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The table below reconciles the changes in fair value of our oil and natural gas derivatives during 2016. Of the $504 million fair value liability as of December 31, 2016, a $489 million liability relates to contracts maturing in the next 12 months and a $15 million liability relates to contracts maturing after 12 months. All open derivative instruments as of December 31, 2016 are expected to mature by December 31, 2022.

Fair value of contracts outstanding, as of January 1, 2016 ............................................................ Change in fair value of contracts ............................................................................................... Contracts realized or otherwise settled ...................................................................................... Fair value of contracts closed .................................................................................................... Fair value of contracts outstanding, as of December 31, 2016 ......................................................

December 31, 2016 ($ in millions) $ 267 (546) (230) 5 $ (504)

The change in oil and natural gas prices during 2016 decreased the asset related to our derivative instruments by $546 million. This unrealized loss is recorded in oil, natural gas and NGL sales. We settled contracts in 2016 that were in an asset position for $230 million. We terminated contracts that were in a liability position for $5 million. Realized gains and losses will be recorded in oil, natural gas and NGL sales in the month of related production. Interest Rate Derivatives The table below presents principal cash flows and related weighted average interest rates by expected maturity dates, using the earliest demand repurchase date for contingent convertible senior notes. As of December 31, 2016, we had total debt of $9.989 billion, including $8.109 billion of fixed rate debt at interest rates averaging 6.66% and $1.880 billion of floating rate debt at an interest rate of 7.62%. 2017 Liabilities: Debt – fixed rate(a) .............. $ Average interest rate .......... Debt – variable rate ............ $ Average interest rate ..........

506 $ 5.47% — $ —%

2018

264 $ 3.46% — $ —%

Years of Maturity 2019 2020 2021 ($ in millions)

Thereafter

— $ 1,061 $ 820 $ —% 6.68% 5.88% 380 $ — $ 1,500 $ 4.13% —% 8.50%

Total

5,458 $ 8,109 7.03% 6.66% — $ 1,880 —% 7.62%

___________________________________________ (a)

This amount does not include the premium, discount and deferred financing costs included in debt of $449 million and interest rate derivatives of $3 million.

Changes in interest rates affect the amount of interest we earn on our cash, cash equivalents and short-term investments and the interest rate we pay on borrowings under our revolving credit facility, term loan and our floating rate senior notes. All of our other indebtedness is fixed rate and, therefore, does not expose us to the risk of fluctuations in earnings or cash flow due to changes in market interest rates. However, changes in interest rates do affect the fair value of our fixed-rate debt. From time to time, we enter into interest rate derivatives, including fixed-to-floating interest rate swaps (we receive a fixed interest rate and pay a floating market rate) to mitigate our exposure to changes in the fair value of our senior notes and floating-to-fixed interest rate swaps (we receive a floating market rate and pay a fixed interest rate) to manage our interest rate exposure related to our revolving credit facility borrowings. As of December 31, 2016, there were no interest rate derivatives outstanding. As of December 31, 2016, we had $14 million of net gains related to settled derivative contracts that will be recorded within interest expense as realized gains or losses once they are transferred from our senior note liability or within interest expense as unrealized gains or losses over the remaining seven-year term of our related senior notes. Realized and unrealized (gains) or losses from interest rate derivative transactions are reflected as adjustments to interest expense on the consolidated statements of operations. 71

Profile for Chesapeake Energy

2016 Annual Report  

2016 Annual Report