Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

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, convertible senior notes and Chesapeake revolving credit facility listed in Note 6 are fully and unconditionally guaranteed, jointly and severally, by certain of our 100% owned subsidiaries. Our BVL subsidiaries are not guarantors of Chesapeake’s indebtedness and are subject to covenants under the BVL credit agreement and BVL indenture. Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries are also 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 June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018. 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 JUNE 30, 2019

($ in millions)



	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	9	$	1	$	2	$	(8	)	$	4
Other current assets	54		1,229		97		—			1,380
Intercompany receivable, net	6,321		—		—		(6,321		)	—
Total Current Assets	6,384		1,230		99		(6,329		)	1,384
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, at cost based on successful efforts accounting, net	—		9,556		4,132		—			13,688
Other property and equipment, net	—		1,061		84		—			1,145
Property and equipment held for sale, net	—		12		—		—			12
Total Property and Equipment, Net	—		10,629		4,216		—			14,845
LONG-TERM ASSETS:
Other long-term assets	327		247		24		(287		)	311
Investments in subsidiaries and intercompany advances	5,982		2,338		—		(8,320		)	—
TOTAL ASSETS	$	12,693	$	14,444	$	4,339	$	(14,936	)	$	16,540

CURRENT LIABILITIES:
Current liabilities	$	137	$	1,841	$	250	$	(8	)	$	2,220
Intercompany payable, net	—		6,321		—		(6,321		)	—
Total Current Liabilities	137		8,162		250		(6,329		)	2,220
LONG-TERM LIABILITIES:
Long-term debt, net	8,311		—		1,390		—			9,701
Other long-term liabilities	54		300		322		(287		)	389
Total Long-Term Liabilities	8,365		300		1,712		(287		)	10,090
EQUITY:
Chesapeake stockholders’ equity	4,191		5,982		2,338		(8,320		)	4,191
Noncontrolling interests	—		—		39		—			39
Total Equity	4,191		5,982		2,377		(8,320		)	4,230
TOTAL LIABILITIES AND EQUITY	$	12,693	$	14,444	$	4,339	$	(14,936	)	$	16,540

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2018

($ in millions)



	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

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2019

($ in millions)



	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	1,218	$	236		$	—		$	1,454
Marketing	—			916		—			—			916
Total Revenues	—			2,134		236			—			2,370
Other	—			15		—			—			15
Gains on sales of assets	—			1		—			—			1
Total Revenues and Other	—			2,150		236			—			2,386
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			138		28			—			166
Oil, natural gas and NGL gathering, processing and transportation	—			265		6			—			271
Production taxes	—			30		10			—			40
Exploration	—			16		(1		)	—			15
Marketing	—			940		—			—			940
General and administrative	—			65		24			—			89
Provision for legal contingencies, net	—			3		—			—			3
Depreciation, depletion and amortization	—			439		141			—			580
Impairments	—			1		—			—			1
Other operating expense	—			3		—			—			3
Total Operating Expenses	—			1,900		208			—			2,108
INCOME FROM OPERATIONS	—			250		28			—			278
OTHER INCOME (EXPENSE):
Interest income (expense)	(160		)	5		(20		)	—			(175		)
Losses on investments	—			—		(23		)	—			(23		)
Other income	—			16		2			—			18
Equity in net earnings of subsidiary	281			10		—			(291		)	—
Total Other Income (Expense)	121			31		(41		)	(291		)	(180		)
INCOME(LOSS) BEFORE INCOME TAXES	121			281		(13		)	(291		)	98
INCOME TAX (BENEFIT) EXPENSE	23			—		(23		)	—			—
NET INCOME	98			281		10			(291		)	98
Net income attributable to noncontrolling interests	—			—		—			—			—
NET INCOME ATTRIBUTABLE TO CHESAPEAKE	98			281		10			(291		)	98
Other comprehensive income	—			8		—			—			8
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHESAPEAKE	$	98		$	289	$	10		$	(291	)	$	106

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2018

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	978		$	4		$	—	$	982
Marketing	—			1,273			—			—		1,273
Total Revenues	—			2,251			4			—		2,255
Other	—			16			—			—		16
Gains on sales of assets	—			18			—			—		18
Total Revenues and Other	—			2,285			4			—		2,289
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			138			—			—		138
Oil, natural gas and NGL gathering, processing and transportation	—			338			2			—		340
Production taxes	—			26			—			—		26
Exploration	—			20			—			—		20
Marketing	—			1,292			—			—		1,292
General and administrative	—			104			1			—		105
Provision for legal contingencies, net	—			4			—			—		4
Depreciation, depletion and amortization	—			470			1			—		471
Impairments	—			54			—			—		54
Other operating income	—			(1		)	—			—		(1		)
Total Operating Expenses	—			2,445			4			—		2,449
INCOME FROM OPERATIONS	—			(160		)	—			—		(160		)
OTHER INCOME (EXPENSE):
Interest expense	(155		)	—			—			—		(155		)
Other income	—			57			—			—		57
Equity in net earnings of subsidiary	(103		)	—			(1		)	104		—
Total Other Income (Expense)	(258		)	57			(1		)	104		(98		)
LOSS BEFORE INCOME TAXES	(258		)	(103		)	(1		)	104		(258		)
INCOME TAX BENEFIT	(9		)	—			—			—		(9		)
NET LOSS	(249		)	(103		)	(1		)	104		(249		)
Net (income) loss attributable to noncontrolling interests	—			(1		)	1			—		—
NET LOSS ATTRIBUTABLE TO CHESAPEAKE	(249		)	(104		)	—			104		(249		)
Other comprehensive income	—			7			—			—		7
COMPREHENSIVE LOSS ATTRIBUTABLE TO CHESAPEAKE	$	(249	)	$	(97	)	$	—		$	104	$	(242	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2019

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	2,068		$	315		$	—		$	2,383
Marketing	—			2,149			—			—			2,149
Total Revenues	—			4,217			315			—			4,532
Other	—			30			—			—			30
Gains on sales of assets	—			20			—			—			20
Total Revenues and Other	—			4,267			315			—			4,582
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			255			43			—			298
Oil, natural gas and NGL gathering, processing and transportation	—			534			11			—			545
Production taxes	—			58			16			—			74
Exploration	—			36			3			—			39
Marketing	—			2,170			—			—			2,170
General and administrative	—			150			42			—			192
Provision for legal contingencies, net	—			3			—			—			3
Depreciation, depletion and amortization	—			874			225			—			1,099
Impairments	—			2			—			—			2
Other operating expense	—			26			38			—			64
Total Operating Expenses	—			4,108			378			—			4,486
INCOME (LOSS) FROM OPERATIONS	—			159			(63		)	—			96
OTHER INCOME (EXPENSE):
Interest income (expense)	(314		)	10			(32		)	—			(336		)
Losses on investments	—			—			(24		)	—			(24		)
Other income	—			25			2			—			27
Equity in net earnings of subsidiary	104			(90		)	—			(14		)	—
Total Other Expense	(210		)	(55		)	(54		)	(14		)	(333		)
INCOME (LOSS) BEFORE INCOME TAXES	(210		)	104			(117		)	(14		)	(237		)
INCOME TAX BENEFIT	(287		)	—			(27		)	—			(314		)
NET INCOME (LOSS)	77			104			(90		)	(14		)	77
Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	77			104			(90		)	(14		)	77
Other comprehensive income	—			18			—			—			18
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	$	77		$	122		$	(90	)	$	(14	)	$	95

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2018

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES:
Oil, natural gas and NGL	$	—		$	2,216		$	9		$	—		$	2,225
Marketing	—			2,519			—			—			2,519
Total Revenues	—			4,735			9			—			4,744
Other	—			32			—			—			32
Gains on sales of assets	—			37			—			—			37
Total Revenues and Other	—			4,804			9			—			4,813
OPERATING EXPENSES:
Oil, natural gas and NGL production	—			285			—			—			285
Oil, natural gas and NGL gathering, processing and transportation	—			693			3			—			696
Production taxes	—			57			—			—			57
Exploration	—			101			—			—			101
Marketing	—			2,560			—			—			2,560
General and administrative	—			191			1			—			192
Restructuring and other termination costs	—			38			—			—			38
Provision for legal contingencies, net	—			9			—			—			9
Depreciation, depletion and amortization	—			927			3			—			930
Impairments	—			64			—			—			64
Other operating income	—			(1		)	—			—			(1		)
Total Operating Expenses	—			4,924			7			—			4,931
INCOME (LOSS) FROM OPERATIONS	—			(120		)	2			—			(118		)
OTHER INCOME (EXPENSE):
Interest expense	(317		)	—			—			—			(317		)
Gains on investments	—			139			—			—			139
Other income	—			56			—			—			56
Equity in net earnings of subsidiary	76			1			(1		)	(76		)	—
Total Other Income (Expense)	(241		)	196			(1		)	(76		)	(122		)
INCOME (LOSS) BEFORE INCOME TAXES	(241		)	76			1			(76		)	(240		)
INCOME TAX BENEFIT	(9		)	—			—			—			(9		)
NET INCOME (LOSS)	(232		)	76			1			(76		)	(231		)
Net income attributable to noncontrolling interests	—			(1		)	—			—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	(232		)	75			1			(76		)	(232		)
Other comprehensive income	—			17			—			—			17
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	$	(232	)	$	92		$	1		$	(76	)	$	(215	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2019

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash Provided By Operating Activities	$	—		$	613		$	242		$	(2	)	$	853

CASH FLOWS FROM INVESTING ACTIVITIES:
Drilling and completion costs	—			(805		)	(265		)	—			(1,070		)
Business combination, net	—			(381		)	28			—			(353		)
Acquisitions of proved and unproved properties	—			(17		)	—			—			(17		)
Proceeds from divestitures of proved and unproved properties	—			82			—			—			82
Additions to other property and equipment	—			(7		)	(11		)	—			(18		)
Other investing activities	—			4			—			—			4
Net Cash Used In Investing Activities	—			(1,124		)	(248		)	—			(1,372		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility borrowings	6,119			—			297			—			6,416
Payments on revolving credit facility borrowings	(5,166		)	—			(286		)	—			(5,452		)
Cash paid to purchase debt	(381		)	—			—			—			(381		)
Cash paid for preferred stock dividends	(46		)	—			—			—			(46		)
Other financing activities	(12		)	(4		)	(4		)	2			(18		)
Intercompany advances, net	(515		)	515			—			—			—
Net Cash Provided By (Used In) Financing Activities	(1		)	511			7			2			519
Net increase (decrease) in cash and cash equivalents	(1		)	—			1			—			—
Cash and cash equivalents, beginning of period	4			1			1			(2		)	4
Cash and cash equivalents, end of period	$	3		$	1		$	2		$	(2	)	$	4

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2018

($ in millions)



	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash Provided By Operating Activities	$	88		$	866		$	5		$	(8	)	$	951

CASH FLOWS FROM INVESTING ACTIVITIES:
Drilling and completion costs	—			(928		)	—			—			(928		)
Acquisitions of proved and unproved properties	—			(102		)	—			—			(102		)
Proceeds from divestitures of proved and unproved properties	—			384			—			—			384
Additions to other property and equipment	—			(5		)	—			—			(5		)
Other investing activities	—			148			—			—			148
Net Cash Used In Investing Activities	—			(503		)	—			—			(503		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility borrowings	6,118			—			—			—			6,118
Payments on revolving credit facility borrowings	(6,393		)	—			—			—			(6,393		)
Cash paid for preferred stock dividends	(46		)	—			—			—			(46		)
Other financing activities	(2		)	(126		)	(7		)	6			(129		)
Intercompany advances, net	235			(237		)	2			—			—
Net Cash Used In Financing Activities	(88		)	(363		)	(5		)	6			(450		)
Net decrease in cash and cash equivalents	—			—			—			(2		)	(2		)
Cash and cash equivalents, beginning of period	5			1			2			(3		)	5
Cash and cash equivalents, end of period	$	5		$	1		$	2		$	(5	)	$	3