017
USD ($)
project
|
Dec. 31, 2016
USD ($)
project
|
Dec. 31, 2015
USD ($)
|
---|---|---|---|---|
Extractive Industries [Abstract] | ||||
Exploratory well costs capitalized for a period of one year or less | $ 34,000 | $ 4,000 | $ 2,000 | |
Exploratory well costs capitalized for a period greater than one year | 2,000 | 32,000 | 39,000 | |
Exploratory well costs capitalized | $ 36,000 | $ 36,000 | $ 41,000 | $ 48,000 |
Number of projects with exploratory well costs capitalized for a period greater than one year | project | 7 | 6 | 5 |
Investments - Narrative (Details) - USD ($) shares in Millions, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Schedule of Equity Method Investments [Line Items] | |||
Proceeds from sales of investments | $ 74 | $ 0 | $ 0 |
FTS International, Inc. [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Investment, ownership percentage | 20.00% | 29.00% | |
Investment, realized gain (loss) | $ 61 | ||
Number of shares sold (in shares) | 4.3 | ||
Proceeds from sales of investments | $ 74 | ||
Shares owned (in shares) | 22.0 | ||
FTS International, Inc. [Member] | IPO [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Investment, ownership percentage | 24.00% | ||
Investment, realized gain (loss) | $ 78 | ||
Sundrop Fuels, Inc. [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Impairments of investments | $ 119 |
Impairments - Impairments of Oil and Natural Gas Properties (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | |||
Total impairments of oil and natural gas properties | $ 78 | $ 809 | $ 102 |
Impairments due to lower forecasted commodity prices [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total impairments of oil and natural gas properties | 23 | 27 | 73 |
Impairments due to reduction in future development [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total impairments of oil and natural gas properties | 0 | 560 | 0 |
Impairments due to anticipated sale [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total impairments of oil and natural gas properties | $ 55 | $ 222 | $ 29 |
Impairments - Fixed Assets and Other Table (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | |||
Asset impairment | $ 53 | $ 5 | $ 461 |
Natural gas compressors [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | 45 | 0 | 21 |
Barnett Shale exit costs [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | 0 | 0 | 284 |
Devonian Shale exit costs [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | 0 | 0 | 142 |
Gathering systems [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | 0 | 0 | 3 |
Buildings and land [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | 4 | 5 | 11 |
Other [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | $ 4 | $ 0 | $ 0 |
Impairments - Narrative (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018
USD ($)
compressor
|
Dec. 31, 2017
USD ($)
compressor
|
Dec. 31, 2016
USD ($)
compressor
|
|
Property, Plant and Equipment [Line Items] | |||
Asset impairment | $ 53 | $ 5 | $ 461 |
Natural gas compressors, difference between carrying value and fair value [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | $ 45 | $ 8 | |
Equipment, number of units | compressor | 890 | 155 | |
Natural gas compressors, obsolete [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Asset impairment | $ 13 | ||
Equipment, number of units | compressor | 205 | ||
Barnett Shale exit costs [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Impairment charge | $ 284 | ||
Devonian Shale exit costs [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Impairment charge | $ 142 |
Other Operating Expenses - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Transportation equipment [Member] | Natural gas [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Loss on contract termination | $ 126 | |
Transportation equipment [Member] | Oil [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Loss on contract termination | $ 290 | |
Other, Barnett Shale exit costs, termination of Gathering Agreement [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Loss on contract termination | $ 361 |
Restructuring and Other Termination Costs (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Jan. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Restructuring and Related Activities [Abstract] | ||||
Restructuring and other termination costs, number of positions eliminated, period percent | 13.00% | |||
Restructuring Reserve [Roll Forward] | ||||
Balance as of December 31, 2017 | $ 0 | |||
Restructuring and other termination costs | $ 38 | 38 | $ 0 | $ 6 |
Termination benefits paid | (38) | |||
Balance as of December 31, 2018 | $ 0 | $ 0 |
Asset Retirement Obligations (Details) - USD ($) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | |||||
Asset retirement obligations, beginning of period | $ 166 | $ 177 | $ 166 | $ 177 | $ 261 |
Additions | 3 | 5 | |||
Revisions | 11 | (34) | |||
Settlements and disposals | (35) | (70) | |||
Accretion expense | 10 | 15 | |||
Asset retirement obligations, end of period | $ 166 | $ 177 | |||
Less current portion | 11 | 15 | |||
Asset retirement obligation, long-term | $ 155 | $ 162 |
Major Customers - Narrative (Details) - segment |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Revenue, Major Customer [Line Items] | |||
Number of reportable segments | 1 | ||
Valero Energy Corporation [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration risk, percentage | 10.00% | ||
Royal Dutch Shell PLC [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration risk, percentage | 10.00% | ||
BP PLC [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration risk, percentage | 10.00% |
Condensed Consolidating Financial Information - Narrative (Details) |
Dec. 31, 2018 |
---|---|
Senior notes [Member] | |
Condensed Financial Statements, Captions [Line Items] | |
Noncontrolling Interest, Ownership Percentage by Parent | 100.00% |
Subsequent Events - Narrative (Details) - USD ($) $ in Millions |
Feb. 01, 2019 |
Jan. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Subsequent Event [Line Items] | ||||
Common stock, shares authorized (in shares) | 2,000,000,000 | 2,000,000,000 | ||
Subsequent event [Member] | ||||
Subsequent Event [Line Items] | ||||
Common stock, shares authorized (in shares) | 3,000,000,000 | |||
Subsequent event [Member] | Wildhorse Resource Development Corporation [Member] | ||||
Subsequent Event [Line Items] | ||||
Acquisition, consideration transferred, common stock (in shares) | $ 717.3 | |||
Acquisition, consideration transferred, cash | 381.0 | |||
Acquisition, debt assumed | $ 1,400.0 |
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