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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) A summary of the changes in the fair values of Chesapeake’s financial assets (liabilities) classified as Level 3 during 2016 and 2015 is presented below.

Beginning balance as of December 31, 2015 ........................................................ Total gains (losses) (realized/unrealized): Included in earnings(a) ..................................................................................... Total purchases, issuances, sales and settlements: Settlements ..................................................................................................... Sales ............................................................................................................... Ending balance as of December 31, 2016 ............................................................. Beginning balance as of December 31, 2014 ........................................................ Total gains (losses) (realized/unrealized): Included in earnings(a) ..................................................................................... Total purchases, issuances, sales and settlements: Settlements ..................................................................................................... Ending balance as of December 31, 2015 ............................................................. ___________________________________________ (a)

Total gains (losses) included in earnings for the period... Change in unrealized gains (losses) related to assets still held at reporting date .............................................

Commodity Supply Derivatives Contracts ($ in millions) $ (91) $ 297 6

(118)

$

75 — (10)

$

(33) (146) —

$

(54)

$

$

1

100

316

(137) (91)

(20) 297

$

Oil, Natural Gas Marketing, Gathering and NGL and Compression Sales Revenue 2016 2015 2016 2015 ($ in millions) $ 6 $ 100 $ (118) $ 316 $

(7)

$

43

$

$

296

Qualitative and Quantitative Disclosures about Unobservable Inputs for Level 3 Fair Value Measurements The significant unobservable inputs for Level 3 derivative contracts include unpublished forward prices of natural gas, market volatility and credit risk of counterparties. Changes in these inputs 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, and adverse changes to our counterparties’ creditworthiness decreases the fair value of our derivatives. The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts at fair value as of December 31, 2016: Instrument Type Oil trades Natural gas trades

Unobservable Input Oil price volatility curves Natural gas price volatility curves

Range

Weighted Average

17.32% - 25.95%

23.95%

Fair Value December 31, 2016 ($ in millions) $ (1)

19.72% – 68.72%

30.71%

$

124

(9)

Profile for Chesapeake Energy

2016 Annual Report  

2016 Annual Report