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Interest Expense. Interest expense was $296 million in 2016 compared to $317 million in 2015 and $89 million in 2014 as follows:

Interest expense on senior notes ............................................................. Interest expense on term loan .................................................................. Amortization of loan discount, issuance costs and other .......................... Amortization of premium associated with troubled debt restructuring ...... Interest expense on revolving credit facilities ........................................... Realized gains on interest rate derivatives(a) ............................................ Unrealized (gains) losses on interest rate derivatives(b) ........................... Capitalized interest ................................................................................... Total interest expense ......................................................................

Years Ended December 31, 2016 2015 2014 ($ in millions) $ 588 $ 682 $ 704 46 — 36 33 62 42 (165) (3) — 35 12 28 (11) (6) (12) 21 (6) (72) (251) (424) (637) $ 296 $ 317 $ 89

Average senior notes borrowings ............................................................. Average credit facilities borrowings .......................................................... Average term loan borrowings .................................................................

$ $ $

8,749 195 537

$ $ $

11,705 — —

11,653 306 625

___________________________________________ (a)

Includes settlements related to the interest accrual for the period and the effect of (gains) losses on early-terminated trades. Settlements of early-terminated trades are reflected in realized (gains) losses over the original life of the hedged item.

(b)

Includes changes in the fair value of open interest rate derivatives offset by amounts reclassified to realized (gains) losses during the period.

The 2016 and 2015 decreases in capitalized interest resulted from lower average balances of unproved oil and natural gas properties, the primary asset on which interest is capitalized. The 2016 decrease in interest expense on senior notes is due to the decrease in the average outstanding principal amount of senior notes. The 2016 increase in the amortization of premium associated with troubled debt restructuring is due to a full year of amortization on our second lien notes. See Note 3 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of our debt refinancing. Interest expense, excluding unrealized gains or losses on interest rate derivatives and net of amounts capitalized, was $1.18 per boe in 2016 compared to $1.30 per boe in 2015 and $0.63 per boe in 2014. Losses on Investments. Losses on investments were $8 million, $96 million and $75 million in 2016, 2015 and 2014, respectively. In 2016, the losses were primarily related to our equity investment in Sundrop Fuels, Inc. (Sundrop). Losses on investments in 2015 and 2014 were primarily related to our equity investments in FTS International, Inc. (FTS) and Sundrop. See Note 14 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of our investments. Impairment of Investments. In 2016, 2015 and 2014, we recognized impairments of investments of $119 million, $53 million and $5 million, respectively. The 2016 amount consisted of an other-than-temporary impairment of our Sundrop investment. The 2015 amount consisted of an other-than-temporary impairment of our FTS investment due to the extended decrease in the oil and natural gas pricing environment. The 2014 amount related to an other miscellaneous investment. See Note 14 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of our investments. Net Gain (Loss) on Sales of Investments. In 2016, we recorded a $10 million net loss on the sale of an investment compared to a $67 million net gain on the sales of investments in 2014. In 2016, we sold certain of our mineral interests and assigned our partnership interest in Mineral Acquisition Company I, L.P. to KKR Royalty Aggregator LLC. As a result of the transaction, we wrote off our equity investment and recognized a $10 million loss. In 2014, we sold all of our interest in Chaparral Energy, Inc. for net cash proceeds of $209 million and recorded a $73 million gain related to the sale. In addition, we sold an equity investment in a natural gas trading and management firm for cash proceeds of $30 million and recorded a loss of $6 million associated with the transaction. 62

Profile for Chesapeake Energy

2016 Annual Report  

2016 Annual Report