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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Restricted Stock and Stock Option Compensation. We recognized the following compensation costs related to restricted stock and stock options for the years ended December 31, 2016, 2015 and 2014.

General and administrative expenses ...................................................... Oil and natural gas properties .................................................................. Oil, natural gas and NGL production expenses ........................................ Marketing, gathering and compression expenses .................................... Oilfield services expenses ........................................................................ Total ...............................................................................................

Years Ended December 31, 2016 2015 2014 ($ in millions) $ 38 $ 43 $ 46 16 23 29 13 18 18 1 5 6 — — 5 $ 68 $ 89 $ 104

Liability-Classified Awards Performance Share Units. We have granted PSUs to senior management that vest ratably over a three-year term and are settled in cash on the third anniversary of the awards. The ultimate amount earned is based on achievement of performance metrics established by the Compensation Committee of the Board of Directors, which include total shareholder return (TSR) and, for certain of the awards, operational performance goals such as finding and development costs and production levels. For PSUs granted in 2016, the TSR component can range from 0% to 100% and the operational component can range from 0% to 100%, resulting in a maximum payout of 200%. For PSUs granted in 2015, the TSR component can range from 0% to 100%, and each of the two operational components can range from 0% to 50% resulting in a maximum total payout of 200%. For PSUs granted in 2014, the TSR component can range from 0% to 200%, with no operational components. Compensation expense associated with PSU grants 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 the Company’s estimates of the underlying performance measures. The Company utilized a Monte Carlo simulation for the TSR performance measure and the following assumptions to determine the grant date fair value of the PSUs. The payout percentage for all PSU grants is capped at 100% if the Company's absolute TSR is less than zero. Volatility ................................................................................................................................................. Risk-free interest rate ............................................................................................................................ Dividend yield for value of awards .........................................................................................................

91.19% 1.20% —%

The following table presents a summary of our 2016, 2015 and 2014 PSU awards. Units 2016 Awards: Payable 2019...................... 2015 Awards: Payable 2018...................... 2014 Awards: Payable 2017......................

December 31, 2016 Fair Value Vested Liability

Grant Date Fair Value ($ in millions)

2,348,893

$

10

$

20

$

12

629,694

$

13

$

4

$

3

561,215

$

16

$

$

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Profile for Chesapeake Energy

2016 Annual Report  

2016 Annual Report