SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 21, 2002
(February 21, 2002)
CHESAPEAKE ENERGY CORPORATION
-------------------------------
(Exact name of Registrant as specified in its Charter)
Oklahoma 1-13726 73-1395733
------------------------------------------------------------------------------
(State or other jurisdiction (Commission File No.)(IRS Employer Identification
of incorporation) No.)
6100 North Western Avenue, Oklahoma City, Oklahoma 73118
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(405) 848-8000
------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
Chesapeake Energy Corporation ("Chesapeake") issued a Press Release on
February 21, 2002. The following was included in the Press Release:
CHESAPEAKE ENERGY CORPORATION POSTS STRONG 2001 RESULTS:
CASH FLOW, EBITDA AND PRODUCTION SET RECORDS
Company Reports Fourth Quarter 2001 Net Income Available to Common Shareholders
of $41 Million, Cash Flow of $113 Million and Ebitda of $138 Million
on Revenue of $177 Million and Production of 41 Bcfe
Company Reports Full-Year 2001 Net Income Available to Common Shareholders
of $215 Million, Cash Flow of $522 Million and Ebitda of $620 Million
on Revenue of $969 Million and Production of 161 Bcfe
Chesapeake today reported its financial and operating results for the fourth
quarter of 2001 and for the full-year 2001. For the fourth quarter of 2001,
Chesapeake generated net income available to common shareholders of $41.3
million ($0.23 per fully diluted common share), operating cash flow of $112.7
million ($0.62 per fully diluted common share), and ebitda (operating cash flow
plus interest expense) of $138.0 million on revenue of $177.1 million.
The company's fourth quarter 2001 net income available to common shareholders
included a $9.9 million risk management loss (a non-cash item related to the
application of SFAS 133 to certain of the company's commodity hedging
contracts), a $10.1 million impairment of certain equity investments (primarily
RAM Energy, Inc. common stock), and a $27.0 million gain from selling the
company's Canadian subsidiary. The combined after-tax income related to these
items was $5.4 million, or $0.03 per fully diluted common share.
Production for the fourth quarter of 2001 was 41.4 billion cubic feet of natural
gas equivalent (bcfe), comprised of 36.5 billion cubic feet of natural gas (bcf)
(88%) and 0.81 million barrels of oil (mmbo) (12%). Gas production increased
28.0% from the fourth quarter of 2000 as overall production rose 27.5%.
Production also increased by 1.5% compared to the third quarter of 2001. Average
prices realized during the fourth quarter of 2001 were $24.07 per barrel of oil
(bo) and $3.88 per thousand cubic feet of natural gas (mcf), for a gas
equivalent price of $3.90 per thousand cubic feet of natural gas equivalent
(mcfe). Hedging activities increased fourth quarter 2001 realizations by $6.27
per bo and $1.62 per mcf, for a total revenue increase of $64.3 million ($1.55
per mcfe).
The table below summarizes Chesapeake's key statistics during the 2001 fourth
quarter and compares them to the 2001 third quarter and the fourth quarter of
2000:
Three
Months
Ended
12/31/01 9/30/01 12/31/00
-------- ------- --------
Average daily production (in mmcfe) 450 443 353
Gas as % of total production 88 86 88
Natural gas production (in bcf) 36.5 36.6 28.5
Average realized gas price ($/mcf) 3.88 4.34 4.90
Oil production (in mbbls) 807 705 652
Average realized oil price ($/bbl) 24.07 27.37 28.93
Natural gas equivalent production (in bcfe) 41.4 40.8 32.5
Gas equivalent realized price ($/mcfe) 3.90 4.36 4.89
General and administrative costs ($/mcfe) .10 .08 .11
Production taxes ($/mcfe) .04 .17 .24
Lease operating expenses ($/mcfe) .47 .47 .41
Interest expense ($/mcfe) .61 .59 .67
DD&A of oil and gas properties ($/mcfe) 1.16 1.15 .82
Operating cash flow ($ in millions) 112.7 125.1 114.4
Operating cash flow ($/mcfe) 2.72 3.07 3.52
Ebitda ($ in millions) 138.0 149.2 136.3
Ebitda ($/mcfe) 3.34 3.66 4.19
Net income to common shareholders ($ in millions) 41.3 65.0 82.5*
*Excludes $265.0 million related to the reversal of a deferred tax valuation
allowance recorded in the fourth quarter of 2000.
Chesapeake Reports Excellent Full-Year 2001 Results
For the full-year 2001, Chesapeake generated net income available to common
shareholders of $215.4 million ($1.25 per fully diluted common share), operating
cash flow of $521.6 million ($3.00 per fully diluted common share), and ebitda
(operating cash flow plus interest expense) of $619.9 million on revenue of
$969.1 million.
The company's net income available to common shareholders included $84.8 million
of risk management income (a non-cash item related to the application of SFAS
133 to certain of the company's commodity hedging contracts), a $10.1 million
impairment of certain equity investments (primarily RAM Energy, Inc. common
stock), a $27.0 million gain from selling the company's Canadian subsidiary, a
$3.4 million cost for an unused standby credit facility associated with the
acquisition of Gothic Energy Corporation, and a $46.0 million extraordinary
after-tax loss on the early extinguishment of debt. The combined after-tax
income related to these items was $14.2 million, or $0.09 per fully diluted
common share.
Production for 2001 was 161.5 bcfe, comprised of 144.2 bcf (89%) and 2.88 mmbo
(11%). Gas production increased 24.5% from 2000's levels as overall production
rose 20.3%. Average prices realized during 2001 were $26.92 per bo and $4.56 per
mcf, for a gas equivalent price of $4.56 per mcfe. Hedging activities increased
2001 realizations by $2.75 per bo and $0.68 per mcf, for a total revenue
increase of $105.4 million ($0.65 per mcfe).
The table below summarizes Chesapeake's key statistics during 2001 and compares
them to the two prior years' results:
Year Ended
12/31/01 12/31/00 12/31/99
-------- -------- --------
Average daily production (in mmcfe) 442 367 366
Gas as % of total production 89 86 81
Natural gas production (in bcf) 144.2 115.8 108.6
Average realized gas price ($/mcf) 4.56 3.36 1.97
Oil production (in mbbls) 2,880 3,068 4,147
Average realized oil price ($/bbl) 26.92 26.39 16.01
Natural gas equivalent production (in bcfe) 161.5 134.2 133.5
Gas equivalent realized price ($/mcfe) 4.56 3.50 2.10
General and administrative costs ($/mcfe) .09 .10 .10
Production taxes ($/mcfe) .20 .19 .10
Lease operating expenses ($/mcfe) .47 .37 .35
Interest expense ($/mcfe) .61 .64 .61
DD&A of oil and gas properties ($/mcfe) 1.07 .75 .71
Operating cash flow ($ in millions) 521.6 304.9 137.9
Operating cash flow ($/mcfe) 3.23 2.27 1.03
Ebitda ($ in millions) 619.9 391.2 218.9
Ebitda ($/mcfe) 3.84 2.92 1.64
Net income to common shareholders ($ in millions) 215.4 188.7* 16.6
*Excludes $265.0 million related to the reversal of a deferred tax valuation
allowance recorded in the fourth quarter of 2000.
Chesapeake Reports Attractive 2001 Finding Costs, Excellent Reserve
Replacement Ratio and Record Level of Proved Oil and Natural Gas Reserves
Chesapeake began 2001 with proved reserves of 1,355 bcfe and during the year
produced 161 bcfe, acquired 648 bcfe, sold 150 bcfe, discovered 271 bcfe and
ended the year with 1,780 bcfe, an increase of 31%. Reserve replacement during
the year was 364%. This strong operating performance occurred even though the
company recorded negative reserve revisions of 183 bcfe, of which 27 bcfe
resulted from well performance changes while 156 bcfe resulted from sharply
lower oil and gas prices at year-end 2001 compared to year-end 2000. In general,
lower year-end oil and gas prices (which under SEC rules must be held flat for
all future years) reduce the projected economic life and therefore reduce the
recoverable reserves of proved producing properties and make certain proved
undeveloped locations (PUD's) uneconomic to drill.
Reserve additions through acquisitions totaled 648 bcfe at a cost of $1.12 per
mcfe and reserve additions through drilling were 271 bcfe at a cost of $1.53 per
mcfe. Excluding revisions related to lower oil and gas prices, 2001 overall
finding costs were $1.27 per mcfe. Chesapeake's estimated future net cash flows
discounted at 10%, or PV-10, were $1.65 billion as of year-end 2001 using NYMEX
pricing of $19.84 per bo and $2.74 per mcf. If the company's reserves were
calculated using oil and natural gas pricing of $20.00 per bo and $3.50 per mcf,
PV-10 would increase to $2.28 billion and proved reserves would increase to
1,827 bcfe.
Chesapeake's Hedging Program Proves to be One of Industry's Best -
Gains for 2001- 03 May Reach $300 Million
In contrast to many other oil and natural gas producers, Chesapeake views oil
and natural gas pricing volatility as an inherent risk of its business and
attempts to understand and manage this risk as it does other business risks. By
hedging when prices are at very high historical levels, Chesapeake believes that
it can lock in long term rates of return that are superior to those that can be
earned by passively accepting volatile market prices. During 2001 Chesapeake
demonstrated that its program of actively managing pricing risk was one of the
most successful in the industry, resulting in a revenue increase of $105
million. Furthermore, Chesapeake expects to record additional revenue from its
hedging program of approximately $150 million in 2002 and $45 million in 2003 if
oil and natural gas prices remain at current levels. This added revenue should
provide Chesapeake with a significant competitive advantage during a year when
other independent producers are significantly decreasing their drilling budgets
and oilfield service companies are steadily reducing the cost of drilling. For
additional details on the company's hedging positions, please refer to the
Outlook Information section at www.chkenergy.com.
Chesapeake Updates Progress on its Numerous
High-Impact Exploration Projects
During the past three years, Chesapeake has assembled one of the best onshore
U.S. natural gas exploration inventories in the industry, having invested $110
million in land and 3-D seismic during this period and having doubled its
geological and geophysical professional staff. As a result, Chesapeake has built
an exploration program in 2002 that should expose it to more than 1,000 bcfe of
unbooked potential reserves. These prospects were generated by the company's
exploration staff, have an average depth of 19,000 feet and have been delineated
using detailed subsurface geological analysis and 3-D seismic. In addition,
Chesapeake believes it has industry-leading deep drilling expertise onshore in
the U.S. and that it is presently conducting the deepest drilling campaign in
the U.S. This deep drilling effort is highlighted by the Cat Creek 1-19 well in
Beckham County, Oklahoma, which is currently drilling below 23,000 feet toward a
projected total depth of 25,000 feet.
In addition, the company has substantial upside exposure to a high-potential oil
exploration project in Colombia, operated by Seven Seas Petroleum Corporation
(AMEX: SEV). In 2001, Chesapeake invested $22.5 million in Seven Seas' 12%
senior secured notes and received warrants for an approximate 20% equity stake
in Seven Seas. Chesapeake's investment in Seven Seas is being used to drill the
18,000' Escuela #2 well, which was spud in early December 2001 and is drilling
below 11,900' toward a test of the Subthrust Dindal structure underneath the
Guaduas Field. The Subthrust Dindal structure covers more than 50,000 acres and
has estimated reserve potential of greater than one billion barrels of oil,
thereby making it one of the largest undrilled oil prospects in the western
hemisphere.
Management Summary and Three-Year Track Record
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented,
"Chesapeake's terrific year in 2001 resulted from a series of key management
decisions involving product strategy (we favored gas over oil), geographic
strategy (we concentrated in the Mid-Continent where our economies of scale
provide unusually high returns on investment), business strategy (we proved
adept at both drilling and acquiring) and risk management strategy (we
successfully hedged). The results of these decisions are reflected not only in
our 2001 results, but also in our three-year results from year-end 1998 through
2001. During this period, Chesapeake believes its track record of value added
growth has been one of the best in the independent exploration and production
business:
o Production increased from 130 bcfe in 1998 to 161 bcfe in 2001, a compound
annual growth rate (CAGR) of 7%;
o Proved reserves increased from 1,091 bcfe in 1998 to 1,780 bcfe in 2001, a
CAGR of 18%;
o Three-year reserve replacement ratio was 261% and finding costs
averaged only $1.05 per mcfe in adding over 1,536 bcfe through
acquisitions and drilling;
o Ebitda increased from $183 million in 1998 to $620 million in 2001
and cash flow grew from $115 million in 1998 to $522 million in 2001,
CAGRs of 50% and 66%, respectively;
o Net income available to common shareholders during the three-year period
totaled $686 million and shareholders' equity increased by $1.015 billion;
and
o Gains from hedges entered into during 2000 and 2001 should reach $300
million during a time when most other energy companies failed to take
advantage of oil and natural gas pricing volatility.
"During these three years of exceptional achievement, Chesapeake has become the
second largest producer of natural gas in the Mid-Continent, among the ten
largest independent gas producers in the U.S. and one of the most profitable
producers of natural gas in the industry. We believe the combination of our
successful product and geographic strategies, our value-added risk management
strategy, our balanced acquisition and drilling programs, our high quality
assets and our low operating costs will enable Chesapeake to continue delivering
one of the industry's best track records of value creation in the years to
come."
Conference Call Information
Chesapeake's management invites your participation in a conference call tomorrow
morning, February 22 at 8:00 a.m. CST to discuss the contents of this release.
Please call 913-981-5519 between 7:50 and 8:00 a.m. CST on February 22 if you
would like to participate in the call. For those unable to participate, the call
will also be available over the Internet by visiting our home page at
www.chkenergy.com and clicking on the link under Shareholder Information or by
going directly to www.ccbn.com. In addition, a replay of the call will also be
available by calling 719-457-0820 between 11:00 a.m. CST Friday, February 22
through midnight Thursday, March 7. The passcode for this call is 502603.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in 000's, except per share data)
(unaudited)
TWELVE MONTHS ENDED: December 31, 2001 December 31, 2000
$ $/mcfe $ $/mcfe
----------- ---------- ---------- --------
REVENUES:
Oil and gas sales 735,529 4.56 470,170 3.50
Risk management income 84,789 0.52 - -
Oil and gas marketing sales 148,733 0.92 157,782 1.18
------- ------ -------- -------
Total revenues 969,051 6.00 627,952 4.68
------- ------ -------- -------
OPERATING COSTS:
Production expenses 75,374 0.47 50,085 0.37
Production taxes 33,010 0.20 24,840 0.19
General and administrative 14,449 0.09 13,177 0.10
Oil and gas marketing expenses 144,373 0.89 152,309 1.14
Depreciation, depletion, and amortization
of oil and gas properties 172,902 1.07 101,291 0.75
Depreciation and amortization of other assets 8,663 0.06 7,481 0.05
------- ------ -------- -------
Total operating costs 448,771 2.78 349,183 2.60
------- ------ -------- -------
INCOME FROM OPERATIONS 520,280 3.22 278,769 2.08
------- ------ -------- -------
OTHER INCOME (EXPENSE):
Interest and other income 2,877 0.02 3,649 0.03
Interest expense (98,321) (0.61) (86,256) (0.64)
Impairment of investment in securities (10,079) (0.06) - -
Gain on sale of Canadian subsidiary 27,000 0.17 - -
Gothic standby credit facility cost (3,392) (0.02) - -
------- ------ -------- ------
Total other income (expense) (81,915) (0.50) (82,607) (0.61)
------- ------ -------- -------
Income Before Income Taxes and
Extraordinary Item 438,365 2.72 196,162 1.47
Income Tax Expense (Benefit) 174,959 1.09 (259,408) (1.93)
------- ------ -------- -------
INCOME BEFORE EXTRAORDINARY ITEM 263,406 1.63 455,570 3.40
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
applicable income tax (46,000) (0.28) - -
------- ----- -------- ------
NET INCOME 217,406 1.35 455,570 3.40
Preferred Stock Dividends (2,050) (0.02) (8,484) (0.07)
Gain on Redemption of Preferred Stock - - 6,574 0.05
------- ------ -------- ------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 215,356 1.33 453,660 3.38
======= ===== ======== ======
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONT'D.)
($ in 000's, except per share data)
(unaudited)
TWELVE MONTHS ENDED: December 31, 2001 December 31, 2000
----------------- -----------------
$ $/mcfe $ $/mcfe
------------ ---------- ---------- --------
Earnings per Common Share - Basic
Income Before Extraordinary Item, Risk
Management Income, Impairment of Equity
Investments, Gain on Sale of Canadian
subsidiary and Gothic Standby Credit Facility
Costs (4) 1.24 3.52
Risk Management Income, Impairment of Equity
Investments, Gain on Sale of Canadian subsidiary
and Gothic Standby Credit Facility Costs (4) 0.37 -
Extraordinary Item (0.28) -
------------ -------
Net Income 1.33 3.52
============ =======
Earnings Per Common Share - Assuming Dilution
Income Before Extraordinary Item, Risk
Management Income, Impairment of Equity
Investments, Gain on Sale of Canadian
subsidiary and Gothic Standby Credit Facility 1.16 3.01
Costs (4)
Risk Management Income, Impairment of Equity
Investments, Gain on Sale of Canadian
subsidiary and Gothic Standby Credit Facility
Costs (4) 0.35 -
Extraordinary Item (0.26) -
------------ -------
Net Income 1.25 3.01
============ =======
Average Common Shares and Common -
Equivalent Shares Outstanding
Basic 162,362 128,993
Diluted (1) 173,981 151,564
Operating Cash Flow (2) 521,612 3.23 304,934 2.27
EBITDA(3) 619,933 3.84 391,190 2.92
Thousands of barrels of oil (mbbl) 2,880 -6% 3,068
Millions of cubic feet of gas (mmcf) 144,171 25% 115,771
Millions of cubic feet of gas equivalents (mmcfe) 161,451 20% 134,179
Mmcfe per day 442 20% 367
Average price/barrel $ 26.92 2% $ 26.39
Average price/mcf $ 4.56 36% $ 3.36
Average gas equivalent price/mcfe $ 4.56 30% $ 3.50
1. Earnings per share assuming dilution for the years ended December 31, 2001
and 2000 include the effect of dilutive stock options, the effect of the
assumed conversion of all preferred stock as of the beginning of the
period, and 2001 includes the effect of dilutive warrants.
2. Income before income taxes and extraordinary item, depreciation, depletion
and amortization, risk management income, impairment of investment in
securities, Gothic standby credit facility cost, and gain on sale of
Canadian subsidiary.
3. Earnings before income taxes and extraordinary item, interest expense,
depreciation, depletion and amortization, risk management income,
impairment of investment in securities, Gothic standby credit facility
cost, and gain on sale of Canadian subsidiary.
4. All items are shown on an after-tax basis.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in 000's, except per share data)
(unaudited)
THREE MONTHS ENDED: December 31, 2001 December 31, 2000
$ $/mcfe $ $/mcfe
------------ ----------- ---------- --------
REVENUES:
Oil and gas sales 161,339 3.90 158,685 4.89
Risk management income (9,926) (0.24) - -
Oil and gas marketing sales 25,662 0.62 51,961 1.60
------- ----------- ---------- -------
Total revenues 177,075 4.28 210,646 6.49
------- ----------- ---------- -------
OPERATING COSTS:
Production expenses 19,441 0.47 13,263 0.41
Production taxes 1,661 0.04 7,709 0.24
General and administrative 4,335 0.10 3,580 0.11
Oil and gas marketing expenses 25,036 0.61 49,726 1.53
Depreciation, depletion, and amortization
of oil and gas properties 47,998 1.16 26,704 0.82
Depreciation and amortization of other assets 2,709 0.06 1,930 0.06
------- ----------- ---------- -------
Total operating costs 101,180 2.44 102,912 3.17
------- ----------- ---------- -------
INCOME FROM OPERATIONS 75,895 1.84 107,734 3.32
------- ----------- ---------- -------
OTHER INCOME (EXPENSE):
Interest and other income 1,493 0.03 (77) -
Interest expense (25,344) (0.61) (21,899) (0.68)
Impairment of investment in securities (10,079) (0.24) - -
Gain on sale of Canadian subsidiary 27,000 0.65 - -
------- ------------ ---------- -------
Total other income (expense) (6,930) (0.17) (21,976) (0.68)
-------- ------------ ---------- -------
Income Before Income Taxes and
Extraordinary Item 68,965 1.67 85,758 2.64
Income Tax Expense (Benefit) 26,340 0.64 (262,287) (8.08)
-------- ----------- ---------- -------
INCOME BEFORE EXTRAORDINARY ITEM 42,625 1.03 348,045 10.72
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
applicable income tax - - - -
------- ---------- --------- -------
NET INCOME 42,625 1.03 348,045 10.72
Preferred Stock Dividends (1,322) (0.03) (570) (0.01)
Gain on Redemption of Preferred Stock - - - -
------- ------------ --------- -------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 41,303 1.00 347,475 10.71
======= ============ ========= =======
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONT'D.)
($ in 000's, except per share data)
(unaudited)
THREE MONTHS ENDED: December 31, 2001 December 31, 2000
$ $/mcfe $ $/mcfe
---------- ---------- ---------- --------
Earnings per Common Share - Basic
Income Before Extraordinary Item, Risk
Management Income, Impairment of
Equity Investments, and Gain on Sale
of Canadian subsidiary (4) 0.22 2.28
Risk Management Income, Impairment of Equity
Investments and Gain on Sale of Canadian
subsidiary(4) 0.03 -
Extraordinary Item - -
---------- ----------
Net Income 0.25 2.28
========== ==========
Earnings Per Common Share - Assuming Dilution
Income Before Extraordinary Item, Risk
Management Income, Impairment of
Equity Investments, and Gain on Sale
of Canadian subsidiary (4) 0.20 2.12
Risk Management Income, Impairment of Equity
Investments, and Gain on Sale of Canadian
subsidiary (4) 0.03 -
Extraordinary Item - -
---------- ----------
Net Income 0.23 2.12
========== ==========
Average Common Shares and Common -
Equivalent Shares Outstanding
Basic 164,616 152,533
Diluted (1) 182,725 164,520
Operating Cash Flow (2) 112,677 2.72 114,392 3.52
EBITDA(3) 138,021 3.34 136,291 4.20
Thousands of barrels of oil (mbbl) 807 24% 652
Millions of cubic feet of gas (mmcf) 36,537 28% 28,544
Millions of cubic feet of gas equivalents (mmcfe) 41,379 27% 32,456
Mmcfe per day 450 27% 353
Average price/barrel $ 24.07 -17% $ 28.93
Average price/mcf $ 3.88 -21% $ 4.90
Average gas equivalent price/mcfe $ 3.90 -20% $ 4.89
1. Earnings per share assuming dilution for the three months ended December
31, 2001 and 2000 includes the effect of dilutive stock options, the effect
of the assumed conversion of all preferred stock as of the beginning of the
period, and 2001 includes the effect of dilutive warrants.
2. Income before income taxes and extraordinary item, depreciation, depletion
and amortization, risk management income, impairment of investment in
securities, and gain on sale of Canadian subsidiary.
3. Earnings before income taxes and extraordinary item, interest expense,
depreciation, depletion, amortization, risk management income, impairment
of investment in securities, and gain on sale of Canadian subsidiary.
4. All items are shown on an after-tax basis.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in 000's)
(unaudited)
December 31, December 31,
2001 2000
Cash and cash equivalents $ 116,794 $ 3,500
Other current assets 238,717 163,426
-------------- ----------
TOTAL CURRENT ASSETS 355,511 166,926
-------------- ----------
Property and equipment (net) 1,785,581 896,171
Investment in Gothic Corporation common stock - 126,434
Deferred tax asset 66,781 229,823
Other assets 72,023 21,072
------------ ----------
TOTAL ASSETS $2,279,896 $1,440,426
============ ==========
Current liabilities $ 167,509 $ 162,701
Long-term debt 1,329,453 944,845
Revenue and royalties due others 12,696 7,798
Other long-term liabilities 3,831 -
Deferred income tax liability - 11,850
------------ ----------
TOTAL LIABILITIES 1,513,489 1,127,194
STOCKHOLDERS' EQUITY 766,407 313,232
------------ ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,279,896 $1,440,426
============ ==========
COMMON SHARES OUTSTANDING 164,742 153,030
ITEM 9. REGULATION FD DISCLOSURE
The following was included in the Press Release:
Chesapeake Updates Full Year 2002 Forecasts,
Cap-Ex Budget and Balance Sheet Goals
The following forecasts and estimates revise and replace in their entirety
previous projections last updated on December 4, 2001. The company's forecasts
and estimates are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
due to the risks and uncertainties described in the Company's filings with the
Securities and Exchange Commission. Furthermore, these projections do not
reflect the potential impact of unforeseen events that may occur subsequent to
the issuance of this release.
The company's current 2002 guidance projects production of 166-170 bcfe (87%
gas), up from previous projections of 162-166 bcfe. Chesapeake projects per mcfe
lease operating expenses of $0.50-0.55, production taxes of $0.18-0.22 (down
from $0.20-0.24), interest expense of $0.62-0.67, general and administrative
costs of $0.10-0.11 and DD&A of oil and gas properties of $1.15-1.25 (down from
$1.20-1.30). The company expects its 2002 tax rate to average 40%, of which
virtually all should be deferred.
Chesapeake's drilling, land and seismic cap-ex budget for 2002 is currently
projected to be approximately $300 million, compared to previous estimates for
2002 of $250-275 million and compared to $400 million in 2001. Based on expected
lower costs and greater efficiency in the service industry, the company expects
that its 25% smaller budget in 2002 will likely result in more footage drilled
in 2002 than in 2001. Chesapeake will fund its planned $300 million drilling,
land and seismic cap-ex budget from its cash flow from operations, which is
currently expected to exceed $325 million. In addition, the company has $130
million of cash on hand and has an undrawn $225 million revolving bank credit
facility.
Chesapeake does not budget for acquisitions because of the inability to predict
when properties attractive to the company will become available for purchase.
However, Chesapeake believes that it will have the opportunity to acquire
high-quality properties in 2002 at attractive prices. The company enjoyed an
excellent year in 2001 with its acquisitions, investing $724 million through 160
acquisitions to acquire 648 bcfe of proved reserves.
Chesapeake funded its $724 million in acquisitions by issuing $174 million in
common and preferred stock and funded the remaining $550 million using excess
operating cash flow, cash on hand and the issuance of long term debt. The
company's two key balance sheet goals remain unchanged: reduce debt on a
relative, or debt per mcfe, basis, and ensure the company's average debt
maturity is more than five years. Currently, the company's average debt maturity
is 8.8 years and its long-term debt (net of cash) is $1.21 billion. With
Chesapeake's proved reserves at 1,780 bcfe, net debt per mcfe is $0.68. This key
measure of the company's success in deleveraging its balance sheet has improved
four consecutive years and Chesapeake expects continued reduction in debt per
mcfe to occur in 2002.
This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements include estimates and give our current
expectations or forecasts of future events. They are based on our historical
operating trends, our existing commodity hedging position and our current
estimate of proved reserves. Although we believe our forward-looking statements
are reasonable, they can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties. For example, statements concerning the fair
values of derivative contracts and their estimated contribution to our future
results of operations are based upon market information as of a specific date.
These market prices are subject to significant volatility. Factors that could
cause actual operating and financial results to differ materially from expected
results include the volatility of oil and gas prices, our substantial
indebtedness, our commodity price risk management activities, the cost and
availability of drilling and production services, our ability to replace
reserves, the availability of capital, uncertainties inherent in evaluating our
own reserves and the reserves we acquire, drilling and operating risks and other
risk factors described in the company's 2000 annual report on Form 10-K and
subsequent filings with the Securities and Exchange Commission.
Chesapeake Energy Corporation is one of the 10 largest independent natural gas
producers in the U.S. Headquartered in Oklahoma City, the company's operations
are focused on exploratory and developmental drilling and producing property
acquisitions in the Mid-Continent region of the United States. The company's
Internet address is www.chkenergy.com.
With the filing of this report on Form 8-K, we are posting the same information
on our web site at www.chkenergy.com. We caution you that our outlook is given
as of February 21, 2002 based on currently available information, and that we
are not undertaking any obligation to update our estimates as conditions
change or other information becomes available.
SIGNATURE
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
By: /s/ Aubrey K. McClendon
-----------------------------------
Aubrey K. McClendon
Chairman of the Board and
Chief Executive Officer
Dated: February 21, 2002