Basis Of Presentation And Summary Of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2012

Basis Of Presentation And Summary Of Significant Accounting Policies [Abstract]

Principles Of Consolidation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of Chesapeake Energy Corporation ("Chesapeake" or the "Company") and its subsidiaries have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission (SEC). Chesapeake's annual report on Form 10-K for the year ended December 31, 2011 (2011 Form 10-K) includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. All material adjustments (consisting solely of normal recurring adjustments) which, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been reflected. The accompanying condensed consolidated financial statements of Chesapeake include the accounts of our direct and indirect wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The results for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year. This Form 10-Q relates to the three months ended March 31, 2012 (the "Current Quarter") and the three months ended March 31, 2011 (the "Prior Quarter").

Critical Accounting Policies

Critical Accounting Policies

We consider accounting policies related to derivatives, variable interest entities, natural gas and oil properties and income taxes to be critical policies. These policies are summarized in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2011 Form 10-K.

Risks And Uncertainties

Risks and Uncertainties

Approximately 83% of our estimated proved reserves volumes as of December 31, 2011 were natural gas and for the full year 2011 and Current Quarter, 84% and 81% of our natural gas and oil sales volumes were natural gas, respectively. Although we are shifting our strategy to a more liquids-heavy portfolio, having 61% of our natural gas and oil revenue before the effects of hedging derived from liquids production in the Current Quarter and curtailing drilling operations and production in our dry gas plays due to low natural gas prices, we have a material exposure to those low prices. While our derivative arrangements serve to mitigate a portion of the effect of price volatility on our cash flows, our forecasted natural gas production is currently not protected against downward price adjustments by derivative instruments and our use of crude oil derivatives to partially mitigate the price risk of our liquids production is subject to basis risk to the extent oil and natural gas liquids prices do not remain highly correlated. Sustained low natural gas prices, and volatile commodity prices in general, could have a material adverse effect on our financial position, results of operations and cash flows, which could adversely impact our ability to comply with financial covenants under our credit facilities and further limit our ability to fund our planned capital expenditures. In addition, sustained low commodity prices could result in a reduction in the estimated quantity of proved reserves we report and in the estimated future net cash flows expected to be generated from reserves that may require us to write down the carrying value of our natural gas and oil properties, and such amounts could be material.