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Gains (Losses) on Purchases or Exchanges of Debt. In 2016 and 2015, we recorded gains of $236 million and $279 million, respectively, on purchases of debt and we recorded losses on purchases of debt of $197 million in 2014. In 2016, we used the proceeds from our term loan facility, convertible notes issuance and senior notes issuance, together with cash on hand, to purchase and retire $1.451 billion principal amount of our senior notes and $708 million principal amount of our contingent convertible senior notes for an aggregate $2.078 billion pursuant to tender offers. Also, in 2016, we repurchased in the open market approximately $325 million principal amount of our senior notes for $300 million and $141 million principal amount of our contingent convertible senior notes for $86 million. Additionally, in 2016, we privately negotiated exchanges of approximately $290 million principal amount of our outstanding senior notes for 53,923,925 shares of our common stock and $287 million principal amount of our outstanding contingent convertible senior notes for 55,427,782 shares of our common stock. We recorded an aggregate gain of $236 million associated with these debt repurchases and exchanges. In December 2015, we privately exchanged newly issued 8.00% Senior Secured Second Lien Notes due 2022 for certain outstanding senior unsecured notes and contingent convertible notes. For certain of the notes exchanged, we are accounting for these exchanges as a trouble debt restructuring (TDR). For exchanges classified as TDR, if the future undiscounted cash flows of the newly issued debt are less than the net carrying value of the original debt, a gain is recorded for the difference and the carrying value of the newly issued debt is adjusted to the future undiscounted cash flow amount and no interest expense is recorded going forward. For the remaining TDR exchanges, where the future undiscounted cash flows are greater than the net carrying value of the original debt, no gain is recognized and a new effective interest rate is established. Accordingly, we recognized a gain of $304 million in our consolidated statement of operations. Direct costs incurred for $29 million related to the notes exchange were also recognized. Additionally, we purchased in the open market approximately $119 million aggregate principal amount of our 3.25% Senior Notes due 2016 for cash. We recorded a gain of approximately $5 million associated with the repurchase. In December 2014, we entered into a new five-year $4.0 billion senior revolving credit facility to use for general corporate purposes. That credit facility replaced our then-existing $4.0 billion senior secured revolving credit facility that was scheduled to mature in December 2015. We recognized a loss of approximately $2 million in extinguishment costs related to former lenders under the terminated facility who were not continuing under the new facility. In 2014, we repaid the borrowings under and terminated our $2.0 billion term loan credit facility due 2017 and recorded a loss of approximately $90 million. Also in 2014, we purchased and redeemed $1.265 billion in aggregate principal amount of our 9.5% Senior Notes due 2015. We recorded a loss of approximately $99 million associated with the purchase and redemption. In addition, we redeemed $97 million in principal amount of our 6.875% Senior Notes due 2018 at par. We recorded a loss of approximately $6 million associated with the redemption. Other Income. Other income was $19 million in 2016 compared to $8 million in 2015 and $22 million in 2014. The 2016 other income consisted primarily of $2 million of interest income and $17 million of miscellaneous income. The 2015 income consisted of $6 million of interest income and $2 million of miscellaneous income. The 2014 other income consisted of $3 million of interest income and $19 million of miscellaneous income. Income Tax Expense (Benefit). Chesapeake recorded an income tax benefit of $190 million in 2016, an income tax benefit of $4.463 billion in 2015 and income tax expense of $1.144 billion in 2014. Our effective income tax rate was 4.1% in 2016 compared to 23.4% in 2015 and 35.8% in 2014. The decrease in the effective income tax rate from 2015 to 2016 is primarily due to the tax benefit at expected rates being offset by a valuation allowance. Further, our effective tax rate can fluctuate as a result of the impact of state income taxes and permanent differences. See Note 6 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of income tax expense (benefit). Net Income Attributable to Noncontrolling Interests. Chesapeake recorded net income attributable to noncontrolling interests of $2 million, $50 million and $139 million in 2016, 2015 and 2014, respectively. The 2016 amount was attributable to the Chesapeake Granite Wash Trust (the Trust). The 2015 amount was primarily related to dividends paid on preferred stock of our CHK C-T subsidiary. The decrease from 2015 to 2016 is due to the repurchase of all of the preferred shares of CHK C-T from third-party shareholders in August 2015. The 2014 amount included income related to the Trust as well as dividends paid on preferred stock of our CHK C-T and CHK Utica subsidiaries. The decrease from 2014 to 2015 is primarily due to the repurchase of all of the outstanding preferred shares of CHK Utica and CHK C-T from third-party preferred shareholders in July 2014 and August 2015, respectively. See Notes 8 and 15 of the notes to our consolidated financial statements included in Item 8 of this report for a discussion of these entities.

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Profile for Chesapeake Energy

2016 Annual Report  

2016 Annual Report