0000895126-20-000115 | 10-Q | XBRL Viewer

TOTAL LIABILITIES AND EQUITY

(3,924)

4,401

$ 7,808

$ 16,193

[1]	Amounts and shares have been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) $ in Millions	Mar. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) $ / shares shares
Preferred stock, par value (usd per share) \| $ / shares	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares) \| shares	20,000,000	20,000,000
Preferred stock, shares outstanding (shares) \| shares	5,563,458	5,563,458
Common stock, par value (usd per share) \| $ / shares	$ 0.01	$ 0.01
Common stock, shares authorized (shares) \| shares	22,500,000	15,000,000
Common stock, shares issued (shares) \| shares	9,783,773	9,772,793
Treasury stock, common shares (shares) \| shares	0	26,224
VIE, cash and cash equivalents	$ 82	$ 6
VIE, proved oil and natural gas properties	31,251	30,765
VIE, accumulated depreciation, depletion and amortization	(29,110)	(20,002)
VIE, other current liabilities	1,152	1,432
VIE
VIE, cash and cash equivalents	2	2
VIE, proved oil and natural gas properties	755	755
VIE, accumulated depreciation, depletion and amortization	(748)	(713)
VIE, other current liabilities	$ 1	$ 1

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
shares in Thousands, $ in Millions

3 Months Ended

Mar. 31, 2020

USD ($)

$ / shares

Mar. 31, 2019

USD ($)

$ / shares

$ 2,541

$ 2,196

Gains on sales of assets

Severance and ad valorem taxes

General and administrative

103

Restructuring and other termination costs

Provision for legal contingencies, net

Depreciation, depletion and amortization

603

519

Impairments

8,522

Other operating expense

Total Operating Expenses

10,768

2,378

LOSS FROM OPERATIONS

(8,227)

(182)

OTHER INCOME (EXPENSE):

Interest expense

(145)

(161)

Losses on investments

(23)

(1)

Gains on purchases or exchanges of debt

Other income

Total Other Expense

(99)

(153)

LOSS BEFORE INCOME TAXES

(8,326)

(335)

Income tax benefit

(13)

(314)

NET LOSS

(8,313)

(21)

Net loss attributable to noncontrolling interests

NET LOSS ATTRIBUTABLE TO CHESAPEAKE

(8,297)

(21)

Preferred stock dividends

(22)

(23)

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS

$ (8,319)

$ (44)

LOSS PER COMMON SHARE:

Basic (in dollars per share) | $ / shares

^[1]

$ (852.97)

$ (6.37)

Diluted (in dollars per share) | $ / shares

^[1]

$ (852.97)

$ (6.37)

WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING

Basic (in shares) | shares

^[1]

9,753

6,902

Diluted (in shares) | shares

^[1]

9,753

6,902

Oil, natural gas and NGL

$ 1,801

$ 929

Marketing

724

1,233

Oil, natural gas and NGL and Marketing

746

1,230

2,525

2,162

Other

Oil, natural gas and NGL production

Oil, natural gas and NGL gathering, processing and transportation

122

115

285

274

Exploration

Statement of Comprehensive Income [Abstract]

$ 282

$ 24

[1]	Amounts and shares have been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

NET LOSS

$ (8,313)

$ (21)

OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX:

Reclassification of losses on settled derivative instruments

^[1]

Other Comprehensive Income

COMPREHENSIVE LOSS

(8,304)

(11)

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

COMPREHENSIVE LOSS ATTRIBUTABLE TO CHESAPEAKE

$ (8,288)

$ (11)

[1]	Deferred tax activity incurred in other comprehensive income was offset by a valuation allowance.

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=118930883&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (a)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1B
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=118930883&loc=SL7669625-108580

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (c)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8736-108599

Reference 6: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4J
-URI http://asc.fasb.org/extlink&oid=116874947&loc=SL4591551-111686

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 230
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=118932676&loc=d3e3000-108585

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 19
-URI http://asc.fasb.org/extlink&oid=108774443&loc=SL4569616-111683

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4K
-URI http://asc.fasb.org/extlink&oid=116874947&loc=SL4591552-111686

+ Details

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS	$ (8,313)		$ (21)
ADJUSTMENTS TO RECONCILE NET LOSS TO CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation, depletion and amortization	603		519
Deferred income tax benefit	(10)	$ 10	(314)
Derivative (gains) losses, net	(907)		304
Cash receipts on derivative settlements, net	89		14
Stock-based compensation	5		6
Gains on sales of assets	0		(19)
Impairments	8,522		1
Exploration	279		18
Losses on investments	23		1
Gains on purchases or exchanges of debt	(63)		0
Other	8		40
Changes in assets and liabilities	161		(93)
Net Cash Provided By Operating Activities	397		456
CASH FLOWS FROM INVESTING ACTIVITIES:
Drilling and completion costs	(501)		(515)
Business combination, net	0		(353)
Acquisitions of proved and unproved properties	(6)		(6)
Proceeds from divestitures of proved and unproved properties	7		26
Additions to other property and equipment	(11)		(9)
Proceeds from sales of other property and equipment	0		1
Net Cash Used In Investing Activities	(511)		(856)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility borrowings	2,331		3,572
Payments on revolving credit facility borrowings	(2,021)		(3,136)
Cash paid to purchase debt	(93)		(1)
Cash paid for preferred stock dividends	(22)		(23)
Other	(5)		(8)
Net Cash Provided By Financing Activities	190		404
Net increase in cash and cash equivalents	76		4
Cash and cash equivalents, beginning of period	6		4
Cash and cash equivalents, end of period	82	$ 6	8
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of capitalized interest	113		145
Income taxes paid, net of refunds received	0		(5)
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for business combination	0		2,037
Change in accrued drilling and completion costs
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in non-cash investing and financing activities	$ (29)		$ 39

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Millions

Total

TOTAL CHESAPEAKE STOCKHOLDERS’ EQUITY (DEFICIT)

PREFERRED STOCK:

COMMON STOCK:(a)

ADDITIONAL PAID-IN CAPITAL:(a)

ACCUMULATED DEFICIT:

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

TREASURY STOCK – COMMON:(a)

NONCONTROLLING INTERESTS:

Chesapeake stockholders’ equity, beginning of period at Dec. 31, 2018

$ 1,671

$ 0

$ 14,387

$ (13,912)

$ (23)

$ (31)

^[1]

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Common shares issued for WildHorse Merger

2,037

Stock-based compensation

Dividends on preferred stock

(23)

Net loss attributable to Chesapeake

$ (21)

(21)

Hedging activity

Purchase of 17,901 and 12,697 shares for company benefit plans

^[1]

(6)

Release of 44,126 and 553 shares from company benefit plans

^[1]

Chesapeake stockholders’ equity, end of period at Mar. 31, 2019

$ 4,097

16,408

(13,933)

(13)

(36)

^[1]

Stockholders' equity attributable to noncontrolling interest, beginning of period at Dec. 31, 2018

$ 41

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net loss attributable to noncontrolling interests

Stockholders' equity attributable to noncontrolling interest, end of period at Mar. 31, 2019

Increase (Decrease) in Stockholders' Equity [Roll Forward]

4,138

Chesapeake stockholders’ equity, beginning of period at Dec. 31, 2019

4,401

4,364

$ 1,631

16,973

(14,220)

(32)

^[1]

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Common shares issued for WildHorse Merger

Stock-based compensation

(31)

Dividends on preferred stock

(22)

Net loss attributable to Chesapeake

(8,297)

Hedging activity

Purchase of 17,901 and 12,697 shares for company benefit plans

^[1]

(2)

Release of 44,126 and 553 shares from company benefit plans

^[1]

Chesapeake stockholders’ equity, end of period at Mar. 31, 2020

(3,945)

$ (3,945)

$ 0

$ 16,920

$ (22,517)

$ 21

$ 0

^[1]

Stockholders' equity attributable to noncontrolling interest, beginning of period at Dec. 31, 2019

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net loss attributable to noncontrolling interests

(16)

Stockholders' equity attributable to noncontrolling interest, end of period at Mar. 31, 2020

$ 21

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract]

$ (3,924)

[1]	Amounts and shares have been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical)	3 Months Ended
	Mar. 31, 2020 shares	Mar. 31, 2019 shares
TREASURY STOCK – COMMON:(a)
Purchase of shares for company benefit plans (in shares)	17,901	12,697
Release of shares from company benefit plans (in shares)	44,126	553

Basis of Presentation and Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Basis of Presentation and Summary of Significant Accounting Policies	Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements of Chesapeake were prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted. This Form 10-Q relates to the three months ended March 31, 2020 (the “Current Quarter”) and the three months ended March 31, 2019 (the “Prior Quarter”). Our annual report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) should be read in conjunction with this Form 10-Q. The accompanying condensed consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our direct and indirect wholly owned subsidiaries and entities in which we have a controlling financial interest. Intercompany accounts and balances have been eliminated. Risks and Uncertainties On March 11, 2020, the World Health Organization declared the ongoing coronavirus (COVID-19) outbreak a pandemic and recommended containment and mitigation measures worldwide. The pandemic has reached more than 200 countries and territories and has resulted in widespread adverse impacts on the global economy and on our customers and other parties with whom we have business relations. To date, we have experienced limited operational impacts as a result of the restrictions from working remotely or COVID-19 directly. As an essential business under the guidelines issued by each of the states in which we operate, we have been allowed to continue operations, although for the health and safety of our employees we chose to have our non-essential personnel work remotely. As a result, since mid-March, we have restricted access to all of our offices and have directed employees to work remotely to the extent possible. Those employees who are unable to work remotely are being closely monitored and are taking safety precautions to minimize the risk of exposure. These restrictions have allowed us to maintain the engagement and connectivity of our personnel, as well as minimize the number of employees required in the office and field. However, due to severe impacts from the global COVID-19 pandemic on the global demand for oil and natural gas, operating results for the three months ended March 31, 2020 are not necessarily indicative of financial results for the entire year as only one month of the Current Quarter was impacted by COVID-19 and the related economic volatility. Moreover, future operations could be negatively affected if a significant number of our employees are quarantined as a result of exposure to the virus. There is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. One of the largest impacts of the pandemic has been a significant reduction in global demand for oil and, to a lesser extent, natural gas. This significant decline in demand has been met with a sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of the Organization of Petroleum Exporting Countries (OPEC+) and other foreign, oil-exporting countries. The resulting supply/demand imbalance is having disruptive impacts on the oil and natural gas exploration and production industry and on other industries that serve exploration and production companies. These industry conditions, coupled with those resulting from the COVID-19 pandemic, are expected to lead to significant global economic contraction generally and in our industry in particular. Oil and natural gas prices have historically been volatile; however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19 and the OPEC+ decisions mentioned above. While an agreement to cut production has since been announced by OPEC+ and its allies, the situation, coupled with the impact of COVID-19, has continued to result in a significant downturn in the oil and gas industry. Oil prices declined sharply in April 2020 and remain volatile. Strip pricing for natural gas has increased as a result of the oil price war; however, the impact of these recent developments and our business are unpredictable. We expect to see continued volatility in oil and natural gas prices for the foreseeable future, and such volatility, combined with the current depressed prices, has impacted and is expected to continue to adversely impact our business. A continued low level of demand or prices for oil and natural gas or otherwise would have a continued material adverse effect on our business, cash flows, liquidity, financial condition and results of operations. We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time due to numerous uncertainties. The ultimate impacts will depend on future developments, including the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by members of OPEC+ and other foreign, oil-exporting countries, governmental authorities, customers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. Reverse Stock Split On April 13, 2020, our Board of Directors and our shareholders approved a 1-for-200 (1:200) reverse stock split of our common stock and a reduction in the total number of authorized shares of our common stock as determined by a formula based on two-thirds of the reverse stock split ratio. The reverse stock split became effective as of the close of business on April 14, 2020. Our common stock began trading on a split-adjusted basis on the New York Stock Exchange (NYSE) at the market open on April 15, 2020. The par value of the common stock was not adjusted as a result of the reverse stock split. All share and per share data have been retroactively adjusted to reflect this reverse stock split, including reclassifying an amount equal to the reduction in par value of our common stock to additional paid-in capital. See Note 17 for additional information.

Going Concern	3 Months Ended
Going Concern	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Going Concern	Going Concern Fluctuations in oil and natural gas prices have a material impact on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced. Historically, oil and natural gas prices have been volatile; however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19 and the OPEC+ decisions discussed in Note 1. We expect to see continued volatility in oil and natural gas prices for the foreseeable future, and such volatility, combined with the current depressed prices has impacted and is expected to continue to adversely impact our business. If the current depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant and an expected significant reduction in our borrowing base in our scheduled determination, then our liquidity and our ability to comply with our financial covenants during the next 12 months will be adversely affected. Based on our current forecast, we do not expect to be in compliance with our financial covenants beginning in the fourth quarter of 2020. Failure to comply with these covenants, if not waived, would result in an event of default under our revolving credit facility, the potential acceleration of outstanding debt thereunder and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under our other outstanding indebtedness. As a result of the impacts to the Company’s financial position resulting from declining industry conditions and in consideration of the substantial amount of long-term debt outstanding, the Company has engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code. However, there can be no assurances that the Company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions. As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements (i) have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and other commitments in the normal course of business and (ii) do not include any adjustments to reflect the possible future effects of the uncertainty on the recoverability or classification of recorded asset amounts or the amounts or classifications of liabilities.

Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Debt

Our long-term debt consisted of the following as of March 31, 2020 and December 31, 2019:



	March 31, 2020						December 31, 2019
	Principal Amount			Carrying Amount			Principal Amount			Carrying Amount
	($ in millions)
Revolving credit facility	$	1,900		$	1,900		$	1,590		$	1,590
Term loan due 2024	1,500			1,472			1,500			1,470
11.5% senior secured second lien notes due 2025	2,330			3,205			2,330			3,248
6.625% senior notes due 2020	177			177			208			208
6.875% senior notes due 2020	76			76			93			93
6.125% senior notes due 2021	167			167			167			167
5.375% senior notes due 2021	127			127			127			127
4.875% senior notes due 2022	272			272			338			338
5.75% senior notes due 2023	167			167			209			209
7.00% senior notes due 2024	624			624			624			624
6.875% senior notes due 2025	2			2			2			2
8.00% senior notes due 2025	246			245			246			245
5.5% convertible senior notes due 2026^(a)(b)	1,064			773			1,064			765
7.5% senior notes due 2026	119			119			119			119
8.00% senior notes due 2026	46			44			46			44
8.00% senior notes due 2027	253			253			253			253
Debt issuance costs	—			(40		)	—			(44		)
Total debt, net	9,070			9,583			8,916			9,458
Less current maturities of long-term debt, net^(c)	(420		)	(420		)	(385		)	(385		)
Total long-term debt, net	$	8,650		$	9,163		$	8,531		$	9,073

___________________________________________


(a)	We are required to account for the liability and equity components of our convertible debt instrument separately and to reflect interest expense through the first demand repurchase date, as applicable, at the interest rate of similar nonconvertible debt at the time of issuance. The applicable rate for our 5.5% Convertible Senior Notes due 2026 is 11.5%.


(b)	Prior to maturity under certain circumstances and at the holder’s option, the notes are convertible. During the Current Quarter, the price of our common stock was below the threshold level for conversion and, as a result, the holders do not have the option to convert their notes in the second quarter of 2020.


(c)	As of March 31, 2020, net current maturities of long-term debt includes our 6.625% Senior Notes due August 2020, our 6.875% Senior Notes due November 2020 and our 6.125% Senior Notes due February 2021. As of December 31, 2019, net current maturities of long-term debt includes our 6.625% Senior Notes due August 2020 and our 6.875% Senior Notes due November 2020.

Senior Notes

In the Current Quarter, we repurchased approximately $156 million aggregate principal amount of the following senior notes for $93 million and recorded an aggregate gain of approximately $63 million.



	Notes Repurchased
	($ in millions)
6.625% senior notes due 2020	$	31
6.875% senior notes due 2020	17
4.875% senior notes due 2022	66
5.75% senior notes due 2023	42
Total	$	156

Revolving Credit Facility

Our revolving credit facility matures in September 2023 and the current aggregate commitment of the lenders and borrowing base under the facility is $3.0 billion. The revolving credit facility provides for an accordion feature, pursuant to which the aggregate commitments thereunder may be increased to up to $4.0 billion from time to time, subject to agreement of the participating lenders and certain other customary conditions. Scheduled borrowing base redeterminations will continue to occur semiannually. Our borrowing base was reaffirmed on November 1, 2019. As of March 31, 2020, we had outstanding borrowings of $1.900 billion under our revolving credit facility and had used $89 million for various letters of credit. Our next borrowing base redetermination, scheduled for the second quarter of 2020, is not complete. Although we believe we have adequate reserves value to support the reaffirmation of our full borrowing base, we believe it is likely the lending group will reduce our borrowing base due to our distressed financial position.

Borrowings under our revolving credit facility bear interest at an alternative base rate (ABR) or LIBOR, at our election, plus an applicable margin ranging from 1.50%-2.50% per annum for ABR loans and 2.50%-3.50% per annum for LIBOR loans, depending on the percentage of the borrowing base then being utilized.

Our revolving credit facility is subject to various financial and other covenants. The terms of the credit agreement include covenants limiting, among other things, our ability to incur additional indebtedness, make investments or loans, incur liens, consummate mergers and similar fundamental changes, make restricted payments, make investments in unrestricted subsidiaries and enter into transactions with affiliates.

On December 3, 2019, we entered into the second amendment to our credit agreement. Among other things, the amendment (i) permitted the issuance of certain secured indebtedness with a lien priority or proceeds recovery behind the obligations under the credit agreement without a corresponding 25% reduction in the borrowing base under the credit agreement, if issued by the next scheduled redetermination of the borrowing base, (ii) increased the amount of indebtedness that can be secured on a pari passu first-lien basis with (and with recovery proceeds behind) the obligations under the credit agreement from $1 billion to $1.5 billion, (iii) increased the applicable margin as defined in the credit agreement on borrowings under the credit agreement by 100 basis points, (iv) requires liquidity of at least $250 million at all times, (v) for each fiscal quarter commencing with the fiscal quarter ending December 31, 2019, replaced the secured leverage ratio financial covenant with a requirement that the first lien secured leverage ratio not exceed 2.50 to 1 as of the end of such fiscal quarter, (vi) increased the maximum permitted total leverage ratio as of the end of each fiscal quarter to 4.50 to1 through the fiscal quarter ending December 31, 2021, with step-downs to 4.25 to 1 for the fiscal quarter ending March 31, 2022 and to 4.00 to 1 for each fiscal quarter ending thereafter, and (vii) required that we use the aggregate net cash proceeds of certain asset sales in excess of $50 million to prepay certain indebtedness and/or reduce commitments under our credit agreement, until the retirement of all of our senior notes maturing before September 12, 2023. On December 26, 2019, we entered into the third amendment to our credit agreement, which, among other things, permitted the issuance of certain secured indebtedness with a lien priority behind the obligations under the credit agreement without a corresponding 25% reduction in the borrowing base under the credit agreement, if issued by December 31, 2019 and issued in exchange for, or the proceeds used to refinance, our senior notes.

As of March 31, 2020, we were in compliance with all applicable financial covenants under the credit agreement and we were able to borrow up to the full availability under our revolving credit facility. If the current depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant and an expected significant reduction in our borrowing base in our scheduled determination, then our liquidity and our ability to comply with our financial covenants during the next 12 months will be adversely affected. Based on our current forecast, we do not expect to be in compliance with our financial covenants beginning in the fourth quarter of 2020. Failure to comply with these covenants, if not waived, would result in an event of default under our revolving credit facility, the potential acceleration of outstanding debt thereunder and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under our other outstanding indebtedness.

Phase-Out of LIBOR

In July 2017, the UK's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR as a benchmark by the end of 2021. At the present time, our revolving credit facility and our term loan have terms that extend beyond 2021. Our revolving credit facility and our term loan each provide for a mechanism to amend the underlying agreements to reflect the establishment of an alternate rate of interest upon the occurrence of certain events related to the phase-out of LIBOR. However, we have not yet pursued any technical amendment or other contractual alternative to our revolving credit facility or term loan to address this matter. We are currently evaluating the potential impact of the eventual replacement of the LIBOR interest rate.

Fair Value of Debt

We estimate the fair value of our Level 1 debt based on the market value of our publicly traded debt as determined based on the yield of our senior notes. The fair value of our Level 2 debt is based on a market approach using estimates provided by an independent investment financial data services firm. Fair value is compared to the carrying value in the table below:



	March 31, 2020				December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			($ in millions)
Short-term debt (Level 1)	$	420	$	103	$	385	$	360
Long-term debt (Level 1)	$	565	$	68	$	753	$	622
Long-term debt (Level 2)	$	8,598	$	3,042	$	8,320	$	6,085

Earnings Per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share

Basic earnings per share (EPS) is calculated using the weighted average number of common shares outstanding during the period and includes the effect of any participating securities as appropriate. Participating securities consist of unvested restricted stock issued to our employees and non-employee directors that provide dividend rights.

Diluted EPS is calculated assuming the issuance of common shares for all potentially dilutive securities, provided the effect is not antidilutive. For all periods presented, our convertible senior notes did not have a dilutive effect and, therefore, were excluded from the calculation of diluted EPS.

Shares of common stock for the following securities were excluded from the calculation of diluted EPS as the effect was antidilutive:



	Three Months Ended March 31,
	2020	2019
	(in thousands)
Common stock equivalent of our preferred stock outstanding^(a)	290	298
Common stock equivalent of our convertible senior notes outstanding^(a)	621	729
Participating securities^(a)	4	2

____________________________________________


(a)	Amount has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

As a result of the Company’s reverse stock split effective on April 14, 2020, proportionate adjustments were made to the conversion price of Chesapeake’s outstanding 5.5% Convertible Senior Notes due 2026, 4.5% Cumulative Convertible Preferred Stock, 5.00% Cumulative Convertible Preferred Stock (Series 2005B), 5.75% Cumulative Convertible Non-Voting Preferred Stock (Series A) and 5.75% Cumulative Non-Voting Convertible Preferred Stock and to the outstanding awards and number of shares issued and issuable under the Company's equity compensation plans. See Note 17 for additional information.

Contingencies and Commitments

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Contingencies and Commitments

There have been no material developments in previously reported legal or environmental contingencies or commitments other than the items discussed below.

Contingencies

Litigation and Regulatory Proceedings

We are involved in a number of litigation and regulatory proceedings including those described below. Many of these proceedings are in early stages, and many of them seek or may seek damages and penalties, the amount of which is indeterminate. Our total accrued liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different.

Business Operations. We are involved in various lawsuits and disputes incidental to our business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions.

We and other natural gas producers have been named in various lawsuits alleging underpayment of royalties and other shares of the proceeds of production. The lawsuits against us allege, among other things, that we used below-market prices, made improper deductions, utilized improper measurement techniques, entered into arrangements with affiliates that resulted in underpayment of amounts owed in connection with the production and sale of natural gas and NGL, or similar theories. These lawsuits include cases filed by individual royalty owners and putative class actions, some of which seek to certify a statewide class. The lawsuits seek compensatory, consequential, treble, and punitive damages, restitution and disgorgement of profits, declaratory and injunctive relief regarding our payment practices, pre-and post-judgment interest, and attorney’s fees and costs. Royalty plaintiffs have varying provisions in their respective leases, oil and gas law varies from state to state, and royalty owners and producers differ in their interpretation of the legal effect of lease provisions governing royalty calculations. We have resolved a number of these claims through negotiated settlements of past and future royalty obligations and have prevailed in various other lawsuits. We are currently defending numerous lawsuits seeking damages with respect to underpayment of royalties or other shares of the proceeds of production in multiple states where we have operated, including those discussed below.

On December 9, 2015, the Commonwealth of Pennsylvania, by the Office of Attorney General, filed a lawsuit in the Bradford County Court of Common Pleas related to royalty underpayment and lease acquisition and accounting practices with respect to properties in Pennsylvania. The lawsuit, which primarily relates to the Marcellus Shale and Utica Shale, alleges that we violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) by making improper deductions and entering into arrangements with affiliates that resulted in underpayment of royalties. The lawsuit includes other UTPCPL claims and antitrust claims, including that a joint exploration agreement to which we are a party established unlawful market allocation for the acquisition of leases. The lawsuit seeks statutory restitution, civil penalties and costs, as well as a temporary injunction from exploration and drilling activities in Pennsylvania until restitution, penalties and costs have been paid, and a permanent injunction from further violations of the UTPCPL. We intend to vigorously defend these claims.

Putative statewide class actions in Pennsylvania and Ohio and purported class arbitrations in Pennsylvania have been filed on behalf of royalty owners asserting various claims for damages related to alleged underpayment of royalties as a result of the divestiture of substantially all of our midstream business and most of our gathering assets in 2012 and 2013. These cases include claims for violation of and conspiracy to violate the federal Racketeer Influenced and Corrupt Organizations Act and for an unlawful market allocation agreement for mineral rights, intentional interference with contractual relations, and violations of antitrust laws related to purported markets for gas mineral rights, operating rights and gas gathering sources. These lawsuits seek in aggregate compensatory, consequential, treble, and punitive damages, restitution and disgorgement of profits, declaratory and injunctive relief regarding our royalty payment practices, pre-and post-judgment interest, and attorney’s fees and costs. On December 20, 2017 and August 9, 2018, we reached tentative settlements to resolve substantially all Pennsylvania civil royalty cases for a total of approximately $36 million.

We believe losses are reasonably possible in certain of the pending royalty cases for which we have not accrued a loss contingency, but we are currently unable to estimate an amount or range of loss or the impact the actions could have on our future results of operations or cash flows. Uncertainties in pending royalty cases generally include the complex nature of the claims and defenses, the potential size of the class in class actions, the scope and types of the properties and agreements involved, and the applicable production years.

On July 24, 2018, Healthcare of Ontario Pension Plan (HOOPP) filed a demand for arbitration with the American Arbitration Association regarding HOOPP’s purchase of our interest in Chaparral Energy, Inc. stock for $215 million on January 5, 2014. HOOPP claims that we engaged in material misrepresentations and fraud, and that we violated the Securities Exchange Act of 1934 (the “Exchange Act”) and Oklahoma Uniform Securities Act. HOOPP seeks either rescission or $215 million in monetary damages, and in either case, interest, attorney’s fees, disgorgement and punitive damages. We intend to vigorously defend these claims.

In February 2019, a putative class action lawsuit was filed in the District Court of Dallas County, Texas against FTS International, Inc. (FTSI), certain investment banks, FTSI’s directors including certain of our officers and certain shareholders of FTSI including us. The lawsuit alleges various violations of Sections 11 (with respect to certain of our officers in their capacities as directors of FTSI) and 15 (with respect to such officers and us) of the Securities Act of 1933 in connection with public disclosure made during the initial public offering of FTSI. The suit seeks damages in excess of $1,000,000 and attorneys’ fees and other expenses. We intend to vigorously defend these claims.

Environmental Contingencies

The nature of the oil and gas business carries with it certain environmental risks for us and our subsidiaries. We have implemented various policies, programs, procedures, training and audits to reduce and mitigate such environmental risks. We conduct periodic reviews, on a company-wide basis, to assess changes in our environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. We manage our exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, we may, among other things, exclude a property from the transaction, require the seller to remediate the property to our satisfaction in an acquisition or agree to assume liability for the remediation of the property.

We are named as a defendant in numerous lawsuits in Oklahoma alleging that we and other companies have engaged in activities that have caused earthquakes. These lawsuits seek compensation for injury to real and personal property, diminution of property value, economic losses due to business interruption, interference with the use and enjoyment of property, annoyance and inconvenience, personal injury and emotional distress. In addition, they seek the reimbursement of insurance premiums and the award of punitive damages, attorneys’ fees, costs, expenses and interest. We intend to vigorously defend these claims.

Other Matters

Based on management’s current assessment, we are of the opinion that no pending or threatened lawsuit or dispute relating to our business operations is likely to have a material adverse effect on our future consolidated financial position, results of operations or cash flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could differ materially from management’s estimates.

Commitments

Gathering, Processing and Transportation Agreements

We have contractual commitments with midstream service companies and pipeline carriers for future gathering, processing and transportation of oil, natural gas and NGL to move certain of our production to market. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related to gathering, processing and transportation agreements are not recorded as obligations in the accompanying condensed consolidated balance sheets; however, they are reflected in our estimates of proved reserves.

The aggregate undiscounted commitments under our gathering, processing and transportation agreements, excluding any reimbursement from working interest and royalty interest owners, credits for third-party volumes or future costs under cost-of-service agreements, are presented below:



	March 31, 2020
	($ in millions)
Remainder of 2020	$	815
2021	986
2022	880
2023	752
2024	681
2025 – 2034	3,479
Total	$	7,593

In addition, we have entered into long-term agreements for certain natural gas gathering and related services within specified acreage dedication areas in exchange for cost-of-service based fees redetermined annually, or tiered fees based on volumes delivered relative to scheduled volumes. Future gathering fees may vary with the applicable agreement.

Other Liabilities

3 Months Ended

Mar. 31, 2020

Other Liabilities Disclosure [Abstract]

Other Liabilities

Other current liabilities as of March 31, 2020 and December 31, 2019 are detailed below:



	March 31, 2020		December 31, 2019
	($ in millions)
Revenues and royalties due others	$	396	$	516
Accrued drilling and production costs	260		326
Joint interest prepayments received	57		52
VPP deferred revenue^(a)	50		55
Accrued compensation and benefits^(b)	56		156
Other accrued taxes	132		150
Other	201		177
Total other current liabilities	$	1,152	$	1,432

Other long-term liabilities as of March 31, 2020 and December 31, 2019 are detailed below:



	March 31, 2020		December 31, 2019
	($ in millions)
VPP deferred revenue^(a)	$	—	$	9
Other	81		116
Total other long-term liabilities	$	81	$	125

____________________________________________

(a)

At the inception of our volumetric production payment (VPP) agreements, we (i) removed the proved reserves associated with the VPP, (ii) recognized VPP proceeds as deferred revenue which are being amortized on a unit-of-production basis to other revenue over the term of the VPP, (iii) retained responsibility for the production costs and capital costs related to VPP interests and (iv) ceased recognizing production associated with the VPP volumes. The remaining deferred revenue balance will be recognized in other revenues in the consolidated statement of operations through 2021, assuming the related VPP production volumes are delivered as scheduled.

(b)

In the Current Quarter, we terminated our nonqualified deferred compensation plan. Accordingly, we derecognized the asset associated with the plan after the participants’ investments were liquidated. The cash was distributed to the participants and we extinguished the corresponding $43 million accrued liability.

Revenue

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue

The following table shows revenue disaggregated by operating area and product type, for the Current Quarter and the Prior Quarter:



	Three Months Ended March 31, 2020
	Oil			Natural Gas			NGL		Total
	($ in millions)
Marcellus	$	—		$	175		$	—	$	175
Haynesville	—			85			—		85
Eagle Ford	277			31			20		328
Brazos Valley	172			4			4		180
Powder River Basin	68			15			7		90
Mid-Continent	22			10			4		36
Revenue from contracts with customers	539			320			35		894
Gains on oil, natural gas and NGL derivatives	839			68			—		907
Oil, natural gas and NGL revenue	$	1,378		$	388		$	35	$	1,801

Marketing revenue from contracts with customers	$	508		$	124		$	30	$	662
Other marketing revenue	61			1			—		62
Marketing revenue	$	569		$	125		$	30	$	724

	Three Months Ended March 31, 2019
	Oil			Natural Gas			NGL		Total
	($ in millions)
Marcellus	$	—		$	302		$	—	$	302
Haynesville	—			201			—		201
Eagle Ford	331			48			46		425
Brazos Valley	121			4			2		127
Powder River Basin	74			25			10		109
Mid-Continent	40			15			11		66
Revenue from contracts with customers	566			595			69		1,230
Losses on oil, natural gas and NGL derivatives	(259		)	(42		)	—		(301		)
Oil, natural gas and NGL revenue	$	307		$	553		$	69	$	929

Marketing revenue from contracts with customers	$	613		$	413		$	117	$	1,143
Other marketing revenue	72			20			—		92
Losses on marketing derivatives	—			(2		)	—		(2		)
Marketing revenue	$	685		$	431		$	117	$	1,233

Accounts Receivable

Our accounts receivable are primarily from purchasers of oil, natural gas and NGL and from exploration and production companies that own interests in properties we operate. This industry concentration could affect our overall exposure to credit risk, either positively or negatively, because our purchasers and joint working interest owners may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of all our counterparties and we generally require letters of credit or parent guarantees for receivables from parties deemed to have sub-standard credit, unless the credit risk can otherwise be mitigated. We estimate expected credit losses using forecasts based on historical information and current information, in addition to specifically identifying receivables that may be uncollectible.

On January 1, 2020 we adopted ASU 2016-03, Financial Instruments-Credit Losses. The standard, as further amended, affects trade receivables, financial assets and certain other instruments that are not measured at fair value through net income. This ASU replaced the previously required incurred loss approach for estimating credit losses with an expected loss model. The adoption and implementation of this ASU did not have a material impact on our accounts receivable.

Accounts receivable as of March 31, 2020 and December 31, 2019 are detailed below:



	March 31, 2020			December 31, 2019
	($ in millions)
Oil, natural gas and NGL sales	$	458		$	737
Joint interest	178			200
Other	150			74
Allowance for doubtful accounts	(24		)	(21		)
Total accounts receivable, net	$	762		$	990

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes We estimate our annual effective tax rate (AETR) for continuing operations in recording our quarterly income tax provision for the various jurisdictions in which we operate. The tax effects of statutory rate changes, significant unusual or infrequent items, and certain changes in the assessment of the realizability of deferred tax assets are excluded from the determination of our estimated AETR as such items are recognized as discrete items in the quarter in which they occur. Our estimated AETR for the Current Quarter is 0.1%. The impairments recorded during the Current Quarter (See Note 13 for additional information on the impairments) resulted in the deferred tax position attributable to Texas reverting back to a net asset before valuation allowance. As such, the $10 million of deferred tax expense recorded during the fourth quarter of 2019 is being reversed through the determination of the estimated AETR and application of such to the year-to-date pre-tax book income. The estimated AETR is low as a result of projecting a full valuation allowance for the year with only the $10 million going through the estimated AETR as a deferred tax benefit. Based on all available positive and negative evidence, including projections of future taxable income, we believe it is more likely than not that our deferred tax assets will not be realized. A significant piece of objectively verifiable negative evidence evaluated is the cumulative loss incurred over the rolling thirty-six-month period ended March 31, 2020. Such evidence limits our ability to consider various forms of subjective positive evidence, such as any projections of future growth and earnings. However, should we return to a level of sustained profitability, consideration will need to be given to projections of future taxable income to determine whether such projections provide an adequate source of taxable income for the realization of our deferred tax assets, primarily federal net operating loss (NOL) carryforwards. A full valuation allowance was recorded against our net deferred tax asset position for federal and state purposes as of March 31, 2020 and, with the exception of Texas, as of December 31, 2019. On February 1, 2019, we completed the acquisition of WildHorse Resource Development Corporation (“WildHorse”). For federal income tax purposes, the transaction (the “WildHorse Merger”) qualified as a tax-free merger under Section 368 of the Internal Revenue Code of 1986, as amended, (the “Code”) and, as a result, we acquired carryover tax basis in WildHorse’s assets and liabilities. We recorded a net deferred tax liability of $314 million as part of the business combination accounting for WildHorse. As a consequence of maintaining a full valuation allowance against our net deferred tax asset, a partial release of the valuation allowance was recorded as a discrete income tax benefit of $314 million through the condensed consolidated statement of operations in the first quarter of 2019. The net deferred tax liability acquired includes deferred tax liabilities on plant, property and equipment and prepaid compensation totaling $401 million, partially offset by deferred tax assets totaling $87 million relating to federal NOL carryforwards, disallowed interest carryforwards and certain other deferred tax assets. These carryforwards will be subject to an annual limitation under Section 382 of the Code of approximately $61 million. We determined that no separate valuation allowances were required to be established through business combination accounting against any of the individual deferred tax assets acquired. We are subject to U.S. federal income tax as well as income and capital taxes in various state jurisdictions in which we operate. We recorded an income tax benefit of $13 million for the Current Quarter. The benefit for the Current Quarter was primarily a result of reversing substantially all of the deferred tax liability associated with Texas through the estimated AETR and recording a receivable for amounts previously sequestered from refunds of corporate alternative minimum tax (AMT) credits. Our ability to utilize NOL carryforwards and possibly other tax attributes to reduce future federal taxable income and federal income tax is subject to various limitations under Section 382 of the Code. The utilization of these attributes may be subject to an annual limitation under Section 382 of the Code should transactions involving our equity, including issuances of our stock or the sale or exchange of our stock by certain shareholders, result in a cumulative shift of more than 50% in the beneficial ownership of our stock during any three-year testing period (an “Ownership Change”). (For this purpose, “stock” includes certain preferred stock). Some states impose similar limitations on tax attribute utilization upon experiencing an Ownership Change. On April 23, 2020, our Board of Directors approved the adoption of a rights plan that is intended to protect value by preserving our ability to use our tax attributes, such as NOLs, to offset potential future income taxes for federal income tax purposes. See Note 17 for additional information. As of March 31, 2020, we do not believe that an Ownership Change has occurred that would subject us to an annual limitation on the utilization of our NOL carryforwards and other tax attributes. However, with our cumulative shift in excess of 40%, future transactions involving our equity, including relatively small transactions and transactions beyond our control, could cause an Ownership Change and therefore an annual limitation on the utilization of NOL carryforwards and possibly other tax attributes (which annual limitation could potentially be very low). On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act provides relief to corporate taxpayers by permitting a five year carryback of 2018 through 2020 NOLs, removing the 80% limitation on the utilization of certain NOLs carried forward to years beginning before January 1, 2021, increasing the 30% limitation on interest expense deductibility under Section 163(j) of the Code to 50% of adjusted taxable income for 2019 and 2020 and accelerating refunds for AMT credit carryforwards, along with a few other provisions. With respect to the Current Quarter, there was no impact on our income tax provision from the enactment of the CARES Act.

Equity

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Equity

Common Stock

A summary of the changes in our common shares issued is detailed below.



	Three Months Ended March 31,
	2020	2019
	(in thousands)
Beginning balance^(a)	9,773	4,568
Common shares issued for WildHorse Merger^(a)	—	3,587
Restricted stock issuances (net of forfeitures and cancellations)^(a)(b)	11	13
Ending balance^(a)	9,784	8,168

____________________________________________


(a)	All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

(b)

See Note 10 for discussion of restricted stock.

Share-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Our share-based compensation program consists of restricted stock, stock options, performance share units (PSUs) and cash restricted stock units (CRSUs) granted to employees and restricted stock granted to non-employee directors under our long-term incentive plans. The restricted stock and stock options are equity-classified awards and the PSUs and CRSUs are liability-classified awards.

Equity-Classified Awards

Restricted Stock. We grant restricted stock units to employees and non-employee directors. A summary of the changes in unvested restricted stock during the Current Quarter is presented below:



	Shares of Unvested Restricted Stock^(a)		Weighted Average Grant Date Fair Value Per Share^(a)
	(in thousands)
Unvested restricted stock as of January 1, 2020	52		$	710
Granted	68		$	60
Vested	(18	)	$	828
Forfeited	—		$	1,042
Unvested restricted stock as of March 31, 2020	102		$	256

____________________________________________


(a)	All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

The aggregate intrinsic value of restricted stock that vested during the Current Quarter was approximately $1 million based on the stock price at the time of vesting.

As of March 31, 2020, there was approximately $18 million of total unrecognized compensation expense related to unvested restricted stock. The expense is expected to be recognized over a weighted average period of approximately 2.15 years.

Stock Options. In the Prior Quarter, we granted members of management stock options that vest ratably over a three-year period. Each stock option award has an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expire seven years to ten years from the date of grant.

We utilize the Black-Scholes option pricing model to measure the fair value of stock options. The expected life of an option is determined using the simplified method. Volatility assumptions are estimated based on the average historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant over the expected life of the option. The dividend yield is based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option.

The following table provides information related to stock option activity in the Current Quarter:



	Number of Shares Underlying Options^(a)		Weighted Average Exercise Price Per Share^(a)		Weighted Average Contract Life in Years	Aggregate Intrinsic Value^(b)
	(in thousands)					($ in millions)
Outstanding as of January 1, 2020	90		$	1,420	5.70	$	—
Granted	—		$	—
Exercised	—		$	—		$	—
Expired	(1	)	$	1,090
Forfeited	—		$	—
Outstanding as of March 31, 2020	89		$	1,424	5.47	$	—
Exercisable as of March 31, 2020	80		$	1,510	5.18	$	—

___________________________________________


(a)	All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.


(b)	The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option.

As of March 31, 2020, there was $3 million of total unrecognized compensation expense related to stock options. The expense is expected to be recognized over a weighted average period of approximately 1.35 years, net of actual forfeitures.

Restricted Stock and Stock Option Compensation. We recognized the following compensation costs, net of actual forfeitures, related to restricted stock and stock options for the Current Quarter and the Prior Quarter:



	Three Months Ended March 31,
	2020		2019
	($ in millions)
General and administrative expenses	$	4	$	6
Oil and natural gas properties	1		1
Oil, natural gas and NGL production expenses	1		1
Total restricted stock and stock option compensation	$	6	$	8

Liability-Classified Awards

Performance Share Units. In the Prior Quarter, we granted PSUs to senior management that vest ratably over a three-year performance period and are settled in cash. The ultimate amount earned is based on achievement of performance metrics established by the Compensation Committee of the Board of Directors. Compensation expense associated with PSU awards is recognized over the service period based on the graded-vesting method. The value of the PSU awards at the end of each reporting period is dependent upon our estimates of the underlying performance measures.

For PSUs granted in 2017, performance metrics include a total shareholder return (TSR) component, which can range from 0% to 100% and an operational performance component based on finding and development costs, which can range from 0% to 100%, resulting in a maximum payout of 200%. The payout percentage for the 2017 PSU awards is capped at 100% if our absolute TSR is less than zero. The PSUs are settled in cash on the third anniversary of the awards. The performance period for the 2017 awards ended on December 31, 2019.

For PSUs granted in 2018 and 2019, performance metrics include an operational performance component based on a ratio of cumulative earnings before interest expense, income taxes, and depreciation, depletion and amortization expense (EBITDA) to capital expenditures, for which payout can range from 0% to 200%. For the 2019 award, EBITDA and capital expenditures will be adjusted for changes resulting from our conversion from the full cost method of accounting to the successful efforts method. The vested PSUs are settled in cash on each of the three annual vesting dates. We used the closing price of our common stock on the grant date to determine the grant date fair value of the PSUs. The PSU liability will be adjusted quarterly, based on changes in our stock price and expected satisfaction of performance metrics, through the end of the performance period.

Cash Restricted Stock Units. In 2018, we granted CRSUs to employees that vest straight-line over a three-year period and are settled in cash on each of the three annual vesting dates. The ultimate amount earned is based on the closing price of our common stock on each of the vesting dates. We used the closing price of our common stock on the grant date to determine the grant date fair value of the CRSUs. The CRSU liability will be adjusted quarterly, based on changes in our stock price, through the end of the vesting period.

The following table presents a summary of our liability-classified awards:



		Grant Date Fair Value		March 31, 2020
	Units^(a)	Grant Date Fair Value		Fair Value		Vested Liability
		($ in millions)		($ in millions)
2019 PSU Awards:
Payable 2021 and 2022	15,581	$	9	$	1	$	—
2018 PSU Awards:
Payable 2021	5,822	$	4	$	—	$	—
2017 PSU Awards:
Payable 2020	428	$	1	$	—	$	—
2018 CRSU Awards:
Payable 2021	19,928	$	12	$	1	$	—

____________________________________________


(a)	All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

We recognized the following compensation costs (credits), net of actual forfeitures, related to our liability-classified awards for the Current Quarter and the Prior Quarter.



	Three Months Ended March 31,
	2020			2019
	($ in millions)
General and administrative expenses	$	(3	)	$	9
Oil and natural gas properties	—			1
Oil, natural gas and NGL production expenses	(1		)	3
Exploration expenses	—			1
Total liability-classified awards compensation	$	(4	)	$	14

Derivative and Hedging Activities

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative and Hedging Activities

We use derivative instruments to reduce our exposure to fluctuations in future commodity prices and to protect our expected operating cash flow against significant market movements or volatility. All of our oil, natural gas and NGL derivative instruments are net settled based on the difference between the fixed-price payment and the floating-price payment, resulting in a net amount due to or from the counterparty. None of our open oil, natural gas or NGL derivative instruments were designated for hedge accounting as of March 31, 2020 or December 31, 2019.

Oil, Natural Gas and NGL Derivatives

As of March 31, 2020 and December 31, 2019, our oil, natural gas and NGL derivative instruments consisted of the following types of instruments:


•	Swaps: We receive a fixed price and pay a floating market price to the counterparty for the hedged commodity. In exchange for higher fixed prices on certain of our swap trades, we may sell call options and call swaptions.


•	Options: We sell, and occasionally buy, call options in exchange for a premium. At the time of settlement, if the market price exceeds the fixed price of the call option, we pay the counterparty the excess on sold call options and we receive the excess on bought call options. If the market price is lower than the fixed price of the call option, no payment is due from either party.


•	Call Swaptions: We sell call swaptions to counterparties in exchange for a premium. Swaptions allow the counterparty, on a specific date, to extend an existing fixed-price swap for a certain period of time or to increase the notional volumes of an existing fixed-price swap.

•

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, we receive the fixed price and pay the market price. If the market price is between the put and the call strike prices, no payments are due from either party. Three-way collars include the sale by us of an additional put option in exchange for a more favorable strike price on the call option. This eliminates the counterparty’s downside exposure below the second put option strike price.


•	Basis Protection Swaps: These instruments are arrangements that guarantee a fixed price differential to NYMEX from a specified delivery point. We receive the fixed price differential and pay the floating market price differential to the counterparty for the hedged commodity.

•

Put spreads: These instruments contain a fixed floor price (bought put) and sub floor price (sold put). If the market price exceeds the bought put strike, we receive the market price. If the market price is between the bought put and sold put strike prices, we receive the bought put price. If the market price falls below the sub floor, we receive the market price plus the difference between the sold put and bought put.

The estimated fair values of our oil, natural gas and NGL derivative instrument assets (liabilities) as of March 31, 2020 and December 31, 2019 are provided below:



	March 31, 2020				December 31, 2019
	Notional Volume	Fair Value			Notional Volume	Fair Value
		($ in millions)				($ in millions)
Oil (mmbbl):
Fixed-price swaps	21	$	640		24	$	(7	)
Call options (sold)	9	(9		)	—	—
Collars	1	48			2	14
Basis protection swaps	10	38			8	(2		)
Total oil	41	717			34	5
Natural gas (bcf):
Fixed-price swaps	199	152			265	125
Call options	113	(19		)	22	—
Call swaptions	29	(4		)	29	(2		)
Put spreads	94	15			—	—
Basis protection swaps	46	1			30	2
Total natural gas	481	145			346	125
Total estimated fair value		$	862			$	130

We have terminated certain commodity derivative contracts that were previously designated as cash flow hedges for which the original contract months are yet to occur. See further discussion below under Effect of Derivative Instruments – Accumulated Other Comprehensive Income (Loss).

Effect of Derivative Instruments – Condensed Consolidated Balance Sheets

The following table presents the fair value and location of each classification of derivative instrument included in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 on a gross basis and after same-counterparty netting:



Balance Sheet Classification	Gross Fair Value			Amounts Netted in the Consolidated Balance Sheets			Net Fair Value Presented in the Consolidated Balance Sheets
	($ in millions)
As of March 31, 2020
Commodity Contracts:
Short-term derivative asset	$	889		$	(5	)	$	884
Short-term derivative liability	(5		)	5			—
Long-term derivative liability	(22		)	—			(22		)
Total derivatives	$	862		$	—		$	862

As of December 31, 2019
Commodity Contracts:
Short-term derivative asset	$	174		$	(40	)	$	134
Short-term derivative liability	(42		)	40			(2		)
Long-term derivative liability	(2		)	—			(2		)
Total derivatives	$	130		$	—		$	130

Effect of Derivative Instruments – Condensed Consolidated Statements of Operations

The components of oil, natural gas and NGL revenues for the Current Quarter and the Prior Quarter are presented below:



	Three Months Ended March 31,
	2020			2019
	($ in millions)
Oil, natural gas and NGL revenues	$	894		$	1,230
Gains (losses) on undesignated oil, natural gas and NGL derivatives	916			(291		)
Losses on terminated cash flow hedges	(9		)	(10		)
Total oil, natural gas and NGL revenues	$	1,801		$	929

The components of marketing revenues for the Current Quarter and the Prior Quarter are presented below:



	Three Months Ended March 31,
	2020		2019
	($ in millions)
Marketing revenues	$	724	$	1,235
Losses on undesignated marketing natural gas derivatives	—		(2		)
Total marketing revenues	$	724	$	1,233

Effect of Derivative Instruments – Accumulated Other Comprehensive Income (Loss)

A reconciliation of the changes in accumulated other comprehensive income (loss) in our condensed consolidated statements of stockholders’ equity related to our cash flow hedges is presented below:



	Three Months Ended March 31,
	2020					2019
	Before Tax			After Tax		Before Tax			After Tax
	($ in millions)
Balance, beginning of period	$	(45	)	$	12	$	(80	)	$	(23	)
Losses reclassified to income	9			9		10			10
Balance, end of period	$	(36	)	$	21	$	(70	)	$	(13	)

The accumulated other comprehensive loss as of March 31, 2020 represents the net deferred loss associated with commodity derivative contracts that were previously designated as cash flow hedges for which the original contract months are yet to occur. Remaining deferred gain or loss amounts will be recognized in earnings in the month for which the original contract months are to occur. As of March 31, 2020, we expect to transfer approximately $29 million of net loss included in accumulated other comprehensive income (loss) to net income (loss) during the next 12 months. The remaining amounts will be transferred by December 31, 2022.

Credit Risk Considerations

Our derivative instruments expose us to our counterparties’ credit risk. To mitigate this risk, we enter into derivative contracts only with counterparties that have a high credit rating or are deemed by us to have acceptable credit strength, and are deemed by management to be competent and competitive market-makers, and we attempt to limit our exposure to non-performance by any single counterparty. As of March 31, 2020, our oil, natural gas and NGL derivative instruments were spread among 11 counterparties.

Hedging Arrangements

Certain of our hedging arrangements are with counterparties that are also lenders (or affiliates of lenders) under our revolving credit facility. The contracts entered into with these counterparties are secured by the same collateral that secures the revolving credit facility. In addition, we enter into bilateral hedging agreements with other counterparties. The counterparties’ and our obligations under the bilateral hedging agreements must be secured by cash or letters of credit to the extent that any mark-to-market amounts owed to us or by us exceed defined thresholds. As of March 31, 2020, we did not have any cash or letters of credit posted as collateral for our commodity derivatives.

Fair Value

The fair value of our derivatives is based on third-party pricing models, which utilize inputs that are either readily available in the public market, such as oil, natural gas and NGL forward curves and discount rates, or can be corroborated from active markets or broker quotes. These values are compared to the values given by our counterparties for reasonableness. Since oil, natural gas and NGL swaps do not include optionality and therefore generally have no unobservable inputs, they are classified as Level 2. All other derivatives have some level of unobservable input, such as volatility curves, and are therefore classified as Level 3. Derivatives are also subject to the risk that either party to a contract will be unable to meet its obligations. We factor non-performance risk into the valuation of our derivatives using current published credit default swap rates. To date, this has not had a material impact on the values of our derivatives.

The following table provides information for financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019:



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
			($ in millions)
As of March 31, 2020
Derivative Assets (Liabilities):
Commodity assets	$	—	$	831		$	46		$	877
Commodity liabilities	—		—			(15		)	(15		)
Total derivatives	$	—	$	831		$	31		$	862

As of December 31, 2019
Derivative Assets (Liabilities):
Commodity assets	$	—	$	160		$	14		$	174
Commodity liabilities	—		(42		)	(2		)	(44		)
Total derivatives	$	—	$	118		$	12		$	130

A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during the Current Quarter and the Prior Quarter is presented below:



	Commodity Derivatives			Utica Contingent Consideration
	($ in millions)
Balance, as of January 1, 2020	$	12		$	—
Total gains (losses) (realized/unrealized):
Included in earnings^(a)	28			—
Total purchases, issuances, sales and settlements:
Settlements	(9		)	—
Balance, as of March 31, 2020	$	31		$	—

Balance, as of January 1, 2019	$	87		$	7
Total gains (losses) (realized/unrealized):
Included in earnings^(a)	(88		)	—
Total purchases, issuances, sales and settlements:
Settlements	4			—
Balance, as of March 31, 2019	$	3		$	7

___________________________________________



(a)		Commodity Derivatives
		Commodity Derivatives
		2020		2019
		($ in millions)
	Total gains (losses) included in earnings for the period	$	28	$	(88	)
	Change in unrealized gains (losses) related to assets still held at reporting date	$	19	$	(84	)

Qualitative and Quantitative Disclosures about Unobservable Inputs for Level 3 Fair Value Measurements

The significant unobservable inputs for Level 3 derivative contracts include market volatility. Changes in market volatility impact the fair value measurement of our derivative contracts, which is based on an estimate derived from option models. For example, an increase or decrease in the forward prices and volatility of oil and natural gas prices decreases or increases the fair value of oil and natural gas derivatives. The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts at fair value as of March 31, 2020:



Instrument Type	Unobservable Input	Range	Weighted Average^(a)	Fair Value March 31, 2020
				($ in millions)
Oil trades	Oil price volatility curves	26.50% – 242.41%	42.97%	$	39
Natural gas trades	Natural gas price volatility curves	20.56% – 141.43%	42.77%	$	(8	)

____________________________________________

(a)

Weighted average volatility is weighted by relative volume.

Exploration Expense

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Exploration Expense

A summary of our exploration expense for the Current Quarter and the Prior Quarter is as follows:



	Three Months Ended March 31,
	2020		2019
	($ in millions)
Impairments of unproved properties	$	272	$	18
Dry hole expense	7		—
Geological and geophysical expense and other	3		6
Exploration expense	$	282	$	24

Unproved oil and natural gas properties are periodically assessed for impairment by considering future drilling and exploration plans, results of exploration activities, commodity price outlooks, planned future sales and expiration of all or a portion of the projects. The exploration expense charges during the Current Quarter are the result of non-cash impairment charges in unproved properties, primarily in our Brazos Valley, Powder River Basin, Haynesville and Mid-Continent operating areas.

Impairments

3 Months Ended

Mar. 31, 2020

Impairments

During the Current Quarter, the decrease in demand for crude oil primarily due to COVID-19 and sharp decline in commodity prices related to the combined impact of falling demand and recent increases in production from OPEC+ resulted in decreases in current and expected long-term crude oil and NGL sale prices. These conditions resulted in reductions to the market capitalization of peer companies in the energy industry. We determined these adverse market conditions represent a triggering event to perform an impairment assessment of our long-lived assets used in, and in support of, our operations, including proved oil and gas properties, and our sand mine assets.

Proved Oil and Gas Properties

Our impairment test involved a Step 1 assessment to determine if the net book value of our proved oil and natural gas properties is expected to be recovered from the estimated undiscounted future cash flows.

•

We calculated the expected undiscounted future net cash flows of our long-lived assets using management’s assumptions and expectations of (i) commodity prices, which are based on the NYMEX strip pricing escalated by an inflationary rate after 2 years, (ii) pricing adjustments for differentials, (iii) operating costs, (iv) capital investment plans, (v) future production volumes, and (vi) estimated proved reserves.


•	Unprecedented volatility in the price of oil due to the decrease in demand has led us to rely on NYMEX strip pricing, which represents a Level 1 input.

Certain oil and gas properties in our Eagle Ford, Brazos Valley, Powder River Basin, and Mid-Continent and other non-core operating areas failed the Step 1 assessment. For these assets, we used a discounted cash flow analysis to estimate fair value. The expected future net cash flows were discounted using a rate of 11%, which we believe represents the estimated weighted average cost of capital of a theoretical market participant. Based on Step 2 of our long-lived assets impairment test, we recognized an $8.446 billion impairment because the carrying value exceeded estimated fair market value as of March 31, 2020.

•

Significant inputs associated with the calculation of discounted future net cash flows include estimates of (i) recoverable reserves, (ii) production rates, (iii) future operating and development costs, (iv) future commodity prices escalated by an inflationary rate after two years, adjusted for differentials, and (v) a market-based weighted average cost of capital. We utilized NYMEX strip pricing, adjusted for differentials, to value the reserves. The NYMEX strip pricing inputs used are classified as Level 1 fair value assumptions and all other inputs are classified as Level 3 fair value assumptions.

Sand Mine

Our in-field sand mine assets predominately service the oil and gas properties in our Brazos Valley operating area. Based on management’s assumptions and expectations of (i) future commodity prices, (ii) capital investment plans in the Brazos Valley operating area, and (iii) future operating cost of the sand mine, management expects the market for sand to significantly decrease for the foreseeable future. As a result, we recognized a $76 million impairment related to our sand mine assets for the difference between fair value and the carrying value as of March 31, 2020. The inputs used are classified as Level 3 fair value assumptions.

Capitalized Exploratory Well Costs

3 Months Ended

Mar. 31, 2020

Capitalized Exploratory Well Costs

A summary of the changes in our capitalized well costs for the Current Quarter is detailed below. Additions pending the determination of proved reserves excludes amounts capitalized and subsequently charged to expense within the same year.



	Three Months Ended March 31, 2020
	($ in millions)
Balance as of January 1	$	7
Charges to exploration expense	(7		)
Balance as of March 31	$	—

As of March 31, 2020, there were no drilling and completion costs on exploratory wells pending determination of proved reserves capitalized for greater than one year.

Investments	3 Months Ended
Investments	Mar. 31, 2020
Equity Method Investments and Joint Ventures [Abstract]
Investments	Investments In the Current Quarter, the hydraulic fracturing industry experienced challenging operating conditions resulting in the current fair value of our investment in FTS International, Inc. (NYSE: FTSI) falling below book value of $23 million and remaining below that value as of the end of the Current Quarter. Based on FTSI’s operating results and FTSI’s share price of $0.22 per share as of March 31, 2020, we determined that the reduction in fair value is other-than-temporary, and recognized an impairment of our entire investment in FTSI of $23 million.

Other Operating Expense	3 Months Ended
Other Operating Expense	Mar. 31, 2020
Other Income and Expenses [Abstract]
Other Operating Expenses	Other Operating Expense In the Current Quarter, we terminated certain gathering, processing and transportation contracts and recognized a non-recurring $79 million expense related to the contract terminations. The contract terminations removed approximately $169 million of future commitments related to gathering, processing and transportation agreements. See Note 5 for further discussion of contingencies and commitments. In the Prior Quarter, we recorded approximately $23 million of costs related to our acquisition of WildHorse which consisted of consulting fees, financial advisory fees, legal fees and travel and lodging expenses. In addition, we recorded approximately $38 million of severance expense as a result of the acquisition of WildHorse. A majority of the WildHorse executives and employees were terminated. These executives and employees were entitled to severance benefits in accordance with existing employment agreements.

Subsequent Events	3 Months Ended
Subsequent Events	Mar. 31, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events Reverse Stock Split On April 13, 2020, our Board of Directors and our shareholders approved a 1-for-200 (1:200) reverse stock split of our common stock and a reduction of the total number of authorized shares of our common stock as determined by a formula based on two-thirds of the reverse stock split ratio. The reverse stock split became effective as of the close of business on April 14, 2020. Our common stock began trading on a split-adjusted basis on the NYSE at the market open on April 15, 2020. The par value of the common stock was not adjusted as a result of the reverse stock split. The reverse stock split was intended to, among other things, increase the per share trading price of our common shares to satisfy the $1.00 minimum closing price requirement for continued listing on the NYSE. As a result of the reverse stock split, each 200 pre-split shares of common stock outstanding were automatically combined into one issued and outstanding share of common stock. The fractional shares that resulted from the reverse stock split were canceled by paying cash in lieu of the fair value. The number of outstanding shares of common stock were reduced from approximately 1.957 billion as of April 10, 2020 to approximately 9.784 million shares (without giving effect to the liquidation of fractional shares). The total number of shares of common stock that we are authorized to issue was reduced from 3,000,000,000 to 22,500,000 shares. All share and per share amounts in the accompanying condensed consolidated financial statements and notes thereto were retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of our common stock to additional paid-in capital. Preferred Stock Dividend Suspension On April 17, 2020, we announced that we were suspending payment of dividends on each series of our outstanding convertible preferred stock. Suspension of the dividends did not constitute an event of default under any of our debt instruments. Adoption of Rights Plan On April 23, 2020, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a “Right”), payable on May 4, 2020, for each share of common stock, par value $0.01 per share, of the Company (the “Common Stock”) outstanding on May 4, 2020 to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Section 382 Rights Agreement (the “Rights Agreement”), dated as of April 23, 2020, between the Company and Computershare Trust Company, N.A., as rights agent. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series B Preferred Stock, par value $0.01 per share, of the Company at a price of $90.00 subject to adjustment. The purpose of the Rights Agreement is to protect value by preserving the Company’s ability to use its tax attributes (e.g., federal NOLs) to offset potential future income taxes for federal income tax purposes. As of December 31, 2019, the Company had federal NOLs of approximately $7.6 billion available to offset future federal taxable income. The Company’s ability to use its federal NOLs as well as other tax attributes would be substantially limited if it experiences an Ownership Change. The Rights Agreement is intended to reduce the likelihood of an Ownership Change by deterring any person or group of affiliated or associated persons from acquiring beneficial ownership of 4.9% or more of the outstanding shares of Common Stock. The Rights Agreement will expire on the close of business on the day following the certification of the voting results from the Company’s 2021 annual meeting, unless the Company’s shareholders ratify the Rights Agreement at or prior to such meeting, in which case it will continue in effect until April 22, 2023, unless terminated earlier in accordance with its terms.

Basis of Presentation and Summary of Significant Accounting Policies (Policy)	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying condensed consolidated financial statements of Chesapeake were prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted.

Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of long-term debt

Our long-term debt consisted of the following as of March 31, 2020 and December 31, 2019:



	March 31, 2020						December 31, 2019
	Principal Amount			Carrying Amount			Principal Amount			Carrying Amount
	($ in millions)
Revolving credit facility	$	1,900		$	1,900		$	1,590		$	1,590
Term loan due 2024	1,500			1,472			1,500			1,470
11.5% senior secured second lien notes due 2025	2,330			3,205			2,330			3,248
6.625% senior notes due 2020	177			177			208			208
6.875% senior notes due 2020	76			76			93			93
6.125% senior notes due 2021	167			167			167			167
5.375% senior notes due 2021	127			127			127			127
4.875% senior notes due 2022	272			272			338			338
5.75% senior notes due 2023	167			167			209			209
7.00% senior notes due 2024	624			624			624			624
6.875% senior notes due 2025	2			2			2			2
8.00% senior notes due 2025	246			245			246			245
5.5% convertible senior notes due 2026^(a)(b)	1,064			773			1,064			765
7.5% senior notes due 2026	119			119			119			119
8.00% senior notes due 2026	46			44			46			44
8.00% senior notes due 2027	253			253			253			253
Debt issuance costs	—			(40		)	—			(44		)
Total debt, net	9,070			9,583			8,916			9,458
Less current maturities of long-term debt, net^(c)	(420		)	(420		)	(385		)	(385		)
Total long-term debt, net	$	8,650		$	9,163		$	8,531		$	9,073

___________________________________________


(a)	We are required to account for the liability and equity components of our convertible debt instrument separately and to reflect interest expense through the first demand repurchase date, as applicable, at the interest rate of similar nonconvertible debt at the time of issuance. The applicable rate for our 5.5% Convertible Senior Notes due 2026 is 11.5%.


(b)	Prior to maturity under certain circumstances and at the holder’s option, the notes are convertible. During the Current Quarter, the price of our common stock was below the threshold level for conversion and, as a result, the holders do not have the option to convert their notes in the second quarter of 2020.


(c)	As of March 31, 2020, net current maturities of long-term debt includes our 6.625% Senior Notes due August 2020, our 6.875% Senior Notes due November 2020 and our 6.125% Senior Notes due February 2021. As of December 31, 2019, net current maturities of long-term debt includes our 6.625% Senior Notes due August 2020 and our 6.875% Senior Notes due November 2020.

Schedule of debt repurchased

In the Current Quarter, we repurchased approximately $156 million aggregate principal amount of the following senior notes for $93 million and recorded an aggregate gain of approximately $63 million.



	Notes Repurchased
	($ in millions)
6.625% senior notes due 2020	$	31
6.875% senior notes due 2020	17
4.875% senior notes due 2022	66
5.75% senior notes due 2023	42
Total	$	156

Schedule of fair value of debt

Fair value is compared to the carrying value in the table below:



	March 31, 2020				December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			($ in millions)
Short-term debt (Level 1)	$	420	$	103	$	385	$	360
Long-term debt (Level 1)	$	565	$	68	$	753	$	622
Long-term debt (Level 2)	$	8,598	$	3,042	$	8,320	$	6,085

Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract]

Securities excluded from calculation of diluted EPS

Shares of common stock for the following securities were excluded from the calculation of diluted EPS as the effect was antidilutive:



	Three Months Ended March 31,
	2020	2019
	(in thousands)
Common stock equivalent of our preferred stock outstanding^(a)	290	298
Common stock equivalent of our convertible senior notes outstanding^(a)	621	729
Participating securities^(a)	4	2

____________________________________________

(a)

Amount has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

Contingencies and Commitments (Tables)

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Schedule of contractual obligation



	March 31, 2020
	($ in millions)
Remainder of 2020	$	815
2021	986
2022	880
2023	752
2024	681
2025 – 2034	3,479
Total	$	7,593

Other Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Other Liabilities Disclosure [Abstract]

Other current liabilities

Other current liabilities as of March 31, 2020 and December 31, 2019 are detailed below:



	March 31, 2020		December 31, 2019
	($ in millions)
Revenues and royalties due others	$	396	$	516
Accrued drilling and production costs	260		326
Joint interest prepayments received	57		52
VPP deferred revenue^(a)	50		55
Accrued compensation and benefits^(b)	56		156
Other accrued taxes	132		150
Other	201		177
Total other current liabilities	$	1,152	$	1,432

Other long-term liabilities

Other long-term liabilities as of March 31, 2020 and December 31, 2019 are detailed below:



	March 31, 2020		December 31, 2019
	($ in millions)
VPP deferred revenue^(a)	$	—	$	9
Other	81		116
Total other long-term liabilities	$	81	$	125

____________________________________________

(a)

(b)

Revenue (Tables)

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Schedule of disaggregation of revenue

The following table shows revenue disaggregated by operating area and product type, for the Current Quarter and the Prior Quarter:



	Three Months Ended March 31, 2020
	Oil			Natural Gas			NGL		Total
	($ in millions)
Marcellus	$	—		$	175		$	—	$	175
Haynesville	—			85			—		85
Eagle Ford	277			31			20		328
Brazos Valley	172			4			4		180
Powder River Basin	68			15			7		90
Mid-Continent	22			10			4		36
Revenue from contracts with customers	539			320			35		894
Gains on oil, natural gas and NGL derivatives	839			68			—		907
Oil, natural gas and NGL revenue	$	1,378		$	388		$	35	$	1,801

Marketing revenue from contracts with customers	$	508		$	124		$	30	$	662
Other marketing revenue	61			1			—		62
Marketing revenue	$	569		$	125		$	30	$	724

	Three Months Ended March 31, 2019
	Oil			Natural Gas			NGL		Total
	($ in millions)
Marcellus	$	—		$	302		$	—	$	302
Haynesville	—			201			—		201
Eagle Ford	331			48			46		425
Brazos Valley	121			4			2		127
Powder River Basin	74			25			10		109
Mid-Continent	40			15			11		66
Revenue from contracts with customers	566			595			69		1,230
Losses on oil, natural gas and NGL derivatives	(259		)	(42		)	—		(301		)
Oil, natural gas and NGL revenue	$	307		$	553		$	69	$	929

Marketing revenue from contracts with customers	$	613		$	413		$	117	$	1,143
Other marketing revenue	72			20			—		92
Losses on marketing derivatives	—			(2		)	—		(2		)
Marketing revenue	$	685		$	431		$	117	$	1,233

Schedule of accounts receivable

Accounts receivable as of March 31, 2020 and December 31, 2019 are detailed below:



	March 31, 2020			December 31, 2019
	($ in millions)
Oil, natural gas and NGL sales	$	458		$	737
Joint interest	178			200
Other	150			74
Allowance for doubtful accounts	(24		)	(21		)
Total accounts receivable, net	$	762		$	990

Equity (Tables)

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Summary of changes in common shares issued

A summary of the changes in our common shares issued is detailed below.



	Three Months Ended March 31,
	2020	2019
	(in thousands)
Beginning balance^(a)	9,773	4,568
Common shares issued for WildHorse Merger^(a)	—	3,587
Restricted stock issuances (net of forfeitures and cancellations)^(a)(b)	11	13
Ending balance^(a)	9,784	8,168

____________________________________________


(a)	All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

(b)

See Note 10 for discussion of restricted stock.

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Summary of the changes in unvested restricted stock

A summary of the changes in unvested restricted stock during the Current Quarter is presented below:



	Shares of Unvested Restricted Stock^(a)		Weighted Average Grant Date Fair Value Per Share^(a)
	(in thousands)
Unvested restricted stock as of January 1, 2020	52		$	710
Granted	68		$	60
Vested	(18	)	$	828
Forfeited	—		$	1,042
Unvested restricted stock as of March 31, 2020	102		$	256

____________________________________________

(a)

All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

Schedule of stock option activity

The following table provides information related to stock option activity in the Current Quarter:



	Number of Shares Underlying Options^(a)		Weighted Average Exercise Price Per Share^(a)		Weighted Average Contract Life in Years	Aggregate Intrinsic Value^(b)
	(in thousands)					($ in millions)
Outstanding as of January 1, 2020	90		$	1,420	5.70	$	—
Granted	—		$	—
Exercised	—		$	—		$	—
Expired	(1	)	$	1,090
Forfeited	—		$	—
Outstanding as of March 31, 2020	89		$	1,424	5.47	$	—
Exercisable as of March 31, 2020	80		$	1,510	5.18	$	—

___________________________________________


(a)	All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

(b)

The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option.

Restricted stock and stock option compensation

We recognized the following compensation costs, net of actual forfeitures, related to restricted stock and stock options for the Current Quarter and the Prior Quarter:



	Three Months Ended March 31,
	2020		2019
	($ in millions)
General and administrative expenses	$	4	$	6
Oil and natural gas properties	1		1
Oil, natural gas and NGL production expenses	1		1
Total restricted stock and stock option compensation	$	6	$	8

We recognized the following compensation costs (credits), net of actual forfeitures, related to our liability-classified awards for the Current Quarter and the Prior Quarter.



	Three Months Ended March 31,
	2020			2019
	($ in millions)
General and administrative expenses	$	(3	)	$	9
Oil and natural gas properties	—			1
Oil, natural gas and NGL production expenses	(1		)	3
Exploration expenses	—			1
Total liability-classified awards compensation	$	(4	)	$	14

Summary of liability classified awards

The following table presents a summary of our liability-classified awards:



		Grant Date Fair Value		March 31, 2020
	Units^(a)	Grant Date Fair Value		Fair Value		Vested Liability
		($ in millions)		($ in millions)
2019 PSU Awards:
Payable 2021 and 2022	15,581	$	9	$	1	$	—
2018 PSU Awards:
Payable 2021	5,822	$	4	$	—	$	—
2017 PSU Awards:
Payable 2020	428	$	1	$	—	$	—
2018 CRSU Awards:
Payable 2021	19,928	$	12	$	1	$	—

____________________________________________

(a)

All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 17 for additional information.

Derivative and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of estimated fair values of oil, natural gas and NGL derivative instruments

The estimated fair values of our oil, natural gas and NGL derivative instrument assets (liabilities) as of March 31, 2020 and December 31, 2019 are provided below:



	March 31, 2020				December 31, 2019
	Notional Volume	Fair Value			Notional Volume	Fair Value
		($ in millions)				($ in millions)
Oil (mmbbl):
Fixed-price swaps	21	$	640		24	$	(7	)
Call options (sold)	9	(9		)	—	—
Collars	1	48			2	14
Basis protection swaps	10	38			8	(2		)
Total oil	41	717			34	5
Natural gas (bcf):
Fixed-price swaps	199	152			265	125
Call options	113	(19		)	22	—
Call swaptions	29	(4		)	29	(2		)
Put spreads	94	15			—	—
Basis protection swaps	46	1			30	2
Total natural gas	481	145			346	125
Total estimated fair value		$	862			$	130

Schedule of effect of derivative instruments, condensed consolidated balance sheets



Balance Sheet Classification	Gross Fair Value			Amounts Netted in the Consolidated Balance Sheets			Net Fair Value Presented in the Consolidated Balance Sheets
	($ in millions)
As of March 31, 2020
Commodity Contracts:
Short-term derivative asset	$	889		$	(5	)	$	884
Short-term derivative liability	(5		)	5			—
Long-term derivative liability	(22		)	—			(22		)
Total derivatives	$	862		$	—		$	862

As of December 31, 2019
Commodity Contracts:
Short-term derivative asset	$	174		$	(40	)	$	134
Short-term derivative liability	(42		)	40			(2		)
Long-term derivative liability	(2		)	—			(2		)
Total derivatives	$	130		$	—		$	130

Schedule of effect of derivative instruments, condensed consolidated statements of operations

The components of oil, natural gas and NGL revenues for the Current Quarter and the Prior Quarter are presented below:



	Three Months Ended March 31,
	2020			2019
	($ in millions)
Oil, natural gas and NGL revenues	$	894		$	1,230
Gains (losses) on undesignated oil, natural gas and NGL derivatives	916			(291		)
Losses on terminated cash flow hedges	(9		)	(10		)
Total oil, natural gas and NGL revenues	$	1,801		$	929

The components of marketing revenues for the Current Quarter and the Prior Quarter are presented below:



	Three Months Ended March 31,
	2020		2019
	($ in millions)
Marketing revenues	$	724	$	1,235
Losses on undesignated marketing natural gas derivatives	—		(2		)
Total marketing revenues	$	724	$	1,233

Schedule of effect of derivative instruments, accumulated other comprehensive income (loss)

A reconciliation of the changes in accumulated other comprehensive income (loss) in our condensed consolidated statements of stockholders’ equity related to our cash flow hedges is presented below:



	Three Months Ended March 31,
	2020					2019
	Before Tax			After Tax		Before Tax			After Tax
	($ in millions)
Balance, beginning of period	$	(45	)	$	12	$	(80	)	$	(23	)
Losses reclassified to income	9			9		10			10
Balance, end of period	$	(36	)	$	21	$	(70	)	$	(13	)

Schedule of financial assets (liabilities)

The following table provides information for financial assets (liabilities) measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019:



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
			($ in millions)
As of March 31, 2020
Derivative Assets (Liabilities):
Commodity assets	$	—	$	831		$	46		$	877
Commodity liabilities	—		—			(15		)	(15		)
Total derivatives	$	—	$	831		$	31		$	862

As of December 31, 2019
Derivative Assets (Liabilities):
Commodity assets	$	—	$	160		$	14		$	174
Commodity liabilities	—		(42		)	(2		)	(44		)
Total derivatives	$	—	$	118		$	12		$	130

A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during the Current Quarter and the Prior Quarter is presented below:



	Commodity Derivatives			Utica Contingent Consideration
	($ in millions)
Balance, as of January 1, 2020	$	12		$	—
Total gains (losses) (realized/unrealized):
Included in earnings^(a)	28			—
Total purchases, issuances, sales and settlements:
Settlements	(9		)	—
Balance, as of March 31, 2020	$	31		$	—

Balance, as of January 1, 2019	$	87		$	7
Total gains (losses) (realized/unrealized):
Included in earnings^(a)	(88		)	—
Total purchases, issuances, sales and settlements:
Settlements	4			—
Balance, as of March 31, 2019	$	3		$	7

___________________________________________



(a)		Commodity Derivatives
		Commodity Derivatives
		2020		2019
		($ in millions)
	Total gains (losses) included in earnings for the period	$	28	$	(88	)
	Change in unrealized gains (losses) related to assets still held at reporting date	$	19	$	(84	)

Schedule of quantitative information about level 3 inputs used

The following table presents quantitative information about Level 3 inputs used in the fair value measurement of our commodity derivative contracts at fair value as of March 31, 2020:



Instrument Type	Unobservable Input	Range	Weighted Average^(a)	Fair Value March 31, 2020
				($ in millions)
Oil trades	Oil price volatility curves	26.50% – 242.41%	42.97%	$	39
Natural gas trades	Natural gas price volatility curves	20.56% – 141.43%	42.77%	$	(8	)

____________________________________________

(a)

Weighted average volatility is weighted by relative volume.

Exploration Expense (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of exploration expense

A summary of our exploration expense for the Current Quarter and the Prior Quarter is as follows:



	Three Months Ended March 31,
	2020		2019
	($ in millions)
Impairments of unproved properties	$	272	$	18
Dry hole expense	7		—
Geological and geophysical expense and other	3		6
Exploration expense	$	282	$	24

Capitalized Exploratory Well Costs (Tables)

3 Months Ended

Mar. 31, 2020