EXHIBIT 12
CHESAPEAKE ENERGY CORPORATION
RATIOS OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
($ in millions)
Year Ended December 31, 2003 | Year Ended December 31, 2004 | Year Ended December 31, 2005 | Year Ended December 31, 2006 | Year Ended December 31, 2007 | Three Months Ended March 31, 2008 | ||||||||||||||||
EARNINGS: | |||||||||||||||||||||
Income (loss) before income taxes and cumulative effect of accounting change | $ | 501 | $ | 805 | $ | 1,493 | $ | 3,255 | $ | 2,341 | $ | (214 | ) | ||||||||
Interest expense (a) | 148 | 162 | 221 | 299 | 379 | 95 | |||||||||||||||
(Gain)/loss on investment in equity investees in excess of distributed earnings | — | (1 | ) | 1 | (3 | ) | 21 | 12 | |||||||||||||
Amortization of capitalized interest | 3 | 5 | 10 | 19 | 39 | 13 | |||||||||||||||
Bond discount amortization (b) | — | — | — | — | — | — | |||||||||||||||
Loan cost amortization | 4 | 6 | 9 | 13 | 17 | 5 | |||||||||||||||
Earnings | $ | 656 | $ | 977 | $ | 1,734 | $ | 3,583 | $ | 2,797 | $ | (89 | ) | ||||||||
FIXED CHARGES: | |||||||||||||||||||||
Interest expense | $ | 148 | $ | 162 | $ | 221 | $ | 299 | $ | 379 | $ | 95 | |||||||||
Capitalized interest | 13 | 36 | 79 | 179 | 269 | 85 | |||||||||||||||
Bond discount amortization (b) | — | — | — | — | — | — | |||||||||||||||
Loan cost amortization | 4 | 6 | 9 | 13 | 17 | 5 | |||||||||||||||
Fixed Charges | $ | 165 | $ | 204 | $ | 309 | $ | 491 | $ | 665 | $ | 185 | |||||||||
Preferred Stock Dividends | |||||||||||||||||||||
Preferred Dividend Requirements | $ | 22 | $ | 40 | $ | 42 | $ | 89 | $ | 94 | $ | 12 | |||||||||
Ratio of income before provision for taxes to net income (c) | 1.61 | 1.56 | 1.57 | 1.62 | 1.61 | 1.63 | |||||||||||||||
Subtotal – Preferred Dividends | $ | 36 | $ | 62 | $ | 66 | $ | 144 | $ | 151 | $ | 19 | |||||||||
Combined Fixed Charges and Preferred Dividends | $ | 201 | $ | 266 | $ | 375 | $ | 635 | $ | 816 | $ | 204 | |||||||||
Ratio of Earnings to Fixed Charges | 4.0 | 4.8 | 5.6 | 7.3 | 4.2 | (0.5 | ) | ||||||||||||||
Insufficient coverage | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 274 | |||||||||
Ratio of Earnings to Combined Fixed Charges and Preferred Dividends | 3.3 | 3.7 | 4.6 | 5.6 | 3.4 | (0.4 | ) | ||||||||||||||
Insufficient coverage | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 293 |
(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. |