UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 20202021
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File No. 1-13726
chk-20210930_g1.jpg
CHESAPEAKE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Oklahoma73-1395733
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6100 North Western Avenue,Oklahoma City,Oklahoma73118
(Address of principal executive offices)(Zip Code)
(405) 848-8000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(1)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value $0.01per shareCHKAQCHKN/AThe Nasdaq Stock Market LLC
6.625% Senior Notes due 2020Class A Warrants to purchase Common Stock*CHKEWN/AThe Nasdaq Stock Market LLC
6.875% Senior Notes due 2020Class B Warrants to purchase Common Stock*CHKEZN/AThe Nasdaq Stock Market LLC
6.125% Senior Notes due 2021Class C Warrants to purchase Common Stock*CHKELN/A
5.375% Senior Notes due 2021*N/A
4.875% Senior Notes due 2022*N/A
5.75% Senior Notes due 2023*N/A
4.5% Cumulative Convertible PreferredThe Nasdaq Stock*N/A
Market LLC
(1) On June 29, 2020, our common stock was suspended from trading on the New York Stock Exchange (the “NYSE”). On June 30, 2020, our common stock began trading on the OTC Pink Marketplace maintained by the OTC Markets Group, Inc. under the symbol “CHKAQ.” On July 20, 2020, the NYSE filed a Form 25 delisting our common stock, senior notes and cumulative convertible preferred stock from trading on the NYSE, which delisting became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the de-registration of our common stock, senior notes and cumulative convertible preferred stock under Section 12(b) of the Exchange Act became effective on October 18, 2020.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒      No ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒☐  Accelerated Filer ☐  Non-accelerated Filer ☐☒  
Smaller Reporting Company ☐☒  Emerging Growth Company ☐ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes Yes☐      No ☒ 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court Yes  ☒ No ☐
As of November 5, 2020,1, 2021, there were 9,780,371117,105,845 shares of our $0.01 par value common stock outstanding.


CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2020


2021
PART I. FINANCIAL INFORMATION
Page
Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019
46
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 2020 and 2019
68
Condensed Consolidated Statements of Comprehensive Income (Loss)
for the Three and Nine Months Ended September 30, 2020 and 2019
710
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2020 and 2019
811
Condensed Consolidated Statements of Stockholders’ Equity
for the Three and Nine Months Ended September 30, 2020 and 2019
1013
Note 1. Chapter 11 Proceedings
12
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
16
Note 3. Earnings per Share
1816
Note 2. Chapter 11 Emergence
17
Note 3. Fresh Start Accounting
19
Note 4. DebtEarnings Per Share
1928
Note 5. Debt
30
Note 6. Contingencies and Commitments
2233
Note 6.7. Other Current Liabilities
2434
Note 7.8. Revenue
2535
Note 8.9. Income Taxes
2737
Note 9.10. Equity
2938
Note 10.11. Share-Based Compensation
3039
Note 11.12. Derivative and Hedging Activities
3341
Note 12.13. Exploration Expense
3744
Note 13.14. Impairments
3845
Note 14. Capitalized Exploratory Well Costs
39
Note 15. Investments
39
Note 16. Other Operating Expense (Income), Net
3946
Note 17.16. Separation and Other Termination Costs
3946
Note 18. Condensed Combined Debtor-in-Possession Financial Information17. Subsequent Events
4046
Note 19. Subsequent EventsSupplementary Information
4347
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
4548
Liquidity and Capital Resources
4950
Results of Operations for the Three and Nine Months Ended September 30, 2020 and 2019
5354
6370
6471
PART II. OTHER INFORMATION
Legal Proceedings
72
Risk Factors
73
7377
7377
7377
Item 5.
Other Information
73
Item 6.
Exhibits
74
77
78
80


Definitions
Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Chesapeake,” the “Company” and “Registrant” refer to Chesapeake Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in millions of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:
“ASC” means Accounting Standards Codification.
“Backstop Commitment Agreement” means that certain Backstop Commitment Agreement, dated as of June 28, 2020, by and between Chesapeake and the Backstop Parties, as may be further amended, modified, or supplemented from time to time, in accordance with its terms.
“Backstop Parties” means the members of the FLLO Ad Hoc Group that are signatories to the Backstop Commitment Agreement and Franklin Advisers, Inc., as investment manager on behalf of certain funds and accounts.
“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas.
“Bbl” or “Bbls” means barrel or barrels.
“Bcf” means billion cubic feet.
“Boe” means barrel of oil equivalent. Natural gas proved reserves and production are converted to Boe, at the pressure and temperature base standard of each respective state in which the natural gas is produced, at the rate of six Mcf of gas per Bbl of oil, based upon the approximate relative energy content of natural gas and oil. NGL proved reserves and production are converted to Boe on a one-to-one basis with oil.
“Chapter 11 Cases” means, when used with reference to a particular Debtor, the case pending for that Debtor under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and when used with reference to all the Debtors, the procedurally consolidated Chapter 11 cases pending for the Debtors in the Bankruptcy Court.
“Class A Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan, the Class B Warrants, and the Class C Warrants), at an initial exercise price per share of $27.63. The Class A Warrants are exercisable from the Effective Date until February 9, 2026.
“Class B Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan and the Class C Warrants), at an initial exercise price per share of $32.13. The Class B Warrants are exercisable from the Effective Date until February 9, 2026.
“Class C Warrants” means warrants to purchase 10 percent of the New Common Stock (after giving effect to the Rights Offering, but subject to dilution by the Management Incentive Plan), at an initial exercise price per share of $36.18. The Class C Warrants are exercisable from the Effective Date until February 9, 2026.
“Confirmation Order” means the order confirming the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, Docket No. 2915, entered by the Bankruptcy Court on January 16, 2021.
“Debtors” means the Company, together with all of its direct and indirect subsidiaries that have filed the Chapter 11 Cases.
“DIP Facility” means that certain debtor-in-possession financing facility documented pursuant to the DIP Documents and DIP Order.
“Effective Date” means February 9, 2021.


“Exit Credit Facility” means the reserve-based revolving credit facility available upon emergence from bankruptcy.
“FLLO Term Loan Facility” means the facility outstanding under the FLLO Term Loan Facility Credit Agreement.
“FLLO Term Loan Facility Credit Agreement” means that certain Term Loan Agreement, dated as of December 19, 2019 ((i) as supplemented by that certain Class A Term Loan Supplement, dated as of December 19, 2019 (as amended, restated or otherwise modified from time to time), by and among Chesapeake, as borrower, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto, and (ii) as further amended, restated, or otherwise modified from time to time), by and among Chesapeake, the Debtor guarantors party thereto, GLAS USA LLC, as administrative agent, and the lenders party thereto.
“GAAP” means U.S. generally accepted accounting principles.
“General Unsecured Claim” means any Claim against any Debtor that is not otherwise paid in full during the Chapter 11 Cases pursuant to an order of the Bankruptcy Court and is not an Administrative Claim, a Priority Tax Claim, an Other Priority Claim, an Other Secured Claim, a Revolving Credit Facility Claim, a FLLO Term Loan Facility Claim, a Second Lien Notes Claim, an Unsecured Notes Claim, an Intercompany Claim, or a Section 510(b) Claim.
“MBbls” means thousand barrels.
“MMBbls” means million barrels.
“MBoe” means thousand Boe.
“MMBoe” means million Boe.
“Mcf” means thousand cubic feet.
“MMcf” means million cubic feet.
“New Common Stock” means the single class of common stock issued by Reorganized Chesapeake on the Effective Date.
“NGL” means natural gas liquids.
“NYMEX” means New York Mercantile Exchange.
“OPEC” means Organization of the Petroleum Exporting Countries.
“Petition Date” means June 28, 2020, the date on which the Debtors commenced the Chapter 11 Cases.
“Plan” means the Fifth Amended Joint Chapter 11 Plan of Reorganization of Chesapeake Energy Corporation and its Debtor Affiliates, attached as Exhibit A to the Confirmation Order.
“Put Option Premium” means a nonrefundable aggregate fee of $60 million, which represents 10 percent of the Rights Offering Amount, payable to the Backstop Parties in accordance with, and subject to the terms of the Backstop Commitment Agreement based on their respective backstop commitment percentages at the time such payment is made.
“Rights Offering” means the New Common Stock rights offering for the Rights Offering Amount consummated by the Debtors on the Effective Date.
“SEC” means United States Securities and Exchange Commission.
“Second Lien Notes” means the 11.500% senior notes due 2025 issued by Chesapeake pursuant to the Second Lien Notes Indenture.
“Second Lien Notes Claim” means any Claim on account of the Second Lien Notes.
“Tranche A Loans” means the fully revolving loans made under and on the terms set forth under the Exit Credit Facility which will be partially funded on the Effective Date, will have a scheduled maturity of 3 years from the Effective Date, and shall at all times be repaid prior to the repayment of the Tranche B Loans.


“Tranche B Loans” means term loans made under and on the terms set forth under the Exit Credit Facility which will be fully funded on the Effective Date, will have a scheduled maturity of 4 years from the Effective Date, will be repaid or prepaid only after there are no Tranche A Loans outstanding, and once so prepaid or repaid, may not be reborrowed.
“Warrants” means collectively, the Class A Warrants, Class B Warrants and Class C Warrants.
“WTI” means West Texas Intermediate.
“/Bbl” means per barrel.
“/Boe” means per Boe.
“/Mcf” means per Mcf.

TABLE OF CONTENTSTable of Contents
PART I. FINANCIAL INFORMATION



ITEM 1.Condensed Consolidated Financial Statements

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  September 30,
2020		 December 31,
2019
ASSETS ($ in millions)
CURRENT ASSETS:    
Cash and cash equivalents ($2 and $2 attributable to our VIE) $306
 $6
Accounts receivable, net 676
 990
Short-term derivative assets 0
 134
Other current assets 90
 121
Total Current Assets 1,072
 1,251
PROPERTY AND EQUIPMENT:    
Oil and natural gas properties, at cost based on successful efforts accounting:    
Proved oil and natural gas properties
($755 and $755 attributable to our VIE)
 31,511
 30,765
Unproved properties 1,738
 2,173
Other property and equipment 1,786
 1,810
Total Property and Equipment, at Cost 35,035
 34,748
Less: accumulated depreciation, depletion and amortization
(($748) and ($713) attributable to our VIE)
 (29,399) (20,002)
Property and equipment held for sale, net 10
 10
Total Property and Equipment, Net 5,646
 14,756
Other long-term assets 185
 186
TOTAL ASSETS $6,903
 $16,193
     

SuccessorPredecessor
September 30,
2021		December 31,
2020
Assets
Current assets:
Cash and cash equivalents$849 $279 
Restricted cash9 — 
Accounts receivable, net815 746 
Short-term derivative assets— 19 
Other current assets61 64 
Total current assets1,734 1,108 
Property and equipment:
Oil and natural gas properties, successful efforts method
Proved oil and natural gas properties5,163 25,734 
Unproved properties421 1,550 
Other property and equipment492 1,754 
Total property and equipment6,076 29,038 
Less: accumulated depreciation, depletion and amortization(571)(23,806)
Property and equipment held for sale, net3 10 
Total property and equipment, net5,508 5,242 
Other long-term assets84 234 
Total assets$7,326 $6,584 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS – (Continued)
(Unaudited)

SuccessorPredecessor
September 30,
2021		December 31,
2020
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable$257 $346 
Current maturities of long-term debt— 1,929 
Accrued interest10 3 
Short-term derivative liabilities1,345 93 
Other current liabilities898 723 
Total current liabilities2,510 3,094 
Long-term debt, net1,259 — 
Long-term derivative liabilities265 44 
Asset retirement obligations, net of current portion244 139 
Other long-term liabilities10 5 
Liabilities subject to compromise— 8,643 
Total liabilities4,288 11,925 
Contingencies and commitments (Note 6)
00
Stockholders’ equity (deficit):
Predecessor preferred stock, $0.01 par value, 20,000,000 shares authorized: 0 and 5,563,458 shares outstanding— 1,631 
Predecessor common stock, $0.01 par value, 22,500,000 shares authorized: 0 and 9,780,547 shares issued— — 
Predecessor additional paid-in capital— 16,937 
Predecessor accumulated other comprehensive income— 45 
Successor common stock, $0.01 par value, 450,000,000 shares authorized: 98,286,731 and 0 shares issued1 — 
Successor additional paid-in capital3,594 — 
Accumulated deficit(557)(23,954)
Total stockholders’ equity (deficit)3,038 (5,341)
Total liabilities and stockholders’ equity (deficit)$7,326 $6,584 
  September 30,
2020		 December 31,
2019
LIABILITIES AND EQUITY (DEFICIT) ($ in millions)
CURRENT LIABILITIES:    
Accounts payable $316
 $498
Current maturities of long-term debt, net 1,929
 385
Accrued interest 2
 75
Short-term derivative liabilities 105
 2
Other current liabilities (nominal and $1 attributable to our VIE) 753
 1,432
Total Current Liabilities 3,105
 2,392
Long-term debt, net 0
 9,073
Long-term derivative liabilities 61
 2
Asset retirement obligations, net of current portion 212
 200
Other long-term liabilities 16
 125
Liabilities subject to compromise 8,428
 0
Total Liabilities 11,822
 11,792
CONTINGENCIES AND COMMITMENTS (Note 5)
 

 

EQUITY (DEFICIT):    
Chesapeake Stockholders’ Equity (Deficit):    
Preferred stock, $0.01 par value, 20,000,000 shares authorized: 5,563,458 shares outstanding 1,631
 1,631
Common stock, $0.01 par value, 22,500,000 and 15,000,000 shares authorized: 9,780,371 and 9,772,793 shares issued(a)
 0
 0
Additional paid-in capital(a)
 16,931
 16,973
Accumulated deficit (23,538) (14,220)
Accumulated other comprehensive income 36
 12
Less: treasury stock, at cost; 0 and 26,224 common shares(a)
 0
 (32)
Total Chesapeake Stockholders’ Equity (Deficit) (4,940) 4,364
Noncontrolling interests 21
 37
Total Equity (Deficit) (4,919) 4,401
TOTAL LIABILITIES AND EQUITY (DEFICIT) $6,903
 $16,193

(a)
Amounts and shares have been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 9 for additional information.


The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


SuccessorPredecessor
 Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Revenues and other:
Oil, natural gas and NGL$1,170 $672 
Marketing627 448 
Oil and natural gas derivatives(910)(161)
Gains on sales of assets3 1 
Total revenues and other890 960 
Operating expenses:
Production80 82 
Gathering, processing and transportation219 258 
Severance and ad valorem taxes41 37 
Exploration2 5 
Marketing625 450 
General and administrative30 52 
Separation and other termination costs— 16 
Depreciation, depletion and amortization228 170 
Other operating expense, net3 1 
Total operating expenses1,228 1,071 
Loss from operations(338)(111)
Other income (expense):
Interest expense(17)(25)
Other income— 2 
Reorganization items, net— (611)
Total other expense(17)(634)
Loss before income taxes(355)(745)
Income tax benefit(10)— 
Net loss(345)(745)
Net loss attributable to noncontrolling interests— — 
Net loss attributable to Chesapeake(345)(745)
Preferred stock dividends— — 
Net loss available to common stockholders$(345)$(745)
Loss per common share:
Basic$(3.51)$(76.18)
Diluted$(3.51)$(76.18)
Weighted average common shares outstanding (in thousands):
Basic98,221 9,780 
Diluted98,221 9,780 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 2020 2019
  ($ in millions except per share data)
REVENUES AND OTHER:       
Oil, natural gas and NGL$511
 $1,170
 $2,579
 $3,553
Marketing448
 889
 1,412
 3,038
Total Revenues959
 2,059
 3,991
 6,591
Other15
 15
 45
 45
Gains on sales of assets1
 13
 1
 33
Total Revenues and Other975
 2,087
 4,037
 6,669
OPERATING EXPENSES:       
Oil, natural gas and NGL production82
 135
 295
 394
Oil, natural gas and NGL gathering, processing and transportation258
 270
 813
 815
Severance and ad valorem taxes37
 55
 116
 168
Exploration5
 17
 417
 56
Marketing450
 901
 1,438
 3,071
General and administrative52
 66
 229
 258
Separation and other termination costs16
 0
 43
 0
Provision for legal contingencies, net12
 0
 20
 3
Depreciation, depletion and amortization170
 573
 931
 1,672
Impairments0
 9
 8,522
 11
Other operating expense4
 15
 92
 79
Total Operating Expenses1,086
 2,041
 12,916
 6,527
INCOME (LOSS) FROM OPERATIONS(111) 46
 (8,879) 142
OTHER INCOME (EXPENSE):
   
  
Interest expense(25) (177) (307) (513)
Losses on investments0
 (4) (23) (28)
Gains on purchases or exchanges of debt0
 70
 65
 70
Other income2
 3
 14
 30
Reorganization items, net(611) 0
 (217) 0
Total Other Expense(634) (108) (468) (441)
LOSS BEFORE INCOME TAXES(745) (62) (9,347) (299)
Income tax benefit0
 (1) (13) (315)
NET INCOME (LOSS)(745) (61) (9,334) 16
Net loss attributable to noncontrolling interests0
 0
 16
 0
NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE(745) (61) (9,318) 16
Preferred stock dividends0
 (23) (22) (69)
Loss on exchange of preferred stock0
 (17) 0
 (17)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS$(745) $(101) $(9,340) $(70)
LOSS PER COMMON SHARE:(a)
       
Basic$(76.18) $(11.89) $(955.99) $(8.92)
Diluted$(76.18) $(11.89) $(955.99) $(8.92)
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in thousands):(a)
Basic9,780
 8,492
 9,770
 7,848
Diluted9,780
 8,492
 9,770
 7,848

(a)
All share and per share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 9 for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEOPERATIONS - (Continued)
(Unaudited)


SuccessorPredecessor
 Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Revenues and other:
Oil, natural gas and NGL$2,615 $398 $2,006 
Marketing1,443 239 1,412 
Oil and natural gas derivatives(1,604)(382)573 
Gains on sales of assets9 5 1 
Total revenues and other2,463 260 3,992 
Operating expenses:
Production194 32 295 
Gathering, processing and transportation541 102 813 
Severance and ad valorem taxes106 18 116 
Exploration4 2 417 
Marketing1,440 237 1,438 
General and administrative69 21 229 
Separation and other termination costs11 22 43 
Depreciation, depletion and amortization579 72 931 
Impairments1 — 8,522 
Other operating expense (income), net1 (12)67 
Total operating expenses2,946 494 12,871 
Loss from operations(483)(234)(8,879)
Other income (expense):
Interest expense(47)(11)(307)
Gains on purchases or exchanges of debt— — 65 
Other income (expense)31 2 (9)
Reorganization items, net— 5,569 (217)
Total other income (expense)(16)5,560 (468)
Income (loss) before income taxes(499)5,326 (9,347)
Income tax benefit(10)(57)(13)
Net income (loss)(489)5,383 (9,334)
Net loss attributable to noncontrolling interests— — 16 
Net income (loss) attributable to Chesapeake(489)5,383 (9,318)
Preferred stock dividends— — (22)
Net income (loss) available to common stockholders$(489)$5,383 $(9,340)
Earnings (loss) per common share:
Basic$(4.99)$550.35 $(955.99)
Diluted$(4.99)$534.51 $(955.99)
Weighted average common shares outstanding (in thousands):
Basic98,040 9,781 9,770 
Diluted98,040 10,071 9,770 

  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
NET INCOME (LOSS) $(745) $(61) $(9,334) $16
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX:        
Reclassification of losses on settled derivative instruments(a)
 7
 8
 24
 26
Other Comprehensive Income 7
 8
 24
 26
COMPREHENSIVE INCOME (LOSS) (738) (53) (9,310) 42
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 0
 0
 16
 0
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE $(738) $(53) $(9,294) $42

(a)Deferred tax activity incurred in other comprehensive income was offset by a valuation allowance.

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
 
Net loss$(345)$(745)
Other comprehensive income, net of income tax:
Reclassification of losses on settled derivative instruments— 7 
Other comprehensive income— 7 
Comprehensive loss(345)(738)
Comprehensive loss attributable to noncontrolling interests— — 
Comprehensive loss attributable to Chesapeake$(345)$(738)

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
 
Net income (loss)$(489)$5,383 $(9,334)
Other comprehensive income, net of income tax:
Reclassification of losses on settled derivative instruments— 3 24 
Other comprehensive income— 3 24 
Comprehensive income (loss)(489)5,386 (9,310)
Comprehensive loss attributable to noncontrolling interests— — 16 
Comprehensive income (loss) attributable to Chesapeake$(489)$5,386 $(9,294)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

SuccessorPredecessor
 Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Cash flows from operating activities:
Net income (loss)$(489)$5,383 $(9,334)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization579 72 931 
Deferred income tax benefit— (57)(10)
Derivative (gains) losses, net1,604 382 (573)
Cash receipts (payments) on derivative settlements, net(437)(17)890 
Share-based compensation5 3 16 
Gains on sales of assets(9)(5)(1)
Impairments1 — 8,522 
Non-cash reorganization items, net— (6,680)(300)
Exploration1 2 409 
Gains on purchases or exchanges of debt— — (65)
Other10 45 (23)
Changes in assets and liabilities(19)851 693 
Net cash provided by (used in) operating activities1,246 (21)1,155 
Cash flows from investing activities:
Capital expenditures(404)(66)(973)
Proceeds from divestitures of property and equipment9 — 15 
Net cash used in investing activities(395)(66)(958)
Cash flows from financing activities:
Proceeds from Exit Credit Facility - Tranche A Loans30 — — 
Payments on Exit Credit Facility - Tranche A Loans(80)(479)— 
Proceeds from pre-petition revolving credit facility borrowings— — 3,806 
Payments on pre-petition revolving credit facility borrowings— — (3,467)
 Proceeds from DIP Facility borrowings— — 60 
Payments on DIP Facility borrowings— (1,179)(60)
Proceeds from issuance of senior notes, net— 1,000 — 
Proceeds from issuance of common stock— 600 — 
Proceeds from warrant exercise2 — — 
Debt issuance and other financing costs(3)(8)(109)
Cash paid to purchase debt— — (95)
Cash paid for common stock dividends(67)— — 
Cash paid for preferred stock dividends— — (22)
Other(1)— (10)
Net cash provided by (used in) financing activities(119)(66)103 
Net increase (decrease) in cash, cash equivalents and restricted cash732 (153)300 
Cash, cash equivalents and restricted cash, beginning of period126 279 6 
Cash, cash equivalents and restricted cash, end of period$858 $126 $306 
Cash and cash equivalents$849 $40 $306 
Restricted cash9 86 — 
Total cash, cash equivalents and restricted cash$858 $126 $306 
  Nine Months Ended
September 30,
  2020 2019
  ($ in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:    
NET INCOME (LOSS) $(9,334) $16
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH PROVIDED BY OPERATING ACTIVITIES:    
Depreciation, depletion and amortization 931
 1,672
Deferred income tax benefit (10) (314)
Derivative gains, net (573) (137)
Cash receipts on derivative settlements, net 890
 129
Stock-based compensation 16
 24
Gains on sales of assets (1) (33)
Impairments 8,522
 11
Non-cash reorganization items, net (300) 0
Exploration 409
 35
Losses on investments 23
 21
Gains on purchases or exchanges of debt (65) (70)
Other (46) 42
Changes in assets and liabilities 693
 (214)
Net Cash Provided By Operating Activities 1,155
 1,182
CASH FLOWS FROM INVESTING ACTIVITIES:    
Drilling and completion costs (946) (1,640)
Business combination, net 0
 (353)
Acquisitions of proved and unproved properties (9) (31)
Proceeds from divestitures of proved and unproved properties 10
 110
Additions to other property and equipment (18) (27)
Proceeds from sales of other property and equipment 5
 6
Net Cash Used In Investing Activities (958) (1,935)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from pre-petition revolving credit facility borrowings 3,806
 8,805
Payments on pre-petition revolving credit facility borrowings (3,467) (7,495)
Proceeds from DIP credit facility borrowings 60
 0
Payments on DIP credit facility borrowings (60) 0
DIP credit facility and exit facilities financing costs (109) 0
Cash paid to purchase debt (95) (457)
Cash paid for preferred stock dividends (22) (69)
Other (10) (21)
Net Cash Provided By Financing Activities 103
 763
Net increase in cash and cash equivalents 300
 10
Cash and cash equivalents, beginning of period 6
 4
Cash and cash equivalents, end of period $306
 $14
     
 


The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)
(Unaudited)

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
  Nine Months Ended
September 30,
  2020 2019
  ($ in millions)
SUPPLEMENTAL CASH FLOW INFORMATION:    
Cash paid for reorganization items, net $118
 $0
Interest paid, net of capitalized interest $201
 $487
Income taxes paid, net of refunds received $1
 $(6)
     
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Change in accrued drilling and completion costs $(206) $49
Put option premium on equity backstop agreement $60
 $0
Operating lease obligations recognized $32
 $0
Common stock issued for business combination $0
 $2,037
Debt exchanged for common stock $0
 $693
Preferred stock exchanged for common stock $0
 $40
Change in senior notes exchanged $0
 $35



The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)




  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
PREFERRED STOCK:        
Balance, beginning of period $1,631
 $1,671
 $1,631
 $1,671
Exchange of 0, 40,000, 0, and 40,000 shares of preferred stock for common stock 0
 (40) 0
 (40)
Balance, end of period 1,631
 1,631
 1,631
 1,631
COMMON STOCK:(a)
        
Balance, beginning of period 0
 0
 0
 0
Common shares issued for WildHorse Merger 0
 0
 0
 0
Balance, end of period 0
 0
 0
 0
ADDITIONAL PAID-IN CAPITAL:(a)
        
Balance, beginning of period 16,924
 16,396
 16,973
 14,387
Common shares issued for WildHorse Merger 0
 0
 0
 2,037
Exchange of preferred stock for 0, 51,839, 0 and 51,839 shares of common stock 0
 40
 0
 40
Exchange of senior notes for 0, 1,177,817, 0 and 1,177,817 shares of common stock 0
 440
 0
 440
Exchange of convertible senior notes for 0, 366,945, 0 and 366,945 shares of common stock 0
 135
 0
 135
Equity component of convertible notes repurchases 0
 (2) 0
 (2)
Stock-based compensation 7
 9
 (20) 27
Dividends on preferred stock 0
 (23) (22) (69)
Balance, end of period 16,931
 16,995
 16,931
 16,995
ACCUMULATED DEFICIT:        
Balance, beginning of period (22,793) (13,835) (14,220) (13,912)
Net income (loss) attributable to Chesapeake (745) (61) (9,318) 16
Balance, end of period (23,538) (13,896) (23,538) (13,896)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):        
Balance, beginning of period 29
 (5) 12
 (23)
Hedging activity 7
 8
 24
 26
Balance, end of period 36
 3
 36
 3
         


The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)


  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
TREASURY STOCK – COMMON:(a)
        
Balance, beginning of period 0
 (36) (32) (31)
Purchase of 0, 267, 17,901 and 13,369 shares for company benefit plans 0
 0
 (2) (7)
Release of 0, 187, 44,126 and 1,484 shares from company benefit plans 0
 0
 34
 2
Balance, end of period 0
 (36) 0
 (36)
TOTAL CHESAPEAKE STOCKHOLDERS’ EQUITY (DEFICIT) (4,940) 4,697
 (4,940) 4,697
NONCONTROLLING INTERESTS:        
Balance, beginning of period 21
 39
 37
 41
Net loss attributable to noncontrolling interests 0
 0
 (16) 0
Distributions to noncontrolling interest owners 0
 0
 0
 (2)
Balance, end of period 21
 39
 21
 39
TOTAL EQUITY (DEFICIT) $(4,919) $4,736
 $(4,919) $4,736

(a)
Amounts and shares have been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 9 for additional information.


The accompanying notes are an integral part of these condensed consolidated financial statements.
11

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Supplemental cash flow information:
Cash paid for reorganization items, net$65 $66 $118 
Interest paid, net of capitalized interest$33 $13 $201 
Income taxes paid, net of refunds received$(3)$— $1 
Supplemental disclosure of significant non-cash investing and financing activities:
Change in accrued drilling and completion costs$25 $(5)$(206)
Put option premium on equity backstop agreement$— $60 $60 
Operating lease obligations recognized$— $— $32 

























The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance as of June 30, 2021 (Successor)—$—97,954,037 $1$3,590$(178)$—$—$—$3,413
Share-based compensation——761—4————4
Issuance of common stock for warrant exercise——6,218———————
Issuance of reserved common stock and warrants——325,715———————
Net loss—————(345)———(345)
Dividends on common stock—————(34)———(34)
Balance as of September 30, 2021 (Successor)—$—98,286,731$1$3,594$(557)$—$—$—$3,038
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Deficit
SharesAmountSharesAmount
Balance as of June 30, 2020 (Predecessor)5,563,458 $1,631 9,780,202 $— $16,924 $(22,793)$29 $— $21 $(4,188)
Share-based compensation— — 169 — 7 — — — — 7 
Net loss attributable to Chesapeake— — — — — (745)— — — (745)
Hedging activity— — — — — — 7 — — 7 
Balance as of September 30, 2020 (Predecessor)5,563,458 $1,631 9,780,371 $— $16,931 $(23,538)$36 $— $21 $(4,919)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity (Deficit)
SharesAmountSharesAmount
Balance as of December 31, 2020 (Predecessor)5,563,358 $1,631 9,780,547 $— $16,937 $(23,954)$45 $— $— $(5,341)
Share-based compensation— — 67 — 3 — — — — 3 
Hedging activity— — — — — — 3 — — 3 
Net income— — — — — 5,383 — — — 5,383 
Cancellation of Predecessor equity(5,563,358)(1,631)(9,780,614)— (16,940)18,571 (48)— — (48)
Issuance of Successor common stock— — 97,907,081 1 3,330 — — — — 3,331 
Issuance of Successor Class A warrants— — — — 93 — — — — 93 
Issuance of Successor Class B warrants— — — — 94 — — — — 94 
Issuance of Successor Class C warrants— — — — 68 — — — — 68 
Balance as of February 9, 2021 (Predecessor)— $— 97,907,081 $1 $3,585 $— $— $— $— $3,586 
Balance as of February 10, 2021 (Successor)— $— 97,907,081 $1 $3,585 $— $— $— $— $3,586 
Share-based compensation— — 1,682 — 7 — — — — 7 
Issuance of common stock for warrant exercise— — 52,253 — 2 — — — — 2 
Issuance of reserved common stock and warrants— — 325,715 — — — — — — — 
Net loss— — — — — (489)— — — (489)
Dividends on common stock— — — — — (68)— — — (68)
Balance as of September 30, 2021 (Successor)— $— 98,286,731 $1 $3,594 $(557)$— $— $— $3,038 


The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
Attributable to Chesapeake
Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity (Deficit)
SharesAmountSharesAmount
Balance as of December 31, 2019 (Predecessor)5,563,458 $1,631 9,772,793 $— $16,973 $(14,220)$12 $(32)$37 $4,401 
Share-based compensation— — 7,578 — (20)— — — — (20)
Dividends on preferred stock— — — — (22)— — — — (22)
Hedging activity— — — — — — 24 — — 24 
Net loss attributable to Chesapeake— — — — — (9,318)— — — (9,318)
Purchase of shares for company benefit plans— — — — — — — (2)— (2)
Release of shares for company benefit plans— — — — — — — 34 — 34 
Net loss attributable to noncontrolling interests— — — — — — — — (16)(16)
Balance as of September 30, 2020 (Predecessor)5,563,458 $1,631 9,780,371 $— 16,931 $(23,538)$36 $— $21 $(4,919)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1.Chapter 11 ProceedingsBasis of Presentation and Summary of Significant Accounting Policies
Description of Company
UnlessChesapeake Energy Corporation (“Chesapeake”, “we”, “our”, “us” or the context otherwise requires, references“Company”) is an oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of oil, natural gas and NGL from underground reservoirs. Our operations are located onshore in the United States. As discussed in Note 2 below, we filed the Chapter 11 Cases on the Petition Date and subsequently operated as a debtor-in-possession, in accordance with applicable provisions of the Bankruptcy Code, until emergence on February 9, 2021. To facilitate our financial statement presentations, we refer to “Chesapeake”the post-emergence reorganized Company in these condensed consolidated financial statements and footnotes as the “Successor” for periods subsequent to February 9, 2021, and to the pre-emergence Company as “Predecessor” for periods on or prior to February 9, 2021.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Chesapeake were prepared in accordance with GAAP and the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures have been condensed or omitted.
This Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to the financial position and periods of February 10, 2021 through September 30, 2021 (“2021 Successor Period”), and January 1, 2021 through February 9, 2021 (“2021 Predecessor Period”), the “Company”three months ended September 30, 2021 (“2021 Successor Quarter”), “us”and the three and nine months ended September 30, 2020 (“2020 Predecessor Quarter” and “2020 Predecessor Period”, “we”respectively). Our annual report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”) should be read in conjunction with this Form 10-Q. Except as disclosed herein, and “our”with the exception of information in this report related to our emergence from Chapter 11 and fresh start accounting, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the 2020 Form 10-K. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are to Chesapeake Energy Corporation together with its subsidiaries. On June 28, 2020, (the “Petition Date”) we and certainnecessary 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 (collectively,and entities in which we have a controlling financial interest. Intercompany accounts and balances have been eliminated. The accompanying condensed consolidated financial statements have been prepared assuming the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”)Company will continue as a going concern.
Segments
Operating segments are defined as components of an enterprise that engage in activities from which it may earn revenues and incur expenses for relief (the “Bankruptcy Filing”)which separate operational financial information is available and is regularly evaluated by the chief operating decision maker for the purpose of allocating an enterprise’s resources and assessing its operating performance. We have concluded that we have only 1 reportable operating segment due to the similar nature of the exploration and production business across Chesapeake and its consolidated subsidiaries and the fact that our marketing activities are ancillary to our operations.
Restricted Cash
As of September 30, 2021, we had restricted cash of $9 million. The restricted funds are maintained primarily to pay certain convenience class unsecured claims following our emergence from bankruptcy.
Voluntary Filing under Chapter 11 of TitleBankruptcy
On the Petition Date, the Debtors filed the Chapter 11 ofCases under the United StatesBankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).Court. On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation, Case No. 20-33233. Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries (collectively, the “Non-Filing Entities”) were not part of the Bankruptcy Filing.bankruptcy filing. The Non-Filing Entities will continuehave continued to operate in the ordinary course of business.
Debtor-In-Possession
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We are currently operatingCHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Bankruptcy Court confirmed the Plan and entered the Confirmation Orderon January 16, 2021.The Debtors emerged from the Chapter 11 Cases on the Effective Date. The Company’s bankruptcy proceedings and related matters have been summarized below.
During the pendency of the Chapter 11 Cases, we continued to operate our business in the ordinary course as debtors in possessiondebtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court granted the first day relief we requested that was designed primarily to mitigate the impact of the Chapter 11 Cases on our operations, vendors, suppliers, customers and employees. As a result, we arewere able to conduct normal business activities and paysatisfy all associated obligations for the period following the Bankruptcy FilingPetition Date and arewere also authorized to pay mineral interest owner royalties, employee wages and benefits, and certain vendors and suppliers in the ordinary course for goods and services provided prior to the Bankruptcy Filing.Petition Date. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of business requirerequired the prior approval of the Bankruptcy Court.
Automatic Stay
Subject to certain specific exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed all judicial or administrative actions against us and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities arewere subject to settlementcompromise and discharge under the Bankruptcy Code. The automatic stay was lifted on the Effective Date.
Restructuring Support AgreementWe have applied ASC 852, Reorganizations, in preparing the unaudited condensed consolidated financial statements for the period ended February 9, 2021. ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues, expenses, realized gains and losses and provisions for losses that were realized or incurred during the bankruptcy proceedings, including gain on settlement of liabilities subject to compromise, losses related to executory contracts that have been approved for rejection by the Bankruptcy Court, and unamortized debt issuance costs, premiums and discounts associated with debt classified as liabilities subject to compromise, were recorded as reorganization items, net. In addition, pre-petition obligations that may be impacted by the Chapter 11 process have been classified on the condensed consolidated balance sheet as of December 31, 2020 as liabilities subject to compromise. See Note 3 for more information regarding reorganization items.
On
2.Chapter 11 Emergence
As described in Note 1, on June 28, 2020, the Debtors entered into a restructuring support agreement (the "RSA") with certain holders (collectively, the "Consenting Stakeholders") of (i) obligations under that certain Amended and Restated Credit Agreement, dated as of September 12, 2018, by and among Chesapeake, as borrower, the Debtor guarantors party thereto, MUFG Union Bank, N.A., as administrative agent, and the other lender, issuer, and agent parties thereto (the "pre-petition revolving credit facility"); (ii) obligations under that certain Term Loan Agreement, dated as of December 19, 2019, by and among Chesapeake, as borrower, the Debtor guarantors party thereto, GLAS USA LLC., as administrative agent, and the lender parties thereto (the "FLLO Term Loan"); and (iii) obligations under the 11.5% Senior Secured Second Lien Notes due 2025 (the "Second Lien Notes") issued pursuant to that certain indenture, dated as of December 19, 2019, by and among Chesapeake, as issuer, certain guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee and collateral trustee to support a restructuring (the "Restructuring") on the terms set forth in the RSA and the term sheet annexed to the RSA (the "Restructuring Term Sheet"). Certain Consenting Stakeholders also hold Unsecured Notes (as defined in the Restructuring Term Sheet) and their Unsecured Notes are also subject to the terms and obligations under the RSA. The RSA contemplates that the Company will implement the Restructuring throughfiled the Chapter 11 Cases pursuant to a consensual plan of reorganization (the "Plan")and on September 11, 2020, the Debtors filed in the Chapter 11 proceedings as described further below.
Plan, which was subsequently amended, and entered the Confirmation Order on January 16, 2021. The RSA contains certain covenants on the part of each of the Company and the Consenting Stakeholders, including limitations on the parties’ ability to pursue alternative transactions (subject to customary provisions regarding the ability of the Company’s Board of Directors to satisfy its fiduciary duties), commitments by the Consenting Stakeholders to vote in favorDebtors then emerged from bankruptcy upon effectiveness of the Plan on February 9, 2021. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan.
Plan of Reorganization
In accordance with the Plan confirmed by the Bankruptcy Court, the following significant transactions occurred upon the Company’s emergence from bankruptcy on February 9, 2021:
•On the Effective Date, we issued approximately 97,907,081 shares of New Common Stock, reserved 2,092,918 shares of New Common Stock for future issuance to eligible holders of Allowed Unsecured Notes Claims and commitmentsAllowed General Unsecured Claims and reserved 37,174,210 shares of New Common Stock for issuance upon exercise of the Company andWarrants, which were the Consenting Stakeholders to negotiate in good faith to finalize the documents and agreements contemplated by and required to implement the Plan. The RSA also provides for certain conditions to the obligationsresult of the partiestransactions described below. We also entered into a registration rights agreement, warrant agreements and amended our articles of incorporation and bylaws for termination upon the occurrenceauthorization of certain events, including, without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA. One such condition is the requirement to obtain sufficient savings on certain midstream obligations (as determined by the required plan sponsors, definedNew Common Stock among other corporate governance actions. See Note 10 for further discussion of our post-emergence equity.
•Each holder of an equity interest in the RSA) through rejection ofPredecessor, including Predecessor’s common and preferred stock, had such contracts and/or renegotiation of their terms.

interest canceled, released, and extinguished without any distribution.
12
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

The RSA includes a hedging provision that authorizes the Debtors to enter into post-petition hedge agreements with the lenders•Each holder of obligations under the DIP Creditpre-petition revolving credit facility received, at such holder's prior determined allocation, its pro rata share of either Tranche A Loans or Tranche B Loans, on a dollar for dollar basis.
•Each holder of obligations under the FLLO Term Loan Facility (as defined below). Beginning 30 days afterreceived its pro rata share of 23,022,420 shares of New Common Stock.
•Each holder of an Allowed Second Lien Notes Claim received its pro rata share of 3,635,118 shares of New Common Stock, 11,111,111 Class A Warrants to purchase 11,111,111 shares of New Common Stock, 12,345,679 Class B Warrants to purchase 12,345,679 shares of New Common Stock, and 6,858,710 Class C Warrants to purchase 6,858,710 shares of New Common Stock.
•Each holder of an Allowed Unsecured Notes Claim received its pro rata share of 1,311,089 shares of New Common Stock and 2,473,757 Class C Warrants to purchase 2,473,757 shares of New Common Stock.
•Each holder of an Allowed General Unsecured Claim received its pro rata share of 231,112 shares of New Common Stock and 436,060 Class C Warrants to purchase 436,060 shares of New Common Stock; provided that to the Petition Date, the Debtors are required to, atextent such Allowed General Unsecured Claim is a minimum, hedge 50%Convenience Claim, such holder instead received its pro rata share of the anticipated projected monthly production from proved developed producing oil and natural gas reserves (in each case, calculated separately for (i) crude oil and (ii) natural gas and natural gas liquids, taken together) for a rolling 24-month period. The Debtors notional hedge volumes$10 million, which pro rata share shall not exceed (a) for5 percent of such Convenience Claim.
•Participants in the 18-month period fromRights Offering extending to the date such commodity hedge transaction is executed,applicable classes under the lesserPlan received 62,927,320 shares of (x) 80%New Common Stock.
•In connection with the Rights Offering described above, the Backstop Parties under the Backstop Commitment Agreement received 6,337,031 shares of forecasted production for such monthsNew Common Stock in respect to the Put Option Premium, and (y) 80%442,991 shares of New Common Stock were issued in connection with the backstop obligation thereunder to purchase unsubscribed shares of the anticipated projected monthly production from proved oilNew Common Stock.
•2,092,918 shares of New Common Stock and natural gas reserves, (b)3,948,893 Class C Warrants were reserved for future issuance to eligible holders of Allowed Unsecured Notes Claims and Allowed General Unsecured Claims.The reserved New Common Stock and Class C Warrants will be issued on a pro rata basis upon the 6-month period following, 90%determination of the anticipated projected monthly production from proved developed producing oilallowed portion of all disputed General Unsecured Claims and natural gas reservesUnsecured Notes Claims.
•The 2021 Long Term Incentive Plan (the “LTIP”) was approved with a share reserve equal to 6,800,000 shares of New Common Stock.
•Each holder of an Allowed Other Secured Claim will receive, at the Company's option and in consultation with the Required Consenting Stakeholders (as defined in the Plan): (a) payment in full in cash; (b) the collateral securing its secured claim; (c) for the 24-month period thereafter, 80%reinstatement of the anticipated projected monthly production from proved developed producing oil and natural gas reserves.
Although the Company intends to pursue the Restructuringits secured claim; or (d) such other treatment that renders its secured claim unimpaired in accordance with Section 1124 of the terms set forth inBankruptcy Code.
•Each holder of an Allowed Other Priority Claim will receive cash up to the allowed amount of its claim.
Additionally, pursuant to the Plan there can be no assurance that the Company will be successful in completing the Restructuring or any other similar transaction on the terms set forth in the Plan, on different terms, or at all.
Plan of Reorganization
On September 11, 2020, the Debtors filed the Plan and a related disclosure statement with the Bankruptcy Court. As is customary in bankruptcy proceedings, the Debtors subsequently filed with the Bankruptcy Court an amended plan and amended disclosure statement on October 8, 2020 and a seconded amended plan and second amended disclosure statement on October 30, 2020. The Plan is subject to approval by the Bankruptcy Court. If the Plan is confirmed by the Bankruptcy Court, the Debtors would exit Chapter 11 pursuant toCompany’s post-emergence Board of Directors is comprised of six directors, including the terms of the Plan. Under the Plan, the claims againstCompany’s Executive Chairman, Michael Wichterich, and interests in the Debtors are organized into classes based, in part, on their respective priorities. Below is a summary of the treatment that the stakeholders of the Company would receive under the Plan upon the emergence from bankruptcy:
•
Holders of Other Secured Claims. Each holder of Other Secured Claims (as defined in the RSA) would receive, at the Company's option and in consultation with a requisite number of holders of claims who are backstopping a rights offering pursuant to the Plan: (a) payment in full in cash; (b) the collateral securing its secured claim; (c) reinstatement of its secured claim; or (d) such other treatment rendering its secured claim unimpaired in accordance with Section 1124 of the Bankruptcy Code.
•
Holders of Other Priority Claims. Each holder of Other Priority Claims (as defined in the RSA) would receive treatment in a manner consistent with Section 1129(a)(9) of the Bankruptcy Code.
•
Holders of Pre-Petition Revolving Credit Facility Claims. On the effective date of the Plan (the "Plan Effective Date"), each holder of obligations under the pre-petition revolving credit facility would receive, at such holder's option, its pro rata share of either Tranche A RBL Exit Facility Loans or Tranche B RBL Exit Facility Loans (each as defined in the Exit Facilities Term Sheet, defined below), each on a dollar for dollar basis.
•
Holders of FLLO Term Loan Facility Claims. On the Plan Effective Date, each holder of obligations under the FLLO Term Loan Facility would receive its pro rata share of (i) 76% of the reorganized Company's new common equity interests (the "New Common Stock"), subject to the terms set forth in the Restructuring Term Sheet and (ii) the right to participate in a rights offering on the terms set forth in the Restructuring Term Sheet.
•
Holders of Second Lien Notes Claims. On the Plan Effective Date, each holder of the Second Lien Notes would receive its pro rata share of (i) 12% of the New Common Stock, subject to the terms set forth in the Restructuring Term Sheet, (ii) the right to participate in a rights offering on the terms set forth in the Restructuring Term Sheet, and (iii) warrants to purchase 10% of the New Common Stock on certain terms set forth in the Restructuring Term Sheet, warrants to purchase another 10% of the New Common Stock on certain other terms set forth in the Restructuring Term Sheet, and 50% of warrants to purchase another 10% of the New Common Stock on certain other terms set forth in the Restructuring Term Sheet (the "New Class C Warrants").
•
Holders of Unsecured Notes Claims. On the Plan Effective Date, each holder of the Unsecured Notes (as defined in the RSA) would receive its pro rata share of (i) 12% of the New Common Stock, subject to the terms set forth in the Restructuring Term Sheet (the "Unsecured Notes Claims Recovery"), and (ii) 50% of the New Class C Warrants.

five non-employee directors, Timothy S. Duncan, Benjamin C. Duster, IV, Sarah Emerson, Matthew M. Gallagher and Brian Steck.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

•3.
Holders of General Unsecured ClaimsFresh Start Accounting. On the Plan Effective Date, each holder of allowed general unsecured claims would receive its pro rata share of the General Unsecured Claims Recovery.
•
Equity Holders. Each holder of an equity interest in Chesapeake, including our common and preferred stock, would have such interest canceled, released, and extinguished without any distribution.
DIP Credit Facility
On June 28, 2020,Fresh Start Accounting
In connection with our emergence from bankruptcy and in accordance with ASC 852, we qualified for and applied fresh start accounting on the Effective Date. We were required to apply fresh start accounting because (i) the holders of existing voting shares of the Company prior to the commencementits emergence received less than 50% of the Chapter 11 Cases,voting shares of the Company entered into a commitment letter (the “Commitment Letter”) with certainoutstanding following its emergence from bankruptcy and (ii) the reorganization value of our assets immediately prior to confirmation of the lenders underPlan of approximately $6.8 billion was less than the pre-petition revolving credit facility and/post-petition liabilities and allowed claims of $13.2 billion.
In accordance with ASC 852, with the application of fresh start accounting, the Company allocated its reorganization value to its individual assets based on their estimated fair value in conformity with FASB ASC Topic 820 - Fair Value Measurements and FASB ASC Topic 805 - Business Combinations. Accordingly, the consolidated financial statements after February 9, 2021 are not comparable with the consolidated financial statements as of or their affiliates (collectively, the “Commitment Parties”), pursuantprior to which, and subject to the satisfaction of certain customary conditions, including the approvalthat date. The Effective Date fair values of the Bankruptcy Court,Successor’s assets and liabilities differ materially from their recorded values as reflected on the Commitment Parties agreedhistorical balance sheet of the Predecessor.
Reorganization Value
Reorganization value is derived from an estimate of enterprise value, or fair value of the Company’s interest-bearing debt and stockholders’ equity. Under ASC 852, reorganization value generally approximates fair value of the entity before considering liabilities and is intended to provideapproximate the Debtors withamount a post-petition senior secured super-priority debtor-in-possession revolving credit facility in an aggregate principal amount of up to approximately $2.104 billion (the “DIP Credit Facility”), consistingwilling buyer would pay for the assets immediately after the effects of a revolving loan facility of new money in an aggregate principal amount of up to $925 million, which includes a sub-facility of up to $200 million for the issuance of letters of credit, and an up to approximately $1.179 billion term loan that reflects the roll-up of a portion of outstanding borrowings under the pre-petition revolving credit facility. Pursuant to the Commitment Letter, the Commitment parties have also committed to provide, subject to certain conditions, an up to $2.5 billion exit credit facility, consisting of an up to $1.75 billion revolving credit facility (the “Exit Revolving Facility”) and an up to $750 million senior secured term loan facility (the “Exit Term Loan Facility” and, together with the Exit Revolving Facility, the “Exit Credit Facilities”). The terms and conditions of the DIP Credit Facility arerestructuring. As set forth in the Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) attached to the Commitment Letter. The proceeds of the DIP Credit Facility may be useddisclosure statement, amended for among other things, post-petition working capital, permitted capital investments, general corporate purposes, letters of credit, administrative costs, premiums, expensesupdated pricing, and fees for the transactions contemplated by the Chapter 11 Cases, payment of court approved adequate protection obligations, and other such purposes consistent with the DIP Credit Facility. The terms and conditions of the Exit Credit Facilities are reflected in an exit facilities term sheet attached as an exhibit to the Restructuring Term Sheet (the “Exit Facilities Term Sheet”). The obligations of the lenders to provide the Exit Credit Facilities are subject to satisfaction of certain conditions set forth in the Exit Facilities Term Sheet, including conditions requiring (i) a minimum liquidity of $500 million, (ii) a leverage ratio no greater than 2.25:1.00 and (iii) asset coverage of credit facilities to PV-10 of at least 1.50:1.00. In the Current Period, we incurred $118 million of fees related to the arrangement and funding of the DIP Credit Facility and Exit Credit Facilities. The DIP Credit Facility was approved by the Bankruptcy Court, on a final basis on July 31, 2020 and became effective as of July 1, 2020. See Note 4 for additional information.
Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, we may assume, assign, or reject certain executory contracts and unexpired leases subject to the approvalenterprise value of the Bankruptcy CourtSuccessor was estimated to be between $3.5 billion and certain other conditions. Generally,$4.9 billion. With the rejectionassistance of an executory contract or unexpired lease is treated asthird-party valuation advisors, we determined the enterprise value and corresponding implied equity value of the Successor using various valuation approaches and methods, including: (i) income approach using a pre-petition breachcalculation of such executory contract or unexpired lease and, subject to certain exceptions, relieves us from performing our future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Counterparties to rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against our estate for such damages. Generally, the assumption of an executory contract or unexpired lease requires us to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurancepresent value of future performance. Accordingly, any descriptioncash flows based on our financial projections, (ii) the market approach using selling prices of similar assets and (iii) the cost approach. For GAAP purposes, the Company valued the Successor’s individual assets, liabilities and equity instruments and determined an executory contract or unexpired lease with us, including where applicable a quantificationestimate of our obligations under any such executory contract or unexpired leasethe enterprise value within the estimated range. Management concluded that the best estimate of us, is qualified by any overriding rejection rights we have underenterprise value was $4.85 billion. Specific valuation approaches and key assumptions used to arrive at reorganization value, and the Bankruptcy Code.
Potential Claims
We have filed with the Bankruptcy Court schedules and statements setting forth, among other things, thevalue of discrete assets and liabilities resulting from the application of usfresh start accounting, are described below in greater detail within the valuation process.
The enterprise value and eachcorresponding implied equity value are dependent upon achieving the future financial results set forth in our valuation using an asset-based methodology of our subsidiaries,estimated proved reserves, undeveloped properties, and other financial information, considerations and projections, applying a combination of the income, cost and market approaches as of the fresh start reporting date of February 9, 2021. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the financial projections, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, there is no assurance that the estimates, assumptions, filed in connection therewith. These schedulesvaluations or financial projections will be realized, and statements may be subjectactual results could vary materially.
The following table reconciles the enterprise value to further amendment or modification after filing. Certain holdersthe implied fair value of pre-petition claims that are not governmental units were required to file proofsthe Successor’s equity as of claim by the deadline for general claims, (the “bar date”), which was set by the Bankruptcy Court as October 30, 2020. Governmental units are required to file proof of claims by December 28, 2020, the deadline that was set by the Bankruptcy Court.Effective Date:
As of November 5, 2020, the Debtors have received approximately 7,350 proofs of claim, approximately half of which represent general unsecured claims, for an aggregate amount of approximately $11.2 billion. We will continue

February 9, 2021
Enterprise Value$4,851 
Plus: Cash and cash equivalents(a)
48 
Less: Fair value of debt(1,313)
Successor equity value$3,586 
____________________________________________
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

(a)Cash and cash equivalents includes $8 million that was initially classified as restricted cash as of the Effective Date but subsequently released from escrow and returned to the Successor. Restricted cash exclusive of the $8 million is not included in the table above.
The following table reconciles the enterprise value to evaluatethe reorganization value as of the Effective Date:
February 9, 2021
Enterprise Value$4,851 
Plus: Cash and cash equivalents(a)
48 
Plus: Current liabilities1,582 
Plus: Asset retirement obligations (non-current portion)236 
Plus: Other non-current liabilities97 
Reorganization value of Successor assets$6,814 

(a)Cash and cash equivalents includes $8 million that was initially classified as restricted cash as of the Effective Date but subsequently released from escrow and returned to the Successor. Restricted cash exclusive of the $8 million is not included in the table above.
Valuation Process
The fair values of our oil and natural gas properties, other property and equipment, other long-term assets, long-term debt, asset retirement obligations and warrants were estimated as of the Effective Date.
Oil and natural gas properties. The Company’s principal assets are its oil and natural gas properties, which are accounted for under the successful efforts accounting method. The Company determined the fair value of its oil and natural gas properties based on the discounted future net cash flows expected to be generated from these claims throughout the Chapter 11 process and recognize or adjust amounts in future financial statements as necessaryassets. Discounted cash flow models by operating area were prepared using the best information available at such time. Differences between amounts scheduled by usestimated future revenues and claims by creditors will ultimately be reconciledoperating costs for all developed wells and resolved in connectionundeveloped properties comprising the proved and unproved reserves. Significant inputs associated with the claims resolution process. In lightcalculation 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 five years, adjusted for differentials, and (v) a market-based weighted average cost of capital by operating area. The Company 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. The discount rates utilized were derived using a weighted average cost of capital computation, which included an estimated cost of debt and equity for market participants with similar geographies and asset development type by operating area.
Other property and equipment. The fair value of other property and equipment such as buildings, land, computer equipment, and other equipment was determined using replacement cost method under the cost approach which considers historical acquisition costs for the assets adjusted for inflation, as well as factors in any potential obsolescence based on the current condition of the assets and the ability of those assets to generate cash flow.
Long-term debt. A market approach, based upon quotes from major financial institutions, was used to measure the fair value of the $500 million aggregate principal amount of 5.5% Senior Notes due 2026 (the “2026 Notes”) and $500 million aggregate principal amount of 5.875% Senior Notes due 2029 (the “2029 Notes” and, together with the 2026 Notes, the “Notes”). The carrying value of borrowings under our Exit Credit Facility approximated fair value as the terms and interest rates are based on prevailing market rates.
Asset retirement obligations. The fair value of the Company’s asset retirement obligations was revalued based upon estimated current reclamation costs for our assets with reclamation obligations, an appropriate long-term inflation adjustment, and our revised credit adjusted risk-free rate. The credit adjusted risk-free rate was based on an evaluation of an interest rate that equates to a risk-free interest rate adjusted for the effect of our credit standing.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Warrants. The fair values of the Warrants issued upon the Effective Date were estimated using a Black-Scholes model, a commonly used option-pricing model. The Black-Scholes model was used to estimate the fair value of the warrants with an implied stock price of $20.52; initial exercise price per share of $27.63, $32.13 and $36.18 for Class A, Class B and Class C Warrants, respectively; expected numbervolatility of creditors, the claims resolution process may take considerable time58% estimated using volatilities of similar entities; risk-free rate using a 5-year Treasury bond rate; and an expected annual dividend yield which was estimated to complete and likely will continue after we emerge from bankruptcy.be zero.
Financial Statement Classification of Liabilities Subject to CompromiseCondensed Consolidated Balance Sheet
The accompanying unauditedfollowing condensed consolidated balance sheet is as of September 30, 2020,February 9, 2021. This consolidated balance sheet includes amounts classifiedadjustments that reflect the consummation of the transactions contemplated by the Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”) as of the Effective Date. The explanatory notes following the table below provide further details on the adjustments, including the assumptions and methods used to determine fair value for its assets, liabilities and warrants.
PredecessorReorganization AdjustmentsFresh Start AdjustmentsSuccessor
Assets
Current assets:
Cash and cash equivalents$243 $(203)(a)$— $40 
Restricted cash— 86 (b)— 86 
Accounts receivable, net861 (18)(c)— 843 
Short-term derivative assets— — — — 
Other current assets66 (5)(d)— 61 
Total current assets1,170 (140)— 1,030 
Property and equipment:
Oil and natural gas properties, successful efforts method
Proved oil and natural gas properties25,794 — (21,108)(o)4,686 
Unproved properties1,546 — (1,063)(o)483 
Other property and equipment1,755 — (1,256)(o)499 
Total property and equipment29,095 — (23,427)(o)5,668 
Less: accumulated depreciation, depletion and amortization(23,877)— 23,877 (o)— 
Property and equipment held for sale, net9 — (7)(o)2 
Total property and equipment, net5,227 — 443 (o)5,670 
Other long-term assets198 — (84)(p)114 
Total assets$6,595 $(140)$359 $6,814 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
PredecessorReorganization AdjustmentsFresh Start AdjustmentsSuccessor
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable$391 $24 (e)$— $415 
Current maturities of long-term debt, net1,929 (1,929)(f)— — 
Accrued interest4 (4)(g)— — 
Short-term derivative liabilities398 — — 398 
Other current liabilities645 124 (h)— 769 
Total current liabilities3,367 (1,785)— 1,582 
Long-term debt, net— 1,261 (i)52 (q)1,313 
Long-term derivative liabilities90 — — 90 
Asset retirement obligations, net of current portion139 — 97 (r)236 
Other long-term liabilities5 2 (j)— 7 
Liabilities subject to compromise9,574 (9,574)(k)— — 
Total liabilities13,175 (10,096)149 3,228 
Contingencies and commitments (Note 6)
0000
Stockholders’ equity (deficit):
Predecessor preferred stock1,631 (1,631)(l)— — 
Predecessor common stock— — — — 
Predecessor additional paid-in capital16,940 (16,940)(l)— — 
Successor common stock— 1 (m)— 1 
Successor additional paid-in-capital— 3,585 (m)— 3,585 
Accumulated other comprehensive income48 — (48)(s)— 
Accumulated deficit(25,199)24,941 (n)258 (t)— 
Total stockholders’ equity (deficit)(6,580)9,956 210 3,586 
Total liabilities and stockholders’ equity (deficit)$6,595 $(140)$359 $6,814 
Reorganization Adjustments
(a)The table below reflects the sources and uses of cash on the Effective Date from implementation of the Plan:
Sources:
Proceeds from issuance of the Notes$1,000 
Proceeds from Rights Offering600 
Proceeds from refunds of interest deposit for the Notes5 
Total sources of cash$1,605 
Uses:
Payment of roll-up of DIP Facility balance$(1,179)
Payment of Exit Credit Facility - Tranche A Loan(479)
Transfers to restricted cash for professional fee reserve(76)
Transfers to restricted cash for convenience claim distribution reserve(10)
Payment of professional fees(31)
Payment of DIP Facility interest and fees(12)
Payment of FLLO alternative transaction fee(12)
Payment of the Notes fees funded out of escrow(8)
Payment of RBL interest and fees(1)
Total uses of cash$(1,808)
Net cash used$(203)
(b)Represents the transfer of funds to a restricted cash account for purposes of funding the professional fee reserve and the convenience claim distribution reserve.
(c)Reflects the removal of an insurance receivable associated with a discharged legal liability.
(d)Reflects the collection of an interest deposit for the senior unsecured notes.
(e)Changes in accounts payable include the following:
Accrual of professional service provider success fees$38 
Accrual of convenience claim distribution reserve10 
Accrual of professional service provider fees5 
Reinstatement of accounts payable from liabilities subject to compromise2 
Payment of professional fees(31)
Net impact to accounts payable$24 
(f)Reflects payment of the pre-petition credit facility for $1.179 billion and transfer of the Tranche A and Tranche B Loans to long-term debt for $750 million.
(g)Reflect payments of accrued interest and fees on the DIP Facility.
(h)Changes in other current liabilities include the following:
Reinstatement of other current liabilities from liabilities subject to compromise$191 
Accrual of the Notes fees2 
Settlement of Put Option Premium through issuance of Successor Common Stock(60)
Payment of DIP Facility fees(9)
Net impact to other current liabilities$124 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(i)Changes in long-term debt include the following:
Issuance of the Notes$1,000 
Issuance of Tranche A and Tranche B Loans750 
Payments on Tranche A Loans(479)
Debt issuance costs for the Notes(10)
Net impact to long-term debt, net$1,261 
(j) Reflects reinstatement of a long-term lease liability.
(k) On the Effective Date, liabilities subject to compromise were settled in accordance with the Plan as follows:
Liabilities subject to compromise pre-emergence$9,574 
To be reinstated on the Effective Date:
Accounts payable$(2)
Other current liabilities(191)
Other long-term liabilities(2)
Total liabilities reinstated$(195)
Consideration provided to settle amounts per the Plan or Reorganization:
Issuance of Successor common stock associated with the Rights Offering and Backstop Commitment and settlement of the Put Option Premium$(2,311)
Proceeds from issuance of Successor common stock associated with the Rights Offering and Backstop Commitment600 
Issuance of Successor common stock to FLLO Term Loan holders, incremental to the Rights Offering and Backstop Commitment(783)
Issuance of Successor common stock to second lien note holders, incremental to the Rights Offering and Backstop Commitment(124)
Issuance of Successor common stock to unsecured note holders(45)
Issuance of Successor common stock to general unsecured claims(8)
Fair value of Class A Warrants(93)
Fair value of Class B Warrants(94)
Fair value of Class C Warrants(68)
Proceeds to holders of general unsecured claims(10)
Total consideration provided to settle amounts per the Plan$(2,936)
Gain on settlement of liabilities subject to compromise$6,443 
(l)Pursuant to the Plan, as of the Effective Date, all equity interests in Predecessor, including Predecessor’s common and preferred stock, were cancelled without any distribution.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(m)Reflects the Successor equity including the issuance of 97,907,081 shares of New Common Stock, 11,111,111 shares of Class A Warrants, 12,345,679 shares of Class B Warrants and 9,768,527 shares of Class C Warrants pursuant to the Plan.
Issuance of Successor equity associated with the Rights Offering and Backstop Commitment$2,371 
Issuance of Successor equity to holders of the FLLO Term Loan, incremental to the Rights Offering and Backstop Commitment783 
Issuance of Successor equity to holders of the Second Lien Notes, incremental to the Rights Offering and Backstop Commitment124 
Issuance of Successor equity to holders of the unsecured senior notes45 
Issuance of Successor equity to holders of allowed general unsecured claims8 
Fair value of Class A warrants93 
Fair value of Class B warrants94 
Fair value of Class C warrants68 
Total change in Successor common stock and additional paid-in capital3,586 
Less: par value of Successor common stock(1)
Change in Successor additional paid-in capital$3,585 
(n) Reflects the cumulative net impact of the effects on accumulated deficit as follows:
Gain on settlement of liabilities subject to compromise$6,443 
Accrual of professional service provider success fees(38)
Accrual of professional service provider fees(5)
Surrender of other receivable(18)
Payment of FLLO alternative transaction fee(12)
Total reorganization items, net6,370 
Cancellation of predecessor equity18,571 
Net impact on accumulated deficit$24,941 
Fresh Start Adjustments
(o)Reflects fair value adjustments to our (i) proved oil and natural gas properties, (ii) unproved properties, (iii) other property and equipment (iv) property and equipment held for sale, and the elimination of accumulated depletion, depreciation and amortization.
(p)Reflects the fair value adjustment to record historical contracts at their fair values.
(q)Reflects the fair value adjustments to the 2026 Notes and 2029 Notes for $22 million and $30 million, respectively.
(r)Reflects the adjustment to our asset retirement obligations using assumptions as of the Effective Date, including an inflation factor of 2% and an average credit-adjusted risk-free rate of 5.18%.
(s)Reflects the fair value adjustment to eliminate the accumulated other comprehensive income of $9 million related to hedging settlements offset by the elimination of $57 million of income tax effects which represent liabilities we anticipate will be allowed as claimshas resulted in the Chapter 11 Cases. These amounts represent our current estimaterecording of known or potential obligations to be resolved in connection withan income tax benefit of $57 million. See Note 9 for a discussion of income taxes.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(t)Reflects the Chapter 11 Cases, and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. We will continue to evaluate these liabilities throughout the Chapter 11 process and adjust amounts as necessary. Such adjustments may be material.
Liabilities subject to compromise includes amounts related to the rejection of various executory contracts and unexpired leases. Additional amounts may be included in liabilities subject to compromise in future periods if additional executory contracts and unexpired leases are rejected. The nature of manynet cumulative impact of the potential claims arising under our executory contracts and unexpired leases has not been determined at this time, and therefore, such claims are not reasonably estimable at this time and may be material.fresh start adjustments on accumulated deficit as follows:
The following table summarizes the components of liabilities subject to compromise included on our unaudited condensed consolidated balance sheet as of September 30, 2020:
  September 30,
2020
  ($ in millions)
Debt $7,166
Accounts payable 148
Accrued interest 235
Other liabilities 879
Liabilities subject to compromise $8,428

Fresh start adjustments to property and equipment$443 
Fresh start adjustments to other long-term assets(84)
Fresh start adjustments to long-term debt(52)
Fresh start adjustments to long-term asset retirement obligations(97)
Fresh start adjustments to accumulated other comprehensive income(9)
Total fresh start adjustments impacting reorganizations items, net201 
Income tax effects on accumulated other comprehensive income57 
Net impact to accumulated deficit$258 
Reorganization Items, Net
We have incurred and will continue to incur significant expenses, gains and losses associated with the reorganization, primarily the gain on settlement of liabilities subject to compromise, write-off of unamortized debt issuance costs and related unamortized premiums and discounts, debt and equity financing fees, provision for allowed claims and legal and professional fees incurred subsequent to the Chapter 11 filings for the restructuring process. The accrual for allowed claims primarily represents damages from contract rejections and settlements attributable to the midstream savings requirement as stipulated in the Plan. While the claims reconciliation process is ongoing, we do not believe any existing unresolved claims will result in a material adjustment to the financial statements. The amount of these items, which are beingwere incurred in reorganization items, net within our accompanying unaudited condensed consolidated statements of operations, are expected tohave significantly affectaffected our statements of operations. In future periods, we may also incur adjustments for allowable claims related to our legal proceedings and executory contracts approved for rejections by the Bankruptcy Court.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

The following table summarizes the components in reorganization items, net included in our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2020:operations:
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Write off of unamortized debt premiums (discounts) $0
 $0
 $518
 $0
Write off of unamortized debt issuance costs 0
 0
 (61) 0
Debt and equity financing fees (115) 0
 (178) 0
Provision for allowed claims (465) 0
 (465) 0
Legal and professional fees (40) 0
 (40) 0
Gain on settlement of pre-petition accounts payable 12
 0
 12
 0
Loss on settlement of pre-petition revenues payable (3) 0
 (3) 0
Reorganization items, net $(611) $0
 $(217) $0

2.BasisSuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Accrual for allowed claims$— $(465)
Debt and equity financing fees— (115)
Professional service provider fees and other— (40)
Gains on the settlement of Presentation and Summary of Significant Accounting Policiesliabilities subject to compromise— 9 
Total reorganization items, net$— $(611)
Basis of Presentation
The accompanying unaudited 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 Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to the three and nine months ended September 30, 2020 (the “Current Quarter” and the “Current Period”, respectively) and the three and nine months ended September 30, 2019 (the “Prior Quarter” and the “Prior Period”, respectively). 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 unaudited 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.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern and contemplate the realization of assets and satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is contingent on our ability to comply with the financial and other covenants contained in our DIP Credit Facility, the Bankruptcy Court’s approval of the Plan and our ability to successfully implement the Plan and obtain exit financing, among other factors. As a result of the Bankruptcy Filing, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, we may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions contained in the DIP Credit Facility), for amounts other than those reflected in the accompanying unaudited condensed consolidated financial statements. Further, the Plan could materially change the amounts and classifications of assets and liabilities reported in the condensed consolidated financial statements. The factors noted above raise substantial doubt about our ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern or as a consequence of the Bankruptcy Filing.
Accounting During Bankruptcy
We have applied Accounting Standards Codification (ASC) 852, Reorganizations, in preparing the unaudited condensed consolidated financial statements. ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Gains on the settlement of liabilities subject to compromise$— $6,443 $9 
Accrual for allowed claims— (1,002)(465)
Write off of unamortized debt premiums (discounts) on Predecessor debt— — 518 
Write off of unamortized debt issuance costs on Predecessor debt— — (61)
Gain on fresh start adjustments— 201 — 
Gain from release of commitment liabilities— 55 — 
Debt and equity financing fees— — (178)
Professional service provider fees and other— (60)(40)
Success fees for professional service providers— (38)— 
Surrender of other receivable— (18)— 
FLLO alternative transaction fee— (12)— 
Total reorganization items, net$— $5,569 $(217)
the ongoing operations of the business. Accordingly, certain revenues, expenses, realized gains and losses and provisions for losses that are realized or incurred during the bankruptcy proceedings, including losses related to executory contracts that have been approved for rejection by the Bankruptcy Court, and unamortized deferred financing costs, premiums and discounts associated with debt classified as liabilities subject to compromise, are recorded as reorganization items, net. In addition, pre-petition obligations that may be impacted by the Chapter 11 process have been classified on the unaudited condensed consolidated balance sheet as of September 30, 2020 as liabilities subject to compromise. These liabilities are reported at the amounts we anticipate will be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. See Note 1 for more information regarding reorganization items.
Risks and Uncertainties
26
The global spread of COVID-19 created significant volatility, uncertainty, and economic disruption during the first nine months of 2020. 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. State and local authorities have also implemented multi-step policies with the goal of re-opening. However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases. 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. As a result, since mid-March, we have restricted access to all of our offices and for a period of time directed employees to work remotely to the extent possible. We began to re-open our offices in phases beginning mid-May and special precautions have been implemented to minimize the risk of exposure. These actions have allowed us to maintain the engagement and connectivity of our personnel. However, due to severe impacts from the global COVID-19 pandemic on the global demand for oil and natural gas, financial results may not be necessarily indicative of operating results for the entire year. 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. Prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist. Oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreaks and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported. 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. 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. The continued low level of demand and prices for oil and natural gas or otherwise has had and will continue to have a 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 Organization of Petroleum Exporting Countries (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.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

3.    
4.Earnings Per Share
Basic earningsnet income (loss) per common share (EPS) is calculated usingcomputed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common sharesstock outstanding during the period andperiod. Diluted net income (loss) per common share is calculated in the same manner, but includes the effectimpact of any participatingpotentially dilutive securities. Potentially dilutive securities as appropriate. Participating securitiesduring the Successor Period consist of issuable shares related to warrants, unvested restricted stock, and unvested performance share units and during the Predecessor Period have historically consisted of unvested restricted stock, issuedcontingently issuable shares related to our employeespreferred stock 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 dilutiveunless their effect was antidilutive.
The reconciliations between basic and therefore, were excluded fromdiluted earnings (loss) per share are as follows:
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Numerator
Net loss, basic and diluted$(345)$(745)
Denominator (in thousands)
Weighted average common shares outstanding, basic98,221 9,780 
Effect of potentially dilutive securities
Preferred stock— — 
Warrants— — 
Restricted stock— — 
Performance share units— — 
Weighted average common shares outstanding, diluted98,221 9,780 
Loss per common share
Loss per common share, basic$(3.51)$(76.18)
Loss per common share, diluted$(3.51)$(76.18)
Successor
During the 2021 Successor Quarter, the diluted earnings (loss) per share calculation excludes the effect of diluted EPS.
Shares1,767,203 reserved shares of common stock and 3,334,277 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases as all necessary conditions had not been met for such shares to be considered dilutive shares as of the 2021 Successor Quarter. Additionally, as the 2021 Successor Quarter had a net loss, the diluted earnings (loss) per share calculation excludes the antidilutive effect, calculated using the treasury stock method, of 14,774,330 issuable shares related to warrants, 247,220 shares of restricted stock, and 5,479 shares related to performance share units.
Predecessor
The diluted earnings (loss) per share calculation for the following securities were excluded from2020 Predecessor Quarter excludes the calculationantidilutive effect of diluted EPS as290,716 shares of common stock equivalent of our preferred stock.
We had the effect was antidilutive:
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 2020 2019
 (in thousands)
Common stock equivalent of our preferred stock outstanding(a)
290
 290
 290
 290
Common stock equivalent of our convertible senior notes outstanding(a)
0
 621
 621
 621
Common stock equivalent of our preferred stock outstanding prior to exchange(a)
0
 5
 0
 5
Participating securities(a)
0
 1
 0
 2

(a)
Amount has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 9 for additional information.
As a resultoption to settle conversions of the Company’s reverse5.5% convertible senior notes due 2026 with cash, shares or common stock split effective on April 14, 2020, proportionate adjustments were made toor any combination thereof. As the price of our common stock was below 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 andthreshold level for any time during the conversion period, there was no impact to the outstanding awards and number of shares issued and issuable under the Company's equity compensation plans. See Note 9 for additional information.

diluted earnings (loss) per share.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Numerator
Net income (loss), basic and diluted$(489)$5,383 $(9,340)
Denominator (in thousands)
Weighted average common shares outstanding, basic98,040 9,781 9,770 
Effect of potentially dilutive securities
Preferred stock— 290 — 
Warrants— — — 
Restricted stock— — — 
Performance share units— — — 
Weighted average common shares outstanding, diluted98,040 10,071 9,770 
Earnings (loss) per common share
Earnings (loss) per common share, basic$(4.99)$550.35 $(955.99)
Earnings (loss) per common share, diluted$(4.99)$534.51 $(955.99)
Successor
During the 2021 Successor Period, the diluted earnings (loss) per share calculation excludes the effect of 1,767,203 reserved shares of common stock and 3,334,277 reserved Class C Warrants related to the settlement of General Unsecured Claims associated with the Chapter 11 Cases as all necessary conditions had not been met to be considered dilutive shares as of the 2021 Successor Period. Additionally, as the 2021 Successor Period had a net loss the diluted earnings (loss) per share calculation excludes the antidilutive effect, calculated using the treasury stock method, of 12,851,577 issuable shares related to warrants, 135,350 shares of restricted stock, and 3,508 shares related to performance share units.
Predecessor
The diluted earnings (loss) per share calculation for the 2020 Predecessor Period excludes the antidilutive effect of 290,716 shares of common stock equivalent of our preferred stock.
We had the option to settle conversions of the 5.5% convertible senior notes due 2026 with cash, shares or common stock or any combination thereof. As the price of our common stock was below the conversion threshold level for any time during the conversion period, there was no impact to diluted earnings (loss) per share.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
4.5.Debt
Our long-term debt consisted of the following as of September 30, 20202021 and December 31, 2019:2020:
SuccessorPredecessor
September 30, 2021December 31, 2020
Carrying Amount
Fair Value(a)
Carrying Amount
Fair Value(a)
Exit Credit Facility - Tranche A Loans$— $— $— $— 
Exit Credit Facility - Tranche B Loans221 221 — — 
5.5% senior notes due 2026500 524 — — 
5.875% senior notes due 2029500 534 — — 
DIP Facility— — — — 
Pre-petition revolving credit facility— — 1,929 1,929 
Term loan due 2024— — 1,500 1,220 
11.5% senior secured second lien notes due 2025— — 2,330 373 
6.625% senior notes due 2020— — 176 8 
6.875% senior notes due 2020— — 73 3 
6.125% senior notes due 2021— — 167 7 
5.375% senior notes due 2021— — 127 5 
4.875% senior notes due 2022— — 272 12 
5.75% senior notes due 2023— — 167 8 
7.00% senior notes due 2024— — 624 29 
6.875% senior notes due 2025— — 2 2 
8.00% senior notes due 2025— — 246 10 
5.5% convertible senior notes due 2026— — 1,064 42 
7.5% senior notes due 2026— — 119 5 
8.00% senior notes due 2026— — 46 2 
8.00% senior notes due 2027— — 253 11 
Premiums on senior notes48 — — — 
Debt issuance costs(10)— — — 
Total debt, net1,259 1,279 9,095 3,666 
Less current maturities of long-term debt— — (1,929)(1,929)
Less amounts reclassified to liabilities subject to compromise— — (7,166)(1,737)
Total long-term debt, net$1,259 $1,279 $— $— 

(a)The carrying value of borrowings under our Exit Credit Facility approximate fair value as the interest rates are based on prevailing market rates; therefore, they are a Level 1 fair value measurement. For all other debt, a market approach, based upon quotes from major financial institutions, which are Level 2 inputs, is used to measure the fair value.
Successor Debt
Our post-emergence exit financing consists of the Exit Credit Facility, which includes a reserve-based revolving credit facility and a non-revolving loan facility, and the Notes.
Exit Credit Facility. On the Effective Date, pursuant to the terms of the Plan, the Company, as borrower, entered into a reserve-based credit agreement (the “Credit Agreement”) providing for a reserve-based credit facility
 September 30, 2020 December 31, 2019
 
Principal
Amount
 Carrying
Amount		 Principal
Amount		 Carrying
Amount
 ($ in millions)
DIP credit facility$0
 $0
 $0
 $0
Pre-petition revolving credit facility1,929
 1,929
 1,590
 1,590
Term loan due 20241,500
 1,500
 1,500
 1,470
11.5% senior secured second lien notes due 20252,330
 2,330
 2,330
 3,248
6.625% senior notes due 2020176
 176
 208
 208
6.875% senior notes due 202073
 73
 93
 93
6.125% senior notes due 2021167
 167
 167
 167
5.375% senior notes due 2021127
 127
 127
 127
4.875% senior notes due 2022272
 272
 338
 338
5.75% senior notes due 2023167
 167
 209
 209
7.00% senior notes due 2024624
 624
 624
 624
6.875% senior notes due 20252
 2
 2
 2
8.00% senior notes due 2025246
 246
 246
 245
5.5% convertible senior notes due 20261,064
 1,064
 1,064
 765
7.5% senior notes due 2026119
 119
 119
 119
8.00% senior notes due 202646
 46
 46
 44
8.00% senior notes due 2027253
 253
 253
 253
Debt issuance costs—
 0
 —
 (44)
Total debt, net9,095
 9,095
 8,916
 9,458
Less current maturities of long-term debt(1,929) (1,929) (385) (385)
Less amounts reclassified to liabilities subject to compromise(7,166) (7,166) 0
 0
Total long-term debt, net$0
 $0
 $8,531
 $9,073
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
with an initial borrowing base of $2.5 billion. The borrowing base will be redetermined semiannually on or around May 1 and November 1 of each year. Our borrowing base was reaffirmed in October 2021, and the next scheduled redetermination will be on or about May 1, 2022. The aggregate initial elected commitments of the lenders under the Exit Credit Facility will be $1.75 billion of Tranche A Loans and $221 million of fully funded Tranche B Loans.
The Exit Credit Facility provides for a $200 million sublimit of the aggregate commitments that are available for the issuance of letters of credit. The Exit Credit Facility bears interest at the ABR (alternate base rate) or LIBOR, at our election, plus an applicable margin (ranging from 2.25–3.25% per annum for ABR loans and 3.25–4.25% per annum for LIBOR loans, subject to a 1.00% LIBOR floor), depending on the percentage of the borrowing base then being utilized. The Tranche A Loans mature three years after the Effective Date and the Tranche B Loans mature four years after the Effective Date. The Tranche B Loans can be repaid if no Tranche A Loans are outstanding.
The Credit Agreement contains financial covenants that require the Company and its Guarantors, on a consolidated basis, to maintain (i) a first lien leverage ratio of not more than 2.75 to 1:00, (ii) a total leverage ratio of not more than 3.50 to 1:00, (iii) a current ratio of not less than 1.00 to 1:00 and (iv) at any time additional secured debt is outstanding, an asset coverage ratio of not less than 1.50 to 1:00, defined as PV10 of PDP reserves to total secured debt.The Company has no additional secured debt outstanding as of September 30, 2021.
The Credit Agreement also contains customary affirmative and negative covenants, including, among other things, as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments, and other customary covenants.
The Company is required to pay a commitment fee of 0.50% per annum on the average daily unused portion of the current aggregate commitments under the Tranche A Loans. The Company is also required to pay customary letter of credit and fronting fees.
Outstanding Senior Notes. On February 2, 2021, Chesapeake Escrow Issuer LLC, then an indirect wholly owned subsidiary of the Company, issued $500 million aggregate principal amount of its 2026 Notes and $500 million aggregate principal amount of its 2029 Notes. The Notes included a $52 million premium to reflect fair value adjustments at the date of emergence.
The Notes are guaranteed on a senior unsecured basis by each of the Company’s subsidiaries that guarantee the Exit Credit Facility.
The Notes were issued pursuant to an indenture, dated as of February 5, 2021, among the Issuer, the Guarantors and Deutsche Bank Trust Company Americas, as trustee.
Interest on the Notes is payable semi-annually, on February 1 and August 1 of each year, commencing on August 1, 2021, to holders of record on the immediately preceding January 15 and July 15.
The Notes are the Company’s senior unsecured obligations. Accordingly, they rank (i) equal in right of payment to all existing and future senior indebtedness, including borrowings under the Exit Credit Facility, (ii) effectively subordinate in right of payment to all of existing and future secured indebtedness, including indebtedness under the Exit Credit Facility, to the extent of the value of the collateral securing such indebtedness, (iii) structurally subordinate in right of payment to all existing and future indebtedness and other liabilities of any future subsidiaries that do not guarantee the Notes and any entity that is not a subsidiary that does not guarantee the Notes and (iv) senior in right of payment to all future subordinated indebtedness. Each guarantee of the Notes by a guarantor is a general, unsecured, senior obligation of such guarantor. Accordingly, the guarantees (i) rank equally in right of payment with all existing and future senior indebtedness of such guarantor (including such guarantor’s guarantee of indebtedness under the Exit Credit Facility), (ii) are subordinated to all existing and future secured indebtedness of such guarantor, including such guarantor’s guarantee of indebtedness under our Exit Credit Facility, to the extent of the value of the collateral of such guarantor securing such secured indebtedness, (iii) are structurally subordinated to all indebtedness and other liabilities of any future subsidiaries of such guarantor that do not guarantee the notes and (iv) rank senior in right of payment to all future subordinated indebtedness of such guarantor.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Phase-Out of LIBOR
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The purpose of ASU 2020-04 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates such as LIBOR, which is expected to be phased out at the end of calendar year 2021, to alternative reference rates. ASU 2020-04 applies only to contracts, hedging relationships, debt arrangements and other transactions that reference a benchmark reference rate expected to be discontinued because of reference rate reform. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance will not have a material impact on our consolidated financial statements and related disclosures.
Chapter 11 Proceedings - Predecessor Debt
Filing of the Chapter 11 Cases constituted an event of default with respect to certain of our previous secured and unsecured debt obligations. As a result of the Chapter 11 Cases, the principal and interest due under these debt instruments became immediately due and payable. However, Section 362 of the Bankruptcy Code staysstayed the creditors from taking any action as a result of the default.
The principal amounts outstanding under the FLLO Term Loan, Second Lien Notes and all of our other unsecured senior and convertible senior notes have beenwere reclassified as liabilities subject to compromise on the accompanying unaudited condensed consolidated balance sheet as of September 30,December 31, 2020. Additionally, non-cash adjustments were made to write off all of the related unamortized debt issuance costs and associated discounts and premiums of approximately $457 million, which are included in reorganization items, net in the accompanying unaudited condensed consolidated statements of operations for the Current Period, as discussed in Note 1.
The agreements for our FLLO Term Loan, Second Lien Notes, and unsecured senior and convertible senior notes containcontained provisions regarding the calculation of interest upon default. Upon default, the interest rate on the FLLO Term Loan increasesincreased from LIBOR plus 8.00% to alternative base rate (ABR) (3.25% during the third quarter)2021 Predecessor Period) plus Applicable Margin (7.00% during the third quarter)2021 Predecessor Period) plus 2.00%. For the Second Lien Notes and all of our other unsecured senior and convertible senior notes, the interest rate remainsremained the same upon default. However, interest accruesaccrued on the amount

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

of unpaid interest in addition to the principal balance. We willdid not pay or recognize interest on the FLLO Term Loan, Second Lien Notes, or unsecured senior and convertible senior notes during the Chapter 11 process.
Debtor-in-Possession Credit Agreement
On June 28, 2020, prior to the commencement of Chapter 11 Cases, the Company entered into a commitment letter with certain of the lenders (“New Money Lenders”) under the pre-petition revolving credit facility and/or their affiliates to provide the Debtors with a DIP Credit Facilitydebtor-in-possession credit agreement in an aggregate principal amount of up to approximately $2.104 billion in commitments and loans from the New Money Lenders. The DIP Credit Facility consistsconsisted of a revolving loan facility of new money in an aggregate principal amount of up to $925 million, (the “New Money Facility”), which includesincluded a sub-facility of up to $200 million for the issuance of letters of credit, and a $1.179 billion term loan that reflectsreflected the roll-up of a portion of outstanding borrowings under the pre-petition revolving credit facility: (i) a $925 million term loan reflectingreflected the roll-up of a portion of outstanding existing borrowings made by the New Money Lenders under the existing revolving credit agreement (the “New Money Roll-Up Loans”) and (ii) an up to approximately $254 million term loan reflectingreflected the roll-up or a portion of outstanding existing borrowings made by certain other lenders under the pre-petition revolving credit facility agreement (the “Incremental Roll-Up Loans”).agreement. The $750 million of outstanding borrowings under the pre-petition revolving credit facility that were not rolled up (the “Stub Loans”) will remainremained outstanding throughout the Chapter 11 Cases but will accrueaccrued interest at a lower rate than the rolled-up loans. The proceeds of the DIP Credit Facility may bewere used for, among other things, post-petition working capital, permitted capital investments, general corporate purposes, letters of credit, administrative costs, premiums, expenses and fees for the transactions contemplated by the Chapter 11 Cases, payment of court approved adequate protection obligations and other such purposes consistent with the DIP Credit Facility. TheOn the Effective Date, the DIP Credit Facility was approved byterminated and the Bankruptcy Court on a final basis on July 31, 2020 and became effective asholders of July 1, 2020.
Borrowingsobligations under the DIP Credit Facility will mature, and the lending commitments thereunder will terminate, upon the earliest to occur of: (a) March 28, 2021 (the 9-month anniversary of the Petition Date); (b) the date of the termination of the commitments and/or the acceleration of all of obligations following the occurrence and continuance of an event of default defined the DIP Credit Facility; (c) the first business day on which the interim order, as defined in the DIP Credit Facility, expires or is terminated; (d) the conversion of any of Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code; (e) the dismissal of any of the Chapter 11 Cases; (f) the closing of a sale of all or substantially all of the equity or assets of the Debtors; (g) the date of thereceived payment in full in cash of all obligations and termination of allcash; provided that to the commitments of the Debtors and; (h) the effective date of any of the Debtors’ approved plan of reorganization.
Borrowingsextent such lender under the DIP Facility was also a lender under the Exit Credit Facility, bear interest at an ABR or LIBOR, at our election, plus an applicable marginsuch lender’s allowed DIP claims were first reduced dollar-for-dollar and satisfied by the amount of 5.00% per annum for ABR loans and 6.00% per annum for LIBOR loans forits Exit RBL Loans provided as of the New Money Facility and bear interest at an ABR or LIBOR, at our election, plus an applicable margin of 4.50% per annum for ABR loans and 5.50% per annum for LIBOR loans for the New Money Roll-Up Loans and Incremental Roll-up Loans. The Stub Loans bear interest at LIBOR plus an applicable margin of 3.50% per annum.Effective Date.
Predecessor Senior Notes
In addition to paying interest on outstandingthe 2020 Predecessor Period, we repurchased approximately $160 million aggregate principal under the DIP Credit Facility, we are required to pay a commitment feeamount of 0.50% per annum to the lenderscertain senior notes for $95 million and recorded an aggregate gain of the DIP Credit Facility in respect of the unutilized revolving commitments thereunder and a letter of credit fee equal to 0.125% per annum.
The DIP Credit Facility includes negative covenants that, subject to significant exceptions, limit our ability and the ability of our restricted subsidiaries to, among other things, (i) incur additional indebtedness, (ii) create liens on assets, (iii) engage in mergers, consolidations, liquidations and dissolutions, (iv) sell assets, (v) make investments, loans or advances, except as described in the DIP Credit Facility, (vi) pay dividends and distributions or repurchase capital stock, (vii) engage in certain transactions with affiliates and (viii) change lines of business. The DIP Credit Facility includes certain customary representations and warranties, affirmative covenants and events of default, including but not limited to defaults on account of nonpayment, breaches of representations and warranties and covenants, certain bankruptcy-related events, certain events under ERISA, material judgments and a change in control. If an event of default occurs, the lenders under the DIP Credit Facility will be entitled to take various actions, including the acceleration of all amounts due under the DIP Credit Facility and all actions permitted to be taken under the loan documents or application of law. In addition, the DIP Credit Facility is subject to various other financial performance covenants, including compliance with certain financial metrics to an approved budget and a required Asset Coverage Ratio (as defined in the DIP Credit Agreement) of not less than 1.25:1.00. On September 15, 2020, we entered into the first amendment to the DIP Credit Agreement. The amendment, among other things, amends the maximum hedging

approximately $65 million.
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covenant to allow the Debtors to enter into additional non-speculative hedge agreements based on forecasted production.
Senior Notes
In the Current Period, we repurchased approximately $160 million aggregate principal amount of the following senior notes for $95 million and recorded an aggregate gain of approximately $65 million.
  Notes Repurchased
  ($ in millions)
6.625% senior notes due 2020 $32
6.875% senior notes due 2020 20
4.875% senior notes due 2022 66
5.75% senior notes due 2023 42
Total $160

In the Prior Quarter, we privately negotiated exchanges of approximately $507 million principal amount of our outstanding senior notes for 235,563,519 shares of common stock and $186 million principal amount of our outstanding convertible senior notes for 73,389,094 shares of common stock. We recorded an aggregate net gain of approximately $64 million associated with the exchanges.
In the Prior Quarter, we repurchased approximately $82 million principal amount of our 6.875% Senior Notes due 2025 for $76 million and recorded a $6 million gain.
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 pre-petition revolving credit facility and our term loan have terms that extend beyond 2021. Our pre-petition 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 pre-petition 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. Upon emergence from the Chapter 11 Cases, the pre-petition revolving credit facility will be paid in full with proceeds from our exit financing and, therefore, the estimated fair value equals the carrying value and is excluded from the table below.
  September 30, 2020 December 31, 2019
  
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
    ($ in millions)  
Short-term debt (Level 1) $0
 $0
 $385
 $360
Long-term debt (Level 1) $0
 $0
 $753
 $622
Long-term debt (Level 2) $0
 $0
 $8,320
 $6,085
Liabilities subject to compromise (Level 1) $982
 $38
 $0
 $0
Liabilities subject to compromise (Level 2) $6,184
 $1,475
 $0
 $0


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5.6.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
Chapter 11 Proceedings
Commencement of the Chapter 11 Cases automatically stayed the proceedings and actions against us that are described below, in addition to actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. The plan contemplated byPlan in the RSA, if confirmed, will provideChapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that havehad not been satisfied or addressed during the Chapter 11 Cases. See Note 12 for additional information.
Litigation and Regulatory Proceedings
We arewere involved in a number of litigation and regulatory proceedings including those described below.as of the Petition Date. Many of these proceedings arewere in early stages, and many of them seek or may seeksought 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, and expect to continue to be 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 The majority of the prepetition legal proceedings have been named in various lawsuits alleging underpayment of royalties and other shares ofsettled during 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 owedChapter 11 Cases or will be resolved 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 ofclaims reconciliation process before 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 PleasBankruptcy Court. Any allowed claim related to royalty underpayment and lease acquisition and accounting practices with respect to propertiessuch prepetition litigation will be treated 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 all Pennsylvania civil royalty cases for a total at that time of approximately $36 million. In light of our Bankruptcy Filing, the parties have reopened settlement discussions.
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, HOOPP filed a demand for arbitrationaccordance 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.
On January 29, 2020, a well control incident occurred at one of our wellsites in Burleson County, Texas, causing the deaths of three of our contractors’ employees and injuring a fourth. In connection with this incident, eleven lawsuits have been brought against us and our contractors alleging negligence, gross negligence, and breach of contract, and seeking wrongful death damages, survival statute damages, exemplary damages, and interest. Ten of the suits have been filed in Dallas County, Texas. A joint motion to consolidate filed by all the parties in nine of the ten Dallas County lawsuits is currently pending before the Texas Multidistrict Litigation Panel. The eleventh suit is pending in Burleson County, Texas. The proceedings are in their early stages and are all stayed due to the pending bankruptcy. Our general and excess liability insurance policies provide coverage for third party bodily injury and wrongful death claims, and the contracts between us and our contractors with respect to the well contain customary cross-indemnification provisions. The well control incident liability was not reduced for the potential insurance recovery. A receivable for the probable recovery was accrued.Plan.
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 addressaddressing 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 namedwere recently dismissed as a defendant infrom numerous lawsuits in Oklahoma alleging that we and other companies have engaged in activities that have caused earthquakes. TheseThe lawsuits seeksought 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 seeksought the reimbursement of insurance premiums and the award of punitive damages, attorneys’ fees, costs, expenses and interest. We intendAny allowed claim related to vigorously defend these claims.such prepetition litigation will be treated in accordance with the Plan.
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.

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(Unaudited)

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:
  September 30,
2020
  ($ in millions)
Remainder of 2020 $255
2021 872
2022 804
2023 671
2024 597
2025 – 2034 3,051
Total $6,250

Successor
September 30,
2021
Remainder of 2021$151 
2022547 
2023481 
2024412 
2025316 
2026 – 20331,539 
Total$3,446 
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.
7.Other Current Liabilities
Other current liabilities as of September 30, 2021 and December 31, 2020 are detailed below:
SuccessorPredecessor
September 30,
2021		December 31,
2020
Revenues and royalties due others$454 $236 
Accrued drilling and production costs96 104 
Other accrued taxes105 82 
Accrued compensation and benefits68 59 
Hedging44 7 
Operating leases11 24 
Debt and equity financing fees— 69 
Joint interest prepayments received11 8 
Other109 134 
Total other current liabilities$898 $723 

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6.8.Other LiabilitiesRevenue
Other current liabilities as of September 30, 2020The following table shows revenue disaggregated by operating area and December 31, 2019 are detailed below:product type:
Successor
Three Months Ended September 30, 2021
OilNatural GasNGLTotal
Appalachia$— $383 $— $383 
Gulf Coast— 207 — 207 
South Texas221 44 47 312 
Brazos Valley158 9 8 175 
Powder River Basin58 21 14 93 
Oil, natural gas and NGL revenue$437 $664 $69 $1,170 
Marketing revenue$326 $240 $61 $627 
Predecessor
Three Months Ended September 30, 2020
 OilNatural GasNGLTotal
Appalachia$— $137 $— $137 
Gulf Coast— 92 — 92 
South Texas189 26 26 241 
Brazos Valley127 3 3 133 
Powder River Basin36 7 4 47 
Mid-Continent14 5 3 22 
Oil, natural gas and NGL revenue$366 $270 $36 $672 
Marketing revenue$301 $116 $31 $448 
  September 30,
2020		 December 31,
2019
  ($ in millions)
Revenues and royalties due others $235
 $516
Accrued drilling and production costs 88
 326
Debt and equity financing fees 69
 0
Joint interest prepayments received 27
 52
Operating leases(a)
 23
 9
Accrued reorganization professional fees 23
 0
VPP deferred revenue(b)
 22
 55
Accrued compensation and benefits(c)
 61
 156
Other accrued taxes 123
 150
Other 82
 168
Total other current liabilities $753
 $1,432
34

Other long-term liabilities as of September 30, 2020 and December 31, 2019 are detailed below:
  September 30,
2020		 December 31,
2019
  ($ in millions)
VPP deferred revenue(b)
 $0
 $9
Other 16
 116
Total other long-term liabilities $16
 $125

(a)In the Current Quarter, we entered into a drilling rig contract that extends through 2021 and recorded an operating lease liability and right-of-use asset.
(b)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.
(c)In the Current Period, 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.

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(Unaudited)

7.Revenue
The following table shows revenue disaggregated by operating area and product type, for the Current Quarter the Prior Quarter, the Current Period and the Prior Period:
Successor
Period from
February 10, 2021 through September 30, 2021
OilNatural GasNGLTotal
Appalachia$— $772 $— $772 
Gulf Coast— 401 — 401 
South Texas562 97 102 761 
Brazos Valley409 30 17 456 
Powder River Basin144 51 30 225 
Oil, natural gas and NGL revenue$1,115 $1,351 $149 $2,615 
Marketing revenue$828 $483 $132 $1,443 
Predecessor
Period from
January 1, 2021 through February 9, 2021
 OilNatural GasNGLTotal
Appalachia$— $119 $— $119 
Gulf Coast— 53 — 53 
South Texas92 15 15 122 
Brazos Valley67 2 2 71 
Powder River Basin20 7 6 33 
Oil, natural gas and NGL revenue$179 $196 $23 $398 
Marketing revenue$141 $78 $20 $239 
Predecessor
Nine Months Ended September 30, 2020
 OilNatural GasNGLTotal
Appalachia$— $445 $— $445 
Gulf Coast— 245 — 245 
South Texas539 77 59 675 
Brazos Valley375 10 9 394 
Powder River Basin1332814175 
Mid-Continent44 19 9 72 
Oil, natural gas and NGL revenue$1,091 $824 $91 $2,006 
Marketing revenue from contracts with customers$930 $338 $76 $1,344 
Other marketing revenue67 1 — 68 
Marketing revenue$997 $339 $76 $1,412 
35
  Three Months Ended September 30, 2020
  Oil Natural Gas NGL Total
  ($ in millions)
Marcellus $0
 $137
 $0
 $137
Haynesville 0
 92
 0
 92
Eagle Ford 189
 26
 26
 241
Brazos Valley 127
 3
 3
 133
Powder River Basin 36
 7
 4
 47
Mid-Continent 14
 5
 3
 22
Revenue from contracts with customers 366
 270
 36
 672
Losses on oil, natural gas and NGL derivatives (2) (159) 0
 (161)
Oil, natural gas and NGL revenue $364
 $111
 $36
 $511
         
Marketing revenue $301
 $116
 $31
 $448
         
  Three Months Ended September 30, 2019
  Oil Natural Gas NGL Total
  ($ in millions)
Marcellus $0
 $158
 $0
 $158
Haynesville 0
 129
 0
 129
Eagle Ford 282
 32
 22
 336
Brazos Valley 194
 10
 5
 209
Powder River Basin 97
 16
 5
 118
Mid-Continent 40
 8
 5
 53
Revenue from contracts with customers 613
 353
 37
 1,003
Gains on oil, natural gas and NGL derivatives 124
 43
 0
 167
Oil, natural gas and NGL revenue $737
 $396
 $37
 $1,170
         
Marketing revenue from contracts with customers $603
 $165
 $37
 $805
Other marketing revenue 80
 4
 0
 84
Marketing revenue $683
 $169
 $37
 $889
         


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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

  Nine Months Ended September 30, 2020
  Oil Natural Gas NGL Total
  ($ in millions)
Marcellus $0
 $445
 $0
 $445
Haynesville 0
 245
 0
 245
Eagle Ford 539
 77
 59
 675
Brazos Valley 375
 10
 9
 394
Powder River Basin 133
 28
 14
 175
Mid-Continent 44
 19
 9
 72
Revenue from contracts with customers 1,091
 824
 91
 2,006
Gains (losses) on oil, natural gas and NGL derivatives 689
 (116) 0
 573
Oil, natural gas and NGL revenue $1,780
 $708
 $91
 $2,579
         
Marketing revenue from contracts with customers $930
 $338
 $76
 $1,344
Other marketing revenue 67
 1
 0
 68
Marketing revenue $997
 $339
 $76
 $1,412
         
  Nine Months Ended September 30, 2019
  Oil Natural Gas NGL Total
  ($ in millions)
Marcellus $0
 $657
 $0
 $657
Haynesville 0
 494
 0
 494
Eagle Ford 962
 117
 88
 1,167
Brazos Valley 513
 23
 12
 548
Powder River Basin 273
 59
 23
 355
Mid-Continent 131
 34
 26
 191
Revenue from contracts with customers 1,879
 1,384
 149
 3,412
Gains (losses) on oil, natural gas and NGL derivatives (49) 190
 0
 141
Oil, natural gas and NGL revenue $1,830
 $1,574
 $149
 $3,553
         
Marketing revenue from contracts with customers $1,830
 $741
 $202
 $2,773
Other marketing revenue 230
 38
 0
 268
Losses on marketing derivatives 0
 (3) 0
 (3)
Marketing revenue $2,060
 $776
 $202
 $3,038
         


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(Unaudited)

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 September 30, 20202021 and December 31, 20192020 are detailed below:
  September 30,
2020		 
December 31,
2019
  ($ in millions)
Oil, natural gas and NGL sales $547
 $737
Joint interest 91
 200
Other 67
 74
Allowance for doubtful accounts (29) (21)
Total accounts receivable, net $676
 $990

SuccessorPredecessor
September 30,
2021		December 31,
2020
Oil, natural gas and NGL sales$670 $589 
Joint interest105 119 
Other41 68 
Allowance for doubtful accounts(1)(30)
Total accounts receivable, net$815 $746 
8.9.Income Taxes
We estimate our annual effective tax rate (AETR)(“AETR”) for continuing operations in recording our interim quarterly income tax provision for the various jurisdictions in which we operate. The tax effects of statutory rate changes, significant unusual or infrequently occurring 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 Quarter2021 Successor Period is 0.1%. 2.0% as a result of projecting current state income taxes and a full valuation allowance against our anticipated net deferred asset position at December 31, 2021. Although we are projecting a current state tax liability, a benefit has been recorded in the 2021 Successor Period due to the application of the AETR to the 2021 Successor Period book net loss before income taxes.
The impairmentsincome tax provision for the 2021 Predecessor Period was determined based on actual results for the period ended February 9, 2021, including those resulting from fresh start accounting. The effective tax rate for the 2021 Predecessor Period was (1.1%) which results from the elimination of long-livedthe income tax effects associated with hedging settlements from accumulated other comprehensive income as part of fresh start accounting. We recorded an income tax benefit of $57 million in the 2021 Predecessor Period for the elimination of such income tax effects. Any changes to our deferred tax assets and liabilities for the 2021 Predecessor Period (whether resulting from Reorganization Adjustments, Fresh Start Adjustments or otherwise) were completely offset with a corresponding adjustment to our valuation allowance which results in the low effective tax rate. Accordingly, there are no balances shown for deferred tax assets or liabilities in the condensed consolidated balance sheet table shown in Note 3.
For the 2020 Predecessor Period, we recorded duringan income tax benefit of $13 million, which included the first quarterreversal of 2020 (see Note 13 for additional information on the impairments) resulted insubstantially all of the deferred tax position attributable toliability associated with Texas reverting back tothrough the application of the estimated AETR as well as recording a receivable for amounts previously sequestered from refunds of corporate alternative minimum tax credits. This resulted in a 0.1% effective tax rate for the 2020 Predecessor Period.
As of the Effective Date, we were in a net deferred tax asset before valuation allowance. As of December 31, 2019, we reported Texas as the only tax jurisdictionposition and anticipate being in a net deferred tax liabilityasset position and recorded an associated income tax expenseas of $10 million. The $10 million of net deferred tax liability attributable to Texas is being reversed through the determination of the estimated AETR for the year ended December 31, 2020. The estimated AETR is otherwise 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.
2021. Based on all available positive and negative evidence, including projections of future taxable income, we believe it is more likely than not that some or all of our deferred tax assets will not be realized, including the deferred tax assets attributable to Texas. A significant piece of objectively verifiable negative evidence evaluated is the cumulative loss incurred over the rolling thirty-six-month period ended September 30, 2020. Such evidence limits our ability to consider various forms of subjective positive evidence,realized. As 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 and state 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 September 30, 20202021 and with the exception of Texas, which was in a net deferred tax liability position, as of December 31, 2019.
On February 1, 2019, we completed2020. A significant piece of objectively verifiable negative evidence evaluated is the acquisitionlosses incurred in recent quarters. Should future results of WildHorse Resource Development Corporation (“WildHorse”). For federal incomeoperations demonstrate profitability, additional weight may be placed upon other evidence, such as future forecasts of taxable income. Additionally, future events and new evidence, such as tax purposes, the transaction (the “WildHorse Merger”) qualified as a tax-free merger

law changes, increased commodity pricing, and
27
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

the integration of profit generating assets, could lead to a fresh evaluation of future forecasts and the conclusion that some or all of the deferred tax assets are more likely than not to be realizable. Therefore, we believe that there is a possibility that some or all of the valuation allowance could be released in the foreseeable future.
We have evaluated the income tax impact of the Plan, including the ownership change under Section 368382 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 partemergence from bankruptcy. Section 382(b) of the business combination accountingCode provides an annual limitation with respect to the ability of a corporation to utilize its tax attributes existing at the time of an ownership change against future taxable income. We did not qualify for WildHorse. As a consequencethe exception under Section 382(l)(5) of having a full valuation allowance againstthe Code, and therefore an annual limitation was determined under Section 382(l)(6) of the Code, which is based on the post-emergence value of the taxpayer’s equity multiplied by the adjusted federal long-term rate in effect for the month in which the ownership change occurred. The amount of the annual limitation has been computed to be $54 million and will be prorated for the current year based on the number of days attributable to the post-Effective Date portion of the year. The limitation applies to 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 NOLoperating loss (“NOL”) carryforwards, disallowed business interest carryforwards and certain other deferred tax assets. These carryforwards will be subjectgeneral business credits until such attributes expire or are fully utilized. As we believe we were in an overall net unrealized built-in loss position at the Effective Date, the limitation also applies to an annual limitation under Section 382any recognized built-in losses incurred for a period of five years but only to the extent of the Code of approximately $61 million.overall net unrealized built-in loss. We determinedestimate that this will occur during the current year such 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 taxesfurther limitation for recognized built-in losses will occur in various state and local jurisdictions in which we operate. As a result of having a full valuation allowance against our net deferred tax asset position, we did not record an income tax provision for the Current Quarter. However, we recorded an income tax benefit of $13 million for the Current Period, which includes the impact of Texas reverting back to a net deferred tax asset position as well as recording a benefit for amounts previously sequestered from refunds of corporate alternative minimum tax (AMT) credits.
Our ability to utilize NOL carryforwards and 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.)subsequent years. Some states impose similar limitations on tax attribute utilization upon experiencing an Ownership Change. Asownership change.
In Chapter 11 bankruptcy cases, the cancellation of September 30, 2020, we do not believe that an Ownership Change has occurred that would subject us to an annual limitation ondebt income (“CODI”) realized upon emergence from bankruptcy is excludible from taxable income but results in a reduction of tax attributes in accordance with the utilizationattribute reduction and ordering rules of Section 108 of the Code. The amount of our NOL carryforwards and other tax attributes; however, our current ownership shift remains at greater than 40%.
On April 23, 2020, our Board of Directors approved the adoption of a rights plan thatCODI is designed to protect the availability of NOL carryforwards and other tax attributes by reducing the likelihood of an Ownership Change prior to confirmation of the Plan by the Bankruptcy Court (see Note 9 for additional information on the rights plan). Further, as part of the Chapter 11 Cases, the Bankruptcy Court has granted a first day motion for entry of an order seeking relief that will enable the Company to closely monitor certain transfers of beneficial ownership of our stock so asestimated to be in a position to prevent such transfers with the purpose of avoiding an Ownership Change prior to confirmation of the Plan by the Bankruptcy Court, thereby preserving the value of$5 billion and will be taken completely against, and therefore will reduce, our NOL carryforwardscarryforwards. After taking into account the CODI and other tax attributes.
Certainthe impact of the restructuring transactions contemplated by the RSA may have a material impact on the Company’s tax attributes, the full extent of which is currently unknown. Cancellation of indebtedness income resulting from such restructuring transactions may significantly reduce the Company’s tax attributes, including but not limited to NOL carryforwards. Further, the Company will experience an Ownership Change under Section 382 of the Code, upon confirmationthe remaining federal NOL carryforwards are estimated to be in the range of $2.5 billion to $3.0 billion. Approximately $900 million are NOL carryforwards which expire in 2037 and $1.6 billion to $2.1 billion are NOL carryforwards which do not expire. The reductions in NOL carryforwards for the CODI and expiring NOL carryforwards are expected to be fully offset by a corresponding decrease to our valuation allowance at December 31, 2021. Some states have similar rules for attribute reduction which will result in the reduction of certain of our state NOL carryforwards.
10.Equity
New Common Stock. As discussed in Note 2, on the Effective Date, we issued an aggregate of approximately 97,907,081 shares of New Common Stock, par value $0.01 per share, to the holders of allowed claims, and approximately 2,092,918 shares of New Common Stock were reserved for future distributions under the Plan. During the 2021 Successor Period, 325,715 reserved shares were issued to resolve allowed unsecured claims.
On November 2, 2021, we declared a quarterly dividend payable of $0.4375 per share, which will be paid on December 9, 2021 to stockholders of record at the close of business on November 24, 2021.
Warrants. As discussed in Note 2, on the Effective Date, we issued 11,111,111 Class A Warrants, 12,345,679 Class B Warrants and 9,768,527 Class C Warrants, that are initially exercisable for one share of New Common Stock per Warrant at initial exercise prices of $27.63, $32.13 and $36.18 per share, respectively, subject to adjustments pursuant to the terms of the Plan byWarrants. Additionally, 3,948,893 Class C Warrants were reserved for future issuance. During the Bankruptcy Court which will subject certain remaining tax attributes2021 Successor Period, 614,616 reserved Class C Warrants were issued to an annual limitation under Section 382resolve allowed unsecured claims. The Warrants are exercisable from the Effective Date until February 9, 2026. The Warrants contain customary anti-dilution adjustments in the event of any stock split, reverse stock split, reclassification, stock dividend or other distributions. The exercise prices of the Code. Additionally,Warrants were adjusted to prevent the Company will incur significant one-time costs associated withdilution of rights for the effects of the quarterly dividend distribution on September 9, 2021, and the adjusted exercise prices are $27.27, $31.71, and $35.71 per share for the Class A, Class B and Class C Warrants, respectively. During the 2021 Successor Period, 19,068 Class A, 32,221 Class B and 6,859 Class C Warrants were converted into 52,253 common shares.
Chapter 11 Proceedings
Upon emergence from Chapter 11 on February 9, 2021, as discussed in Note 2, Predecessor common stock and preferred stock were canceled and released under the Plan a material amount of which are non-deductible for tax purposes under the Code.
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 NOLs incurred from 2018 through 2020, removing the 80% limitationwithout receiving any recovery 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 and the Current Period, there was no net impact on our income tax provision from the enactment of the CARES Act.

account thereof.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

9.11.EquityShare-Based Compensation
As discussed in Note 2, on the Effective Date, our Predecessor common stock was canceled and New Common Stock was issued. Accordingly, our then existing share-based compensation awards were also canceled, which resulted in the recognition of any previously unamortized expense related to the canceled awards on the date of cancellation. Share-based compensation for the Predecessor and Successor Periods is not comparable.
Successor Share-Based Compensation
As of the Effective Date, the Board of Directors adopted the LTIP with a share reserve equal to 6,800,000 shares of New Common Stock. The LTIP provides for the grant of restricted stock units, restricted stock awards, stock options, stock appreciation rights, performance awards and other stock awards to the Company’s employees and non-employee directors.
Restricted Stock Units. In the 2021 Successor Period, we granted restricted stock units to employees and non-employee directors under the LTIP, which will vest over a three-year and one-year period, respectively. The fair value of restricted stock units is based on the closing sales price of our common stock on the date of grant, and compensation expense is recognized ratably over the requisite service period. A summary of the changes in our common shares issuedunvested restricted stock units is detailed below.presented below:
 
Unvested
Restricted Stock Units		Weighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of February 10, 2021— $— 
Granted727 $44.28 
Vested(2)$44.30 
Forfeited/canceled(38)$44.30 
Unvested as of September 30, 2021687 $44.28 
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
  (in thousands)
Beginning balance(a)
 9,780
 8,172
 9,773
 4,568
Common shares issued for WildHorse Merger(a)
 0
 0
 0
 3,587
Exchange of convertible notes(a)(b)
 0
 367
 0
 367
Exchange of senior notes(a)(b)
 0
 1,178
 0
 1,178
Exchange of preferred stock(a)(c)
 0
 52
 0
 52
Restricted stock issuances (net of forfeitures and cancellations)(a)(d)
 0
 2
 7
 19
Ending balance(a)
 9,780
 9,771
 9,780
 9,771

(a)All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See below for additional information.
(b)
See The aggregate intrinsic value of restricted stock units that vested during the 2021 Successor Period was approximately $0.1 million based on the stock price at the time of vesting.Note 4 for a discussion of debt exchanges.
(c)
In the Prior Quarter, we exchanged 51,839 shares of common stock for 40,000 shares of our 5.75% (Series A) Cumulative Convertible Preferred Stock. In connection with the exchange, we recognized a loss equal to the excess of the fair value of all common stock issued in exchange for the preferred stock over the fair value of the common stock issuable pursuant to the original terms of the preferred stock. The loss of $17 million is reflected as a reduction to net income available to common stockholders for the purpose of calculating earnings per common share.
(d)
See Note 10 for a discussion of restricted stock.
Reverse Stock Split
On April 13, 2020, our BoardAs of DirectorsSeptember 30, 2021, there was approximately $25 million of total unrecognized compensation expense related to unvested restricted stock units. The expense is expected to be recognized over a weighted average period of approximately 2.44 years.
Performance Share Units. In the 2021 Successor Period, we granted performance share units (“PSUs”) to senior management under the LTIP, which will generally vest over a three-year period and our shareholders approvedwill be settled in shares. The performance criteria include share price hurdles, total shareholder return (“TSR”), and relative TSR (“rTSR”). The share price hurdle award could result in a 1-for-200 (1:200) reverse stock split of our common stock and a reductionpayout between 0% - 100% of the target units, and the TSR and rTSR awards could result in a total number of authorized shares of our common stock as determined by a formula based on two-thirdspayout between 0% - 200% of the reverse stock split ratio.target units. 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 parfair value of the common stockPSUs was not adjusted asmeasured on the grant date using a resultMonte Carlo simulation, and compensation expense is recognized ratably over the requisite service period because these awards depend on a combination of service and market criteria.
The following table presents the assumptions used in the valuation of the reverse stock split.PSUs granted in 2021.
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.
AssumptionShare Price HurdleTSR, rTSR
Risk-free interest rate0.30 %0.23 %
Volatility68.4 %71.4 %
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.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Adoption of Rights Plan
On April 23, 2020, the Board of DirectorsA summary 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 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.changes in unvested PSUs is presented below:
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.
Unvested Performance Share UnitsWeighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of February 10, 2021— $— 
Granted142 $54.23 
Vested(9)$38.95 
Forfeited/canceled(2)$45.76 
Unvested as of September 30, 2021131 $55.41 
As of December 31, 2019, the Company had federal NOLs September 30, 2021, there was approximately $6 million of approximately $7.6 billion availabletotal unrecognized compensation expense related to offset future federal taxable income.unvested PSUs. The Company’s abilityexpense is expected 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 likelihoodrecognized over a weighted average period 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 our common stock.approximately 2.67 years.
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.Predecessor Share-Based Compensation
10.Share-Based Compensation
Our Predecessor share-based compensation program consistsconsisted of restricted stock, stock options, performance share units (PSUs)PSUs and cash restricted stock units (CRSUs)(“CRSUs”) granted to employees and restricted stock granted to non-employee directors under our long-term incentive plans. The restricted stock and stock options arewere equity-classified awards and the PSUs and CRSUs arewere liability-classified awards. On May 5, 2020, all of the outstanding share-based compensation issued to executive officers and designated vice presidents was canceled and replaced with cash retention incentives. Refer to 2020 Compensation Adjustments below for more information.
Equity-Classified Awards
Restricted Stock.Stock Units. We grantgranted restricted stock units to employees and non-employee directors. A summary of the changes in unvested restricted stock during the Current Periodunits is presented below:
  
Shares of
Unvested
Restricted Stock(a)
 
Weighted Average
Grant Date
Fair Value Per Share(a)
  (in thousands)  
Unvested as of January 1, 2020 52
 $710
Granted 68
 $60
Vested (21) $794
Forfeited/canceled (97) $243
Unvested as of September 30, 2020 2
 $584

(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 9 for additional information.
The aggregate intrinsic value of restricted stock that vested during the Current Period was approximately $1 million based on the stock price at the time of vesting.
As of September 30, 2020, there was approximately $1 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 1.14 years.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Unvested
Restricted Stock Units		Weighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of January 1, 20211 $616.57 
Granted— $— 
Vested— $— 
Forfeited/canceled(1)$611.47 
Unvested as of February 9, 2021— $— 
Stock Options. In the Prior2020 Predecessor Period, we granted members of management stock options that vestvested ratably over a three-yearthree-year period. Each stock option award hashad an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expireexpired seven years to ten years from the date of grant.
We utilizeutilized the Black-Scholes option pricingoption-pricing model to measure the fair value of stock options. The expected life of an option iswas determined using the simplified method. Volatility assumptions arewere estimated based on the average historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate iswas 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 iswas based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option.
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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table provides information related to stock option activity in the Current Period:activity:
Number of
Shares
Underlying  
Options		Weighted
Average
Exercise Price Per Share
Weighted  
Average
Contract Life in Years
Aggregate  
Intrinsic
Value(a)
 
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 thousands)   ($ in millions)
Outstanding as of January 1, 2020 90
 $1,420
 5.70 $0
Outstanding as of January 1, 2021Outstanding as of January 1, 202120 $1,429 4.27$— 
Granted 0
 $0
  Granted— $— 
Exercised 0
 $0
 $0
Exercised— $— $— 
Expired (21) $893
  Expired(1)$742 
Forfeited/canceled (47) $1,666
  Forfeited/canceled(19)$1,452 
Outstanding as of September 30, 2020 22
 $1,390
 4.24 $0
Exercisable as of September 30, 2020 22
 $1,400
 4.31 $0
Outstanding as of February 9, 2021Outstanding as of February 9, 2021— $— —$— 
Exercisable as of February 9, 2021Exercisable as of February 9, 2021— $— —$— 

(a)
(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 9 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 September 30, 2020, there was 0 unrecognized compensation expense related to unvested stock options.
Restricted Stock, and Stock Option, and PSU Compensation.We recognized the following compensation costs, net of actual forfeitures, related to restricted stock, and stock options, and PSUs for the Current Quarter, the Prior Quarter, the Current PeriodSuccessor and the Prior Period:Predecessor Periods:
SuccessorPredecessor
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
General and administrative expenses$2 $7 
Oil and natural gas properties1 — 
Oil, natural gas and NGL production expenses1 — 
Total restricted stock, stock option, and PSU compensation$4 $7 
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2020 2019 2020 2019SuccessorPredecessor
($ in millions)Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended September 30, 2020
General and administrative expenses$7
 $6
 $15
 $21
General and administrative expenses$4 $3 $15 
Oil and natural gas properties0
 1
 1
 2
Oil and natural gas properties2 — 1 
Oil, natural gas and NGL production expenses0
 1
 1
 3
Oil, natural gas and NGL production expenses1 — 1 
Total restricted stock and stock option compensation$7
 $8
 $17
 $26
Total restricted stock, stock option, and PSU compensationTotal restricted stock, stock option, and PSU compensation$7 $3 $17 

Liability-Classified Awards
Performance Share Units. In the Prior Period, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

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
 September 30, 2020
  
Units(a)
  Fair Value Vested Liability
    ($ in millions) ($ in millions)
2018 CRSU Awards:        
Payable 2021 14,273
 $9
 $0
 $0

(a)12.
All share information has been retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020. See Note 9 for additional information.

We recognized the following compensation costs (credits), net of actual forfeitures, related to our liability-classified awards for the Current Quarter, the Prior Quarter, the Current Period and the Prior Period.
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
General and administrative expenses $0
 $(1) $(3) $7
Oil and natural gas properties 0
 1
 0
 2
Oil, natural gas and NGL production expenses 0
 0
 (1) 3
Exploration expenses 0
 0
 0
 0
Total liability-classified awards compensation $0
 $0
 $(4) $12

2020 Compensation Adjustments
On May 5, 2020, all of the outstanding share-based compensation, including restricted stock, stock options, PSUs and CRSUs, granted to our executive officers and designated vice presidents was canceled and replaced with cash retention incentives. The cash retention incentives granted to executive officers are equally weighted between achievement of certain specified performance metrics and a service period. The cash retention incentives may be clawed back if an executive officer or vice president terminates employment for any reason other than a qualifying termination prior to the earlier of (i) the effective date of a plan of reorganization under Chapter 11 of the Bankruptcy Code or (ii) May 8, 2021. The transactions were considered a modification to the previously issued equity-classified awards. As such, the remaining unrecognized expense related to restricted stock and stock options will result in $18 million of share-based compensation expense to be amortized over the relevant service period of the new cash retention incentives. The $15 million after-tax fair value of the cash retention incentives was capitalized to other current assets in the condensed consolidated balance sheets in the Current Period and will be amortized over the relevant service period. The difference between the cash and after-tax value of the cash retention incentives of approximately $10 million, which is not subject to the claw back provisions contained within the agreements, was expensed to general and administrative expenses in the condensed consolidated statements of operations for the Current Period.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

11.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. These commodity derivative financial instruments include financial price swaps, basis protection swaps, and collars. All of our oil and 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. NaN of our oil, natural gas or NGL derivative instruments were designated for hedge accounting as of September 30, 2020 or December 31, 2019. Pursuant to the RSA associated with our Chapter 11 Cases, we are required to hedge a certain amount of our production with our DIP Credit Facility lenders. See Note 1 for additional details regarding these hedging requirements.
Oil, Natural Gas and NGL Derivatives
Our oil, natural gas and NGL derivative instruments consist 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

The estimated fair values of our oil and natural gas and NGL derivative instrument assets (liabilities) as of September 30, 20202021 and December 31, 20192020 are provided below: 
  September 30, 2020 December 31, 2019
  Notional Volume Fair Value Notional Volume Fair Value
    ($ in millions)     ($ in millions)  
Oil (mmbbl):        
Fixed-price swaps 26
 $(5) 24
 $(7)
Collars 0
 0
 2
 14
Basis protection swaps 0
 0
 8
 (2)
Total oil 26
 (5) 34
 5
Natural gas (bcf):        
Fixed-price swaps 780
 (161) 265
 125
Call options (sold) 0
 0
 22
 0
Call swaptions 0
 0
 29
 (2)
Basis protection swaps 0
 0
 30
 2
Total natural gas 780
 (161) 346
 125
Total estimated fair value   $(166)   $130

SuccessorPredecessor
 September 30, 2021December 31, 2020
Notional VolumeFair ValueNotional VolumeFair Value
Oil (MMBbl):
Fixed-price swaps18 $(464)27 $(136)
Basis protection swaps9 (3)7 (1)
Total oil27 (467)34 (137)
Natural gas (Bcf):
Fixed-price swaps429 (926)728 10 
Collars207 (171)53 8 
Basis protection swaps126 (46)66 1 
Total natural gas762 (1,143)847 19 
Total estimated fair value$(1,610)$(118)
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 September 30, 20202021 and December 31, 20192020 on a gross basis and after same-counterparty netting:
Gross
Fair Value
Amounts Netted
in the
Consolidated
Balance Sheets
Net Fair Value
Presented in the
Consolidated
Balance Sheets
Successor
As of September 30, 2021
Commodity Contracts:
Short-term derivative asset$14 $(14)$— 
Long-term derivative asset7 (7)— 
Short-term derivative liability(1,359)14 (1,345)
Long-term derivative liability(272)7 (265)
Total derivatives$(1,610)$— $(1,610)
Predecessor
As of December 31, 2020
Commodity Contracts:
Short-term derivative asset$84 $(65)$19 
Long-term derivative asset5 (5)— 
Short-term derivative liability(158)65 (93)
Long-term derivative liability(49)5 (44)
Total derivatives$(118)$— $(118)
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 September 30, 2020      
Commodity Contracts:      
Short-term derivative asset $12
 $(12) $0
Long-term derivative asset 4
 (4) 0
Short-term derivative liability (117) 12
 (105)
Long-term derivative liability (65) 4
 (61)
Total derivatives $(166) $0
 $(166)
       
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) 0
 (2)
Total derivatives $130
 $0
��$130



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(Unaudited)

Effect of Derivative Instruments – Condensed Consolidated Statements of Operations
The components of oil and natural gas and NGL revenues for the Current Quarter, the Prior Quarter, the Current Period and the Prior Periodderivatives are presented below:
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Oil, natural gas and NGL revenues $672
 $1,003
 $2,006
 $3,412
Gains (losses) on undesignated oil, natural gas and NGL derivatives (154) 175
 597
 167
Losses on terminated cash flow hedges (7) (8) (24) (26)
Total oil, natural gas and NGL revenues $511
 $1,170
 $2,579
 $3,553
 SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Losses on undesignated oil and natural gas derivatives$(910)$(154)
Losses on terminated cash flow hedges— (7)
Total oil and natural gas derivatives$(910)$(161)
The components of marketing revenues for the Current Quarter, the Prior Quarter, the Current Period and the Prior Period are presented below:
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Marketing revenues $448
 $889
 $1,412
 $3,042
Losses on undesignated marketing natural gas derivatives 0
 0
 0
 (4)
Total marketing revenues $448
 $889
 $1,412
 $3,038


 SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Gains (losses) on undesignated oil and natural gas derivatives$(1,604)$(379)$597 
Losses on terminated cash flow hedges— (3)(24)
Total oil and natural gas derivatives$(1,604)$(382)$573 
Effect of Derivative Instruments – Accumulated Other Comprehensive Income (Loss)
A reconciliation of the changes in accumulated other comprehensive income (loss) in our condensed consolidated statements of stockholders’ equity related to our cash flow hedges is presented below:
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Before 
Tax  		After 
Tax  		Before 
Tax		After 
Tax
Balance, beginning of period$— $— $(28)$29 
Losses reclassified to income— — 7 7 
Balance, end of period$— $— $(21)$36 
  Three Months Ended September 30,
  2020 2019
  Before 
Tax  		 After 
Tax  		 Before 
Tax  		 After 
Tax  
  ($ in millions)
Balance, beginning of period $(28) $29
 $(62) $(5)
Losses reclassified to income 7
 7
 8
 8
Balance, end of period $(21) $36
 $(54) $3

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from
 January 1, 2021 through
 February 9, 2021		Nine Months Ended
September 30, 2020
Before 
Tax  		After 
Tax  		Before 
Tax		After 
Tax		Before 
Tax  		After 
Tax  
Balance, beginning of period$— $— $(12)$45 $(45)$12 
Losses reclassified to income— — 3 3 24 24 
Fresh start adjustments— — 9 9 — — 
Elimination of tax effects— — — (57)— — 
Balance, end of period$— $— $— $— $(21)$36 
  Nine Months Ended September 30,
  2020 2019
  Before 
Tax  		 After 
Tax  		 Before 
Tax  		 After 
Tax  
  ($ in millions)
Balance, beginning of period $(45) $12
 $(80) $(23)
Losses reclassified to income 24
 24
 26
 26
Balance, end of period $(21) $36
 $(54) $3
TheOur accumulated other comprehensive loss as of September 30, 2020 representsbalance represented 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

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(Unaudited)

months were yet to occur. The remaining deferred gain or loss amounts were to be recognized in earnings in the month for which the original contract months arewere to occur. AsIn connection with our adoption of September 30, 2020,fresh start accounting we expectrecorded a fair value adjustment to transfer approximately $16 million of net loss included ineliminate the accumulated other comprehensive income (loss)related to net income (loss) duringhedging settlements including the next 12 months. The remaining amounts will be transferred by December 31, 2022.elimination of tax effects. See Note 3 for a discussion of fresh start accounting adjustments.
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 ratingare highly rated 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 September 30, 2020,2021, our oil and natural gas and NGL derivative instruments were spread among seveneight counterparties.
Hedging Arrangements
Certain of our hedging arrangements are with counterparties that are also lenders (or affiliates of lenders) under our DIPExit Credit Facility. The contracts entered into with these counterparties are secured by the same collateral that secures the pre-petition revolving credit facility. In addition, we enter into bilateral hedging agreements with other counterparties.Exit Credit Facility. 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 September 30, 2020,2021, 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. SinceAs our oil, natural gas and NGL swapsderivatives 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 September 30, 20202021 and December 31, 2019:2020:
SuccessorPredecessor
Significant Other Observable Inputs (Level 2)September 30,
2021		December 31,
2020
Derivative Assets (Liabilities):
Commodity assets$21 $88 
Commodity liabilities(1,631)(206)
Total derivatives$(1,610)$(118)
13.Exploration Expense
A summary of our exploration expense is as follows:
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Impairments of unproved properties$1 $3 
Geological and geophysical expense and other1 2 
Exploration expense$2 $5 
  
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 September 30, 2020        
Derivative Assets (Liabilities):        
Commodity assets $0
 $14
 $0
 $14
Commodity liabilities 0
 (180) 0
 (180)
Total derivatives $0
 $(166) $0
 $(166)
         
As of December 31, 2019        
Derivative Assets (Liabilities):        
Commodity assets $0
 $160
 $14
 $174
Commodity liabilities 0
 (42) (2) (44)
Total derivatives $0
 $118
 $12
 $130
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

A summary of the changes in the fair values of our financial assets (liabilities) classified as Level 3 during the Current Period and the Prior Period is presented below:
  
Commodity
Derivatives
 Utica Contingent Consideration
  ($ in millions)
Balance, as of January 1, 2020 $12
 $0
Total gains (losses) (realized/unrealized):    
Included in earnings(a)
 3
 0
Total purchases, issuances, sales and settlements:    
Settlements (15) 0
Balance, as of September 30, 2020 $0
 $0
     
Balance, as of January 1, 2019 $87
 $7
Total gains (losses) (realized/unrealized):    
Included in earnings(a)
 (47) (7)
Total purchases, issuances, sales and settlements:    
Settlements (8) 0
Balance, as of September 30, 2019 $32
 $0
___________________________________________
(a)  Commodity Derivatives Utica Contingent Consideration
   
   2020 2019 2020 2019
   ($ in millions)
 Total gains (losses) included in earnings for the period $3
 $(47) $0
 $(7)
 
Change in unrealized gains (losses) related to assets
still held at reporting date
 $0
 $(57) $0
 $(7)

12.Exploration Expense
A summary of our exploration expense for the Current Quarter, the Prior Quarter, the Current Period and the Prior Period is as follows:
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Impairments of unproved properties $3
 $1
 $402
 $26
Dry hole expense 0
 8
 7
 8
Geological and geophysical expense and other 2
 8
 8
 22
Exploration expense $5
 $17
 $417
 $56

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Impairments of unproved properties$1 $2 $402 
Dry hole expense— — 7 
Geological and geophysical expense and other3 — 8 
Exploration expense$4 $2 $417 
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 Current2020 Predecessor Period are primarily the result of non-cash impairment charges in unproved properties, primarily in our Brazos Valley, Haynesville,Gulf Coast, Powder River Basin and Mid-Continent operating areas.

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(Unaudited)

13.14.Impairments
During the Current2020 Predecessor Period, the decrease in demand for crude oil, primarily due to the combined impacts of COVID-19 and sharp decline in commodity prices related to the combined impact of falling demand andOPEC+ production increases, in production from OPEC+ resulted in decreases in then current and then 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 representrepresented 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,South Texas, 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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 in the Current Period.as of March 31, 2020. The inputs used are classified as Level 3 fair value assumptions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

14.15.Capitalized Exploratory Well Costs
A summary of the changes in our capitalized well costs for the Current Period is detailed below.
  Nine Months Ended September 30, 2020
  ($ in millions)
Balance as of January 1 $7
Charges to exploration expense (7)
Balance as of September 30 $0

As of September 30, 2020, there were 0 drilling and completion costs on exploratory wells pending determination of proved reserves capitalized for greater than one year.
15.Investments
In the Current Period, 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 Period. Based on FTSI’s operating results, 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.
In the Prior Period, in connection with the acquisition of WildHorse, we obtained a 50% membership interest in JWH Midstream LLC (JWH). The carrying value of our investment in JWH, which was being accounted for as an equity method investment, was approximately $17 million as of March 31, 2019. In the Prior Period, we paid approximately $7 million to terminate our involvement in the partnership. This removed us from any future obligations related to this joint venture and, therefore, we impaired the full value of the investment and recognized an approximate $23 million expense in the Prior Period.
16.Other Operating Expense (Income), Net
In the Current2020 Predecessor Period, we terminated certain gathering, processing and transportation contracts and recognized a non-recurring $80 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 56 for further discussion of contingencies and commitments.
In the Prior The 2020 Predecessor Period we recorded approximately $34contract termination expense and $29 million of costsother operating expense primarily 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 $38royalty settlements is partially offset by $42 million of severance expense as a resultincome from the amortization 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.volumetric production payment deferred revenue.
17.16.Separation and Other Termination Costs
In the Current Quarter2021 Successor Period, 2021 Predecessor Period and the Current2020 Predecessor Period, we incurred charges of approximately $16$11 million, $22 million and $43 million, respectively, related to one-time termination benefits for certain employees.
17.Subsequent Events

On November 1, 2021, we acquired Vine Energy, Inc. (“Vine”), an energy company focused on the development of natural gas properties in the over-pressured stacked Haynesville and Mid-Bossier shale plays in Northwest Louisiana pursuant to a definitive agreement with Vine dated August 10, 2021 (“Vine Acquisition”) for total consideration of approximately $1.3 billion, consisting of approximately 19.0 million shares of our common stock and $92 million in cash. We funded the cash portion of the consideration with cash on hand.

In conjunction with the Vine Acquisition, Vine’s Second Lien Term Loan was repaid and terminated for $163 million inclusive of a $13 million make whole premium with cash on hand due to the agreement containing a change in control provision making the term loan callable upon closing. Vine’s reserve based loan facility, which had no borrowings as of November 1, 2021, was terminated at the time of the acquisition. Additionally, Vine’s 6.75% Senior Notes with a principal amount of $950 million were assumed by the Company.

The Current Quarter amount was paidVine Acquisition will be accounted for as a business combination, with the fair value of consideration allocated to the acquisition date fair value of assets and liabilities acquired. Vine’s post-acquisition date results of operations will be included in October 2020.the Company’s interim consolidated financial statements beginning in November 2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

18.Condensed Combined Debtor-in-Possession Financial Information
The financial statements
Oil, Natural Gas and NGL Reserve Quantities

Presented below represent the condensed combined financial statementsis a summary of the Debtors as ofchanges in estimated reserves through March 31, 2021:
OilNatural GasNGLTotal
(MMBbl)(Bcf)(MMBbl)(MMBoe)
March 31, 2021
Proved reserves, beginning of period161 3,530 52 802 
Extensions, discoveries and other additions5 1,691 6 292 
Revisions of previous estimates10 160 7 44 
Production(7)(180)(2)(39)
Proved reserves, end of period169 5,201 63 1,099 
Proved developed reserves:
Beginning of period158 3,196 51 742 
End of period164 3,373 57 783 
Proved undeveloped reserves:
Beginning of period3 334 1 60 
End of period5 1,828 6 316 
Reflected above represents material changes to estimated reserves from December 31, 2020 through March 31, 2021. There were no material changes to estimated reserves from March 31, 2021 through September 30, 20202021. During the quarter ended March 31, 2021, extensions, discoveries and December 31, 2019other additions increased primarily due to updates to our five-year development plan in contemplation of emergence from bankruptcy on February 9, 2021 and forcertainty regarding our ability to finance the three and nine months ended September 30, 2020 and 2019.development of our proved reserves over a five-year period.
Condensed Combined Balance Sheets Total Combined Debtor Entities
  September 30,
2020		 December 31,
2019
ASSETS ($ in millions)
CURRENT ASSETS:    
Cash and cash equivalents $304
 $4
Other current assets 765
 1,244
Total Current Assets 1,069
 1,248
PROPERTY AND EQUIPMENT:    
Oil and natural gas properties, based on successful efforts accounting, net 4,637
 13,586
Other property and equipment, net 992
 1,118
Property and equipment held for sale, net 10
 10
Total Property and Equipment, Net 5,639
 14,714
Other long-term assets 185
 187
Investments in subsidiaries and intercompany advances (11) 6
TOTAL ASSETS $6,882
 $16,155
LIABILITIES AND EQUITY (DEFICIT)    
CURRENT LIABILITIES:    
Current liabilities $3,105
 $2,391
Total Current Liabilities 3,105
 2,391
Long-term debt, net 0
 9,073
Deferred income tax liabilities 0
 10
Other long-term liabilities 289
 317
Liabilities subject to compromise 8,428
 0
Total Liabilities 11,822
 11,791
EQUITY (DEFICIT):    
Chesapeake Stockholders’ Equity (Deficit) (4,940) 4,364
Total Equity (Deficit) (4,940) 4,364
TOTAL LIABILITIES AND EQUITY (DEFICIT) $6,882
 $16,155
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(Unaudited)

Condensed Combined Statements of Operations Total Combined Debtor Entities
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
   ($ in millions)
REVENUES AND OTHER:        
Oil, natural gas and NGL $510
 $1,167
 $2,574
 $3,543
Marketing 448
 889
 1,412
 3,038
Total Revenues 958
 2,056
 3,986
 6,581
Other 15
 15
 45
 45
Gains on sales of assets 1
 13
 1
 33
Total Revenues and Other 974
 2,084
 4,032
 6,659
OPERATING EXPENSES:        
Oil, natural gas and NGL production 82
 135
 295
 394
Oil, natural gas and NGL gathering, processing and transportation 257
 268
 810
 810
Severance and ad valorem taxes 37
 55
 116
 168
Exploration 5
 17
 417
 56
Marketing 450
 901
 1,438
 3,071
General and administrative 52
 66
 228
 257
Separation and other termination costs 16
 0
 43
 0
Provision for legal contingencies, net 12
 0
 20
 3
Depreciation, depletion and amortization 170
 572
 929
 1,668
Impairments 0
 9
 8,489
 11
Other operating expense 4
 15
 92
 79
Total Operating Expenses 1,085
 2,038
 12,877
 6,517
INCOME (LOSS) FROM OPERATIONS (111) 46
 (8,845) 142
OTHER INCOME (EXPENSE):        
Interest expense (25) (177) (307) (513)
Losses on investments 0
 (4) (23) (28)
Gains on purchases or exchanges of debt 0
 70
 65
 70
Other income 2
 3
 14
 30
Reorganization items, net (611) 0
 (217) 0
Equity in net losses of subsidiary 0
 0
 (18) 0
Total Other Expense (634) (108) (486) (441)
LOSS BEFORE INCOME TAXES (745) (62) (9,331) (299)
Income tax benefit 0
 (1) (13) (315)
NET INCOME (LOSS) (745) (61) (9,318) 16
Other comprehensive income 7
 8
 24
 26
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE $(738) $(53) $(9,294) $42











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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Condensed Combined Statements of Cash Flows Total Combined Debtor Entities
  Nine Months Ended
September 30,
  2020 2019
  ($ in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net Cash Provided By Operating Activities $1,153
 $1,178
CASH FLOWS FROM INVESTING ACTIVITIES:    
Drilling and completion costs (946) (1,640)
Business combination, net 0
 (353)
Acquisitions of proved and unproved properties (9) (31)
Proceeds from divestitures of proved and unproved properties 10
 110
Additions to other property and equipment (18) (27)
Proceeds from sales of other property and equipment 5
 6
Net Cash Used In Investing Activities (958) (1,935)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from pre-petition revolving credit facility borrowings 3,806
 8,805
Payments on pre-petition revolving credit facility borrowings (3,467) (7,495)
Proceeds from DIP credit facility borrowings 60
 0
Payments on DIP credit facility borrowings (60) 0
DIP credit facility and exit facilities financing costs (109) 0
Cash paid to purchase debt (95) (457)
Cash paid for preferred stock dividends (22) (69)
Other financing activities (8) (19)
Net Cash Provided By Financing Activities 105
 765
Net increase in cash and cash equivalents 300
 8
Cash and cash equivalents, beginning of period 4
 3
Cash and cash equivalents, end of period $304
 $11
     



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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

19.Subsequent Events
On October 13, 2020, we filed a notice with the Bankruptcy Court that we reached an agreement with Tapstone Energy as the “Stalking Horse” bidder to sell our Mid-Continent asset for $85 million in a 363 transaction under the Bankruptcy Code. A Bankruptcy Court supervised auction will be held on November 10, 2020, in which other pre-qualified buyers may submit bids for the asset. We will then present the results of the auction process to the Bankruptcy Court for its final approval of the sale on November 13, 2020. We anticipate the transaction will close on December 11, 2020.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
SUPPLEMENTARY INFORMATION


Oil, Natural Gas and NGL Reserve Quantities

Presented below is a summary of changes in estimated reserves through March 31, 2020:
  Oil Natural Gas NGL Total
  (mmbbl) (bcf) (mmbbl) (mmboe)
March 31, 2020        
Proved reserves, beginning of period 358
 6,566
 120
 1,572
Extensions, discoveries and other additions 3
 91
 1
 19
Revisions of previous estimates (136) (2,298) (40) (560)
Production (12) (173) (3) (43)
Proved reserves, end of period 213
 4,186
 78
 988
Proved developed reserves:        
Beginning of period 201
 3,377
 82
 846
End of period 198
 3,371
 73
 832
Proved undeveloped reserves:        
Beginning of period 157
 3,189
 38
 726
End of period 15
 815
 5
 156
Reflected above represents material changes to estimated reserves from December 31, 2019 through March 31, 2020. There were no material changes to estimated reserves in the second quarter of 2020 or in the Current Quarter. During the quarter ended March 31, 2020, revisions of previous estimates decreased primarily due to updates to our five-year development plan in contemplation of ongoing market conditions and uncertainty regarding our ability to finance the development of our proved reserves over a five-year period.

ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion should be read together with the condensed consolidated financial statements included in Item 1 of Part I of this report and the consolidated financial statements included in Item 8 of our 20192020 Form 10-K.
We are an independent exploration and production company engaged in the acquisition, exploration and development of properties to produce oil, natural gas and NGL from underground reservoirs. We own a large and geographically diverse portfolio of onshore U.S. unconventional natural gas and liquids assets, including interests in approximately 13,7007,500 gross oil and natural gas wells. We have significant positions in the liquids-rich resource plays of the Eagle Ford Shale in South Texas, the stacked pay in the Powder River Basin in Wyoming and the Anadarko Basin in northwestern Oklahoma.wells at September 30, 2021. Our natural gas resource plays are the Marcellus Shale in the northern Appalachian Basin in Pennsylvania (“Appalachia”) and the Haynesville/Bossier Shales in northwestern Louisiana.Louisiana (“Gulf Coast”). Our liquids-rich resource plays are the Eagle Ford Shale in South Texas (“South Texas” and “Brazos Valley”) and the stacked pay in the Powder River Basin in Wyoming (“Powder River Basin”).
Our strategy is to develop our significant resource plays in a manner that generatescreate shareholder value by generating sustainable free cash flow from operating activitiesour oil and improves margins through financial disciplinenatural gas development and operating efficiencies, while maintaining exceptional environmental and safety performance. Current market conditions make it difficult to execute on this strategy, as evidenced by our voluntary filing for Chapter 11 protection on June 28, 2020; however, weproduction activities. We continue to focus on increasing cash provided by operating activities, improving margins through operating efficiencies and financial discipline and operating efficienciesimproving our Environmental, Social, and maintaining exceptional environmental and safetyGovernance (ESG) performance. To accomplish these goals, we intend to allocate our human resources and capital expenditures to projects we believe offer the highest cash return and value,on capital invested, to deploy leading drilling and completion technology throughout our portfolio, and to take advantage of acquisition and divestiture opportunities to strengthen our cost structureportfolio. We also intend to continue to dedicate capital to projects that reduce the environmental impact of our oil and our portfolio.natural gas producing activities. We continue to seek opportunities to reduce cash costs per barrel of oil equivalent production (production, gathering, processing and transportation and general and administrative) per barrel of oil equivalent production through operational efficiencies including but not limited toby, among other things, improving our production volumes from existing wells. In response
Leading a responsible energy future is foundational to current market conditions,Chesapeake's success. Our core values and culture demand we continuously evaluate the environmental impact of our operations and work diligently to improve our ESG performance across all facets of our Company. Our path to leading a responsible energy future begins with our initiative to achieve net-zero direct greenhouse gas emissions by 2035, which we announced in February 2021. To meet this challenge, we have reducedset meaningful initial goals including:
•Eliminate routine flaring from all new wells completed from 2021 forward, and enterprise-wide by 2025;
•Reduce our workforce, curtailedmethane intensity to 0.09% by 2025; and
•Reduce our GHG intensity to 5.5 by 2025.
In July 2021, we announced our plan to receive independent certification of our natural gas production under the MiQ methane standard and reduced capital, whichEO100 Standard for Responsible Energy Development. We anticipate that certified natural gas will furtherbe available in our Gulf Coast basin by the end of 2021 and in our Appalachia basin by the end of the second quarter of 2022. The MiQ certification will provide a verified approach to tracking our commitment to reduce future production.our methane intensity to 0.09% by 2025, as well as support our overall objective of achieving net-zero direct greenhouse gas emissions by 2035.
Recent DevelopmentsOur results of operations as reported in our condensed consolidated financial statements for the 2021 Successor Quarter, 2021 Successor Period, 2021 Predecessor Period, 2020 Predecessor Quarter and 2020 Predecessor Period are in accordance with GAAP. Although GAAP requires that we report on our results for the periods January 1, 2021 through February 9, 2021 and February 10, 2021 through September 30, 2021 separately, management views our operating results for the nine months ended September 30, 2021 by combining the results of the 2021 Predecessor Period and the 2021 Successor Period because management believes such presentation provides the most meaningful comparison of our results to prior periods. We are not able to compare the 40 days from January 1, 2021 through February 9, 2021 operating results to any of the previous periods reported in the condensed consolidated financial statements and do not believe reviewing this period in isolation would be useful in identifying any trends in, or reaching any conclusions regarding, our overall operating performance. We believe the key performance indicators such as operating revenues and expenses for the 2021 Successor Period combined with the 2021 Predecessor Period provide more meaningful comparisons to other periods and are useful in understanding operational trends. Additionally, there were no changes in policies between the periods, and any
Voluntary Reorganization Under Chapter 11
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material impacts as a result of fresh start accounting were included within the discussion of these changes. These combined results do not comply with GAAP and have not been prepared as pro forma results under applicable regulations, but are presented because we believe they provide the most meaningful comparison of our results to prior periods.
Recent Developments
Emergence from Bankruptcy
On June 28, 2020 (the “Petition Date”), we and certain of our subsidiaries (collectively, the “Debtors”)Petition Date the Debtors filed voluntary petitions (the “Chapterthe Chapter 11 Cases”) for relief (the “Bankruptcy Filing”)Cases under Chapter 11 of Title 11 of the United StatesBankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).Court. On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation, Case No. 20-33233 (DRJ).20-33233. Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries (collectively, the “Non-Filing Entities”) were not part of the Bankruptcy Filing. The Non-Filing Entities will continuehave continued to operate in the ordinary course of business.
We are currently operating as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has granted first day motions filed by us that were designed primarily to mitigateconfirmed the impact of the Chapter 11 Cases on our operations, customers and employees. As a result, we are able to conduct normal business activities and pay all associated obligations for the period following the Bankruptcy Filing and are authorized to pay owner royalties, employee wages and benefits, and certain vendors and suppliers in the ordinary course for goods and services provided. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of business require the prior approval of the Bankruptcy Court.
For the duration of the Chapter 11 Cases, our operations and ability to develop and execute our business plan are subject to the risks and uncertainties associated with the Chapter 11 process as described in Item 1A. “Risk Factors.” As a result of these risks and uncertainties, the number of our shares of common stock and stockholders, assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases,Plan and the description of our operations, properties and capital plans included in this Form 10-Q may not accurately reflect our operations, properties and capital plans followingDebtors entered the Chapter 11 Cases.
DuringConfirmation Order on January 16, 2021. The Debtors emerged from bankruptcy on the Chapter 11 Cases, we expect our financial results to continue to be volatile as Restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the Bankruptcy Filing.Effective Date. In addition, we have incurred significant professional fees and other costs in

connection with preparation for the Chapter 11 Cases and expect that we will continue to incur significant professional fees and costs throughout our Chapter 11 Cases.
On October 13, 2020,exit from bankruptcy, we filed a noticeregistration statement with the Bankruptcy Court that we reached an agreement with Tapstone Energy as the “Stalking Horse” bidderSEC to sellfacilitate future sales of our Mid-Continent asset for $85 million inequity by certain holders of our New Common Stock and warrants. Sales of a 363 transaction under the Bankruptcy Code. A Bankruptcy Court supervised auction will be held on November 10, 2020, in which other pre-qualified buyers may submit bids for the asset. We will then present the resultssubstantial number of the auction processNew Common Stock in the public markets, or the perception that these sales might occur, could reduce the value of our equity and impair our ability to the Bankruptcy Courtraise capital through a future sale of, or pay for its final approval of the sale on November 13, 2020. We anticipate the transaction will close on December 11, 2020.
acquisitions using, our equity. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a complete discussion of the Chapter 11 Cases.
DelistingChief Executive Officer
On April 27, 2021, we announced the departure of Doug Lawler from his positions as Chief Executive Officer and Director of Chesapeake, effective April 30, 2021. Michael Wichterich, the Chairman of our Common Stock fromBoard of Directors, served as Interim Chief Executive Officer while the New York Stock ExchangeBoard of Directors conducted a search for a new Chief Executive Officer.
Our common stockMr. Wichterich intends to continue in his role as Chair of the Board of Directors following the appointment of Chesapeake's new Chief Executive Officer. During the period that Mr. Wichterich was previously listed onboth the New York Stock Exchange (the “NYSE”) underChair of the symbol “CHK.” AsBoard of Directors and Interim Chief Executive Officer, Matt Gallagher, the Chair of the Nominating and Governance Committee of the Board of Directors, served as Lead Independent Director.
On October 11, 2021, we announced that the Board of Directors appointed Domenic “Nick” Dell’Osso as President and Chief Executive Officer and as member of the Board, effective October 11, 2021. Additionally, Mr. Dell’Osso will remain in his role as Chief Financial Officer until his replacement has been announced. On October 11, 2021, the Board of Directors of the Company appointed Michael Wichterich, who resigned as Interim Chief Executive Officer upon the appointment of Mr. Dell’Osso, as Executive Chairman of the Company.
Vine Acquisition
On November 1, 2021, we completed our acquisition of Vine pursuant to a resultdefinitive agreement with Vine dated August 10, 2021. The transaction strengthens Chesapeake’s competitive position, meaningfully increasing our free cash flow outlook and deepening our inventory of premium natural gas locations, while preserving the strength of our failure to satisfy the continued listing requirements of the NYSE, on June 29, 2020, our common stock ceased to trade on the NYSE. Since June 30, 2020, our common stock has been quoted on the OTC Pink Marketplace maintained by the OTC Markets Group, Inc. under the symbol “CHKAQ.” On July 20, 2020, the NYSE filed a Form 25 with the SEC to delist our common stock, senior notes and cumulative convertible preferred stock from the NYSE. The delisting was effective 10 days after the Form 25 was filed and our common stock, senior notes and cumulative convertible preferred stock were deregistered under Section 12(b) of the Exchange Act on October 18, 2020.balance sheet.
COVID-19 Pandemic and Impact on Global Demand for Oil and Natural Gas
The global spread of COVID-19 created significant volatility, uncertainty, and economic disruption during the first nine months of 2020 and into 2021. 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. State and local authorities have also implemented multi-step policies with the goal of re-opening. However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases. To date, we have experienced limited operational impacts as a result of the restrictions from working remotelyCOVID-19 or COVID-19 directly. As an essential business under the guidelines issued by each of the states in whichrelated governmental restrictions. While we operate, we have been allowed to continue operations. As a result, since mid-March, we have restricted access to all of our offices and for a period of time directed employees to work remotely to the extent possible. We began to re-open our offices in phases beginning mid-May and special precautions have been implemented to minimize the risk of exposure. These actions have allowed us to maintain the engagement and connectivity of our personnel. However, due to severe impacts from the global COVID-19 pandemic on the global demand for oil and natural gas, financial results may not necessarily be indicative of operating results for the entire year. Moreover, future operations could be negatively affected if a significant number of our employees are quarantined as a result of exposure to the virus.
Our first priority in our response to this crisis has been the health and safety of our employees and those of our other business counterparties. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our employees, contractors and vendors to the best of our ability in the circumstances. We have a business continuity team for health, safety and environmental matters and personnel issues, and we have activated this business continuity team to address various impacts of the situation, as they develop. We also have modified certain business practices (including those related to employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences) to protect the health and safety of our employees, contractors and communities in which we operate by conforming to government restrictions and best practices encouraged by the Centers for Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities.
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. Prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist. Oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreaks and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported. 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. 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. The continued low level of demand and prices for oil and natural gas or otherwise has had and will continue to have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
As of the date of this Form 10-Q, our efforts to respond to the challenges presented by the conditions described above and minimize the impacts to our business have yielded results. We have moved quickly to implement strategies to reduce costs, increase operational efficiencies and lower our capital spending. In April we underwent a reduction in workforce impacting approximately 13% of our employees, and in September we underwent an additional reduction in workforce impacting another 12% of our employees. In connection with such reductions, we recorded non-recurring charges of approximately $16 million and $43 million in the Current Quarter and the Current Period, respectively, and we anticipate an estimated annualized savings of approximately $70 million. Due to the significant drop in oil prices and midstream constraints in the Current Quarter and the Current Period, we shut-in wells and delayed turn-in-lines, which reduced our oil production by approximately 50%, 25% and 10% in May, June and July, respectively. As market conditions improve, we have returned most wells to production and intend to complete most of our drilled but uncompleted wells. We anticipate our capital expenditures for the remainder of the year will be focused primarily on our natural gas assets. We have not received any funding under the CARES Act or other federal programs to support our operations and do not anticipate that we will. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, and this includes changes to comply with health-related guidelines as they are modified and supplemented.
We cannot predict the full impact that COVID-19 or the current 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 duewe believe demand is recovering and prices will continue to numerous uncertainties. The ultimate impacts will depend on future developments, including, among others, 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 Organization of Petroleum Exporting Countries (OPEC+) and other foreign, oil-exporting countries, governmental authorities, customers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.be positively impacted. For additional discussion regarding risks associated with the COVID-19 pandemic, see Part II, Item 7. Management’s
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Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Form 10-K and Item 1A “Risk Factors” in this report.our 2020 Form 10-K.
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.
Liquidity and Capital Resources
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. The price condition will be deemed cured if on the last trading day of any calendar month within six months following the receipt from the NYSE of the notice of non-compliance, we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. On April 1, 2020, the NYSE tolled the compliance period through June 30, 2020. 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.
Adoption of Rights Plan
On April 23, 2020, our Board of Directors declared a dividend of one Right payable on May 4, 2020 for each share of our common stock outstanding on May 4, 2020 to the shareholders of record on that date. In connection with the

distribution of the Rights, we entered into a Rights Agreement with Computershare Trust Company, N.A., as rights agent. Each Right entitles the registered holder to purchase from us Preferred Shares.
The Rights Agreement is intended to protect value by preserving our ability to use our tax attributes to offset potential future income taxes for federal income tax purposes. Our ability to use our tax attributes would be substantially limited if we experience an Ownership Change. The Rights Agreement is intended to reduce the likelihood of an Ownership Change prior to confirmation of the Plan by the Bankruptcy Court 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 our common stock.
The Rights Agreement will expire on the close of business on the day following the certification of the voting results from our 2021 annual meeting of shareholders, unless our 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. This summary description of the rights plan does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which was filed as an exhibit to our current report on Form 8-K filed on April 23, 2020.

Liquidity and Capital Resources
Liquidity Overview
OurFor the 2021 Successor Period, our primary sources of capital resources and liquidity have historicallyconsisted of internally generated cash flows from operations, and our primary uses of cash have been for the development of our oil and gas properties and return of value to shareholders through dividends. Historically, our primary sources of capital resources and liquidity have consisted of internally generated cash flows from operations, borrowings under certain credit agreements and dispositions of non-core assets and the capital markets when conditions are favorable.assets. Our ability to issue additional indebtedness, dispose of assets or access the capital markets may bewas substantially limited or nonexistent during the Chapter 11 Cases and will requirerequired court approval in most instances. Accordingly, our liquidity will dependin the Predecessor Periods depended mainly on cash generated from operating activitiesoperations and available funds under certain credit agreements including the DIP Credit Facility discussed below.in the 2021 Predecessor Period and revolving credit facility in the 2020 Predecessor Period.
Filing ofWe believe we have emerged from the Chapter 11 Cases constituted an event of defaultas a fundamentally stronger company, built to generate sustainable free cash flow with respect to certain of our secureda strengthened balance sheet, geographically diverse asset base and unsecured debt obligations.continuously improving ESG performance. As a result of the Chapter 11 Cases, the principal and interest due under these debt instruments became immediately due and payable. However, the creditors are stayed from taking any action aswe reduced our total indebtedness by $9.4 billion by issuing equity in a result of the default under Section 362 of the Bankruptcy Code.
Recent Events Affecting Liquidity
On June 28, 2020, priorreorganized entity to the commencementholders of the Chapter 11 Cases, the Company entered into a commitment letter (the “Commitment Letter”) with certain of the lendersour FLLO Term Loan, Second Lien Notes, unsecured notes and allowed general unsecured claimants.
We believe our cash flow from operations, cash on hand and borrowing capacity under the pre-petition revolving credit facility and/or their affiliates (collectively,Exit Credit Facility, as discussed below, will provide sufficient liquidity during the “Commitment Parties”), pursuant to which,next 12 months and subject to the satisfactionforeseeable future. As of certain customary conditions,September 30, 2021, we had $2.577 billion of liquidity available, including $849 million of cash on hand and $1.728 billion of aggregate unused borrowing capacity available under the approvalExit Credit Facility. As of the Bankruptcy Court, the Commitment Parties agreed to provide the Debtors with a post-petition senior secured super-priority debtor-in-possession revolving credit facility in an aggregate principal amount of up to approximately $2.104 billion (the “DIP Credit Facility”), consisting of a revolving loan facility of new money in an aggregate principal amount of up to $925 million, which includes a sub-facility of up to $200 million for the issuance of letters of credit, and an up to approximately $1.179 billion term loan that reflects the roll-up of a portion ofSeptember 30, 2021, we had no outstanding borrowings under the pre-petition revolving credit facility. Pursuant to the Commitment Letter, the Commitment Parties also committed to provide, subject to certain conditions, an up to $2.5 billion exit credit facility, consisting of an up to $1.75 billion revolving credit facility (the “Exit Revolving Facility”) and an up to $750 million senior secured term loan facility (the “Exit Term Loan Facility” and, together with theour Exit Revolving Facility, the “Exit Credit Facilities”). The terms and conditions of the DIP Credit Facility are set forth– Tranche A Loans and $221 million in the DIP Credit Agreement (the “DIP Credit Agreement”) attached to the Commitment Letter. The financing package provides us the capital necessary to fundborrowings under our operations during the Court-supervised Chapter 11 reorganization proceedings. The proceeds of the DIPExit Credit Facility may be used for, among other things, post-petition working capital, permitted capital investments, general corporate purposes, letters of credit, administrative costs, premiums, expenses and fees for the transactions contemplated by the Chapter 11 Cases, payment of court approved adequate protection obligations, and other such purposes consistent with the DIP Credit Facility. On July 1, 2020, the Company, as borrower, entered into the DIP Credit Agreement along with the Debtor guarantors party thereto, MUFG Union Bank, N.A., as agent, and the other lender, issuer, and agent parties thereto with the other Debtors party thereto. On September 15, 2020, we entered into the first amendment to the DIP Credit Agreement. The amendment, among other things, amends the maximum hedging covenant to allow the Debtors to enter into additional non-speculative hedge agreements based on forecasted production.– Tranche B Loans. See Note 45 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion of our DIP Credit Facility.debt obligations, including carrying and fair value of our senior notes.
AsDividend
With our strong liquidity position, we initiated a new dividend strategy. We expect the annual dividend on our common shares will be paid quarterly. We made the first dividend payment of $0.34375 per share on June 10, 2021 to stockholders of record at the close of business on May 24, 2021, and we made the second dividend payment of $0.34375 per share on September 30, 2020 and9, 2021 to stockholders of record at the close of business on August 24, 2021. On November 2, 2021, Chesapeake's Board of Directors increased the quarterly dividend on its common shares to $0.4375 per share, or 27% higher compared to the previous amount. The third dividend payment will be payable on December 31, 2019,9, 2021 to stockholders of record at the close of business on November 24, 2021. On August 10, 2021, we hadannounced a cash balancevariable return program that will result in the payment of $306 million and $6 million, respectively. Asan additional dividend, payable beginning in March 2022, equal to the sum of September 30, 2020 and December 31, 2019, we had a net working capital deficit of $2.033 billion and $1.141 billion, respectively. Additionally, our DIP Credit Facility was approved by the Bankruptcy Court on a final basis on July 31, 2020 which allows us up to $925 million of borrowing capacity. As of September 30, 2020, we had no outstanding borrowings under our DIP Credit Facility.
We believe ourfree cash flow from operations, borrowing capacity under the DIP Credit Facility and cash on hand will provide sufficient liquidity duringprior quarter less the bankruptcy process. We expect to incur significant costs associated with the bankruptcy process, including fees for legal, financial and restructuring advisors to the Company, certain of our creditors and royalty interest owners. Therefore, our ability to obtain confirmation of the Plan in a timely manner is critical to ensuring our liquidity is sufficient during the bankruptcy process.
Our ability to continue as a going concern is contingent on our ability to comply with the financial and other covenants contained in our DIP Credit Facility, the Bankruptcy Court’s approval of the Plan and our ability to successfully implement the Plan and obtain exit financing, among other factors. As a result of the Bankruptcy Filing, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under

Chapter 11, we may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions contained in the DIP Credit Facility), for amounts other than those reflected in the accompanying condensed consolidated financial statements. Further, the Plan could materially change the amounts and classifications of assets and liabilities reported in the condensed consolidated financial statements. The factors noted above raise substantial doubt about our ability to continue as a going concern.
Credit Risk
Our customers and counterparties are experiencing uncertain economic conditions which may impact their ability to make payments to us, which could adversely affect our business, cash flows, liquidity, financial condition and results of operations. 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.base dividend, multiplied by 50%.
Derivative and Hedging Activities
Our results of operations and cash flows are impacted by changes in market prices for oil and natural gas and NGL. Togas. We enter into various derivative instruments to mitigate a portion of our exposure to adverse marketoil and natural gas price changes, we enter into various derivative instruments.declines, but these transactions may also limit our cash flows in periods of rising oil and natural gas prices. Our oil, natural gas and NGL derivative activities, when combined with our sales of oil, natural gas and NGL, allow us to better predict the total revenue we expect to receive. Pursuant to the RSA associated with our Chapter 11 Cases, we are required to hedge a certain amount of our production with our DIP Credit Facility lenders. See Note 1Item 3. for additional details regarding these hedging requirements.
As of November 5, 2020, including OctoberQuantitative and November derivative contracts that have settled, we had 2020 downside oil price protection through swaps at an average price of $41.97 per bbl. We had 2020 downside gas price protection through swaps at $2.45 per mcf.
Oil Derivatives(a)
Year Type of Derivative Instrument Notional Volume Average NYMEX Price
    (mmbbls)  
2020 Fixed-price swaps 4
 $41.97
2021 Fixed-price swaps 15
 $42.18
2022 Fixed-price swaps 6
 $42.34
Natural Gas Derivatives(a)
Year Type of Derivative Instrument Notional Volume Average NYMEX Price
    (bcf)  
2020 
Fixed-price swaps(b)
 121
 $2.45
2020 Basis protection swaps 9
 ($0.64)
2021 
Fixed-price swaps(b)
 518
 2.67
2021 Two-way collars 30
 $2.80/$3.29
2021 Basis protection swaps 13
 ($0.64)
2022 Fixed-price swaps 209
 $2.52

(a)Includes amounts settled in October and November 2020.
(b)Includes non-NYMEX fixed-price swaps.
See Note 11 of the notes to our condensed consolidated financial statementsQualitative Disclosures About Market Risk included in Item 1 of Part I of this report for further discussion on the impact of derivatives and hedging activities.commodity price risk on our financial position.
Contractual Obligations and Off-Balance Sheet Arrangements
From time to time, we enter into arrangements and transactions that can give rise to contractual obligations and

off-balance sheet commitments. As of September 30, 2020, these arrangements2021, our material contractual obligations included repayment of senior notes, outstanding borrowings and transactions included (i) certain operatinginterest payment obligations under the Exit Credit Facility, asset retirement obligations, lease agreements, (ii) open purchase commitments, (iii) open delivery commitments, (iv) open drilling commitments, (v)obligations, undrawn letters of credit (vi) open gathering and transportation commitments, and (vii) various other commitments we enter into in the ordinary course of business that could result in future cash obligations.
Capital Expenditures
We have significant control and flexibility over the timing and execution of our development plan, enabling us to reduce our capital spending as needed. As a result of the impact to global oil demand primarily caused by the COVID-19 pandemic, In addition, we have significantly reduced our forecasted 2020 capital expenditures to a rangecontractual commitments with midstream
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Table of $1.0 billion - $1.2 billion compared to our 2019 capital spending level of $2.2 billion. This reduction in spending will reduce ourContents
companies and pipeline carriers for future production levels. Management continues to review operational plans for 2020gathering, processing and beyond, which could result in changes to projected capital expenditures and projected revenues from salestransportation of oil, natural gas and NGL.NGL to move certain of our production to market. The estimated gross undiscounted future commitments under these agreements were approximately $3.4 billion as of September 30, 2021. As discussed above, we estimate the sources of our capital will continue to be adequate to fund our near and long-term contractual obligations.
Post-Emergence Debt
On the Effective Date, pursuant to the terms of the Plan, the Company, as borrower, entered into a reserve-based credit agreement (the “Credit Agreement”) providing for the Exit Credit Facility which features an initial borrowing base of $2.5 billion. The borrowing base will be redetermined semiannually on or around May 1 and November 1 of each year. Our borrowing base was reaffirmed in October 2021, and the next scheduled redetermination will be on or about May 1, 2022. The aggregate initial elected commitments of the lenders under the Exit Credit Facility will be $1.75 billion of revolving Tranche A Loans and $221 million of fully funded Tranche B Loans.
The Exit Credit Facility provides for a $200 million sublimit of the aggregate commitments that are available for the issuance of letters of credit. The Exit Credit Facility bears interest at the ABR (alternate base rate) or LIBOR, at our election, plus an applicable margin (ranging from 2.25–3.25% per annum for ABR loans and 3.25–4.25% per annum for LIBOR loans, subject to a 1.00% LIBOR floor), depending on the percentage of the borrowing base then being utilized. The Tranche A Loans mature 3 years after the Effective Date and the Tranche B Loans mature 4 years after the Effective Date. The Tranche B Loans can be repaid if no Tranche A Loans are outstanding.
On February 2, 2021, the Company issued $500 million aggregate principal amount of its 2026 Notes and $500 million aggregate principal amount of its 2029 Notes. The offering of the Notes was part of a series of exit financing transactions undertaken in connection with the Debtors’ Chapter 11 Cases and meant to provide the exit financing originally intended to be provided by the Exit Term Loan Facility pursuant to the Commitment Letter.
Based upon the business plan approved by the Court and our hedging activities we expect to generate adequate cash flows from operating activities to fully fund all investing activities without incremental borrowings under our Exit Credit Facility.
Assumption and Repayment of Vine Debt
In conjunction with the Vine Acquisition, Vine’s Second Lien Term Loan was repaid and terminated for $163 million inclusive of a $13 million make whole premium with cash on hand due to the agreement containing a change in control provision making the term loan callable upon closing. Vine’s reserve based loan facility, which had no borrowings as of November 1, 2021, was terminated at the time of the acquisition. Additionally, Vine’s 6.75% Senior Notes with a principal amount of $950 million were assumed by the Company.
Capital Expenditures
For the year ending December 31, 2021, we currently expect to bring or have online approximately 125 to 140 gross wells by investing approximately $740 – $810 million in capital expenditures while operating approximately eight rigs inclusive of the Vine Acquisition. We expect that approximately 80% of our 2021 capital expenditures will be directed toward our natural gas assets. For the year ending December 31, 2022, we currently expect to invest approximately $1.3 – $1.6 billion in capital expenditures while operating approximately 10 to 12 rigs. We currently plan to fund our capital program through cash on hand and expected cash flow from our operations. We may alter or change our plans with respect to our capital program and expected capital expenditures based on developments in our business, our financial position, our industry or any of the markets in which we operate.
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Sources of Funds
The following table presents the sources of our cash and cash equivalents for the Current PeriodSuccessor and the Prior Period.Predecessor periods.
  Nine Months Ended
September 30,
  2020 2019
  ($ in millions)
Cash provided by operating activities $1,155
 $1,182
Proceeds from divestitures of proved and unproved properties, net 10
 110
Proceeds from revolving pre-petition credit facility borrowings, net 339
 1,310
Proceeds from sales of other property and equipment, net 5
 6
Total sources of cash and cash equivalents $1,509
 $2,608
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Cash provided by (used in) operating activities$1,246 $(21)$1,155 
Proceeds from issuance of senior notes— 1,000 — 
Proceeds from issuance of common stock— 600 — 
Proceeds from warrant exercise2 — — 
Proceeds from divestitures of property and equipment9 — 15 
Proceeds from revolving pre-petition credit facility borrowings, net— — 339 
Total sources of cash and cash equivalents$1,257 $1,579 $1,509 
Cash Flows from Operating Activities
Cash provided by operating activities was $1.246 billion in the 2021 Successor Period, cash used in operating activities was $21 million in the 2021 Predecessor Period, and cash provided by operating activities was $1.155 billion in the Current Period compared to $1.182 billion2020 Predecessor Period. The increase in the Prior Period. The decrease in the Current2021 Successor Period is primarily due to lowerhigher prices for the oil, natural gas and NGL we sold andpartially offset by lower volumes of oil natural gas and NGL sold. The cash used in the 2021 Predecessor Period was primarily due to the payment of professional fees related to the Chapter 11 Cases. Cash flows from operations are largely affected by the same factors that affect our net income, excluding various non-cash items, such as depreciation, depletion and amortization, certain impairments, gains or losses on sales of assets, deferred income taxes and mark-to-market changes in our open derivative instruments. The Current Period was impacted by COVID-19 and the related economic volatility and a continued low level of demand or depressed prices for oil and natural gas has had a continued material adverse effect on our cash flows. See further discussion below under Results of Operations.

Proceeds from Issuance of Common Stock and Senior Notes
In the 2021 Predecessor Period, we issued $500 million aggregate principal amount of 5.5% 2026 Notes and $500 million aggregate principal amount of 5.875% 2029 Notes for total proceeds of $1.0 billion. Additionally, upon emergence from Chapter 11, we issued 62,927,320 shares of New Common Stock in exchange for $600 million of cash as agreed upon in the Plan.
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Uses of Funds
The following table presents the uses of our cash and cash equivalents for the Current PeriodSuccessor and the Prior Period:
Predecessor periods:
 Nine Months Ended
September 30,
 2020 2019SuccessorPredecessor
 ($ in millions)Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Oil and Natural Gas Expenditures:    Oil and Natural Gas Expenditures:
Drilling and completion costs $946
 $1,640
Acquisitions of proved and unproved properties 9
 31
Total oil and natural gas expenditures 955
 1,671
Capital expendituresCapital expenditures$404 $66 $973 
Other Uses of Cash and Cash Equivalents:    Other Uses of Cash and Cash Equivalents:
Payments on Exit Credit Facility - Tranche A Loans, netPayments on Exit Credit Facility - Tranche A Loans, net50 479 — 
Payments on DIP Facility borrowingsPayments on DIP Facility borrowings— 1,179 — 
Cash paid to purchase debt 95
 457
Cash paid to purchase debt— — 95 
DIP credit facility and exit facilities financing costs 109
 —
Business combination, net —
 353
Additions to other property and equipment 18
 27
Debt issuance and other financing costsDebt issuance and other financing costs3 8 109 
Common stock dividends paidCommon stock dividends paid67 — — 
Preferred stock dividends paid 22
 69
Preferred stock dividends paid— — 22 
Other 10
 21
Other1 — 10 
Total other uses of cash and cash equivalents 254
 927
Total other uses of cash and cash equivalents121 1,666 236 
Total uses of cash and cash equivalents $1,209
 $2,598
Total uses of cash and cash equivalents$525 $1,732 $1,209 
Drilling and Completion CostsCapital Expenditures
Our drilling and completion costscapital expenditures significantly decreased in the Current Period compared to the Prior Periodcombined 2021 Successor and Predecessor Periods primarily as a result of decreased drilling and completion activity mainly in our liquids-rich plays.
Payments on DIP Facility Borrowings
On the Effective Date, the DIP Facility was terminated, and the holders of obligations under the DIP Facility received payment in full in cash; provided that to the extent such lender under the DIP Facility was also a lender under the Exit Credit Facility, such lender’s allowed DIP claims were first reduced dollar-for-dollar and satisfied by the amount of its Exit RBL Loans provided as of the Effective Date.
Cash Paid to Purchase Debt
In the Current2020 Predecessor Period, we repurchased approximately $160$160 million aggregate principal amount of our senior notes for $95 million. See Note 4$95 million.
Common Stock Dividends
As part of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion of the notes repurchased.
DIP Credit Facility Financing Costs
In the Current Period,dividend program, we paid $109dividends of $67 million of one-time fees to lenders to establish our DIP Credit Facility and Exit Credit Facilities.
Business Combination - Acquisition of WildHorse
In the Prior Period, we acquired WildHorse for approximately 717.4 million shares ofon our common stock or 3.6 million shares retroactively adjusted to reflect a 1-for-200 (1:200) reverse stock split effective April 14, 2020, and $381 million less $28 million of cash held by WildHorse as ofin the acquisition date.2021 Successor Period.
Preferred Stock Dividends
We paid dividends of $22 million and $69 million on our preferred stock in the Current Period and the Prior Period, respectively.2020 Predecessor Period. On April 17, 2020, we announced that we were suspending payment of dividends on each series of our outstanding convertible preferred stock. Pursuant toOn the RSA associated with ourEffective Date of the Chapter 11 Cases, each holder of an equity interest in Chesapeake would have suchhad their interest canceled, released, and extinguished without any distribution. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for additional information about the Chapter 11 Cases.

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Results of Operations
Oil, Natural Gas and NGL Production and Average Sales Prices
Successor
Three Months Ended September 30, 2021
 OilNatural GasNGLTotal
 MBbl
per day		$/BblMMcf
per day		$/McfMBbl
per day		$/BblMBoe
per day		$/Boe
Appalachia— — 1,302 3.20 — — 217 19.21 
Gulf Coast— — 589 3.81 — — 98 22.84 
South Texas34 70.96 107 4.46 15 34.60 66 51.02 
Brazos Valley25 69.54 33 2.82 3 27.41 34 56.88 
Powder River Basin9 69.31 53 4.33 3 44.53 21 47.48 
Total68 70.22 2,084 3.46 21 35.14 436 29.14 
Predecessor
Three Months Ended September 30, 2020
 OilNatural GasNGLTotal
 MBbl
per day		$/BblMMcf
per day		$/McfMBbl
per day		$/BblMBoe
per day		$/Boe
Appalachia— — 1,070 1.40 — — 178 8.37 
Gulf Coast— — 550 1.81 — — 91 10.86 
South Texas51 39.79 132 2.08 22 12.81 95 27.31 
Brazos Valley36 38.45 43 0.80 5 6.69 49 29.82 
Powder River Basin10 38.69 41 1.79 3 15.94 20 25.98 
Mid-Continent4 40.12 31 1.63 3 11.58 12 20.15 
Total101 39.31 1,867 1.57 33 11.94 445 16.40 
Successor
Period from February 10, 2021 through September 30, 2021
 OilNatural GasNGLTotal
 MBbl
per day		$/BblMMcf
per day		$/McfMBbl
per day		$/BblMBoe
per day		$/Boe
Appalachia— — 1,289 2.57 — — 215 15.43 
Gulf Coast— — 552 3.11 — — 92 18.67 
South Texas36 67.02 108 3.85 15 28.88 69 47.25 
Brazos Valley27 65.60 34 3.74 4 20.91 36 54.37 
Powder River Basin10 65.02 55 3.94 3 36.91 22 43.45 
Total73 66.23 2,038 2.84 22 28.85 434 25.85 
Predecessor
Period from January 1, 2021 through February 9, 2021
OilNatural GasNGLTotal
MBbl
per day		$/BblMMcf
per day		$/McfMBbl
per day		$/BblMBoe
per day		$/Boe
Appalachia— — 1,233 2.42 — — 206 14.49 
Gulf Coast— — 543 2.44 — — 90 14.62 
South Texas42 54.12 127 3.00 14 26.04 78 39.20 
Brazos Valley32 52.37 38 1.14 4 16.09 42 42.23 
Powder River Basin10 51.96 61 2.92 4 34.31 24 34.25 
Total84 53.21 2,002 2.45 22 25.92 440 22.63 
Predecessor
Nine Months Ended September 30, 2020
 OilNatural GasNGLTotal
 MBbl
per day		$/BblMMcf
per day		$/McfMBbl
per day		$/BblMBoe
per day		$/Boe
Appalachia— — 1,032 1.57 — — 172 9.43 
Gulf Coast— — 536 1.66 — — 89 9.95 
South Texas51 38.27 136 2.08 19 11.58 93 26.56 
Brazos Valley38 36.52 54 0.68 6 4.61 53 27.00 
Powder River Basin14 35.71 60 1.71 4 13.19 28 23.25 
Mid-Continent4 37.49 39 1.85 3 11.44 14 19.43 
Total107 37.32 1,857 1.62 32 10.31 449 16.32 
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Table of Contents
  Three Months Ended September 30, 2020
  Oil Natural Gas NGL Total
  
mbbl
per day
 $/bbl 
mmcf
per day
 $/mcf 
mbbl
per day
 $/bbl 
mboe
per day
 % $/boe
Marcellus —
 —
 1,069
 1.40
 —
 —
 178
 40
 8.37
Haynesville —
 —
 549
 1.81
 —
 —
 91
 21
 10.86
Eagle Ford 51
 39.79
 132
 2.08
 22
 12.81
 95
 21
 27.31
Brazos Valley 36
 38.45
 43
 0.80
 5
 6.69
 49
 11
 29.82
Powder River Basin 10
 38.69
 41
 1.79
 3
 15.94
 20
 4
 25.98
Mid-Continent 4
 40.12
 31
 1.63
 3
 11.58
 12
 3
 20.15
Retained assets(a)
 101
 39.31
 1,865
 1.56
 33
 11.94
 445
 100
 16.40
Divested assets —
 —
 2
 5.38
 —
 —
 —
 —
 —
Total 101
 39.31
 1,867
 1.57
 33
 11.94
 445
 100% 16.40
                   
  Three Months Ended September 30, 2019
  Oil Natural Gas NGL Total
  
mbbl
per day
 $/bbl 
mmcf
per day
 $/mcf 
mbbl
per day
 $/bbl 
mboe
per day
 % $/boe
Marcellus —
 —
 928
 1.85
 —
 —
 154
 32
 11.11
Haynesville —
 —
 694
 2.03
 —
 —
 116
 24
 12.17
Eagle Ford 51
 60.13
 162
 2.13
 16
 14.24
 94
 20
 38.62
Brazos Valley 36
 58.23
 62
 1.70
 6
 8.84
 53
 11
 43.07
Powder River Basin 20
 54.20
 86
 1.96
 5
 11.49
 39
 8
 33.08
Mid-Continent 8
 55.24
 57
 1.63
 5
 12.06
 22
 5
 26.28
Retained assets(a)
 115
 58.18
 1,989
 1.93
 32
 12.44
 478
 100
 22.79
Divested assets —
 —
 —
 —
 —
 —
 —
 —
 —
Total 115
 58.18
 1,989
 1.93
 32
 12.44
 478
 100% 22.79
                   
  Nine Months Ended September 30, 2020
  Oil Natural Gas NGL Total
  
mbbl
per day
 $/bbl 
mmcf
per day
 $/mcf 
mbbl
per day
 $/bbl 
mboe
per day
 % $/boe
Marcellus —
 —
 1,032
 1.57
 —
 —
 172
 38
 9.43
Haynesville —
 —
 535
 1.66
 —
 —
 89
 20
 9.95
Eagle Ford 51
 38.27
 136
 2.08
 19
 11.58
 93
 21
 26.56
Brazos Valley 38
 36.52
 54
 0.68
 6
 4.61
 53
 12
 27.00
Powder River Basin 14
 35.71
 60
 1.71
 4
 13.19
 28
 6
 23.25
Mid-Continent 4
 37.49
 39
 1.85
 3
 11.44
 14
 3
 19.43
Retained assets(a)
 107
 37.32
 1,856
 1.62
 32
 10.31
 449
 100
 16.32
Divested assets —
 —
 1
 3.23
 —
 —
 —
 —
 —
Total 107
 37.32
 1,857
 1.62
 32
 10.31
 449
 100% 16.32
                   

  Nine Months Ended September 30, 2019
  Oil Natural Gas NGL Total
  
mbbl
per day
 $/bbl 
mmcf
per day
 $/mcf 
mbbl
per day
 $/bbl 
mboe
per day
 % $/boe
Marcellus —
 —
 935
 2.57
 —
 —
 156
 32
 15.45
Haynesville —
 —
 734
 2.46
 —
 —
 122
 25
 14.78
Eagle Ford 57
 61.95
 153
 2.77
 20
 16.75
 102
 21
 41.95
Brazos Valley(b)
 31
 60.38
 47
 1.80
 5
 8.89
 44
 9
 45.75
Powder River Basin 18
 54.28
 86
 2.51
 5
 15.66
 38
 8
 34.15
Mid-Continent 9
 55.57
 58
 2.16
 5
 17.05
 23
 5
 29.25
Retained assets(a)
 115
 59.78
 2,013
 2.52
 35
 15.50
 485
 100
 25.71
Divested assets —
 —
 2
 1.37
 —
 —
 1
 —
 —
Total 115
 59.78
 2,015
 2.51
 35
 15.50
 486
 100% 25.70
                   

(a)Includes assets retained as of September 30, 2020.
(b) Average production per day since the date of the WildHorse acquisition on February 1, 2019, 242 days, was 35 mbbl, 53 mmcf and 6 mbbl for oil, natural gas and NGL, respectively.
Oil, Natural Gas and NGL Sales
Successor
Three Months Ended September 30, 2021
OilNatural GasNGLTotal
Appalachia$— $383 $— $383 
Gulf Coast— 207 — 207 
South Texas221 44 47 312 
Brazos Valley158 9 8 175 
Powder River Basin58 21 14 93 
Oil, natural gas and NGL revenue$437 $664 $69 $1,170 
Predecessor
Three Months Ended September 30, 2020
 OilNatural GasNGLTotal
Appalachia$— $137 $— $137 
Gulf Coast— 92 — 92 
South Texas189 26 26 241 
Brazos Valley127 3 3 133 
Powder River Basin36 7 4 47 
Mid-Continent14 5 3 22 
Oil, natural gas and NGL revenue$366 $270 $36 $672 
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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions)
Oil $366
 $613
 (40)% $1,091
 $1,879
 (42)%
Natural gas 270
 353
 (24)% 824
 1,384
 (40)%
NGL 36
 37
 (3)% 91
 149
 (39)%
Oil, natural gas and NGL sales $672
 $1,003
 (33)% $2,006
 $3,412
 (41)%
Successor
Period from February 10, 2021 through September 30, 2021
OilNatural GasNGLTotal
Appalachia$— $772 $— $772 
Gulf Coast— 401 — 401 
South Texas562 97 102 761 
Brazos Valley409 30 17 456 
Powder River Basin144 51 30 225 
Total oil, natural gas and NGL sales$1,115 $1,351 $149 $2,615 
Predecessor
Period from January 1, 2021 through February 9, 2021
OilNatural GasNGLTotal
Appalachia$— $119 $— $119 
Gulf Coast— 53 — 53 
South Texas92 15 15 122 
Brazos Valley67 2 2 71 
Powder River Basin20 7 6 33 
Total oil, natural gas and NGL sales$179 $196 $23 $398 
Non-GAAP Combined
Nine Months Ended September 30, 2021
OilNatural GasNGLTotal
Appalachia$— $891 $— $891 
Gulf Coast— 454 — 454 
South Texas654 112 117 883 
Brazos Valley476 32 19 527 
Powder River Basin164 58 36 258 
Total oil, natural gas and NGL sales$1,294 $1,547 $172 $3,013 
Predecessor
Nine Months Ended September 30, 2020
 OilNatural GasNGLTotal
Appalachia$— $445 $— $445 
Gulf Coast— 245 — 245 
South Texas539 77 59 675 
Brazos Valley375 10 9 394 
Powder River Basin133 28 14 175 
Mid-Continent44 19 9 72 
Total oil, natural gas and NGL sales$1,091 $824 $91 $2,006 
The net decrease in oil,Oil, natural gas and NGL sales in the Current2021 Successor Quarter of $331increased $498 million compared to the 2020 Predecessor Quarter. The increase is primarily attributable to (i) $262a $511 million increase in revenues from higher average prices received, partially offset by a $13 million decrease in revenues due to decreases in the average price received per boe and (ii) $69 million decrease in revenues due to decreasedslightly lower sales volumes, which primarily resulted from production curtailments, natural declines and shut-in wells.the sale of Mid-Continent properties in 2020. The higher average prices received are consistent with the upward trend in index prices for all products seen throughout the 2021 Successor Quarter.
The net decrease in oil,
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Oil, natural gas and NGL sales in the Current Period of $1.406 billioncombined 2021 Successor and Predecessor Periods increased $1,007 million compared to the 2020 Predecessor Period. The increase is primarily attributable to (i) $1.152 billiona $1,074 million increase in revenues from higher average prices received, partially offset by a $72 million reduction from the sale of Mid-Continent properties in 2020. Excluding the decrease in revenuesvolumes related to the sale of Mid-Continent properties in 2020, average daily production is consistent in the combined 2021 Successor and Predecessor Periods and 2020 Predecessor Period due to decreasesan increase in new well completions in Appalachia and Gulf Coast offset by a reduction in South Texas, Brazos Valley, and Powder River Basin wells turned-in-line.
Production Expenses
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended September 30, 2020
$/Boe$/Boe
Appalachia$9 0.47 $8 0.49
Gulf Coast131.42 101.20
South Texas315.04 242.73
Brazos Valley185.96 173.83
Powder River Basin94.38 94.53
Mid-Continent— — 1413.11
Total production expenses$80 1.99 $82 1.99
SuccessorPredecessorNon-GAAP CombinedPredecessor
Period from February 10, 2021 through
September 30, 2021		Period from
January 1, 2021 through
February 9, 2021		Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
$/Boe$/Boe$/Boe$/Boe
Appalachia$23 0.47 $4 0.50 $27 0.47 $24 0.51 
Gulf Coast30 1.39 4 1.12 34 1.35 32 1.30 
South Texas74 4.60 12 3.90 86 4.48 85 3.24 
Brazos Valley46 5.52 9 4.85 55 5.41 67 4.61 
Powder River Basin21 4.07 3 3.37 24 3.96 37 4.74 
Mid-Continent— — — — — — 50 13.69 
Total production expenses$194 1.92 $32 1.80 $226 1.90 $295 2.40 
Production expenses in the average price received per boe and (ii) $2542021 Successor Quarter decreased $2 million as compared to the 2020 Predecessor Quarter. The decrease in revenueswas primarily due to a $14 million reduction from the sale of Mid-Continent properties in 2020, partially offset by increased workover expense and repair and maintenance expense in South Texas and Gulf Coast.
Production expenses in the combined 2021 Successor and Predecessor Periods decreased sales$69 million as compared to the 2020 Predecessor Period. The decrease was primarily due to a $50 million reduction from the sale of Mid-Continent properties in 2020 and a $25 million reduction in our Brazos Valley and Powder River Basin operating areas due to lower production volumes from reduced capital allocation.
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Gathering, Processing and Transportation Expenses
SuccessorPredecessor
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
$/Boe$/Boe
Appalachia$83 4.14 $73 4.39 
Gulf Coast28 3.09 46 5.42 
South Texas82 13.38 106 12.08 
Brazos Valley3 0.98 7 1.49 
Powder River Basin23 11.95 21 11.84 
Mid-Continent— — 5 5.10 
Total gathering, processing and transportation expenses$219 5.45 $258 6.28 
SuccessorPredecessorNon-GAAP CombinedPredecessor
Period from February 10, 2021 through
September 30, 2021		Period from
January 1, 2021 through
February 9, 2021		Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
$/Boe$/Boe$/Boe$/Boe
Appalachia$204 4.07 $34 4.17 $238 4.08 $217 4.60 
Gulf Coast64 2.98 11 2.93 75 2.98 137 5.59 
South Texas203 12.56 42 13.35 245 12.69 338 13.28 
Brazos Valley8 1.03 3 1.92 11 1.18 21 1.40 
Powder River Basin62 12.00 12 12.53 74 12.08 79 10.46 
Mid-Continent— — — — — — 21 5.83 
Total gathering, processing and transportation expenses$541 5.45 $102 5.78 $643 5.41 $813 6.61 
Gathering, processing and transportation expenses in the 2021 Successor Quarter decreased $39 million as compared to the 2020 Predecessor Quarter. Gulf Coast decreased $18 million as a result of contract negotiations in the Chapter 11 Cases. South Texas decreased $24 million primarily as a result of reduced production curtailments,due to fewer wells brought on line in 2021. Additionally, the sale of Mid-Continent properties in 2020 resulted in a $5 million reduction. These decreases were partially offset by a $10 million increase in Appalachia as a result of increased production.
Gathering, processing and transportation expenses in the combined 2021 Successor and Predecessor Periods decreased $170 million as compared to the 2020 Predecessor Period. Gulf Coast decreased $62 million as a result of contract negotiations in the Chapter 11 Cases. South Texas decreased $93 million primarily as a result of reduced production as well as contract negotiations in the Chapter 11 Cases. Additionally, the sale of Mid-Continent properties in 2020 resulted in a $21 million reduction. These decreases were partially offset by a $21 million increase in Appalachia as a result of increased production.
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Severance and Ad Valorem Taxes
SuccessorPredecessor
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
$/Boe$/Boe
Appalachia$2 0.13 $1 0.09 
Gulf Coast5 0.55 4 0.52 
South Texas17 2.72 16 1.79 
Brazos Valley8 2.63 10 2.05 
Powder River Basin9 4.59 5 2.65 
Mid-Continent— — 1 1.13 
Total severance and ad valorem taxes$41 1.03 $37 0.90 
SuccessorPredecessorNon-GAAP CombinedPredecessor
Period from February 10, 2021 through
September 30, 2021		Period from
January 1, 2021 through
February 9, 2021		Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
$/Boe$/Boe$/Boe$/Boe
Appalachia$6 0.13 $1 0.07 $7 0.12 $4 0.09 
Gulf Coast12 0.55 2 0.54 14 0.55 14 0.60 
South Texas42 2.56 8 2.53 50 2.55 43 1.68 
Brazos Valley25 3.03 5 2.99 30 3.03 33 2.23 
Powder River Basin21 4.15 2 2.88 23 3.95 18 2.37 
Mid-Continent— — — — — — 4 1.07 
Total severance and ad valorem taxes$106 1.05 $18 1.03 $124 1.05 $116 0.94 
Severance and ad valorem taxes in the 2021 Successor Quarter increased $4 million as compared to the 2020 Predecessor Quarter. The severance tax increase of $4 million was primarily driven by increased revenue as a result of improved pricing.
Severance and ad valorem taxes in the combined 2021 Successor and Predecessor Periods increased $8 million as compared to the 2020 Predecessor Period. The severance tax increase of $12 million was primarily driven by increased revenue as a result of improved pricing. The ad valorem tax decrease of $4 million was primarily driven by lower assessed property values in the combined 2021 Successor and Predecessor Periods for Brazos Valley and South Texas.










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Gross Margin by Operating Area
The table below presents the gross margin for each of our operating areas. Gross margin by operating area is defined as oil, natural declinesgas and shut-in wells.NGL sales less production expenses, gathering, processing and transportation expenses, and severance and ad valorem taxes.

SuccessorPredecessor
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
$/Boe$/Boe
Appalachia$289 14.47 $55 3.40 
Gulf Coast161 17.78 32 3.72 
South Texas182 29.88 95 10.71 
Brazos Valley146 47.31 99 22.45 
Powder River Basin52 26.56 12 6.96 
Mid-Continent— — 2 0.81 
Gross margin by operating area$830 20.67 $295 7.23 
SuccessorPredecessorNon-GAAP CombinedPredecessor
Period from February 10, 2021 through
September 30, 2021		Period from
January 1, 2021 through
February 9, 2021		Nine Months Ended
September 30, 2021		Nine Months Ended September 30, 2020
$/Boe$/Boe$/Boe$/Boe
Appalachia$539 10.76 $80 9.75 $619 10.63 $200 4.23 
Gulf Coast295 13.75 36 10.03 331 13.21 62 2.46 
South Texas442 27.53 60 19.42 502 26.22 209 8.36 
Brazos Valley377 44.79 54 32.47 431 42.72 273 18.76 
Powder River Basin121 23.23 16 15.47 137 22.02 41 5.68 
Mid-Continent— — — — — — (3)(1.16)
Gross margin by operating area$1,774 17.43 $246 14.02 $2,020 17.01 $782 6.37 

Oil and Natural Gas Derivatives
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Oil derivatives – realized gains (losses)$(128)$2 
Oil derivatives – unrealized gains (losses)62 (4)
Total losses on oil derivatives(66)(2)
Natural gas derivatives – realized gains (losses)(163)5 
Natural gas derivatives – unrealized losses(681)(164)
Total losses on natural gas derivatives(844)(159)
Total losses on oil and natural gas derivatives$(910)$(161)
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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Oil derivatives – realized gains (losses) $2
 $26
 $698
 $18
Oil derivatives – unrealized gains (losses) (4) 98
 (9) (67)
Total gains (losses) on oil derivatives (2) 124
 689
 (49)
         
Natural gas derivatives – realized gains (losses) 5
 83
 179
 71
Natural gas derivatives – unrealized gains (losses) (164) (40) (295) 119
Total gains (losses) on natural gas derivatives (159) 43
 (116) 190
Total gains (losses) on oil and natural gas derivatives $(161) $167
 $573
 $141

SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Oil derivatives – realized gains (losses)$(302)$(19)$698 
Oil derivatives – unrealized losses(138)(190)(9)
Total gains (losses) on oil derivatives(440)(209)689 
Natural gas derivatives – realized gains (losses)(179)6 179 
Natural gas derivatives – unrealized losses(985)(179)(295)
Total losses on natural gas derivatives(1,164)(173)(116)
Total gains (losses) on oil and natural gas derivatives$(1,604)$(382)$573 
See Note 1112 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of our derivative activity.
Marketing Revenues and Expenses
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Marketing revenues$627 $448 
Marketing expenses625 450 
Marketing margin$2 $(2)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 Change 2020 2019 ChangeSuccessorPredecessor
 ($ in millions)Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Marketing revenues $448
 $889
 (50)% $1,412
 $3,038
 (54)%Marketing revenues$1,443 $239 $1,412 
Marketing expenses 450
 901
 (50)% 1,438
 3,071
 (53)%Marketing expenses1,440 237 1,438 
Marketing margin $(2) $(12) (83)% $(26) $(33) 21 %Marketing margin$3 $2 $(26)
Marketing revenues and expenses decreased in the Current Quarter and the Current Period primarily as a result of decreased oil, natural gas, and NGL prices received in our marketing operations and less volumes being marketed. Marketing margin increased in the Current2021 Successor Quarter andprimarily due to increased profit on third-party marketing as a result of improved pricing.
Marketing margin increased in the Current2021 Successor Period primarily due to improved margins related to non-equity transactions.the significant drop in oil prices during the 2020 Predecessor Period that resulted in an unfavorable inventory valuation adjustment.
Other Revenue





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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions)
Other revenue $15
 $15
 —% $45
 $45
 —%
Exploration Expense
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Impairments of unproved properties$1 $3 
Geological and geophysical expense and other1 2 
Total exploration expense$2 $5 
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Impairments of unproved properties$1 $2 $402 
Dry hole expense— — 7 
Geological and geophysical expense and other3 — 8 
Total exploration expense$4 $2 $417 
Other revenue relatesThe 2020 Predecessor Period exploration expense is the result of non-cash impairment charges in unproved properties, primarily to the amortization of deferred VPP revenue. Our remaining deferred revenue balance of $22 million will be amortized on a straight-line basis through 2021.in our Brazos Valley, Gulf Coast, Powder River Basin and Mid-Continent operating areas. See Note 613 of the notes to our condensed consolidated financial statements included in Item 1 of this report for further discussion of our VPP.

Oil, Natural Gas and NGL Production Expenses
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions, except per unit)
Marcellus $8
 $9
 (11)% $24
 $27
 (11)%
Haynesville 10
 12
 (17)% 32
 39
 (18)%
Eagle Ford 24
 45
 (47)% 85
 141
 (40)%
Brazos Valley 17
 25
 (32)% 67
 62
 8 %
Powder River Basin 9
 20
 (55)% 37
 51
 (27)%
Mid-Continent 14
 24
 (42)% 50
 75
 (33)%
Retained Assets(a)
 82
 135
 (39)% 295
 395
 (25)%
Divested Assets —
 —
 — % —
 (1) (100)%
Total oil, natural gas and NGL production expenses $82
 $135
 (39)% $295
 $394
 (25)%
             
  ($ per boe)
Marcellus $0.49
 $0.63
 (22)% $0.51
 $0.62
 (18)%
Haynesville $1.20
 $1.16
 3 % $1.30
 $1.13
 15 %
Eagle Ford $2.73
 $5.23
 (48)% $3.34
 $4.94
 (32)%
Brazos Valley $3.83
 $5.28
 (27)% $4.61
 $5.92
 (22)%
Powder River Basin $4.53
 $5.47
 (17)% $4.74
 $4.76
 — %
Mid-Continent $13.11
 $12.04
 9 % $13.69
 $11.36
 21 %
Retained Assets(a)
 $1.99
 $3.09
 — % $2.40
 $2.97
 — %
Divested Assets $—
 $—
 — % $—
 $—
 — %
Total oil, natural gas and NGL production expenses per boe $1.99
 $3.09
 (36)% $2.40
 $2.97
 (19)%

(a) Includes assets retained as of September 30, 2020.
The absolute and per unit decrease in the Current Quarter and the Current Period is primarily the result of production curtailments and reduced workover activity in the liquids-rich operating areas due to lower commodity prices.
Oil, Natural Gas, and NGL Gathering, Processing and Transportation Expenses
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions, except per unit)
Oil, natural gas and NGL gathering, processing and transportation expenses $258
 $270
 (4)% $813
 $815
 — %
Oil ($ per bbl) $4.23
 $3.53
 20 % $3.82
 $3.12
 22 %
Natural gas ($ per mcf) $1.19
 $1.19
 — % $1.29
 $1.21
 7 %
NGL ($ per bbl) $4.52
 $5.19
 (13)% $5.20
 $5.27
 (1)%
Total ($ per boe) $6.28
 $6.12
 3 % $6.61
 $6.14
 8 %
The per unit increase in oil, natural gas and NGL gathering, processing and transportation expenses was primarily due to the increase in transportation expense related to oil deficiency fees for our Eagle Ford operating area and production curtailments.

Severance and Ad Valorem Taxes
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions, except per unit)
Severance taxes $20
 $35
 (43)% $63
 $109
 (42)%
Ad valorem taxes 17
 20
 (15)% 53
 59
 (10)%
Severance and ad valorem taxes $37
 $55
 (33)% $116
 $168
 (31)%
             
Severance taxes per boe $0.50
 $0.79
 (37)% $0.51
 $0.82
 (38)%
Ad valorem taxes per boe 0.40
 0.44
 (9)% 0.43
 0.44
 (2)%
Severance and ad valorem taxes per boe $0.90
 $1.23
 (27)% $0.94
 $1.26
 (25)%
The decrease in severance taxes was primarily due to the reduction in net revenue value as a result of decreased prices in areas where tax is calculated on net revenue instead of production. The decrease in ad valorem taxes is primarily due to lower assessed property values for 2020 compared to 2019.
Exploration Expense
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions)
Impairments of unproved properties $3
 $1
 200 % $402
 $26
 1,446 %
Dry hole expense —
 8
 — % 7
 8
 (13)%
Geological and geophysical expense and other 2
 8
 (75)% 8
 22
 (64)%
Exploration expense $5
 $17
 (71)% $417
 $56
 645 %
The increase in exploration expense in the Current Period is the result of non-cash impairment charges in unproved properties, primarily in our Brazos Valley, Haynesville, Powder River Basin and Mid-Continent operating areas. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1Part I of this report for further discussion.
General and Administrative Expenses
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Gross compensation and benefits$68 $93 
Non-labor24 29 
Allocations and reimbursements(62)(70)
Total general and administrative expenses, net$30 $52 
General and administrative expenses, net per Boe$0.74 $1.27 
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Gross compensation and benefits$162 $32 $305 
Non-labor60 12 167 
Allocations and reimbursements(153)(23)(243)
Total general and administrative expenses, net$69 $21 $229 
General and administrative expenses, net per Boe$0.68 $1.19 $1.86 
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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 Change 2020 2019 Change
  ($ in millions, except per unit)
Gross compensation and overhead $122
 $150
 (19)% $472
 $530
 (11)%
Allocated to production expenses (24) (33) (27)% (78) (105) (26)%
Allocated to marketing expenses (3) (3) — % (9) (11) (18)%
Allocated to exploration expenses —
 (2) (100)% —
 (8) (100)%
Allocated to sand mine expenses —
 (2) (100)% (3) (5) (40)%
Capitalized general and administrative expenses (11) (11) — % (48) (37) 30 %
Reimbursed from third parties (32) (33) (3)% (105) (106) (1)%
General and administrative expenses, net $52
 $66
 (21)% $229
 $258
 (11)%
             
General and administrative expenses, net per boe $1.27
 $1.48
 (14)% $1.86
 $1.94
 (4)%

The $14 million decrease in general and administrative expenses in the Current Quarter is primarily attributable to $27 million in cost reduction initiatives, including decreases in salaryCompensation and benefits resulting frombefore reimbursements and allocations during the 2021 Successor Quarter decreased $25 million compared to the 2020 Predecessor Quarter due to reductions in workforce in the Current Quarter, the second quarter of 2020 and 2021 Predecessor Periods. Non-labor before reimbursements and allocations during the fourth quarter of 2019. These decreases were partially offset by a decrease in allocated compensation expense of $13 million.
The $292021 Successor Quarter decreased $5 million decrease in general and administrative expenses incompared to the Current Period is2020 Predecessor Quarter primarily attributabledue to $100 million in cost reduction initiatives including decreasesfor professional services. The decrease in salaryallocations and reimbursements was the result of staffing reductions and the sale of Mid-Continent properties in 2020.
Compensation and benefits resulting from reductionbefore reimbursements and allocations during the combined 2021 Successor and Predecessor Periods decreased $111 million compared to the 2020 Predecessor Period due to reductions in workforce in the Current2020 and 2021 Predecessor Periods. Non-labor before reimbursements and allocations during the combined 2021 Successor and Predecessor Periods decreased $95 million compared to the 2020 Predecessor Period and the fourth quarter of 2019. These decreases were partially offset bydue to cost reduction initiatives for professional services as well as $43 million in fees for legal, financial and restructuring advisors incurred in preparation for the Chapter 11 Cases and ain the 2020 Predecessor Period. The decrease in allocated compensation expenseallocations and reimbursements during the combined 2021 Successor and Predecessor Periods compared to the 2020 Predecessor Period was the result of $28 million.reduced drilling, staffing reductions and the sale of Mid-Continent properties in 2020.
Separation and Other Termination Costs
In the Current Quarter
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Separation and other termination costs$— $16 
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Separation and other termination costs$11 $22 $43 
Separation and the Current Period, we incurred charges of approximately $16 million and $43 million, respectively, relatedother termination costs relate to one-time termination benefits for certain employees.
Depreciation, Depletion and Amortization
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 Change 2020 2019 ChangeSuccessorPredecessor
 ($ in millions, except per unit)Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Depreciation, depletion and amortization $170
 $573
 (70)% $931
 $1,672
 (44)%Depreciation, depletion and amortization$228 $170 
Depreciation, depletion and amortization per boe $4.17
 $13.04
 (68)% $7.58
 $12.60
 (40)%
Depreciation, depletion and amortization per BoeDepreciation, depletion and amortization per Boe$5.67 $4.17 
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Depreciation, depletion and amortization$579 $72 $931 
Depreciation, depletion and amortization per Boe$5.72 $4.11 $7.58 
The absolute and per unit decreaseincrease in depreciation, depletion and amortization for the Current2021 Successor Quarter andcompared to the Current Period is2020 Predecessor Quarter was primarily the result of the revaluation of the depletable asset base occurring in connection with our emergence from bankruptcy. Fresh start accounting requires that new fair values be established for our assets as of the emergence date. See Note 3 for additional information on revaluation of oil and gas properties.
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The per unit decrease in the 2021 Predecessor Period compared to the 2020 Predecessor Period was attributable to an $8.446$8.4 billion impairment recognized into the Current Period on ourPredecessor’s proved oil and natural gas properties due to lower forecasted commodity prices, which reduced the depletable carrying value.recognized at March 31, 2020.
Impairments
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 2020 2019SuccessorPredecessor
 ($ in millions)Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Impairments of proved oil and natural gas properties $—
 $8
 $8,446
 $8
Impairments of proved oil and natural gas properties$— $— $8,446 
Impairments of other fixed assets and other —
 1
 76
 3
Impairments of other fixed assets and other1 — 76 
Total impairments $—
 $9
 $8,522
 $11
Total impairments$1 $— $8,522 
In the Current2020 Predecessor Period, we recorded impairments of proved oil and natural gas properties related to Eagle Ford,South Texas, Brazos Valley, Powder River Basin, Mid-Continent and other non-core assets, all of which arewere due to lower forecasted commodity prices. Additionally, in the Current2020 Predecessor Period, we recorded a $76 million impairment of our sand mine assets that support our Brazos Valley operating area for the difference between fair value and the carrying value of the assets. See Note 1314 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion.
Other Operating Expense
(Income), Net
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Other operating expense $4
 $15
 $92
 $79
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Other operating expense, net$3 $1 
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Other operating expense (income), net$1 $(12)$67 
In the Current2020 Predecessor Period, we terminated certain gathering, processing and transportation contracts and recognized a non-recurring $80 million expense related to the contract terminations. The contract terminations removed approximately $169as well as $29 million of future commitmentsother operating expense primarily related to gathering, processing and transportation agreements. 

In the Prior Period, we recorded $34royalty settlements offset by $42 million of costs related to our acquisitionincome from the amortization of WildHorse, which consisted of consulting fees, financial advisory fees, legal fees and travel and lodging expenses. Additionally, we recorded $38 million of severance expense as a result of our 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.volumetric production payment deferred revenue.
Interest Expense
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Interest expense on debt$19 $25 
Amortization of premium, discount, issuance costs and other1 2 
Capitalized interest(3)(2)
Total interest expense$17 $25 
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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions, except per unit)
Interest expense on DIP credit facility $2
 $—
 $2
 $—
Interest expense on senior notes —
 139
 239
 420
Interest expense on term loan —
 —
 71
 —
Interest expense on pre-petition revolving credit facility 23
 29
 65
 69
Amortization of discount, issuance costs and other 2
 15
 30
 43
Amortization of premium —
 —
 (87) —
Realized gains on interest rate derivatives —
 (1) —
 (2)
Unrealized losses on interest rate derivatives —
 1
 —
 2
Capitalized interest (2) (6) (13) (19)
Total interest expense $25
 $177
 $307
 $513
         
Interest expense per boe $0.60
 $4.00
 $2.49
 $3.86
         
Average senior notes borrowings n/a
 $7,930
 n/a
 $8,098
Average credit facilities borrowings n/a
 $2,301
 $1,230
 $1,852
Pre-petition revolving credit facility $1,929
 $—
 $643
 $—
DIP credit facility $19
 $—
 $6
 $—
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Interest expense on debt$50 $11 $377 
Amortization of premium, discount, issuance costs and other4 — (57)
Capitalized interest(7)— (13)
Total interest expense$47 $11 $307 
The decrease in total interest expense on senior notes in the Current Quarter and the Current Period is due to the ongoing Chapter 11 proceedings. We are not paying or recognizing interest expense on any of our outstanding debt other than the pre-petition revolving credit facility and DIP credit facility.
Losses on Investments
In the Current Period, the hydraulic fracturing industry experienced challenging operating conditions resulting in the current fair value of our investment in FTSI falling below book value of $23 million and remaining below that value as of the end of the Current Period. Based on FTSI’s operating results, 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.
In the Prior Period, in connection with the acquisition of WildHorse, we obtained a 50% membership interest in JWH Midstream LLC (JWH). The carrying value of our investment in JWH, which was being accounted for as an equity method investment, was approximately $17 million as of March 31, 2019. In the Prior Period, we paid approximately $7 million to terminate our involvement in the partnership. This removed us from any future obligations related to this joint venture and, therefore, we impaired the full value of the investment and recognized an approximate $24 million expense in the Prior Period.2021 Successor Quarter and 2021 Successor Period compared to the 2020 Predecessor Quarter and 2020 Predecessor Period resulted from the decrease in outstanding debt obligations between periods. Upon emergence from the Chapter 11 Cases, all outstanding obligations under our Predecessor senior notes and term loan were cancelled in exchange for shares of New Common Stock and Warrants. See Note 3 and Note 5 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of the Chapter 11 Cases.
Gains on Purchases or Exchanges of Debt
In the Current2020 Predecessor Period, we repurchased approximately $160$160 million aggregate principal amount of senior notes for $95$95 million and recorded an aggregate gain of approximately $65 million.$65 million.

Other Income (Expense)
SuccessorPredecessor
Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
Other income$— $2 
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through February 9, 2021Nine Months Ended
September 30, 2020
Other income (expense)$31 $2 $(9)
In the Prior Quarter,2021 Successor Period, we privately negotiated exchanges of approximately $507 million principal amount of our outstanding senior notes for 235,563,519 shares of common stock and $186 million principal amount of our outstanding convertible senior notes for 73,389,094 shares of common stock. We recorded an aggregate neta gain of approximately $64$22 million associated with the exchanges. Also in the Prior Quarter, we repurchased approximately $82 million principal amount of our 6.875% Senior Notes due 2025 and recordedfor a $6 million gain.refund from a midstream provider.
Reorganization Items, Net
SuccessorPredecessor
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
Accrual for allowed claims$— $(465)
Debt and equity financing fees— (115)
Professional service provider fees and other— (40)
Gains on the settlement of liabilities subject to compromise— 9 
Total reorganization items, net$— $(611)
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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2020 2019 2020 2019
  ($ in millions)
Write off of unamortized debt premiums (discounts) $—
 $—
 $518
 $—
Write off of unamortized debt issuance costs —
 —
 (61) —
Debt and equity financing fees (115) —
 (178) —
Provision for allowed claims (465) —
 (465) —
Legal and professional fees (40) —
 (40) —
Gain on settlement of pre-petition accounts payable 12
 —
 12
 —
Loss on settlement of pre-petition revenues payable (3) —
 (3) —
Reorganization items, net $(611) $—
 $(217) $—
SuccessorPredecessor
Period from February 10, 2021 through September 30, 2021Period from January 1, 2021 through
February 9, 2021		Nine Months Ended
September 30, 2020
Gains on the settlement of liabilities subject to compromise$— $6,443 $9 
Accrual for allowed claims— (1,002)(465)
Write off of unamortized debt premiums (discounts) on Predecessor debt— — 518 
Write off of unamortized debt issuance costs on Predecessor debt— — (61)
Gain on fresh start adjustments— 201 — 
Gain from release of commitment liabilities— 55 — 
Debt and equity financing fees— — (178)
Professional service provider fees and other— (60)(40)
Success fees for professional service providers— (38)— 
Surrender of other receivable— (18)— 
FLLO alternative transaction fee— (12)— 
Total reorganization items, net$— $5,569 $(217)
In the Current Quarter2021 and the Current Period, we recorded $115 million and $178 million, respectively, of expense related to the arrangement and funding of our DIP Credit Facility, Exit Credit Facilities, and rights offering. In the Current Quarter and the Current Period2020 Predecessor Periods, we recorded a $465net gain of $5.569 billion and a net loss of $217 million, provision for expected allowed claims including estimated damages on certain rejected executory contracts. In the Current Period, we recorded $518 million of incomerespectively, in reorganization items, net related to pre-petition premiums and discounts, offset by $61 million of expense related to deferred charges on debt that is considered subject to compromise. In the Current Quarter and the Current Period, we recorded $40 million of legal and professional fees incurred subsequent to the Chapter 11 filingsCases. See Note 2 and Note 3 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of the Chapter 11 Cases and for discussion of adoption of fresh start accounting.
Income Taxes
An income tax benefit of $10 million was recorded for the restructuring process.
Income Tax Benefit
No2021 Successor Period as a result of projecting current state income taxes. Although we are projecting a current state tax provision wasliability, a benefit has been recorded in the Current Quarter and a $13 million2021 Successor Period due to the application of our estimated annual effective tax rate to the 2021 Successor Period book net loss before income taxes. An income tax benefit of $57 million was recorded infor the Current Period. We recorded a $1 million2021 Predecessor Period and an income tax benefit inof $13 million was recorded for the Prior Quarter and a $315 million income tax benefit in the Prior2020 Predecessor Period. Our effective income tax rate was 0.0%2.0% for the Current Quarter and 1.6%2021 Successor Period, (1.1%) for the Prior Quarter. The rate2021 Predecessor Period and 0.1% for the Current Period was 0.1% whereas the effective income tax rate for the Prior Period was 105.4%. The rate for the Prior Period was due to the partial release of the valuation allowance against our net deferred tax asset position as a result of the acquisition of WildHorse.2020 Predecessor Period. Our effective tax rate can fluctuate as a result of the impact of discrete items, state income taxes and permanent differences. See Note 89 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of income taxes.

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Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements include our current expectations or forecasts of future events, including matters relating to the continuing effects of the COVID-19 pandemic and the impact thereof on our business, financial condition, results of operations and cash flows, the potential effects of the Chapter 11 CasesPlan restructuring on our operations, management, and employees, our ability to consummate the Restructuring, actions by, or disputes among or between, members of OPEC+, and other foreign oil-exporting countries, market factors, market prices, our ability to meet debt service requirements, our ongoing evaluationability to continue to pay cash dividends, and implementationthe amount and timing of strategic alternatives, cost-cutting measures, reductions in capital expenditures, refinancing transactions, capital exchange transactions, asset divestitures, operational efficienciesany cash dividends, and future impairments.our ESG initiatives. In this context, forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as "expect," “could,” “may,” "anticipate," "intend," "plan," “ability,” "believe," "seek," "see," "will," "would," “estimate,” “forecast,” "target," “guidance,” “outlook,” “opportunity” or “strategy.”
Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
uncertainties relating to our Chapter 11 Cases, including but not limited to: our•the ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Cases; the effects of the Chapter 11 Cases on us and our various constituents; the impact of Bankruptcy Court rulings in the Chapter 11 Cases; our ability to develop and implement the Plan and whether that Plan will be approved by the Bankruptcy Court and the ultimate outcome of the Chapter 11 Cases in general; the length of time we will operate under the Chapter 11 Cases; attendant risks associated with restrictionsexecute on our ability to pursue our business strategies; risks associated with third-party motions in the Chapter 11 Cases; the potential adverse effects of the Chapter 11 Cases on our liquidity; the potential cancellation of our common and preferred stock in the Chapter 11 Cases; the potential material adverse effect of claims that are not discharged in the Chapter 11 Cases; uncertainty regarding our ability to retain key personnel; and uncertainty and continuing risks associated with our ability to achieve our stated goals and continue as a going concern;strategy following emergence from bankruptcy;
•the impact of the COVID-19 pandemic and its effect on our business, financial condition, employees, contractors, vendors and the global demand for oil and natural gas and U.S. and world financial markets;
•risks related to the Vine Acquisition, including our ability to successfully integrate the business of Vine into the Company and achieve the expected synergies from the Vine Acquisition within the expected timeframe;
•our ability to comply with the covenants under our DIPExit Credit Facility and other indebtedness and the related impact on indebtedness;
•our ability to continue as a going concern;realize anticipated cash cost reductions;
the significant changes in our stock price, the liquidity of the market for our common stock and the risk of future declines or fluctuations, including limitations caused by the delisting of our common stock from the New York Stock Exchange and the subsequent trading of our common stock in less established markets;
•the volatility of oil, natural gas and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles;
•uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures;
•our ability to replace reserves and sustain production;
•drilling and operating risks and resulting liabilities;
•our ability to generate profits or achieve targeted results in drilling and well operations;
•the limitations our level of indebtedness may have on our financial flexibility;
•our inability to access the capital markets on favorable terms;
•the availability of cash flows from operations and other funds to fund cash dividends, finance reserve replacement costs or satisfy our debt obligations;

•adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims;
•legislative, regulatory and regulatoryESG initiatives, including as a result of the November election,change in the U.S. presidential administration, addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal;
•terrorist activities and/or cyber-attacks adversely impacting our operations;
effects of acquisitions and dispositions, including our acquisition of WildHorse and our ability to realize related synergies and cost savings;
•effects of purchase price adjustments and indemnity obligations; and
•
other factors that are described under Risk Factors in Item 1A of our 2019 Form 10-K and this Form 10-Q.
•other factors that are described under Risk Factors in Item 1A of our 2020 Form 10-K and Risk Factors in Item 1A of Part II of this report.
We caution you not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the filing date, and we undertake no obligation to update this information. We urge you to carefully
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review and consider the disclosures in this report and our other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect our business.

Information About Us
Investors should note that we make available, free of charge on our website at chk.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also furnish quarterly, annual, and current reports for certain of our subsidiaries free of charge on our website at chk.com. We also post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases. We may use the Investors section of our website to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. Documents and information on our website are not incorporated by reference herein.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including Chesapeake, that file electronically with the SEC.

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ITEM 3.Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our exposure to market risk. The term market risk relates to our risk of loss arising from adverse changes in oil, natural gas, and NGL prices and interest rates. These disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. The forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.
Commodity Price Risk
Our results of operations and cash flows are impacted by changes in market prices for oil, natural gas and NGL, which have been historically volatile and are even more volatile as a result of COVID-19 and the OPEC+ decisions discussed in this Form 10-Q.volatile. To mitigate a portion of our exposure to adverse price changes, we enter into various derivative instruments. Our oil, natural gas and NGL derivative activities, when combined with our sales of oil, natural gas and NGL, allow us to predict with greater certainty the revenue we will receive. We believe our derivative instruments continue to be highly effective in achieving our risk management objectives.
We determine the fair value of our derivative instruments utilizing established index prices, volatility curves and discount factors. These estimates are compared to counterparty valuations for reasonableness. Derivative transactions are also subject to the risk that counterparties will be unable to meet their obligations. This non-performance risk is considered in the valuation of our derivative instruments, but to date has not had a material impact on the values of our derivatives. Future risk related to counterparties not being able to meet their obligations has been partially mitigated under our commodity hedging arrangements that require counterparties to post collateral if their obligations to us are in excess of defined thresholds. The values we report in our financial statements are as of a point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. See Note 1112 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further discussion of the fair value measurements associated with our derivatives.
For the nine months ended September 30, 2020,combined 2021 Successor and Predecessor Periods, oil, natural gas, and NGL revenue, excluding any effect of our derivative instruments, were $1.091 billion, $824$1,294 million, $1,547 million and $91$172 million, respectively. Based on production, oil, natural gas, and NGL revenue for the nine months ended September 30, 20202021 Successor and Predecessor Periods would have increased or decreased by approximately $109$129 million, $82$154 million, and $9$18 million, respectively, for each 10% increase or decrease in prices. As of September 30, 2020,2021, the fair values of our oil and natural gas derivatives were net liabilities of $5$467 million and $161$1,143 million, respectively. A 10% increase or decrease in forward oil prices would decrease or increase the valuation of oil derivatives by approximately $109$124 million. A 10% increase orin forward natural gas prices would decrease the valuation of natural gas derivatives by approximately $259 million. A 10% decrease in forward natural gas prices would decrease or increase the valuation of natural gas derivatives by approximately $211$258 million. See Note 1112 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for further information on our open derivative positions.
Interest Rate Risk
Our exposure to interest rate changes relates primarily to borrowings under our Exit Credit Facility for the 2021 Successor Period and pre-petition revolving credit facility and DIP Credit Facility.Facility for the 2020 and 2021 Predecessor Periods. Interest is payable on borrowings under the Exit Credit Facility, pre-petition revolving credit facility and DIP Credit Facility based on a floating rate.rates. See Note 45 for additional information. As of September 30, 2020,2021, we had $1.929 billion in borrowings outstanding under our pre-petition revolving credit facility and no outstanding borrowings under our DIPExit Credit Facility.Facility - Tranche A Loans and $221 million under our Exit Credit Facility - Tranche B Loans. A 1.0% increase in interest rates based on the variable borrowings as of September 30, 20202021 would result in an increase in our interest expense of approximately $19$2 million per year. Changes in interest rates do affect the fair value
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ITEM 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of September 30, 20202021 that our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1.Legal Proceedings
Chapter 11 Proceedings
For more information onCommencement of the Chapter 11 Cases seeautomatically stayed the proceedings and actions against us that are described below, in addition to actions seeking to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates. The Plan in the Chapter 11 Cases, which became effective on February 9, 2021, provided for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that had not been satisfied or addressed during the Chapter 11 Cases. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report and Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments - Voluntary Reorganization Under Chapter 11.for additional information.
Litigation and Regulatory Proceedings
We arewere involved in a number of litigation and regulatory proceedings including those described below.as of the Petition Date. Many of these proceedings arewere in early stages, and many of them seek or may seeksought damages and penalties, the amount of which is currently indeterminate. Our total accrued liabilitySee Note 6 of the notes to our condensed consolidated financial statements included in respectItem 1 of Part I of this report for information regarding our estimation and provision for potential losses related to 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.proceedings.
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 The majority of these prepetition legal proceedings, including the matters below, have been named in various lawsuits alleging underpayment of royalties and other shares ofsettled during 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 owedChapter 11 Cases or will be resolved 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 ofclaims reconciliation process before 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 PleasBankruptcy Court. Any allowed claim related to royalty underpayment and lease acquisition and accounting practices with respect to propertiessuch prepetition litigation will be treated 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 all Pennsylvania civil royalty cases for a total value at that time of approximately $36 million. In light of our Bankruptcy Filing, the parties have reopened settlement discussions.

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, HOOPP filed a demand for arbitrationaccordance 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.
On January 29, 2020, a well control incident occurred at one of our wellsites in Burleson County, Texas, causing the deaths of three of our contractors’ employees and injuring a fourth. In connection with this incident, eleven lawsuits have been brought against us and our contractors alleging negligence, gross negligence, and breach of contract, and seeking wrongful death damages, survival statute damages, exemplary damages, and interest. Ten of the suits have been filed in Dallas County, Texas. A joint motion to consolidate filed by all the parties in nine of the ten Dallas County lawsuits is currently pending before the Texas Multidistrict Litigation Panel. The eleventh suit is pending in Burleson County, Texas. The proceedings are in their early stages and are all stayed due to the pending bankruptcy. Our general and excess liability insurance policies provide coverage for third party bodily injury and wrongful death claims, and the contracts between us and our contractors with respect to the well contain customary cross-indemnification provisions.Plan.
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 addressaddressing 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 namedwere recently dismissed as a defendant infrom numerous lawsuits in Oklahoma alleging that we and other companies have engaged in activities that have caused earthquakes. TheseThe lawsuits seeksought 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 seeksought the reimbursement of insurance premiums and the award of punitive damages, attorneys’ fees, costs, expenses and interest. We intendAny allowed claim related to vigorously defend these claims.such prepetition litigation will be treated in accordance with the Plan.
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.

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ITEM 1A.Risk Factors
Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our common stock preferred stock or senior notes are described under “Risk Factors” in Item 1A of our 20192020 Form 10-K, which and the additional risk factors could also be affected byprovided below, which supplement the potential effects of the COVID-19 pandemic discussed herein, andrisk factors included in thisour 2020 Form 10-Q.10-K. This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.
Risk Factors
Risks Relating to the Chapter 11 CasesVine Acquisition

The Chapter 11 Casessynergies attributable to the Vine Acquisition may have a material adverse impact onvary from expectations.

We may fail to realize the anticipated benefits and synergies expected from the Vine Acquisition, which could adversely affect our business, financial condition and operating results. The success of the Vine Acquisition will depend, in significant part, on our ability to successfully integrate the acquired business, grow the revenue of the combined company and realize the anticipated strategic benefits and synergies from the combination, such as operational and financial scale, and increased free cash flow. However, achieving these goals requires, among other things, realization of the targeted cost synergies expected from the merger. The growth and the anticipated benefits of the transactions may not be realized fully or at all, or may take longer to realize than expected. Actual operating, technological, strategic and revenue opportunities, if achieved at all, may be less significant than expected or may take longer to achieve than anticipated. If we are not able to achieve these objectives and realize the anticipated benefits and synergies expected from the Vine Acquisition within the anticipated timing or at all, our business, financial condition and operating results may be adversely affected.
We and Vine will be subject to business uncertainties for a period of time after the closing of the Vine Acquisition, which could adversely affect the combined company after the Vine Acquisition.

Uncertainty about the effect of the merger on employees, industry contacts and business partners may have an adverse effect on the combined company. These uncertainties may impair the combined company’s ability to attract, retain and motivate key personnel for a period of time after the closing of the Vine Acquisitionand could cause industry contacts, business partners and others that deal with the combined company to seek to change their existing business relationships with the combined company.

Uncertainties associated with the Vine Acquisition may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

The Company and cash flows. In addition,Vine are dependent on the consummationexperience and industry knowledge of their officers and other key employees to execute their business plans. The combined company’s success after the Vine Acquisition will depend in part upon the ability of the Company and Vine to retain key management personnel and other key employees. Current and prospective employees of the Company and Vine may experience uncertainty about their roles within the combined company following the Vine Acquisition, which may have an adverse effect on the ability of the Company to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company will achieve the same success attracting or retaining key management personnel and other key employees as the Company may have independently achieved prior to the Vine Acquisition.

We have incurred and will continue to incur significant transaction and merger-related costs in connection with the Vine Acquisition, which may be in excess of our expectations.

We have incurred and expect to continue to incur a plannumber of reorganizationnon-recurring costs associated with negotiating and completing the Vine Acquisition, combining the operations of the two companies and achieving desired synergies. These fees and costs have been, and will resultcontinue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the Vine Acquisition and include, among others, employee retention costs, fees paid to financial, legal and accounting advisors, severance and benefit costs and filing fees.

We will also incur transaction fees and costs related to the integration of the companies, which may be substantial. Moreover, we may incur additional unanticipated expenses in connection with the Vine Acquisition and the integration, including costs associated with any stockholder litigation related to the Vine Acquisition. Although we expect that the elimination of duplicative costs as well as the realization of other efficiencies related to the
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integration of the businesses should offset integration-related costs over time, this net benefit may not be achieved in the cancellation and discharge of our equity securities, including our common stock.near term, or at all.

The Chapter 11 Casescosts described above, as well as other unanticipated costs and expenses, could have a material adverse effect on our business, financial condition, results of operations and cash flows. During the pendency of the Chapter 11 Cases, our management may be required to spend a significant amount of time and effort dealing with restructuring matters rather than focusing exclusively on our business operations. Bankruptcy Court protection and operating as debtors-in-possession also may make it more difficult to retain management and the key personnel necessary to the success of our business. In addition, during the pendency of the Chapter 11 Cases, our customers might lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships, renegotiate the terms of our agreements, terminate their relationships with us or require financial assurances from us. Customers may lose confidence in our ability to provide them the level of service they expect, resulting in a significant decline in our revenues, profitability and cash flow.
Other significant risks include or relate to the following:
the effects of the filing of the Chapter 11 Cases on our business and the interests of various constituents, including our shareholders;
Bankruptcy Court rulings in the Chapter 11 Cases, including with respect to our motions and third-party motions, as well as the outcome of other pending litigation;
our ability to operate within the restrictions and the liquidity limitations of the DIP Credit Agreement and any related orders entered by the Bankruptcy Court in connection with the Chapter 11 Cases;
our ability to maintain strategic control as debtors-in-possession during the pendency of the Chapter 11 Cases;
the length of time that we will operate with Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 Cases;
increased advisory costs during the pendency of the Chapter 11 Cases;
the risks associated with restrictions on our ability to pursue some of our business strategies during the pendency of the Chapter 11 Cases;
our ability to satisfy the conditions precedent to consummation of a plan of reorganization;
the potential adverse effects of the Chapter 11 Cases on our business, cash flows, liquidity, financial condition and results of operations;operating results.
the ultimate outcome
Completion of the Chapter 11 CasesVine Acquisition may have triggered change in general;control or other provisions in certain agreements to which Vine or its subsidiaries is a party.

The completion of the cancellationVine Acquisition may trigger change in control or other provisions in certain agreements to which Vine or its subsidiaries is a party. If we are unable to negotiate waivers of our existing equity securities, including our outstanding shares of common stockthose provisions, the counterparties may exercise their rights and preferred stock, inremedies under such agreements, potentially terminating the Chapter 11 Cases;
agreement or seeking monetary damages. Additionally, even if we are able to negotiate waivers, the potential material adverse effects of claims that are not discharged incounterparties may require a fee for such waivers or seek to renegotiate the Chapter 11 Cases;
uncertainties regarding the reactions of our customers, prospective customers and service providersagreements on terms less favorable to the Chapter 11 Cases;combined company.
uncertainties regarding our ability to retain and motivate key personnel; and

uncertainties and continuing risks associated with our ability to achieve our stated goals and continue as a going concern.
Further, under Chapter 11, transactions outside the ordinary course of business, including our proposed disposition of our Mid-Continent asset, are subjectWe havesubstantial indebtedness after giving effect to the prior approval of the Bankruptcy Court,Vine Acquisition, which may limit our ability to respond in a timely manner tofinancial flexibility and adversely affect our financial results.

Under the merger agreement, Vine’s outstanding senior notes remained outstanding, and following certain events, to take advantage of certain opportunities or adapt to changing market or industry conditions.
Becauseinternal reorganization transactions, we became the successor obligor of the riskssenior notes. As of September 30, 2021, the aggregate principal amount of such outstanding senior notes was approximately $950 million. As of September 30, 2021, we had total long-term debt of approximately $1.3 billion, consisting primarily of the amounts outstanding under our credit facility and uncertainties associated withour senior unsecured notes.

The combined company’s pro forma indebtedness as of September 30, 2021, assuming consummation of the Chapter 11 Cases, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Cases mayVine Acquisition had occurred on such date and Vine’s senior notes remained outstanding, would have been approximately $2.2 billion, representing an increase in comparison to our recent, historical indebtedness. This increase in our indebtedness could have adverse effects on our business, cash flows, liquidity, financial condition and results of operations, nor can we provide any assurance as to our ability to continue as a going concern.including:
As a result
•increasing the difficulty of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating under the protection of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, we may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in our consolidated financial statements.  
Delays in the Chapter 11 Cases may increase the risk of us being unable to reorganize our business and emerge from bankruptcy and increase our costs associated with the bankruptcy process.
There can be no assurance that a plan of reorganization will become effective in accordance with its terms on the timeline we anticipate, or at all. Prolonged Chapter 11 proceedings could adversely affect our relationships with customers and employees, among other parties, which in turn could adversely affect our business, competitive position, financial condition, liquidity and results of operations and our ability to continue as a going concern. A weakening of our financial condition, liquidity and results of operations could adversely affect our ability to implement a plan of reorganization (or any other Chapter 11 plan). If we are unable to consummate a plan of reorganization, we may be forced to liquidate our assets.
We are subject to the risks and uncertainties associated with our exclusive right to file a plan of reorganization.
At the outset of the Chapter 11 Cases, the Bankruptcy Code provides debtors-in-possession the exclusive right to file and solicit acceptance of a plan of reorganization for the first 120 days of the bankruptcy case, subject to extension at the discretion of the court. All other parties are prohibited from filing or soliciting a plan of reorganization during this period. If the Bankruptcy Court terminates that right or the exclusivity period expires, there could be a material adverse effect on our ability to achieve confirmation of a plan in order to achieve our stated goals. The possible decision of creditors and/or other third parties, whose interest may be inconsistent with our own, to file alternative plans of reorganization could further protract the Chapter 11 Cases, leading us to continue to incur significant professional fees and costs. Because of these risks and uncertainties associated with the termination or expiration of our exclusivity rights, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we predict the ultimate impact that events occurring during the Chapter 11 Cases may have on our corporate or capital structure.
Adverse publicity in connection with the Chapter 11 Cases or otherwise could negatively affect our businesses.
Adverse publicity or news coverage relating to us, including, but not limited to, publicity or news coverage in connection with the Chapter 11 Cases, may negatively impact our efforts to establish and promote a positive image after emergence from the Chapter 11 Cases.
Trading in our common stock and preferred stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks.
All of our indebtedness is senior to the existing common stock in our capital structure. The RSA contemplates that our existing equity interests will be canceled and discharged in connection with the Chapter 11 Cases and the holders of those equity interests, including the holders of our common and preferred stock, will be entitled to no recovery. Accordingly, any trading in our common and preferred stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common and preferred stock.

Risks of trading in an over-the-counter market.
Since June 30, 2020, our common stock has been trading on the OTC Pink Marketplace maintained by the OTC Markets Group, Inc. under the symbol “CHKAQ.” Securities traded in the over-the-counter market generally have significantly less liquidity than securities traded on a national securities exchange, due to factors such as a reduction in the number of investors that will consider investing in the securities, the number of market makers in the securities, reduction in securities analyst and news media coverage and lower market prices than might otherwise be obtained. In addition to those factors, the market for the outstanding shares of our common stock has been adversely affected by the provisions of the RSA that contemplate that our existing equity interests will be cancelled and discharged in connection with the Chapter 11 Cases and the holders of those equity interests, including the holders of our outstanding shares of common stock, will be entitled to no recovery relating to those equity interests. We can provide no assurance that our common stock will continue to trade on the OTC Pink Marketplace, whether broker-dealers will continue to provide public quotes of our common stock on that market, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue to be provided on that market in the future.
The RSA is subject to significant conditions and milestones that may be difficult for us to satisfy.
There are certain material conditions we must satisfy under the RSA, including the timely satisfaction of milestones in the Chapter 11 Cases, which include the consummation of the financing contemplated by the Exit Credit Facilities and other transactions contemplated by a plan of reorganization. Our ability to timely complete such milestones is subject to risks and uncertainties, many of which are beyond our control.
A plan of reorganization may not become effective.
Even if a plan of reorganization is confirmed by the Bankruptcy Court, it may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control). There can be no assurance that such conditions will be satisfied and, therefore, that a plan of reorganization will become effective and that the Debtors will emerge from the Chapter 11 Cases as contemplated by a plan of reorganization. If the effective date of a plan of reorganization is delayed, the Debtors may not have sufficient cash available to operate their businesses. In that case, the Debtors may need new or additional post-petition financing, which may increase the cost of consummating a plan of reorganization. There can be no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by a plan of reorganization are not completed, it may become necessary to amend the plan. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays to the Chapter 11 Cases.
Even if a Chapter 11 plan of reorganization is consummated, we may not be able to achieve our stated goals.
Even if a Chapter 11 plan of reorganization is consummated, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the transactions under a Chapter 11 plan of reorganization will close. As a result of these and other risks, we cannot guarantee that a Chapter 11 plan of reorganization will achieve our stated goals. Furthermore, even if our debts are reduced or discharged through a plan of reorganization, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Cases. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms.
As a result, a plan of reorganization may not become effective and, thus, we cannot assure you of our ability to continue as a going concern.
Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.
We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, access to additional financing. In addition to the cash requirements necessary to fund our ongoing operations, we have incurred significant professional fees and other costs in connection with preparation for the Chapter 11 Cases and expect that we will continue to incur significant professional fees and other costs throughout the Chapter 11 Cases. We cannot assure you that cash on hand and cash flow from operations will be sufficient to continue to fund our operations and allow us to satisfy our debt obligations, relatedincluding any repurchase obligations         
that may arise thereunder;

•diverting a portion of our cash flows to service our indebtedness, which could reduce the Chapter 11 Cases. Althoughfunds
available for operations and other purposes;

•increasing our vulnerability to general adverse economic and industry conditions;

•placing us at a competitive disadvantage compared to our competitors that are less leveraged and,
therefore, may be able to take advantage of opportunities that we entered intowould be unable to pursue due to     
our indebtedness;

•limiting our ability to access the capital markets to raise capital on favorable terms;


DIP Credit Agreement providing•impairing our ability to obtain additional financing in the future for new money in an aggregate principal amountworking capital, capital
expenditures, acquisitions, general corporate or other purposes; and

•increasing our vulnerability to interest rate increases, as our borrowings under our revolving credit
facility are at variable interest rates.

We believe that the combined company will have flexibility to repay, refinance, repurchase, redeem, exchange or otherwise terminate large portions of up to $925 million pursuant to the DIP Credit Facility in connection with the Chapter 11 Cases, we cannot assure you that such financing willits outstanding debt obligations. However, there can be sufficient,no guarantee that we will be able to secure additional interim financingexecute such refinancings on favorable terms, or adequate exit financing sufficient to meetat all, and a high level of indebtedness increases the risk that we may default on our liquidity needs (or if sufficient funds are available, that they will be offered to us on acceptable terms).
Our liquidity,debt obligations, including ourfrom the debt obligations assumed from Vine. Our ability to meet our ongoing operationaldebt obligations and to reduce our level of indebtedness depends on among other things: (1) our abilityfuture performance. Our future performance depends on many factors independent of the Vine Acquisition, some of which are beyond our control, such as general economic conditions and oil and natural gas prices. We may not be able to comply withgenerate sufficient cash flows to pay the termsinterest on our debt, and conditionsfuture working capital, borrowings or equity financing may not be available to pay or refinance such debt.

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Lawsuits have been filed and may be entered byfiled against the Bankruptcy CourtCompany, Vine and their respective affiliates in connection with the Chapter 11 Cases, (2) our abilityVine Acquisition. An adverse ruling in any such lawsuit could result in substantial costs to access credit under the DIP Credit Facility, (3) our ability to maintain adequate cash on hand, (4) our ability to generate cash flow from operations, (5) our ability to consummate a plan of reorganizationCompany and Vine.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other alternative restructuring transaction, and (6)business combination agreements like the cost, duration and outcomemerger agreement. Even if any of the Chapter 11 Cases.
In certain limited instances, a Chapter 11 caselawsuits which have been filed and may be converted to a case under Chapter 7 of the Bankruptcy Code.
Upon a showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 wouldfiled are without merit, defending against these claims can result in significantly smaller distributions being made to our creditors than those provided forsubstantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a plan of reorganization because of: (1) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern; (2) additional administrative expenses involved in the appointment of a Chapter 7 trustee; and (3) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of executory contracts in connection with a cessation of operations.
The unaudited condensed consolidated financial statements included in this Form 10-Q for the period ended September 30, 2020 contain disclosures that express substantial doubt about our ability to continue as a going concern.
The unaudited condensed consolidated financial statements included in this Form 10-Q for the period ended September 30, 2020 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and other commitments in the normal course of business and does not include any adjustments that might result from uncertainty about our ability to continue as a going concern. Such assumption may not be justified. Our liquidity has been negatively impacted by the prolonged depressed prices we receive for the oil, natural gas and NGL we sell and our substantial indebtedness and associated debt-related expenses.  As a result of these and other factors, we entered into the RSA and commenced the Chapter 11 Cases. The RSA contemplates that our equity investors, including the holders of our common and preferred stock, will lose the entire value of their investment in our business. The inclusion of disclosures that express substantial doubt about our ability to continue as a going concern may negatively impact the trading price of our common and preferred stock and have an adversenegative impact on our relationships with third parties with whom we do business, including our customers, subcontractors, suppliersliquidity and employees, and could have a material adverse impact on our business, financial condition, results of operations and cash flows.
As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.
During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements. We also will be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our historical consolidated balance sheets. Our financial results after the application of fresh start accounting may be different from historical trends.
The actual results achieved during the periods covered by our recently issued projections will vary from those set forth in those projections, and such variations may be material.
In connection with the commencement of the Chapter 11 Cases, we were required to file with the SEC certain projections that we had previously provided to our lenders and others under confidentiality arrangements and

condition.
subsequently filed updated projections with the SEC (the “Projections”). Although we believe the Projections were made on a reasonable basis, no representation was or can be made regarding, and
Additionally, there can be no assurance as to, their attainability. Our actual results achieved duringthat any of the periods covered by the Projectionsdefendants in any potential future lawsuits will vary from those set forthbe successful in the Projections, and those variationsoutcome of such lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may be material.  The Projections are dependent upon numerous assumptions with respect to commodity prices, operating expenses, availability and cost of capital and performance. In addition, as disclosed elsewhere in this “Risk Factors” section, our business and operations are subject to substantial risks which increase the uncertainty inherent in the Projections.  Many of the facts disclosed in this “Risk Factors” section could cause actual results to differ materially from those projected in the Projections. The Projections were not prepared with a view towards public disclosure or complying with the guidelines established by the American Institute of Certified Public Accountants or the SEC’s published guidelines regarding projections or forecasts. Our independent public accountants did not examine, compile, review or perform any procedures with respect to the Projections, and, accordingly, assumed no responsibility for the Projections. No independent expert reviewed the Projections on our behalf. The Projections have not been included or incorporated by reference in this Quarterly Report on Form 10-Q, and, except as may be required by applicable law, we do not intend to update or otherwise revise the Projections, even if any or all the underlying assumptions are not realized.
We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from, among other things, substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims against the Debtors that arose prior to June 28, 2020 or before consummation of a plan of reorganization (i) would be subject to compromise and/or treatment under a plan of reorganization and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of a plan of reorganization. Subject to the terms of a plan of reorganization and orders of the Bankruptcy Court, any claims not ultimately discharged pursuant to a plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our business, cash flows, liquidity, financial condition and results of operations on a post-reorganization basis.
The Chapter 11 Cases limit the flexibility of our management team in running our business.
While we operate our businesses as debtor-in-possession under supervision by the Bankruptcy Court, we are required to obtain the approval of the Bankruptcy Court, and in some cases certain lenders, prior to engaging in activities or transactions outside the ordinary course of business. Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with the various creditors’ committees and other parties-in-interest and one or more hearings. The creditors’ committees and other parties-in-interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions. This process may delay major transactions and limit our ability to respond quickly to opportunities and events. Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction, we would be prevented from engaging in activities and transactions that we believe are beneficial to us.
We may experience employee attrition as a result of the Chapter 11 Cases.
As a result of the Chapter 11 Cases, we have experienced, and may continue to experience, employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Cases is limited by certain restrictions on the implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our business strategies and implement operational initiatives, which may have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
Upon emergence from bankruptcy, the composition of our Board of Directors will change significantly.
The composition of our Board of Directors is expected to change significantly following the Chapter 11 Cases. Any new directors may have different backgrounds, experiences and perspectives from those individuals who currently serve on our Board of Directors and, thus, may have different views on the issues that will determine the future of our company. As a result, our future strategy and plans may differ materially from those of the past.

Risk Factors Relating to the COVID-19 Pandemic
The ongoing coronavirus (COVID-19) pandemic and related economic turmoil have affected and could continue to adversely affect our business, financial condition, results of operations and cash flows.

Our integration of Vine into the Company may not be as successful as anticipated, and we may not achieve the intended benefits or do so within the intended timeframe.

The global spreadVine Acquisition involves numerous operational, strategic, financial, accounting, legal, tax and other risks, potential liabilities associated with the acquired business, and uncertainties related to design, operation and integration of COVID-19 created significant volatility, uncertainty,Vine’s internal control over financial reporting. Difficulties in integrating Vine into the Company may result in Vine performing differently than expected, operational challenges, or the failure to realize anticipated expense-related efficiencies. Potential difficulties that may be encountered in the integration process include, among others:

•the inability to successfully integrate the business of Vine into the Company in a manner that
permits the Company to achieve the full revenue and economic disruption duringcost savings anticipated from the first nine months of 2020. The ongoing COVID-19 outbreak has reachedVine
Acquisition;

•complexities associated with managing the larger, more than 200 countries and has continued to be a rapidly evolving economic and public health situation. The pandemic has resulted in widespread adverse impacts oncomplex integrated business;

•not realizing anticipated operating synergies;

•integrating personnel from the global economy, and there is considerable uncertainty regarding the extent to which COVID-19 will continue to spreadtwo companies and the extentloss of key employees;

•potential unknown liabilities and duration of governmental and other measures implemented to try to slowunforeseen expenses, delays or regulatory conditions associated
with the spread of the virus, such as quarantines, shelter-in-place ordersVine Acquisition;

•integrating relationships with industry contacts and business and government shutdowns. State and local authorities have also implemented multi-step policies with the goal of re-opening. However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases. We have taken certain precautionary measures intended to help minimize the risk to our employees, our business and the communities in which we operate, and we are actively assessing and planning for various operational contingencies in the event one or more of our operational employees experiences any symptoms consistent with COVID-19.However, we cannot guarantee that any actions taken by us will be effective in preventing future disruptions to our business. Moreover, future operations could be negatively affected if a significant number of our employees are quarantined as a result of exposure to the virus.partners;
We regularly monitor the credit worthiness of our customers and derivative contract counterparties. Although we have not received notices from our customers or counterparties regarding non-performance issues or delays resulting from the pandemic, we may have to temporarily shut down or further reduce production, which could result in significant downtime and have significant adverse consequences for our business, financial condition, results of operations, and cash flows. In addition, most of our non-operational employees are now working remotely, which could increase the risk of security breaches or other cyber-incidents or attacks, loss of data, fraud and other disruptions.
Furthermore, the impact of the pandemic, including a resulting reduction in demand for oil and natural gas, coupled with the sharp decline in commodity prices following the announcement of price reductions and production increases in March 2020 by members of OPEC+ has led to significant global economic contraction generally and in our industry in particular. 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. In April 2020, OPEC+ finalized an agreement to cut oil production by 9.7 million barrels per day during May and June 2020. On June 6, 2020, OPEC+ agreed to extend such production cuts until the end of July 2020. In July 2020, OPEC+ reduced the cut in production to 7.7 million barrels per day for August through December 2020. Despite the production cuts, crude oil prices have remained depressed as a result of an increasingly utilized global storage network and the decrease in crude oil demand due to COVID-19. Oil and natural gas prices are expected to continue to be volatile•performance shortfalls as a result of the near term production increasesdiversion of management’s attention caused by completing
the Vine Acquisition and the integration process; and

•the disruption of, or the loss of momentum in, ongoing COVID-19 outbreakbusiness or inconsistencies in standards,
controls, procedures and policies.

Additionally, the success of the Vine Acquisition will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the two businesses, including operational and other synergies that we believe the combined company will achieve. The anticipated benefits and cost savings of the Vine Acquisition may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that we do not currently foresee.

Our results may suffer if we do not effectively manage our expanded operations following the Vine Acquisition.

The success of the Vine Acquisition will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the two businesses, including the need to integrate the operations and business of Vine into our existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with customers, vendors, industry contacts and business partners.

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The anticipated benefits and cost savings of the Vine Acquisition may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that we do not currently foresee. Some of the assumptions that we have made, such as the achievement of operating synergies, may not be realized. There could also be unknown liabilities and unforeseen expenses associated with the Vine Acquisition that were not discovered in the due diligence review conducted by each company prior to entering into the transaction.

The market price of our common stock may be affected by factors different from those that historically have affected the price of our common stock.

Our business differs from that of Vine in certain respects, and, accordingly, the financial position or results of operations and/or cash flows of the combined company, as well as the market price of our common stock, may be affected by factors different from those currently affecting our financial position or results of operations and/or cash flows as an independent standalone company.

As a result of the Vine Acquisition, we have incorporated Vine’s hedging activities into our business, and we may be exposed to additional commodity price risks arising from such hedges.

To mitigate its exposure to changes in commodity prices, Vine hedges natural gas prices from time to time, primarily through the use of certain derivative instruments. As a result of the merger, we assumed Vine’s existing derivative instruments. Actual natural gas prices may differ from our expectations and, as changes in oil and natural gas inventories, industry demand and national and economic performance are reported, and we cannot predict when prices will improve and stabilize. We cannot predict the fulla result, such derivative instruments may have a negative 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, financial condition and operating results.

The combined company may not be able to retain customers or suppliers, and customers or suppliers may seek to modify contractual obligations with the combined company, either of which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with the Company or Vine as a result of the Vine Acquisition.

As a result of the Vine Acquisition, the combined company may experience impacts on relationships with customers and suppliers that may harm the combined company’s business and results of operations. Certain customers or suppliers may seek to terminate or modify contractual obligations following the Vine Acquisition whether or not contractual rights are triggered as a result of the Vine Acquisition. There can be no guarantee that customers and suppliers will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the merger. If any customers or suppliers seek to terminate or modify contractual obligations or discontinue their relationships with the combined company, then the combined company’s business and results of operations may be harmed. If the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, then the combined company may be unable to procure necessary supplies or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

Vine also has contracts with vendors, landlords, licensors and other business partners that may require Vine to obtain consents from these other parties in connection with the Vine Acquisition. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs and/or lose rights that may be material to the business of the combined company. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the Vine Acquisition.

We are subject to risks related to health epidemics and pandemics, including the ongoing COVID-19 pandemic, and it is difficult to predict what effect, if any, this time duemight have on the combined company after the Vine Acquisition.

We face various risks related to numerous uncertainties.
public health issues, including epidemics, pandemics and other outbreaks, including the ongoing COVID-19 pandemic. The ultimate impactactual and potential effects of COVID-19 will dependinclude, but are not limited to, its impact on future developments, including, among others,general economic conditions, trade and financing markets, changes in customer behavior and continuity in business operations, all of which create significant uncertainty. In addition, the ultimate geographic spreadpandemic has resulted in governmental authorities implementing significant and severity of the virus, the consequences of governmental and othervaried measures designed to preventcontain the spread of COVID-19, including travel bans and restrictions, quarantines, shelter in place and stay at home orders and business shutdowns. Governmental authorities may enact additional restrictions, or tighten existing measures if COVID-19 continues to spread. These measures, as well as the virus,COVID-19 pandemic broadly, may have a negative effect on the developmentcombined company after the Vine Acquisition, which effect will be difficult to predict.

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ITEM 22..
Unregistered Sales of Equity Securities and Use of Proceeds
There were no repurchases of our common stock during the quarter ended September 30, 2020.2021.
ITEM 3.Defaults Upon Senior Securities
Our Bankruptcy Filingbankruptcy filing described above constitutesconstituted an event of default that accelerated our obligations under our senior credit facility, our senior secured notes and our unsecured notes. Under the Bankruptcy Code, the creditors under these debt agreements arewere stayed from taking any action against us as a result of an event of default. See Note 45 and Note 12 to the unauditedour condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for additional details about the principal and interest amounts of debt included in liabilities subject to compromise on the accompanying unaudited condensed consolidated balance sheet as of September 30,December 31, 2020 and our Bankruptcy Filing and the Chapter 11 Cases.
Under the terms of our 5.75% Cumulative Convertible Preferred Stock, 5.75% Cumulative Convertible Preferred Stock (Series A), 4.50% Cumulative Convertible Preferred Stock and 5.00% (Series 2005B) Cumulative Convertible Preferred Stock, we may suspend payments of our cumulative quarterly dividends. We have exercised our contractual right to suspend regularly scheduled quarterly payments of dividends on each series of our preferred stock beginning with the quarterly dividend payment for the second quarter of 2020, and arewere therefore currently in arrears with the dividend payments. No dividends have beenwere accrued on our convertible preferred stock subsequent to the Petition Date. Pursuant to the RSA associated with our Chapter 11 Cases,Plan, each holder of an equity interest in Chesapeake would havehad such interest canceled, released, and extinguished without any distribution. See Note 12 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for additional information about the Chapter 11 Cases.
ITEM 4.Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17CFR 229.104) is included in Exhibit 95.1 to this Form 10-Q.
ITEM 5.Other Information

Not applicable.

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ITEM 6.Exhibits
The exhibits listed below in the Index of Exhibits are filed, furnished or incorporated by reference pursuant to the requirements of Item 601 of Regulation S-K.
INDEX OF EXHIBITS
  Incorporated by Reference 
Exhibit
Number
Exhibit DescriptionForm
SEC File
Number
ExhibitFiling Date
Filed or
Furnished
Herewith
2.18-K001-137262.11/19/2021
2.28-K001-137262.18/11/2021
3.18-K001-137263.12/9/2021
3.28-K001-137263.22/9/2021
3.310-K001-137263.33/1/2021
10.1†8-K001-1372610.34/27/2021
10.2†8-K001-1372610.310/12/2021
10.3†10-Q001-1372610.95/13/2021
10.4†8-K001-1372610.14/27/2021
10.5†8-K001-1372610.24/27/2021
10.6†10-Q001-1372610.58/10/2021
10.7†


8-K001-1372610.16/11/2021
10.8†


8-K001-1372610.26/11/2021
10.9†


8-K001-1372610.36/11/2021
10.108-K001-1372610.16/14/2021
10.11†10-Q001-1372610.108/10/2021
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Table of Contents
    Incorporated by Reference  
Exhibit
Number
 Exhibit Description Form 
SEC File
Number
 Exhibit Filing Date 
Filed or
Furnished
Herewith
3.1.1 
Restated Certificate of Incorporation.
 10-K 001-13726 3.1.1 2/27/2019  
             
3.1.2 
Amendment to Restated Certificate of Incorporation, dated April 13, 2020.
 8-K 001-13726 3.1 4/13/2020  
             
3.1.3 
Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005B), as amended.
 10-Q 001-13726 3.1.4 11/10/2008  
             
3.1.4 
Certificate of Designation of 4.5% Cumulative Convertible Preferred Stock, as amended.
 10-Q 001-13726 3.1.6 8/11/2008  
             
3.1.5 
Certificate of Designation of 5.75% Cumulative Non-Voting Convertible Preferred Stock (Series A).
 8-K 001-13726 3.2 5/20/2010  
             
3.1.6 
Certificate of Designation of 5.75% Cumulative Non-Voting Convertible Preferred Stock, as amended.
 10-Q 001-13726 3.1.5 8/9/2010  
             
3.1.7 
Certificate of Designations of Series B preferred Stock, dated April 23, 2020.
 8-K 001-13726 3.1 4/13/2020  
             
3.2 
Chesapeake’s Amended and Restated Bylaws.
 8-K 001-13726 3.2 6/19/2014  
             
10.1 
Senior Secured Super-Priority Debtor-in-Possession Credit Agreement, dated July 1, 2020, by and among Chesapeake Energy Corporation, as borrower, the guarantors party thereto, MUFG Union Bank, N.A., as the agent, and the several lenders from time to time party thereto (Exhibit A to the Restructuring Support Agreement).
 8-K 001-13726 10.1 6/29/2020  
             
10.2 
First Amendment to Senior Secured Super-Priority Debtor-in-Possession Credit Agreement, dated September 15, 2020, by and among Chesapeake Energy Corporation, as borrower, the guarantors party thereto, MUFG Union Bank, N.A., as the agent, and the several lenders from time to time party thereto.
 8-K 001-13726 10.2 9/18/2020  
             
22.1 
List of Guarantor Subsidiaries
 10-Q 001-13726 22.1 5/11/2020  
             
31.1 
Robert D. Lawler, President and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
             
31.2 
Domenic J. Dell’Osso, Jr., Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
             
32.1 
Robert D. Lawler, President and Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
             
32.2 
Domenic J. Dell’Osso, Jr., Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
             
95.1 
Mine Safety Disclosure
         X

  Incorporated by Reference 
Exhibit
Number
Exhibit DescriptionForm
SEC File
Number
ExhibitFiling Date
Filed or
Furnished
Herewith
10.12†10-Q001-1372610.118/10/2021
10.13†8-K001-1372610.110/12/2021
10.14†8-K001-1372610.210/12/2021
10.15†8-K001-1372610.410/12/2021
10.16
Registration Rights Agreement, dated as of August 10, 2021, by and among Chesapeake Energy Corporation, Brix Investment LLC, Brix Investment II LLC, Harvest Investment LLC, Harvest Investment II LLC, Vine Investment LLC and Vine Investment II LLC
8-K001-1372610.18/11/2021
10.17
Merger Support Agreement, dated as of August 10, 2021, by and among Chesapeake Energy Corporation, Hannibal Merger Sub, Inc., Hannibal Merger Sub, LLC, Vine Energy, Inc. and the stockholders of Vine Energy Inc. listed thereto.
8-K001-1372610.28/11/2021
10.18
Second Amendment to Credit Agreement, dated as of October 29, 2021, among Chesapeake Energy Corporation, as borrower, MUFG Bank, Ltd., as administrative agent, MUFG Union Bank, N.A., as collateral agent, and the lenders and other parties party thereto.
X
31.1X
32.1X
95.1X
101 INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
101 SCHInline XBRL Taxonomy Extension Schema Document.X
101 CALInline XBRL Taxonomy Extension Calculation Linkbase Document.X
101 DEFInline XBRL Taxonomy Extension Definition Linkbase Document.X
101 LABInline XBRL Taxonomy Extension Labels Linkbase Document.X
101 PREInline XBRL Taxonomy Extension Presentation Linkbase Document.X
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).X
†Management contract or compensatory plan or arrangement
77
Incorporated by Reference
Exhibit
Number
Exhibit DescriptionForm
SEC File
Number
ExhibitFiling Date
Filed or
Furnished
Herewith
101 INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
101 SCHInline XBRL Taxonomy Extension Schema Document.X
101 CALInline XBRL Taxonomy Extension Calculation Linkbase Document.X
101 DEFInline XBRL Taxonomy Extension Definition Linkbase Document.X
101 LABInline XBRL Taxonomy Extension Labels Linkbase Document.X
101 PREInline XBRL Taxonomy Extension Presentation Linkbase Document.X
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).X
†Management contract or compensatory plan or arrangement

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHESAPEAKE ENERGY CORPORATION
Date: November 2, 2021By:/s/ DOMENIC J. DELL’OSSO, JR.
Domenic J. Dell’Osso, Jr.
President, Chief Executive Officer and
Chief Financial Officer
CHESAPEAKE ENERGY CORPORATION
Date: November 9, 2020By:/s/ ROBERT D. LAWLER      
Robert D. Lawler
President and Chief Executive Officer
Date: November 9, 2020By:/s/ DOMENIC J. DELL’OSSO, JR.
Domenic J. Dell’Osso, Jr.
Executive Vice President and
Chief Financial Officer


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