Exhibit 12
CHESAPEAKE ENERGY CORPORATION
RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(dollars in 000’s)
Year Ended December 31, 2002 | Year Ended December 31, 2003 | Year Ended December 31, 2004 | Year Ended December 31, 2005 | Year Ended December 31, 2006 | Three Months Ended March 31, 2007 | ||||||||||||||||
EARNINGS: | |||||||||||||||||||||
Income before income taxes and cumulative effect of accounting change | $ | 67,140 | $ | 500,952 | $ | 804,926 | $ | 1,493,393 | $ | 3,255,359 | $ | 416,112 | |||||||||
Interest expense (a) | 111,280 | 147,817 | 161,990 | 221,385 | 298,894 | 80,316 | |||||||||||||||
(Gain)/loss on investment in equity investees in excess of distributed earnings | — | 409 | (606 | ) | 766 | (3,420 | ) | (1,163 | ) | ||||||||||||
Amortization of capitalized interest | 1,804 | 2,519 | 4,620 | 9,702 | 18,931 | 7,216 | |||||||||||||||
Bond discount amortization (b) | — | — | — | — | — | — | |||||||||||||||
Loan cost amortization | 4,962 | 4,254 | 5,728 | 9,036 | 13,049 | 3,880 | |||||||||||||||
Earnings | $ | 185,186 | $ | 655,951 | $ | 976,658 | $ | 1,734,282 | $ | 3,582,813 | $ | 506,361 | |||||||||
FIXED CHARGES: | |||||||||||||||||||||
Interest expense | $ | 111,280 | $ | 147,817 | $ | 161,990 | $ | 221,385 | $ | 298,894 | $ | 80,316 | |||||||||
Capitalized interest | 4,976 | 13,041 | 36,240 | 78,959 | 179,129 | 63,623 | |||||||||||||||
Bond discount amortization (b) | — | — | — | — | — | — | |||||||||||||||
Loan cost amortization | 4,962 | 4,254 | 5,728 | 9,037 | 13,049 | 3,880 | |||||||||||||||
Fixed Charges | $ | 121,218 | $ | 165,112 | $ | 203,958 | $ | 309,381 | $ | 491,072 | $ | 147,819 | |||||||||
Preferred Stock Dividends | |||||||||||||||||||||
Preferred Dividend Requirements | $ | 10,117 | $ | 22,469 | $ | 39,506 | $ | 41,813 | $ | 88,645 | $ | 25,836 | |||||||||
Ratio of income before provision for taxes to net income (c) | 1.67 | 1.61 | 1.56 | 1.57 | 1.62 | 1.61 | |||||||||||||||
Subtotal – Preferred Dividends | $ | 16,861 | $ | 36,240 | $ | 61,629 | $ | 65,646 | $ | 143,605 | $ | 41,596 | |||||||||
Combined Fixed Charges and Preferred Dividends | $ | 138,079 | $ | 201,352 | $ | 265,587 | $ | 375,027 | $ | 634,677 | $ | 189,415 | |||||||||
Ratio of Earnings to Fixed Charges | 1.5 | 4.0 | 4.8 | 5.6 | 7.3 | 3.4 | |||||||||||||||
Insufficient coverage | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Ratio of Earnings to Combined Fixed Charges and Preferred Dividends | 1.3 | 3.3 | 3.7 | 4.6 | 5.6 | 2.7 | |||||||||||||||
Insufficient coverage | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(a) | Excludes the effect on unrealized gains or losses on interest rate derivatives. |
(b) | Amortization of bond discount is excluded since it is included in interest expense. |
(c) | Amounts of income before provision for taxes and of net income exclude the cumulative effect of accounting change. |