Chesapeake Energy (CHK) 10-K 1 Mar 10 2009 FY Annual report Financial data

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
CURRENT ASSETS:
Cash and cash equivalents	$307	$1,749
Accounts receivable	1,325	1,324
Short-term derivative instruments	692	1,082
Deferred income tax asset	24	0
Inventory	25	58
Other	73	79
Total Current Assets	2,446	4,292
Natural gas and oil properties, at cost based on full-cost accounting:
Evaluated natural gas and oil properties	35,007	28,965
Unevaluated properties	10,005	11,379
Less: accumulated depreciation, depletion and amortization of natural gas and oil properties	(24,220)	(11,866)
Total natural gas and oil properties, at cost based on full-cost accounting	20,792	28,478
Other property and equipment:
Natural gas gathering systems and treating plants	3,516	2,717
Buildings and land	1,673	1,513
Drilling rigs and equipment	687	430
Natural gas compressors	325	184
Other	550	482
Less: accumulated depreciation and amortization of other property and equipment	(833)	(496)
Total Other Property and Equipment	5,918	4,830
Total Property and Equipment	26,710	33,308
OTHER ASSETS:
Investments	404	444
Long-term derivative instruments	60	261
Other assets	294	288
Total Other Assets	758	993
TOTAL ASSETS	29,914	38,593
CURRENT LIABILITIES:
Accounts payable	957	1,611
Short-term derivative instruments	27	66
Accrued liabilities	920	880
Deferred income taxes	0	358
Income taxes payable	1	108
Revenues and royalties due others	565	431
Accrued interest	218	167
Total Current Liabilities	2,688	3,621
LONG-TERM LIABILITIES:
Long-term debt, net	12,295	13,175
Deferred income tax liabilities	1,059	4,200
Asset retirement obligations	282	269
Long-term derivative instruments	787	111
Revenues and royalties due others	73	49
Other liabilities	389	151
Total Long-Term Liabilities	14,885	17,955
Chesapeake stockholders' equity:
Common stock, $0.01 par value, 1,000,000,000 and 750,000,000 shares authorized, 648,549,165 and 607,953,437 shares issued December 31, 2009 and 2008, respectively	6	6
Paid-in capital	12,146	11,680
Retained earnings (deficit)	(1,261)	4,569
Accumulated other comprehensive income (loss), net of tax of ($62) million and ($163) million, respectively	102	267
Less: treasury stock, at cost; 877,205 and 657,276 common shares as of December 31, 2009 and 2008, respectively	(15)	(10)
Total Chesapeake Stockholders' Equity	11,444	17,017
Noncontrolling interest	897	0
Total Equity	12,341	17,017
TOTAL LIABILITIES AND EQUITY	29,914	38,593
4.50% cumulative convertible preferred stock
Chesapeake stockholders' equity:
Preferred Stock	256	256
5.00% cumulative convertible preferred stock (series 2005B)
Chesapeake stockholders' equity:
Preferred Stock	209	209
5.00% cumulative convertible preferred stock (series 2005)
Chesapeake stockholders' equity:
Preferred Stock	1	1
6.25% mandatory convertible preferred stock
Chesapeake stockholders' equity:
Preferred Stock	0	36
4.125% cumulative convertible preferred stock
Chesapeake stockholders' equity:
Preferred Stock	$0	$3

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (USD $)
In Millions, except Share data	Dec. 31, 2009	Dec. 31, 2008
Common stock, par value	0.01	0.01
Common stock, shares authorized	1,000,000,000	750,000,000
Common stock, shares issued	648,549,165	607,953,437
Accumulated other comprehensive income (loss), tax	($62)	($163)
Treasury stock, shares	877,205	657,276
4.50% cumulative convertible preferred stock
Preferred stock, shares issued	2,558,900	2,558,900
Preferred stock, shares outstanding	2,558,900	2,558,900
Preferred stock amount entitled in liquidation	256	256
5.00% cumulative convertible preferred stock (series 2005B)
Preferred stock, shares issued	2,095,615	2,095,615
Preferred stock, shares outstanding	2,095,615	2,095,615
Preferred stock amount entitled in liquidation	209	209
5.00% cumulative convertible preferred stock (series 2005)
Preferred stock, shares issued	5,000	5,000
Preferred stock, shares outstanding	5,000	5,000
Preferred stock amount entitled in liquidation	1	1
6.25% mandatory convertible preferred stock
Preferred stock, shares issued	0	143,768
Preferred stock, shares outstanding	0	143,768
Preferred stock amount entitled in liquidation	0	36
4.125% cumulative convertible preferred stock
Preferred stock, shares issued	0	3,033
Preferred stock, shares outstanding	0	3,033
Preferred stock amount entitled in liquidation	$0	$3

Statement Of Income Alternative

Statement Of Income Alternative (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
REVENUES:
Natural gas and oil sales	$5,049	$7,858	$5,624
Marketing, gathering and compression sales	2,463	3,598	2,040
Service operations revenue	190	173	136
Total Revenues	7,702	11,629	7,800
OPERATING COSTS:
Production expenses	876	889	640
Production taxes	107	284	216
General and administrative expenses	349	377	243
Marketing, gathering and compression expenses	2,316	3,505	1,969
Service operations expense	182	143	94
Natural gas and oil depreciation, depletion and amortization	1,371	1,970	1,835
Depreciation and amortization of other assets	244	174	153
Impairment of natural gas and oil properties and other assets	11,130	2,830	0
Loss on sale of other property and equipment	38	0	0
Restructuring costs	34	0	0
Total Operating Costs	16,647	10,172	5,150
INCOME (LOSS) FROM OPERATIONS	(8,945)	1,457	2,650
OTHER INCOME (EXPENSE):
Other income (expense)	(28)	(11)	15
Interest expense	(113)	(271)	(401)
Impairment of investments	(162)	(180)	0
Loss on exchanges or repurchases of Chesapeake debt	(40)	(4)	0
Gain on sale of investments	0	0	83
Total Other Income (Expense)	(343)	(466)	(303)
INCOME (LOSS) BEFORE INCOME TAXES	(9,288)	991	2,347
INCOME TAX EXPENSE (BENEFIT):
Current income taxes	4	423	29
Deferred income taxes	(3,487)	(36)	863
Total Income Tax Expense (Benefit)	(3,483)	387	892
NET INCOME(LOSS)	(5,805)	604	1,455
Net (income) attributable to noncontrolling interest	(25)	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE	(5,830)	604	1,455
Preferred stock dividends	(23)	(33)	(94)
Loss on conversion/exchange of preferred stock	0	(67)	(128)
NET INCOME (LOSS) AVAILABLE TO CHESAPEAKE COMMON STOCKHOLDERS	($5,853)	$504	$1,233
EARNINGS (LOSS) PER COMMON SHARE:
Basic	-9.57	0.94	2.7
Assuming dilution	-9.57	0.93	2.63
CASH DIVIDEND DECLARED PER COMMON SHARE	0.3	0.2925	0.2625
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions):
Basic	612	536	456
Assuming dilution	612	545	487

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS)	($5,805)	$604	$1,455
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation, depletion and amortization	1,615	2,144	1,988
Deferred income tax expense (benefit)	(3,487)	(36)	863
Unrealized (gains) losses on derivatives	497	(712)	415
Realized (gains) losses on financing derivatives	(154)	38	(92)
Stock-based compensation	140	132	84
Accretion of discount on contingent convertible notes	79	79	37
Restructuring costs	12	0	0
Loss on sale of other property and equipment	38	0	0
Gain on sale of investments	0	0	(83)
Loss from equity investments	39	38	0
Loss repurchases or exchanges of Chesapeake debt	40	4	0
Impairment of natural gas and oil properties and other fixed assets	11,130	2,830	0
Impairment of investments	162	180	0
Other	27	(2)	8
(Increase) decrease in accounts receivable	0	(78)	(192)
(Increase) decrease in inventory and other assets	(31)	56	(65)
Increase (decrease) in accounts payable, accrued liabilities and other	(105)	76	430
Increase (decrease) in current and non-current revenues and royalties due others	159	4	126
Cash provided by operating activities	4,356	5,357	4,974
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of natural gas and oil companies, proved and unproved properties, net of cash acquired	(2,298)	(8,593)	(3,003)
Exploration and development of natural gas and oil properties	(3,543)	(6,104)	(5,305)
Additions to other property and equipment	(1,683)	(3,073)	(1,439)
Additions to investments	(40)	(74)	(8)
Proceeds from divestitures of proved and unproved properties and leasehold	1,518	6,091	0
Proceeds from sale of volumetric production payments	408	1,579	1,089
Proceeds from sale of compressors	68	114	188
Proceeds from sale of drilling rigs and equipment	0	64	369
Proceeds from sale of investments	0	2	124
Deposits for acquisitions	0	(12)	(15)
Proceeds from sale of other assets and other	108	41	36
Cash used in investing activities	(5,462)	(9,965)	(7,964)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facilities borrowings	7,761	13,291	7,932
Payments on credit facilities borrowings	(9,758)	(11,307)	(6,160)
Proceeds from issuance of senior notes, net of offering costs	1,346	2,136	1,607
Proceeds from issuance of common stock, net of offering costs	0	2,598	0
Cash paid to purchase Chesapeake senior notes	0	(312)	0
Cash paid for common stock dividends	(181)	(148)	(115)
Cash paid for preferred stock dividends	(23)	(35)	(95)
Cash paid for treasury stock	(7)	(5)	0
Proceeds from sale of noncontrolling interest in midstream joint venture	588	0	0
Distribution to midstream joint venture partner	(10)	0	0
Midstream joint venture transaction costs	(16)	0	0
Derivative settlements	109	(167)	(91)
Net increase (decrease) in outstanding payments in excess of cash balance	(249)	330	(98)
Proceeds from mortgage of building	54	0	0
Proceeds from financing of real estate surface assets	145	0	0
Cash received from exercise of stock options	4	9	15
Excess tax benefit from stock-based compensation	0	43	20
Other	(99)	(77)	(27)
Cash provided (used in) by financing activities	(336)	6,356	2,988
Net increase (decrease) in cash and cash equivalents	(1,442)	1,748	(2)
Cash and cash equivalents, beginning of period	1,749	1	3
Cash and cash equivalents, end of period	307	1,749	1
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION OF CASH PAYMENTS FOR:
Interest, net of capitalized interest	64	97	273
Income taxes, net of refunds received	$7	$296	$55

Statement Of Shareholders Equit

Statement Of Shareholders Equity And Other Comprehensive Income (USD $)
In Millions					Preferred Stock		TOTAL CHESAPEAKE STOCKHOLDERS' EQUITY		Total
Balance, beginning of period at Dec. 31, 2006	$5	$5,998	$2,903	$528	$1,958	($26)		$0
Issuance of 0, 51,750,000 and 0 shares of common stock	0	0
Exchange of common stock for 0, 3,654,385 and 0 shares of 5.00% preferred stock (series 2005B)					0
Sale of noncontrolling interest in midstream joint venture								0
Net income (loss) attributable to Chesapeake			1,455						1,455
Purchase of 227,827, 159,430 and 0 shares of treasury stock						0
Hedging activity				(520)
Issuance of 24,822,832, 1,677,000 and 0 shares of common stock for the purchase of leasehold and unproved properties	0	0
Exchange of common stock for 0, 891,000 and 0 shares of 4.50% preferred stock					0
Release of 7,898, 2,975 and 666,186 shares for company benefit plans						20
Investment activity				(19)
Issuance of 2.50% contingent convertible senior notes due 2037		375
Exchange of common stock for 0, 0 and 4,595,000 shares of 5.00% preferred stock (series 2005)					(459)
Issuance of 2.25% contingent convertible senior notes due 2038		0
Exchange of common stock for 143,768, 0 and 2,156,232 shares of 6.25% preferred stock					(539)
Exchange of 10,210,169, 23,913,212 and 0 shares of common stock for convertible notes	0	0
Exchange of common stock for 3,033, 29 and 3 shares of 4.125% preferred stock					0
Exchange of 1,422,425, 12,673,135 and 36,651,658 shares of common stock for preferred stock	0	998
Stock-based compensation		129
Offering/transaction expenses		0
Dividends on common stock		0	(121)
Dividends on preferred stock		0	(89)
Exercise of stock options		15
Other			(4)
Equalization of partners' capital accounts		0						0
Tax effect on equalization of partners' capital		0
Distribution to partner								0
Tax benefit (reduction in tax benefit) from exercise of stock options and restricted stock		20
Chesapeake Midstream Partners net income attributable to Global Infrastructure Partners								0
Preferred stock conversion/exchange expenses		(3)
Balance, end of period at Dec. 31, 2007	5	7,532	4,144	(11)	960	(6)	12,624	0	12,624
Issuance of 0, 51,750,000 and 0 shares of common stock	1	2,697
Exchange of common stock for 0, 3,654,385 and 0 shares of 5.00% preferred stock (series 2005B)					(366)
Sale of noncontrolling interest in midstream joint venture								0
Net income (loss) attributable to Chesapeake			604						604
Purchase of 227,827, 159,430 and 0 shares of treasury stock						(4)
Hedging activity				297
Issuance of 24,822,832, 1,677,000 and 0 shares of common stock for the purchase of leasehold and unproved properties	0	34
Exchange of common stock for 0, 891,000 and 0 shares of 4.50% preferred stock					(89)
Release of 7,898, 2,975 and 666,186 shares for company benefit plans						0
Investment activity				(19)
Issuance of 2.50% contingent convertible senior notes due 2037		0
Exchange of common stock for 0, 0 and 4,595,000 shares of 5.00% preferred stock (series 2005)					0
Issuance of 2.25% contingent convertible senior notes due 2038		345
Exchange of common stock for 143,768, 0 and 2,156,232 shares of 6.25% preferred stock					0
Exchange of 10,210,169, 23,913,212 and 0 shares of common stock for convertible notes	0	480
Exchange of common stock for 3,033, 29 and 3 shares of 4.125% preferred stock					0
Exchange of 1,422,425, 12,673,135 and 36,651,658 shares of common stock for preferred stock	0	454
Stock-based compensation		188
Offering/transaction expenses		(101)
Dividends on common stock		0	(158)
Dividends on preferred stock		0	(21)
Exercise of stock options		8
Other			0
Equalization of partners' capital accounts		0						0
Tax effect on equalization of partners' capital		0
Distribution to partner								0
Tax benefit (reduction in tax benefit) from exercise of stock options and restricted stock		43
Chesapeake Midstream Partners net income attributable to Global Infrastructure Partners								0
Preferred stock conversion/exchange expenses		0
Balance, end of period at Dec. 31, 2008	6	11,680	4,569	267	505	(10)	17,017	0	17,017
Issuance of 0, 51,750,000 and 0 shares of common stock	0	0
Exchange of common stock for 0, 3,654,385 and 0 shares of 5.00% preferred stock (series 2005B)					0
Sale of noncontrolling interest in midstream joint venture								588
Net income (loss) attributable to Chesapeake			(5,830)						(5,830)
Purchase of 227,827, 159,430 and 0 shares of treasury stock						(5)
Hedging activity				(231)
Issuance of 24,822,832, 1,677,000 and 0 shares of common stock for the purchase of leasehold and unproved properties	0	421
Exchange of common stock for 0, 891,000 and 0 shares of 4.50% preferred stock					0
Release of 7,898, 2,975 and 666,186 shares for company benefit plans						0
Investment activity				66
Issuance of 2.50% contingent convertible senior notes due 2037		0
Exchange of common stock for 0, 0 and 4,595,000 shares of 5.00% preferred stock (series 2005)					0
Issuance of 2.25% contingent convertible senior notes due 2038		0
Exchange of common stock for 143,768, 0 and 2,156,232 shares of 6.25% preferred stock					(36)
Exchange of 10,210,169, 23,913,212 and 0 shares of common stock for convertible notes	0	262
Exchange of common stock for 3,033, 29 and 3 shares of 4.125% preferred stock					(3)
Exchange of 1,422,425, 12,673,135 and 36,651,658 shares of common stock for preferred stock	0	39
Stock-based compensation		199
Offering/transaction expenses		(16)
Dividends on common stock		(185)	0
Dividends on preferred stock		(22)	0
Exercise of stock options		4
Other			0
Equalization of partners' capital accounts		(294)						294
Tax effect on equalization of partners' capital		106
Distribution to partner								(10)
Tax benefit (reduction in tax benefit) from exercise of stock options and restricted stock		(48)
Chesapeake Midstream Partners net income attributable to Global Infrastructure Partners								25
Preferred stock conversion/exchange expenses		0
Balance, end of period at Dec. 31, 2009	$6	$12,146	($1,261)	$102	$466	($15)	$11,444	$897	$12,341

2_Statement Of Shareholders Equ

Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $)
			Preferred Stock
Shares of 5.00% preferred stock (series 2005 B) exchange			0
Shares of 4.50% preferred stock exchange			0
Shares of 5.00% preferred stock (series 2005) exchange			4,595,000
Shares of 6.25% preferred stock exchange			2,156,232
Shares of 4.125% preferred stock exchange			3
Shares of common stock issued	0	0
Shares of common stock for the purchase of leasehold and unproved properties	0	0
Shares of common stock for convertible notes	0	0
Shares of common stock for preferred stock	36,651,658	36,651,658
Shares of treasury stock purchased				0
Shares for company benefit plans released				666,186
Shares of 5.00% preferred stock (series 2005 B) exchange			3,654,385
Shares of 4.50% preferred stock exchange			891,000
Shares of 5.00% preferred stock (series 2005) exchange			0
Shares of 6.25% preferred stock exchange			0
Shares of 4.125% preferred stock exchange			29
Shares of common stock issued	51,750,000	51,750,000
Shares of common stock for the purchase of leasehold and unproved properties	1,677,000	1,677,000
Shares of common stock for convertible notes	23,913,212	23,913,212
Shares of common stock for preferred stock	12,673,135	12,673,135
Shares of treasury stock purchased				159,430
Shares for company benefit plans released				2,975
Shares of 5.00% preferred stock (series 2005 B) exchange			0
Shares of 4.50% preferred stock exchange			0
Shares of 5.00% preferred stock (series 2005) exchange			0
Shares of 6.25% preferred stock exchange			143,768
Shares of 4.125% preferred stock exchange			3,033
Shares of common stock issued	0	0
Shares of common stock for the purchase of leasehold and unproved properties	24,822,832	24,822,832
Shares of common stock for convertible notes	10,210,169	10,210,169
Shares of common stock for preferred stock	1,422,425	1,422,425
Shares of treasury stock purchased				227,827
Shares for company benefit plans released				7,898

Statement Of Other Comprehensiv

Statement Of Other Comprehensive Income (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
NET INCOME (LOSS)	($5,805)	$604	$1,455
Other comprehensive income (loss), net of income tax:
Change in fair value of derivative instruments, net of income taxes of $413 million, $113 million and ($56) million, respectively	677	186	(92)
Reclassification of (gain) loss on settled contracts, net of income taxes of ($540) million, $35 million and ($308) million, respectively	(885)	55	(504)
Ineffective portion of derivatives qualifying for cash flow hedge accounting, net of income taxes of ($14) million, $34 million and $46 million, respectively	(23)	56	76
Unrealized (gain) loss on marketable securities, net of income taxes of $14 million, ($12) million and ($11) million, respectively	23	(19)	(19)
Reclassification of loss on investments, net of income taxes of $26 million, $0 and $0, respectively	43	0	0
Comprehensive income (loss)	(5,970)	882	916
(Income) attributable to noncontrolling interest	(25)	0	0
Comprehensive income (loss) available to Chesapeake	($5,995)	$882	$916

3_Statement Of Other Comprehens

Statement Of Other Comprehensive Income (Parenthetical) (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Change in fair value of derivative instruments, income taxes	$413	$113	($56)
Reclassification of (gain) loss on settled contracts, income taxes	(540)	35	(308)
Ineffective portion of derivatives qualifying for cash flow hedge accounting, income taxes	(14)	34	46
Unrealized (gain) loss on marketable securities, income taxes	14	(12)	(11)
Reclassification of loss on investments, income taxes	$26	$0	$0

Basis of Presentation and Summa

Basis of Presentation and Summary of Significant Accounting Policies
	12 Months Ended Dec. 31, 2009 USD / shares
Basis of Presentation and Summary of Significant Accounting Policies	1. Basis of Presentation and Summary of Significant Accounting Policies Description of Company Chesapeake Energy Corporation (Chesapeake or the company) is a natural gas and oil exploration and production company engaged in the exploration, development and acquisition of properties for the production of natural gas and crude oil from underground reservoirs, and we provide marketing and other midstream services. Our properties are located in Alabama, Arkansas, Colorado, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Montana, Nebraska, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming. Principles of Consolidation The accompanying consolidated financial statements of Chesapeake include the accounts of our direct and indirect wholly-owned subsidiaries, as well as our 50/50 joint venture with Global Infrastructure Partners (GIP). Because of certain commitments and contractual arrangements with GIP, the joint venture partnership qualifies as a variable interest entity and must be consolidated by the company, as the primary beneficiary. All significant intercompany accounts and transactions have been eliminated. Change in Accounting Principle On January1, 2009, we adopted and applied retrospectively new accounting and reporting standards for debt with conversion and other options. As a result, our prior year consolidated financial statements have been retrospectively adjusted. See Note 3 for additional information on the application of this accounting principle. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash Equivalents For purposes of the consolidated financial statements, Chesapeake considers investments in all highly liquid instruments with original maturities of three months or less at date of purchase to be cash equivalents. Accounts Receivable Our accounts receivable are primarily from purchasers of natural gas and oil and exploration and production companies which own interests in properties we operate. This industry concentration has the potential to impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, industry or other conditions. We generally require letters of credit for receivables from customers which are judged to have sub-standard credit, unless the credit risk can otherwise be mitigated. Accounts receivable consists of the following components: December31, 2009 2008 ($ in millions) Natural gas and oil sales $ 743 $ 738 Joint interest 394 424 Service operations 7 20 Related parties(a) 15 Other 190

Net Income Per Share

Net Income Per Share
	12 Months Ended Dec. 31, 2009 USD / shares
Net Income Per Share	2. Net Income Per Share Accounting guidance for Earnings Per Share (EPS), requires presentation of basic and diluted earnings per share on the face of the statements of operations for all entities with complex capital structures as well as a reconciliation of the numerator and denominator of the basic and diluted EPS computations. For the years ended December31, 2009, 2008 and 2007, the following securities and associated adjustments to net income comprised of dividends and loss on conversions/exchanges were not included in the calculation of diluted EPS, as the effect was antidilutive: Shares Net Income Adjustments (inmillions) ($inmillions) Year Ended December31, 2009: Common stock equivalent of our preferred stock outstanding: 4.50% cumulative convertible preferred stock 6 $ 12 5.00% cumulative convertible preferred stock (series 2005) $ 5.00% cumulative convertible preferred stock (series 2005B) 5 $ 10 Common stock equivalent of our preferred stock outstanding prior to conversion: 6.25% mandatory convertible preferred stock 1 $ 1 4.125% cumulative convertible preferred stock $ Year Ended December31, 2008: Common stock equivalent of our preferred stock outstanding: 4.50% cumulative convertible preferred stock 6 $ 12 5.00% cumulative convertible preferred stock (series 2005) $ 5.00% cumulative convertible preferred stock (series 2005B) 5 $ 10 6.25% mandatory convertible preferred stock 1 $ 2 Common stock equivalent of our preferred stock outstanding prior to conversion: 4.50% cumulative convertible preferred stock 1 $ 14 5.00% cumulative convertible preferred stock (series 2005B) 4 $ 62 Year Ended December31, 2007: Common stock equivalent of our preferred stock outstanding prior to conversion: 5.00% cumulative convertible preferred stock (series 2005) 16 $ 76 6.25% mandatory convertible preferred stock 14 $ 99 For the year ended December31, 2009, both basic weighted average shares outstanding, which are used in computing basic EPS, and diluted weighted average shares which are used in computing EPS assuming dilution were 612million shares as a result of the net loss to common stockholders. The basic and diluted loss per common share was $9.57. A reconciliation for the years ended December31, 2008 and 2007 is as follows: Income (Numerator) Shares (Denominator) Per Share Amount (in millions, except per share data) For the Year Ended December31, 2008: Basic EPS: Income available to common stockholders $ 504 536 $ 0.94 Effect of Dilutive Securities Effect of contingent convertible senior notes outstanding during the period 1 Employee stock options 2 Restricted stock 6 Diluted EPS Income available to common stockholders and assumed conversions $ 504 545 $ 0.93 For the Ye

Senior Notes and Revolving Bank

Senior Notes and Revolving Bank Credit Facilities
	12 Months Ended Dec. 31, 2009 USD / shares
Senior Notes and Revolving Bank Credit Facilities	3. Senior Notes and Revolving Bank Credit Facilities Our long-term debt consisted of the following at December31, 2009 and 2008: December31, 2009 2008 ($ in millions) 7.5% senior notes due 2013 $ 364 $ 364 7.625% senior notes due 2013 500 500 7.0% senior notes due 2014 300 300 7.5% senior notes due 2014 300 300 6.375% senior notes due 2015 600 600 9.5% senior notes due 2015 1,425 6.625% senior notes due 2016 600 600 6.875% senior notes due 2016 670 670 6.25% Euro-denominated senior notes due 2017(a) 860 835 6.5% senior notes due 2017 1,100 1,100 6.25% senior notes due 2018 600 600 7.25% senior notes due 2018 800 800 6.875% senior Notes due 2020 500 500 2.75% contingent convertible senior notes due 2035(b) 451 451 2.5% contingent convertible senior notes due 2037(b) 1,378 1,378 2.25% contingent convertible senior notes due 2038(b) 763 1,126 Corporate revolving bank credit facility 1,892 3,474 Midstream revolving bank credit facility Midstream joint venture revolving bank credit facility 44 460 Discount on senior notes(c) (921 ) (1,094 ) Interest rate derivatives(d) 69 211 Total notes payable and long-term debt $ 12,295 $ 13,175 (a) The principal amount shown is based on the dollar/euro exchange rate of $1.4332 to 1.00 and $1.3919 to 1.00 as of December31, 2009 and 2008, respectively. See Note 10 for information on our related cross currency swap. (b) The holders of our contingent convertible senior notes may require us to repurchase, in cash, all or a portion of their notes at 100% of the principal amount of the notes on any of four dates that are five, ten, fifteen and twenty years before the maturity date. The notes are convertible, at the holders option, prior to maturity under certain circumstances into cash and, if applicable, shares of our common stock using a net share settlement process. One such triggering circumstance is when the price of our common stock exceeds a threshold amount during a specified period in a fiscal quarter. Convertibility based on common stock price is measured quarter by quarter. In the fourth quarter of 2009, the price of our common stock was below the threshold level for each series of the contingent convertible senior notes during the specified period and, as a result, the holders do not have the option to convert their notes into cash and common stock in the first quarter of 2010 under this provision. The notes are also convertible, at the holders option, during specified five-day periods if the trading price of the notes is below certain levels determined by reference to the trading price of our common stock. In general, upon conversion of a contingent convertible senior note, the holder will receive cash equal to the principal amount of the note and common stock for the notes conversion value in excess of s

Contingencies and Commitments

Contingencies and Commitments
	12 Months Ended Dec. 31, 2009 USD / shares
Contingencies and Commitments	4. Contingencies and Commitments Litigation On February25, 2009, a putative class action was filed in the U.S. District Court for the Southern District of New York against the company and certain of its officers and directors along with certain underwriters of the companys July 2008 common stock offering. Following the appointment of a lead plaintiff and counsel, the plaintiff filed an amended complaint on September11, 2009 alleging that the registration statement for the offering contained material misstatements and omissions and seeking damages under Sections 11, 12 and 15 of the Securities Act of 1933 of an unspecified amount and rescission. The action was transferred to the U.S. District Court for the Western District of Oklahoma on October13, 2009. The company has filed a motion to dismiss which has not been fully briefed. A derivative action was also filed in the District Court of Oklahoma County, Oklahoma on March10, 2009 against the companys directors and certain of its officers alleging breaches of fiduciary duties relating to the disclosure matters alleged in the securities case. On March26, 2009, a shareholder filed a petition in the District Court of Oklahoma County, Oklahoma seeking to compel inspection of company books and records relating to compensation of the companys CEO. On August20, 2009, the court denied the inspection demand, dismissed the petition and entered judgment in favor of Chesapeake. The shareholder is appealing the courts ruling. Three derivative actions were filed in the District Court of Oklahoma County, Oklahoma on April28,May7, and May20, 2009 against the companys directors alleging breaches of fiduciary duties relating to compensation of the companys CEO and alleged insider trading, among other things, and seeking unspecified damages, equitable relief and disgorgement. These three derivative actions were consolidated and a Consolidated Derivative Shareholder Petition was filed on June23, 2009. Chesapeake is named as a nominal defendant. Chesapeake has filed a motion to dismiss which was heard on February1, 2010. On February26, 2010, the court ordered that plaintiffs claims be dismissed and granted plaintiffs leave to file an amended petition within 90 days. It is inherently difficult to predict the outcome of litigation, and we are currently unable to estimate the amount of any potential liabilities associated with the foregoing cases, which are all in preliminary stages. Chesapeake is also involved in various other lawsuits and disputes incidental to its business operations, including commercial disputes, personal injury claims, claims for underpayment of royalties, property damage claims and contract actions. With regard to the latter, several mineral or leasehold owners have filed lawsuits against us seeking specific performance to require us to acquire their oil and natural gas interests and pay acreage bonus payments, damages based on breach of contract and/or, in certain cases, punitive damages based on alleged fraud. The company has satisfactorily resolved several of the suits but some remain pending. The remaining leasehold acquisition cases are in various stages of discover

Income Taxes

Income Taxes
	12 Months Ended Dec. 31, 2009 USD / shares
Income Taxes	5. Income Taxes The components of the income tax provision (benefit) for each of the periods presented below are as follows: YearsEndedDecember31, 2009 2008 2007 ($ in millions) Current $ 4 $ 423 $ 29 Deferred (3,487 ) (36 ) 863 Total $ (3,483 ) $ 387 $ 892 The effective income tax expense (benefit) differed from the computed expected federal income tax expense on earnings before income taxes for the following reasons: YearsEndedDecember31, 2009 2008 2007 ($ in millions) Income tax expense (benefit) at the federal statutory rate (35%) $ (3,251 ) $ 347 $ 821 State income taxes (net of federal income tax benefit) (275 ) 24 56 Other 43 16 15 $ (3,483 ) $ 387 $ 892 Deferred income taxes are provided to reflect temporary differences in the basis of net assets for income tax and financial reporting purposes. The tax-effected temporary differences and tax loss carryforwards which comprise deferred taxes are as follows: YearsEndedDecember31 2009 2008 ($ in millions) Deferred tax liabilities: Natural gas and oil properties $ (96 ) $ (2,755 ) Other property and equipment (184 ) (281 ) Derivative instruments (265 ) (550 ) Volumetric production payments (937 ) (943 ) Contingent convertible debt (464 ) (450 ) Other (23 ) Deferred tax liabilities (1,969 ) (4,979 ) Deferred tax assets: Net operating loss carryforwards 592 5 Asset retirement obligation 107 102 Investments 131 117 Deferred stock compensation 57 85 Accrued liabilities 22 22 Alternative minimum tax credits 25 Other 90 Deferred tax assets 934 421 Total deferred tax asset (liability) $ (1,035 )(a) $ (4,558 ) Reflected in accompanying balance sheets as: Current deferred income tax asset $ 24 $ Current deferred income tax liability (358 ) Non-current deferred income tax liability (1,059 ) (4,200 ) $ (1,035 ) $ (4,558 ) (a) In addition to the income tax benefit of $3.483 billion, activity during 2009 includes net liabilities of $48 million related to stock-based compensation and $41 million related to investments, deferred tax assets for $141 million related to derivative instruments and $106 million related to the equalization of partners capital. These items were not recorded as part of the provision for income taxes. In addition, the activity includes an increase to deferred tax liabilities of $157 million related to federal and state income tax refunds and a reduction of $39 million related to uncertain tax positions.

Related Party Transactions

Related Party Transactions
	12 Months Ended Dec. 31, 2009 USD / shares
Related Party Transactions	6. Related Party Transactions As of December31, 2009, we had accrued accounts receivable from our CEO, Aubrey K. McClendon, of $14 million representing joint interest billings from December 2009 which were invoiced and timely paid in January 2010. Since Chesapeake was founded in 1989, Mr.McClendon, has acquired working interests in virtually all of our natural gas and oil properties by participating in our drilling activities under the terms of the Founder Well Participation Program (FWPP) and predecessor participation arrangements provided for in Mr.McClendons employment agreements. Under the FWPP, approved by our shareholders in June 2005, Mr.McClendon may elect to participate in all or none of the wells drilled by or on behalf of Chesapeake during a calendar year, but he is not allowed to participate only in selected wells. A participation election is required to be received by the Compensation Committee of Chesapeakes Board of Directors not less than 30 days prior to the start of each calendar year. His participation is permitted only under the terms outlined in the FWPP, which, among other things, limits his individual participation to a maximum working interest of 2.5% in a well and prohibits participation in situations where Chesapeakes working interest would be reduced below 12.5% as a result of his participation. In addition, the company is reimbursed for costs associated with leasehold acquired by Mr.McClendon as a result of his well participation. On December31, 2008, we entered into a new five-year employment agreement with Mr.McClendon that contained a one-time well cost incentive award to him. The total cost of the award to Chesapeake was $75 million plus employment taxes in the amount of approximately $1 million. We will recognize the incentive award as general and administrative expense over the five-year vesting period for the clawback described below, resulting in an expense of approximately $15 million per year that began in 2009. In addition to state and federal income tax withholding, similar employment taxes were imposed on Mr.McClendon and withheld from the award. The net incentive award of approximately $44 million was fully applied against costs attributable to interests in company wells acquired by Mr.McClendon or his affiliates under the FWPP. The incentive award is subject to a clawback if during the initial five-year term of the employment agreement, Mr.McClendon resigns from the company or is terminated for cause by the company. As disclosed in Note 17, in 2007 Chesapeake had revenues of $1.1 billion from natural gas and oil sales to Eagle Energy Partners I, L.P., a former affiliated entity. We sold our 33% limited partnership interest in Eagle Energy in June 2007.

Employee Benefit Plans

Employee Benefit Plans
	12 Months Ended Dec. 31, 2009 USD / shares
Employee Benefit Plans	7. Employee Benefit Plans Our qualified 401(k) profit sharing plan is the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan, which is open to employees of Chesapeake and all our subsidiaries except certain employees of Chesapeake Appalachia, L.L.C. Eligible employees may elect to defer compensation through voluntary contributions to their 401(k) plan accounts, subject to plan limits and those set by the Internal Revenue Service. Chesapeake matches employee contributions dollar for dollar (subject to a maximum contribution of 15% of an employees annual salary and bonus compensation) with Chesapeake common stock purchased in the open market. The company contributed $48 million, $40 million and $28 million to the Chesapeake plan in 2009, 2008 and 2007, respectively. In November 2005, Chesapeake acquired Columbia Natural Resources, LLC (CNR), which sponsored the Columbia Natural Resources, LLC 401(k) Plan. Chesapeakes 401(k) plan was amended effective January1, 2006 to honor previous service by employees with CNR and predecessor companies and was open to CNR employees in the Charleston, West Virginia headquarters office as well as exempt, administrative field employees. The CNR plan was adopted by the new employer entity, Chesapeake Appalachia, L.L.C., and was open to all non-administrative field employees, including union employees. Effective January1, 2007, these employees, other than union employees, became eligible to participate in the Chesapeake plan. Prior to 2008, we maintained two nonqualified deferred compensation plans, the 401(k) make-up plan and the deferred compensation plan. Effective on January1, 2008, the deferred compensation plans were merged into the Chesapeake Energy Corporation Amended and Restated Deferred Compensation Plan (DC Plan). Prior to 2009, to be eligible to participate in the DC Plan, an employee must have received annual compensation (base salary and bonus combined in the prior 12months) of at least $100,000, had a minimum of one year of service as a company employee and have made the maximum contribution allowable under the 401(k) plan. For employees with at least five years of service as a company employee, the company matched employee contributions to the plan in Chesapeake common stock. On January1, 2009, the plan was amended to allow for participation for any employees who received compensation (base salary only) of at least $150,000 and had an employment agreement with the company. In addition, the company begins matching employee contributions with Chesapeake common stock once the employee has at least three years of service as a company employee. Chesapeake matches 100% of employee contributions up to 15% of base salary and bonus in the aggregate for the 401(k) plan and the DC Plan. We contributed $7 million, $6 million and $4million to the DC Plan during 2009, 2008 and 2007, respectively, to fund the match. The companys non-employee directors are able to defer up to 100% of director fees into the DC Plan. The maximum compensation that can be deferred by employees under all company deferred compensation plans, including the Chesapeake 401(k) plan, is a total of 75% of

Stockholders' Equity, Restricte

Stockholders' Equity, Restricted Stock and Stock Options
	1/1/2009 - 12/31/2009 USD / shares
Stockholders' Equity, Restricted Stock and Stock Options	8. Stockholders Equity, Restricted Stock and Stock Options Common Stock The following is a summary of the changes in our common shares outstanding for 2009, 2008 and 2007: 2009 2008 2007 (in thousands) Shares issued at January1 607,953 511,648 458,601 Common stock issuances for cash 51,750 Convertible note conversions/exchanges 10,210 23,913 Preferred stock conversions/exchanges 1,423 12,673 36,652 Restricted stock issuances (net of forfeitures) 3,632 4,708 14,268 Stock option exercises 508 1,584 2,127 Common stock issued for the purchase of leasehold and unproved properties 24,823 1,677 Shares issued at December31 648,549 607,953 511,648 Contingent Convertible Senior Notes In 2009 and 2008, holders of certain of our contingent convertible senior notes exchanged or converted their senior notes for shares of common stock in privately negotiated exchanges as summarized below ($ in millions): Year Contingent Convertible Senior Notes PrincipalAmount NumberofCommonShares 2009 2.25% due 2038 $ 364 10,210,169 2008 2.75% due 2035 $ 239 8,841,526 2008 2.50% due 2037 272 8,416,865 2008 2.25% due 2038 254 6,654,821 $ 765 23,913,212 The difference between the allocated debt value of the notes that were exchanged and the fair value of the common stock issued resulted in a loss of $40 million and $27 million, respectively, on the cancellation of indebtedness for the years ended December31, 2009 and 2008. There were no contingent convertible senior notes exchanged or converted in 2007. Preferred Stock The following is a summary of the changes in our preferred shares outstanding for 2009, 2008 and 2007: 4.125% 5.00% (2005) 4.50% 5.00% (2005B) 6.25% (in thousands) Shares outstanding at January1, 2009 3 5 2,559 2,096 144 Conversion/exchange of preferred for common stock 3 144 Shares outstanding at December31, 2009 5 2,559 2,096 Shares outstanding at January1, 2008 3 5 3,450 5,750 144 Conversion/exchange of preferred for common stock (891 ) (3,654 ) Shares outstanding at December31, 2008 3 5 2,559 2,096 144 Shares outstanding at January1, 2007 3 4,600 3,450 5,750 2,300 Conversion/exchange of preferred for common stock (4,595 ) (2,156 ) Shares outstanding at December31, 2007 3 5 3,450 5,750 144 Dividends Dividends declared on our common stock and preferred stock are reflected as adjustments to retained earnings to the extent a surplus of retained earnings will exist after giving effect to the dividends. To the extent retained earnings are insufficient to fund the distrib

Financial Instruments and Hedgi

Financial Instruments and Hedging Activities
	12 Months Ended Dec. 31, 2009 USD / shares
Financial Instruments and Hedging Activities	9. Financial Instruments and Hedging Activities Natural Gas and Oil Derivatives Our results of operations and cash flows are impacted by changes in market prices for natural gas and oil. To mitigate a portion of the exposure to adverse market changes, we have entered into various derivative instruments. These instruments allow us to predict with greater certainty the effective natural gas and oil prices to be received for our hedged production. Although derivatives often fail to achieve 100% effectiveness for accounting purposes, we believe our derivative instruments continue to be highly effective in achieving our risk management objectives. As of December31, 2009 and 2008, our natural gas and oil derivative instruments were comprised of the following types of instruments: Swaps: Chesapeake receives a fixed price and pays a floating market price to the counterparty for the hedged commodity. Collars: These instruments contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, Chesapeake receives the fixed price and pays the market price. If the market price is between the put and the call strike price, no payments are due from either party. Three-way collars include an additional put option in exchange for a more favorable strike price on the collar. This eliminates the counterpartys downside exposure below the second put option. Call options: Chesapeake sells call options in exchange for a premium from the counterparty. At the time of settlement, if the market price exceeds the fixed price of the call option, Chesapeake pays the counterparty such excess and if the market price settles below the fixed price of the call option, no payment is due from either party. Put options: Chesapeake receives a premium from the counterparty in exchange for the sale of a put option. If the market price falls below the fixed price of the put option, Chesapeake pays the counterparty such shortfall. If the market price settles above the fixed price of the put option, no payment is due from either party. Knockout swaps: Chesapeake receives a fixed price and pays a floating market price. The fixed price received by Chesapeake includes a premium in exchange for the possibility to reduce the counterpartys exposure to zero, in any given month, if the floating market price is lower than certain pre-determined knockout prices. Cap-swaps: Chesapeake receives a fixed price and pays a floating market price. The fixed price received by Chesapeake includes a premium in exchange for a cap limiting the counterpartys exposure. In other words, there is no limit to Chesapeakes exposure but there is a limit to the downside exposure of the counterparty. Basis protection swaps: These instruments are arrangements that guarantee a price differential to NYMEX for natural gas from a specified delivery point. For non-Appalachian Basin basis protection swaps, which typically have negative differentials to NYMEX, Chesapeake receives a payment from the counterparty if the price differential is greater than

Supplemental Disclosures About

Supplemental Disclosures About Natural Gas and Oil Producing Activities
	12 Months Ended Dec. 31, 2009 USD / shares
Supplemental Disclosures About Natural Gas and Oil Producing Activities	10. Supplemental Disclosures About Natural Gas and Oil Producing Activities Net Capitalized Costs Evaluated and unevaluated capitalized costs related to Chesapeakes natural gas and oil producing activities are summarized as follows: December31, 2009 2008 ($ in millions) Natural gas and oil properties: Proved $ 35,007 $ 28,965 Unproved 10,005 11,379 Total 45,012 40,344 Less accumulated depreciation, depletion and amortization (24,220 ) (11,866 ) Net capitalized costs $ 20,792 $ 28,478 Unproved properties not subject to amortization at December31, 2009, 2008 and 2007 consisted mainly of leasehold acquired through corporate and significant natural gas and oil property acquisitions and through direct purchases of leasehold. We capitalized approximately $627 million, $585 million and $311 million of interest during 2009, 2008 and 2007, respectively, on significant investments in unproved properties that were not yet included in the amortization base of the full-cost pool. We will continue to evaluate our unevaluated properties; however, the timing of the ultimate evaluation and disposition of the properties has not been determined. The table below sets forth the cost of unproved properties excluded from the amortization base as of December31, 2009 and notes the year in which the associated costs were incurred: Year of Acquisition Total 2009 2008 2007 Prior ($ in millions) Leasehold acquisition cost $ 1,803 $ 4,948 $ 1,059 $ 636 $ 8,446 Exploration cost 346 152 120 618 Capitalized interest 201 551 118 71 941 Total $ 2,350 $ 5,651 $ 1,297 $ 707 $ 10,005 Costs Incurred in Natural Gas and Oil Exploration and Development, Acquisitions and Divestitures Costs incurred in natural gas and oil property exploration and development, acquisitions and divestitures activities which have been capitalized are summarized as follows: December31, 2009 2008 2007 ($ in millions) Development and exploration costs: Development drilling(a) $ 2,729 $ 5,185 $ 4,402 Exploratory drilling 651 612 653 Geological and geophysical costs(b)(c) 162 314 343 Asset retirement obligation and other (2 ) 10 29 Total 3,540 6,121 5,427 Acquisition costs: Unproved properties(d) 2,793 8,250 2,507 Proved properties 61 355 671 Deferred income taxes 13 131 Total 2,854 8,618 3,309 Proceeds from divestitures: Unproved properties (1,265 ) (5,302 ) Proved properties (461 ) (2,433 ) (1,142 ) Total $ 4,668 $ 7,00

Midstream Joint Venture

Midstream Joint Venture
	12 Months Ended Dec. 31, 2009 USD / shares
Midstream Joint Venture	11. Midstream Joint Venture On September30, 2009, we formed a joint venture with Global Infrastructure Partners (GIP), a New York-based private equity fund, to own and operate natural gas midstream assets. As part of the transaction, Chesapeake contributed certain natural gas gathering and processing assets to a new entity, Chesapeake Midstream Partners, L.L.C. (CMP), and GIP purchased a 50% interest in CMP. The assets we contributed to the joint venture were substantially all of our midstream assets in the Barnett Shale and also the majority of our non-shale midstream assets in the Arkoma, Anadarko, Delaware and Permian Basins. The financial results of CMP are consolidated and GIPs 50% ownership interest is reflected as a noncontrolling interest as of December31, 2009 in our consolidated financial statements. CMP focuses on unregulated business activities in service to both Chesapeake and third-party natural gas producers and its revenues are generated almost entirely from fixed fee-based arrangements for gathering, compression, dehydration and treating services. CMP has entered into various agreements with Chesapeake, including a long-term gas gathering agreement at rates consistent with current market pricing. CMP operates the contributed assets. Certain Chesapeake employees provide services to CMP through an employee secondment agreement. In return for certain cost reimbursements, CMP utilizes various support functions within Chesapeake, including accounting, human resources and information technology. Subsidiaries of our wholly-owned subsidiary CMD continue to operate our midstream assets outside of the CMP joint venture. These include natural gas gathering assets in the Fayetteville Shale, Haynesville Shale, Marcellus Shale and other areas in Appalachia. Concurrent with GIPs funding of its interest in the joint venture, CMP closed a new $500 million secured revolving bank credit facility to partially fund capital expenditures associated with the building of additional natural gas gathering systems and for general corporate purposes. Additionally, we amended and restated the existing midstream lending agreement to reduce the total capacity from $460 million to $250 million, among other changes. This separate secured revolving bank credit facility supports CMDs continuing midstream activities. These facilities are described in Note 3. In 2009, we recorded an $86 million impairment of certain of the gathering systems contributed to CMP prior to the formation of the joint venture, and we expensed $4 million of debt issuance costs associated with the portion of our $460 million midstream credit facility that was reduced to $250 million. The combined impairment of $90 million was included in impairment of natural gas and oil properties and other assets on our consolidated statement of operations. Additionally, an estimated post-closing adjustment related to the joint venture transaction was recorded at December31, 2009, and is expected to be finalized in the first quarter of 2010. The $897 million noncontrolling interest included in our consolidated equity at December31, 2009 represents GIPs 50% interest in the net asset

Divestitures

Divestitures
	12 Months Ended Dec. 31, 2009 USD / shares
Divestitures	12. Divestitures Joint Ventures In 2008, we entered into three joint ventures to sell a portion of our leasehold in the joint venture areas, which allowed us to recover much or all of our initial leasehold investments in the plays, reduce our ongoing capital costs and reduce future risks. The transactions are detailed below. On July1, 2008, we entered into a joint venture with Plains Exploration Production Company (PXP) to develop our Haynesville and Bossier Shale leasehold in Northwest Louisiana and East Texas. Under the terms of the joint venture, PXP acquired a 20% interest in approximately 550,000 net acres of our Haynesville and Bossier Shale leasehold for $1.65 billion in cash. PXP also agreed to fund 50% of our remaining 80% share of the costs associated with drilling and completing future Haynesville and Bossier Shale joint venture wells over a multi-year period, up to an additional $1.65 billion. In addition, PXP has the right to a 20% participation in any additional leasehold we acquire in the Haynesville and Bossier Shales at our cost plus a fee. In August 2009, Chesapeake and PXP amended their joint venture agreement to accelerate the payment of PXPs remaining joint venture drilling carries as of September30, 2009, in exchange for an approximate 12% reduction in the total amount of drilling carry obligations due to Chesapeake. As a result, on September29, 2009, Chesapeake received $1.1 billion in cash from PXP and beginning in the 2009 fourth quarter Chesapeake and PXP each began paying their proportionate working interest costs on drilling. On September5, 2008, we entered into a joint venture with BP America Inc. to develop our Fayetteville Shale leasehold in Arkansas. Under the terms of the joint venture, BP acquired a 25% interest in approximately 540,000 net acres of our Fayetteville Shale leasehold for $1.1 billion in cash. BP also paid an additional $800 million by funding 100% of Chesapeakes 75% share of drilling and completion expenditures during 2008 and 2009. In addition, BP has the right to a 25% participation in any additional leasehold we acquire in the Fayetteville Shale at our cost plus a fee. On November25, 2008, we entered into a joint venture with Statoil to develop our Marcellus Shale leasehold in Appalachia. Under the terms of the joint venture, Statoil acquired a 32.5% interest in our Marcellus Shale assets for $3.375 billion. The assets included approximately 1.8million net acres of leasehold, of which Statoil now owns approximately 0.6million net acres and Chesapeake owns approximately 1.2million net acres. Chesapeake received $1.25 billion in cash from Statoil and agreed to fund 75% of Chesapeakes 67.5% share of drilling and completion expenditures until the $2.125 billion obligation has been funded, subject to certain conditions. In addition, Statoil has the right to a 32.5% participation in any additional leasehold we acquire in the Marcellus Shale. Statoils commitment to fund 75% of our share of future drilling and completion costs (up to $2.125 billion) is expected to reduce future DDA expense by reducing the amount of capital we will invest to develop our Marcellus properties. Fo

Restructuring

Restructuring
	12 Months Ended Dec. 31, 2009 USD / shares
Restructuring	13. Restructuring In 2009, we restructured our Charleston, West Virginia-based Eastern Division from a regional corporate headquarters to a regional field office consistent with the business model the company uses elsewhere in the country. As a result, we consolidated the management of our Eastern Division land, legal, accounting, information technology, geoscience and engineering departments into our corporate offices in Oklahoma City. The costs of the reorganization include termination benefits, consolidating or closing facilities and relocating employees. In addition, we had certain other workforce reductions that resulted in termination benefits. A summary of Chesapeakes restructuring charges is presented below ($ in millions): Restructuring CostsThrough December31, 2009 Restructuring Costs To Be Incurred Total Restructuring Costs Restructuring Costs: Termination and relocation costs $ 21 $ 1 $ 22 Acceleration of restricted stock awards 9 9 Other associated costs 3 3 Total Restructuring Costs $ 33 $ 1 $ 34

Investments

Investments
	12 Months Ended Dec. 31, 2009 USD / shares
Investments	14. Investments At December31, 2009, investments accounted for under the equity method totaled $370 million and investments accounted for under the cost method totaled $34 million. Following is a summary of our investments: Approximate % Owned Accounting Method December31, 2009 2008 Carrying Value Carrying Value ($ in millions) Frac Tech Services, Ltd.(a) 20 % Equity $ 239 $ 223 Chaparral Energy, Inc.(b)(c) 32 % Equity 103 152 DHS Drilling Company(b) 47 % Equity 19 Sierra Mid-Con, L.P. 49 % Equity 14 12 Gastar Exploration Ltd.(d) 14 % Cost 32 11 Mountain Drilling Company(b) 49 % Equity 9 Other 16 18 $ 404 $ 444 (a) The carrying value of our investment in Frac Tech is in excess of our underlying equity in net assets by approximately $169 million as of December31, 2009. This excess amount is attributed to certain intangibles associated with the specialty services provided by Frac Tech and is being amortized over the estimated life of the intangibles. (b) Our investees have been impacted by the dramatic slowing of the worldwide economy and the tightening of the credit markets in the fourth quarter of 2008 and into 2009. The economic weakness has resulted in significantly reduced natural gas and oil prices leading to a meaningful decline in the overall level of activity in the markets served by our investees. Associated with the weakness in performance of certain of the investees, as well as an evaluation of their financial condition and near-term prospects, we recognized during 2009 that an other than temporary impairment had occurred on March31, 2009 on the following investments: Chaparral Energy, Inc. of $51 million, DHS Drilling Company of $19 million, Gastar Exploration Ltd. of $70 million and Mountain Drilling Company of $9 million. On December31, 2008, we recognized that an other than temporary impairment occurred on the following investments: Chaparral Energy, Inc., $100 million; DHS Drilling Company, $20 million; Mountain Drilling Company, $10 million; and Ventura Refining and Transmission LLC, Inc., $50 million. We have monitored and will continue to monitor the performance of our investments, and it is reasonably possible that we may experience additional impairments, although we do not believe that our exposure to future charges would be material to our consolidated results of operations. (c) The carrying value of our investment in Chaparral is in excess of our underlying equity in net assets by approximately $43 million as of December31, 2009. This excess is attributed to the natural gas and oil reserves held by Chaparral and is being amortized over the estimated life of these reserves based on a unit of production rate. (d) Our investment in Gastar had an associated cost basis of $89 million as of December31, 2009 and 2008. The table below presents summarized financial information for our significant equity method investments, including Chapa

Fair Value Measurements

Fair Value Measurements
	12 Months Ended Dec. 31, 2009 USD / shares
Fair Value Measurements	15. Fair Value Measurements Effective January1, 2008, we adopted accounting standards for fair value measurements for our financial assets and liabilities measured on a recurring basis. Our nonfinancial assets and liabilities became subject to the standards effective January1, 2009. This guidance establishes a framework for measuring fair value of assets and liabilities and expands disclosures about fair value measurements for financial instruments reported at fair value on the consolidated balance sheet. Under the guidance fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e., an exit price. To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels. Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the financial asset or liability and have the lowest priority. Chesapeake uses appropriate valuation techniques based on available inputs, including counterparty quotes, to measure the fair values of its assets and liabilities. Counterparty quotes are generally assessed as a Level 3 input. The following table provides fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of December31, 2009: Quoted Pricesin Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total FairValue ($ in millions) Financial Assets (Liabilities): Cash equivalents $ 307 $ $ $ 307 Derivatives, net $ $ 692 $ (755 ) $ (63 ) Investments $ 32 $ $ $ 32 Other long-term assets $ 34 $ $ $ 34 Long-term debt $ $ $ (1,398 ) $ (1,398 ) Other long-term liabilities $ (34 ) $ $ $ (34 ) The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the table above. Level 1 Fair Value Measurements Cash Equivalents.The fair value of cash equivalents is based on quoted market prices. Investments.The fair value of Chesapeakes investment in Gastar Exploration Ltd. common stock is based on a quoted market price. Other Long-Term Assets and Liabilities.The fair value of other long-term assets and liabilities, consisting of obligations under our Deferred Compensation Plan, is based on quoted market prices. Level 2 Fair Value Measurements Derivatives.The fair values of our natural gas, oil and diesel swaps are measured internally using established index prices and other sources. These values are based upon, among other things, futures prices

Asset Retirement Obligations

Asset Retirement Obligations
	12 Months Ended Dec. 31, 2009 USD / shares
Asset Retirement Obligations	16. Asset Retirement Obligations The components of the change in our asset retirement obligations are shown below. YearsEndedDecember31. 2009 2008 ($inmillions) Asset retirement obligations, beginning of period $ 269 $ 236 Additions 14 21 Revisions (3 ) Settlements and disposals (15 ) (5 ) Accretion expense 17 17 Asset retirement obligations, end of period $ 282 $ 269

Major Customers and Segment Inf

Major Customers and Segment Information
	12 Months Ended Dec. 31, 2009 USD / shares
Major Customers and Segment Information	17. Major Customers and Segment Information Sales to individual customers constituting 10% or more of total revenues (before the effects of hedging) were as follows: Year Ended December31, Customer Amount Percentof TotalRevenues ($inmillions) 2009 EDF Trading North America LLC $ 571 10 % 2008 Eagle Energy Partners I, L.P. $ 1,283 12 % 2007 Eagle Energy Partners I, L.P. $ 1,072 15 % In September 2003, Chesapeake invested in Eagle Energy Partners I, L.P. and received a 25% limited partnership interest. Through additional investments, Chesapeake increased its limited partner ownership interest to approximately 33% as of December31, 2006. In 2007, we sold our 33% limited partnership interest for proceeds of $124 million and a gain of $83 million. In accordance with accounting guidance for disclosures about segments of an enterprise and related information, we have two reportable operating segments. Our exploration and production operational segment and natural gas and oil midstream segment are managed separately because of the nature of their products and services. The exploration and production segment is responsible for finding and producing natural gas and oil. The midstream segment is responsible for marketing, gathering and compression of natural gas and oil primarily from Chesapeake-operated wells. We also have drilling rig and trucking operations which are responsible for providing drilling rigs primarily used on Chesapeake-operated wells and trucking services utilized in the transportation of drilling rigs on both Chesapeake-operated wells and wells operated by third parties. Our drilling rig and trucking service operations are presented in Other Operations in the table below. Management evaluates the performance of our segments based upon income (loss) before income taxes. Revenues from the midstream segments sale of natural gas and oil related to Chesapeakes ownership interests are reflected as exploration and production revenues. Such amounts totaled $2.9 billion, $5.5 billion and $3.5 billion for 2009, 2008 and 2007, respectively. The following tables present selected financial information for Chesapeakes operating segments. Exploration and Production Midstream Other Operations Inter- Company Eliminations Consolidated Total ($ in millions) For the Year Ended December31, 2009: Revenues $ 5,049 $ 5,341 $ 414 $ (3,102 ) $ 7,702 Intersegment revenues (2,878 ) (224 ) 3,102 Total Revenues 5,049 2,463 190 7,702 Depreciation, depletion and amortization 1,556 44 50 (35 ) 1,615 Other income (expense) (30 ) 3 1 (2 ) (28 ) Interest expense (113 ) (1 ) 1 (113 ) Impairment of natural gas and oil properties and other assets 11,013 90 27 11,130 Impairment of investments (162 ) (162

Condensed Consolidating Financi

Condensed Consolidating Financial Information
	12 Months Ended Dec. 31, 2009 USD / shares
Condensed Consolidating Financial Information	18. Condensed Consolidating Financial Information Chesapeake Energy Corporation is a holding company and owns no operating assets and has no significant operations independent of its subsidiaries. As of December31, 2007, our obligations under our outstanding senior notes and contingent convertible notes listed in Note 3 were fully and unconditionally guaranteed, jointly and severally, by all of our wholly-owned subsidiaries, other than minor subsidiaries, on a senior unsecured basis. Since October 2008, following the restructuring of our non-Appalachian midstream operations, as described in Note 3, certain of our wholly-owned subsidiaries having significant assets and operations have not guaranteed our outstanding notes. Our midstream subsidiaries are subject to covenants in our midstream revolving credit facilities referred to in Note3 that restrict them from paying dividends or distributions or making loans to Chesapeake. Set forth below are condensed consolidating financial statements for Chesapeake Energy Corporation (the parent) on a stand-alone, unconsolidated basis, and its combined guarantor and combined non-guarantor subsidiaries as of and for the years ended December31, 2009 and 2008. We have not provided comparative financial statements for 2007 because the non-guarantor subsidiaries as of December31, 2007 were minor subsidiaries individually or in the aggregate. The financial information may not necessarily be indicative of results of operations, cash flows, or financial position had the subsidiaries operated as independent entities. CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2009 ($ in millions) Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated CURRENT ASSETS: Cash and cash equivalents $ $ 293 $ 14 $ $ 307 Other 27 2,031 166 (85 ) 2,139 Total Current Assets 27 2,324 180 (85 ) 2,446 PROPERTY AND EQUIPMENT: Natural gas and oil properties, at cost based on full-cost accounting 20,781 11 20,792 Other property and equipment, net 2,903 3,015 5,918 Total Property and Equipment 23,684 3,026 26,710 Other assets 197 540 21 758 Investments in subsidiaries and intercompany advance 3,029 222 (3,251 ) TOTAL ASSETS $ 3,253 $ 26,770 $ 3,227 $ (3,336 ) $ 29,914 CURRENT LIABILITIES: Current liabilities $ 277 $ 2,261 $ 235 $ (85 ) $ 2,688 Intercompany payable (receivable) from parent (19,388 ) 17,501 1,800 87 Total Current Liabilities (19,111 ) 19,762 2,035 2 2,688 LONG-TERM LIABILITIES:

Quarterly Financial Data

Quarterly Financial Data (unaudited)
	12 Months Ended Dec. 31, 2009 USD / shares
Quarterly Financial Data (unaudited)	19. Quarterly Financial Data (unaudited) Summarized unaudited quarterly financial data for 2009 and 2008 are as follows ($ in millions except per share data): Quarters Ended March31, 2009 June30, 2009 September30, 2009 December31, 2009 Total revenues $ 1,995 $ 1,673 $ 1,811 $ 2,222 Gross profit (loss)(a)(b) (9,053 ) 424 397 (713 ) Net income (loss) attributable to Chesapeake(b) (5,740 ) 243 192 (524 ) Net income (loss) available to common stockholders(b) (5,746 ) 237 186 (530 ) Net earnings (loss) per common share: Basic $ (9.63 ) $ 0.39 $ 0.30 $ (0.84 ) Diluted $ (9.63 ) $ 0.39 $ 0.30 $ (0.84 ) Quarters Ended March31, 2008 June30, 2008 September 30, 2008 December31, 2008 Total revenues $ 1,611 $ (455 ) $ 7,491 $ 2,981 Gross profit(a) (104 ) (2,532 ) 5,478 (1,385 ) Net income (loss) attributable to Chesapeake (130 ) (1,592 ) 3,322 (995 ) Net income (loss) available to common stockholders (142 ) (1,643 ) 3,291 (1,001 ) Net earnings per common share: Basic $ (0.29 ) $ (3.16 ) $ 5.94 $ (1.74 ) Diluted $ (0.29 ) $ (3.16 ) $ 5.62 $ (1.74 ) (a) Total revenue less operating costs. (b) Includes a $9.6billion and $1.4billion ceiling test write-down on our natural gas and oil properties for the quarters ended March31, 2009 and December31, 2009, respectively.

Recently Issued Accounting Stan

Recently Issued Accounting Standards
	12 Months Ended Dec. 31, 2009 USD / shares
Recently Issued Accounting Standards	20. Recently Issued Accounting Standards In June 2009, the FASB issued amendments to the consolidation standard applicable to variable interest entities in response to concerns about the transparency of involvement with variable interest entities. The amended standard is effective for calendar year companies beginning on January1, 2010. Beginning January1, 2010, we will deconsolidate our joint venture with GIP and account for the investment in the joint venture under the equity method going forward. Adoption of this guidance will result in a cumulative effect adjustment for the difference in our equity in the joint venture at January1, 2010, which was originally recorded at carryover basis, and the fair value of our equity at the formation of the joint venture based on the then fair value. This cumulative effect adjustment will create a basis difference between our equity investment balance and the underlying equity in the net assets of the joint venture. This difference will be accreted through earnings over the expected useful life of the underlying assets held by the joint venture. In January 2010, the FASB updated its oil and gas estimation and disclosure requirements to align its requirements with the SECs modernized oil and gas reporting rules, which are effective for annual reports on Form 10-K for fiscal years ending on or after December 31, 2009. The update amends the definition of proved reserves to use the average of first-day-of-the-month prices during the 12 months preceding the end of the reporting period, adds definitions used in estimating and disclosing proved oil and natural gas quantities and expands the disclosures required for equity-method investments. The update must be applied prospectively as a change in accounting principle that is inseparable from a change in accounting estimate and is effective for entities with annual reporting periods ending on or after December31, 2009. See Note 10 for disclosures regarding our natural gas and oil reserves. The company is not able to disclose the effects resulting from the implementation of these changes on the financial statements or on the amount of proved reserves and disclosed quantities because personnel and time constraints made it infeasible for the company to perform a second reserve estimation process under the prior standards.

Subsequent Events

Subsequent Events
	12 Months Ended Dec. 31, 2009 USD / shares
Subsequent Events	21. Subsequent Events On January26, 2010, Chesapeake and Total EP USA, Inc., a wholly-owned subsidiary of Total S.A. (NYSE: TOT, FP: FP) (Total), closed a $2.25 billion Barnett Shale joint venture transaction, whereby Total acquired a 25% interest in our upstream Barnett Shale assets.Total paid us approximately $800 million in cash at closing and will pay a further $1.45 billion over time by funding 60% of our share of future drilling and completion expenditures.We expect this drilling carry to be funded by year-end 2012. On February5, 2010, we sold certain Chesapeake-operated long-lived producing assets in East Texas and the Texas Gulf Coast in our sixth volumetric production payment (VPP) transaction for proceeds of $180 million, or $3.95 per mcfe of proved reserves.The assets in the VPP included proved reserves of approximately 45.5 bcfe and current net production of approximately 20 mmcfe per day. On February16, 2010, Chesapeake Midstream Partners, L.P. (the Partnership) filed a registration statement on Form S-1 with the SEC relating to a proposed underwritten initial public offering of common units, representing limited partnership interests in the Partnership. The Partnership was formed by Chesapeake and GIP, equal indirect owners of the general partner of the Partnership, to own, operate, develop and acquire midstream assets. Upon the closing of the offering, Chesapeake and GIP will contribute CMPs interests to the Partnership and the Partnership will continue CMPs business. It is expected that the Partnership will succeed to CMPs $500 million revolving credit facility, with certain amendments, and a portion of the proceeds of the offering will be used to repay the outstanding borrowings under the midstream joint venture revolving credit facility.

Schedule II VALUATION AND QUALI

Schedule II VALUATION AND QUALIFYING ACCOUNTS
	12 Months Ended Dec. 31, 2009 USD / shares
Schedule II VALUATION AND QUALIFYING ACCOUNTS	Schedule II CHESAPEAKE ENERGY CORPORATION VALUATION AND QUALIFYING ACCOUNTS ($ in millions) Additions Description Balanceat Beginning of Period Charged To Expense Charged To Other Accounts Deductions Balance at End ofPeriod December31, 2009: Allowance for doubtful accounts $ 12 $ 12 $ $ $ 24 Valuation allowance for deferred tax assets $ $ $ $ $ December31, 2008: Allowance for doubtful accounts $ 8 $ 4 $ $ $ 12 Valuation allowance for deferred tax assets $ $ $ $ $ December31, 2007: Allowance for doubtful accounts $ 6 $ 2 $ $ $ 8 Valuation allowance for deferred tax assets $ $ $ $ $

Document Information

Document Information
	12 Months Ended Dec. 31, 2009 USD / shares
Document Type	10-K
Amendment Flag	false
Document Period End Date	2009-12-31

Entity Information

Entity Information (USD $)
	12 Months Ended Dec. 31, 2009	Feb. 24, 2010	Jun. 30, 2009
Trading Symbol	CHK
Entity Registrant Name	CHESAPEAKE ENERGY CORP
Entity Central Index Key	0000895126
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		651,861,064
Entity Public Float			$12,500,000,000