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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Exploration and Production Marketing, Gathering and Compression Other Intercompany Consolidated Operations ($ in millions) Eliminations Total For the Year Ended December 31, 2009: Revenues ........... $ Intersegment 5,049 $ 5,341 $ 414 $ (3,102) $ 7,702 revenues .......... — (2,878) (224) 3,102 — Total revenues ..... 5,049 2,463 190 — 7,702 Depreciation, depletion and amortization ..... 1,556 44 50 (35) 1,615 Other income (expense) ........... 9 3 1 (2) 11 Interest expense ....... (113) (1) — 1 (113) Impairment of natural gas and oil properties ..... 11,000 — — — 11,000 Impairment of investments ......... (162) — — — (162) (Gains) losses on sale of other property and equipment ........... — 38 — — 38 Other impairments ...... 13 90 27 — 130 Losses on redemptions or exchanges of debt .... (40) — — — (40) Earnings (losses) from equity investees ...... (39) — — — (39) INCOME (LOSS) BEFORE INCOME TAXES ............. $ (9,173) $ (48) $ (70) $ 3 $ (9,288) TOTAL ASSETS ....... $ 25,637 $ 4,323 $ 660 $ (706) $ 29,914 NET CAPITAL EXPENDITURES ..... $ 4,837 $ 966 $ 290 $ — $ 6,093 For the Year Ended December 31, 2008: Revenues ........... $ 7,858 $ 9,126 $ 631 $ (5,986) $ 11,629 Intersegment revenues .......... — (5,528) (458) 5,986 — Total revenues ..... 7,858 3,598 173 — 11,629 Depreciation, depletion and amortization ..... 2,108 28 35 (27) 2,144 Other income (expense) ........... 27 6 — (6) 27 Interest expense ....... (271) (2) — 2 (271) Impairment of natural gas and oil properties ..... 2,800 — — — 2,800 Impairment of investments ......... (180) — — — (180) Other impairments ...... — 30 — — 30 Losses or redemptions on exchanges of debt .... (4) — — — (4) Earnings (losses) from equity investees ...... (38) — — — (38) INCOME (LOSS) BEFORE INCOME TAXES ............. $ 968 $ 28 $ 82 $ (87) $ 991 TOTAL ASSETS ....... $ 35,415 $ 3,416 $ 465 $ (703) $ 38,593 NET CAPITAL EXPENDITURES ..... $ 7,658 $ 1,765 $ 229 $ — $ 9,652 124
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 17. Condensed Consolidating Financial Information Chesapeake Energy Corporation is a holding company and 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 3 are fully and unconditionally guaranteed, jointly and severally, by certain of our wholly owned subsidiaries on a senior unsecured basis. Our midstream subsidiary, CMD, is not a guarantor and is subject to covenants in the midstream revolving bank credit facility referred to in Note 3 that restricts it from paying dividends or distributions or making loans to Chesapeake. Set forth 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, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities. CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2010 ($ in millions) Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated CURRENT ASSETS: Cash and cash equivalents ........ $ — $ 2 $ 100 $ — $ 102 Other ......................... 7 3,065 123 (31) 3,164 Total Current Assets ........... 7 3,067 223 (31) 3,266 PROPERTY AND EQUIPMENT: Natural gas and oil properties, at cost based on full-cost accounting ................... — 27,822 4 — 27,826 Other property and equipment, net.......................... — 3,230 1,322 — 4,552 Total Property and Equipment . . . — 31,052 1,326 — 32,378 Other assets ................... 166 669 700 — 1,535 Investments in subsidiaries and intercompany advance ......... 1,217 263 — (1,480) — TOTAL ASSETS ................ $ 1,390 $ 35,051 $ 2,249 $ (1,511) $ 37,179 CURRENT LIABILITIES: Current liabilities ................ $ 302 $ 4,082 $ 137 $ (31) $ 4,490 Intercompany payable (receivable) from parent ................... (23,664) 21,939 1,612 113 — Total Current Liabilities ......... (23,362) 26,021 1,749 82 4,490 LONG-TERM LIABILITIES: Long-term debt, net .............. 8,934 3,612 94 — 12,640 Deferred income tax liabilities ...... 482 1,879 136 (113) 2,384 Other liabilities .................. 72 2,322 7 — 2,401 Total Long-Term Liabilities ...... 9,488 7,813 237 (113) 17,425 EQUITY: Chesapeake stockholders’ equity ... 15,264 1,217 263 (1,480) 15,264 Noncontrolling interest ........... — — — — — Total Equity .................. 15,264 1,217 263 (1,480) 15,264 TOTAL LIABILITIES AND EQUITY ..................... $ 1,390 $ 35,051 $ 2,249 $ (1,511) $ 37,179 125
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2010: A YEAR OF TRANSITION AND ACHI
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1 | FINANCIAL REVIEW 2010 ANNUAL RE
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4 | LETTER TO SHAREHOLDERS DEAR FEL
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6 | LETTER TO SHAREHOLDERS vs. an a
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8 | LETTER TO SHAREHOLDERS Growing
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10 | LETTER TO SHAREHOLDERS with th
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12 | LETTER TO SHAREHOLDERS wet nat
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14 | LETTER TO SHAREHOLDERS Rig lig
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16 | OPERATING AREAS AMERICA’S PR
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2010 ANNUAL REPORT | 19 Unconcerned
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What advantages does CHK’s unique
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2010 ANNUAL REPORT | 23 Employees l
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to selected students pursuing caree
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process is saving the company an av
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OFFICERS » Aubrey K. McClendon Cha
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George Bradley Kim Brady David Bran
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Daniel Alford Kenny Alford Jamie Al
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Danny Games Felipe Garcia Melissa G
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Jeff C. Glenn Jeannie Harris Larry
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Allison Earl Shannon Earley Jeremy
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Michael Bowling Jesse Bowman Matthe
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Terrydon Maroney Maria Marquez Ken
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UNITED STATES SECURITIES AND EXCHAN
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ITEM 1. Business Our Business Part
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Information About Us Our principal
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Build Operating Focus and Scale. We
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Eagle Ford Shale. Chesapeake’s Ea
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Production, Sales, Prices and Expen
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are based on prices, costs and disc
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The table below compares our estima
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Exploration and Development, Acquis
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Our marketing activities, along wit
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govern our operations carry substan
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Title to Properties Our title to pr
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Present Value or PV-10. When used w
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ITEM 1A. Risk Factors Natural gas a
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eserves will require significant ca
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least 1.65 times. Under certain cir
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Our operations may be adversely aff
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Part II ITEM 5. Market for Registra
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Years Ended December 31, 2010 2009
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(c) Includes the effects of realize
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Our goal of a 25% reduction in debt
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customary conditions, including fil
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In 2010, we received cash distribut
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Corporate Credit Facility. Our $4.0
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optional repurchase dates, the comm
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The estimated fair values of our na
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For 2010, we realized an average pr
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The following table shows our produ
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Interest Expense. Interest expense
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The selection and application of ac
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Under accounting guidance for incom
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Although we believe the expectation
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As of December 31, 2010, we had the
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We have determined the fair value o
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(a) Month LIBOR has been abbreviate
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MANAGEMENT’S REPORT ON INTERNAL C
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CHESAPEAKE ENERGY CORPORATION AND S
Page 119 and 120: CHESAPEAKE ENERGY CORPORATION AND S
Page 137 and 138: Compressor Leases CHESAPEAKE ENERGY
Page 139 and 140: 5. Income Taxes CHESAPEAKE ENERGY C
Page 161 and 162: 11. Divestitures CHESAPEAKE ENERGY
Page 165 and 166: 13. Restructuring Costs CHESAPEAKE
Page 169: CHESAPEAKE ENERGY CORPORATION AND S
Page 181 and 182: Schedule II Description CHESAPEAKE
Page 183 and 184: PART III ITEM 10. Directors, Execut
Page 185 and 186: Exhibit Number Exhibit Description
Page 191 and 192: CORPORATE INFORMATION Corporate Hea
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