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) DECEMBER 5, 2001
(DECEMBER 4, 2001)
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CHESAPEAKE ENERGY CORPORATION
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(Exact name of Registrant as specified in its Charter)
OKLAHOMA 1-13726 73-1395733
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
6100 NORTH WESTERN AVENUE, OKLAHOMA CITY, OKLAHOMA 73118
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(Address of principal executive offices) (Zip Code)
(405) 848-8000
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(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
December 4, 2001. The following was included in the Press Release:
CHESAPEAKE ENERGY CORPORATION ANNOUNCES PURCHASE OF
240 BCFE OF PROVED GAS RESERVES AND 45,000 MCFE OF
DAILY GAS PRODUCTION FOR $249 MILLION
COMPANY ALSO UPDATES 2002 GUIDANCE, DISCLOSES
HEDGING GAINS OF $250 MILLION AND CONFIRMS
NO HEDGING EXPOSURE WITH ENRON
Chesapeake announced three Mid-Continent gas acquisitions that will increase its
proved reserves by 240 bcfe and its production by 45,000 mcfe per day. The cost
of the transactions will be $249 million, which will be paid from Chesapeake's
cash on hand. The acquired assets have a reserves-to-production index of 14.2
years, are 81% natural gas and are 83% proved developed.
Two of the three transactions have recently closed: a $42 million acquisition of
producing Mid-Continent gas properties from a large independent producer and a
$76 million acquisition of producing Mid-Continent gas properties from RAM
Energy, Inc. Chesapeake recently terminated its letter of intent to acquire all
of RAM's common stock.
The third acquisition is scheduled to close on December 18, 2001. This $131
million acquisition is of Sapient Energy Corp., a Tulsa-based privately-owned
Mid-Continent gas producer.
HEDGING GAINS TO DATE EXCEED $250 MILLION - CLOSED POSITIONS
EXCEED $140 MILLION AND OPEN POSITIONS EXCEED $110 MILLION -
COMPANY HAS NO HEDGING EXPOSURE TO ENRON
For the nine months ended September 30, 2001, Chesapeake's hedging program
enhanced the company's oil and gas revenue by $41 million. Based on futures
prices as of November 29, 2001, the market value of Chesapeake's remaining
2001-03 hedges was approximately $210 million. Of this amount, the company has
locked in approximately $100 million through receipt of payment for its October
and November 2001 settlements and by lifting certain hedges early for future
months of production. The remaining $110 million represents Chesapeake's open
positions, virtually all of which are with Morgan Stanley. None of Chesapeake's
past or present hedging positions have been executed with or through Enron
Corporation or any of its subsidiaries or affiliates.
MANAGEMENT SUMMARY
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are
very pleased to announce our three most recent acquisitions of Mid-Continent gas
producing
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properties. These acquisitions are an excellent fit with our existing
Mid-Continent assets and increase our company's proved reserves by 240 bcfe and
our production to 450,000 mcfe per day. Based on the results achieved from our
previous acquisitions in the Mid-Continent, we are confident Chesapeake will
substantially increase the value of the acquired reserves through additional
drilling, more efficient operations and lower administrative costs.
Since January 1998, we have discovered or acquired over 2,200 bcfe of proved
natural gas reserves at the very attractive average cost of $1.09 per mcfe. As a
result, 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 acquisition and drilling programs, our low
operating costs and our value-added hedging strategy will enable Chesapeake to
continue making attractive acquisitions at reasonable prices in the months
ahead. Today's announcements provide further evidence of our ongoing commitment
to creating value through further consolidation in the Mid-Continent."
ITEM 9. REGULATION FD DISCLOSURE
The following was included in the Press Release:
CHESAPEAKE UPDATES FOURTH QUARTER 2001 AND
FULL YEAR 2002 FORECASTS
The following forecasts and estimates revise and replace in their entirety
previous projections last updated on October 24, 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 identified at the end of this release.
Furthermore, these projections do not reflect the potential impact of unforeseen
events that may occur subsequent to the issuance of this release.
Chesapeake's guidance for the fourth quarter of 2001 has been updated for the
effects of the company's recent acquisitions and financings. For the quarter,
the company is projecting production of 40 bcfe (89% gas) and per mcfe lease
operating expenses of $0.50-$0.55, production taxes of $0.21-$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 $1.20-$1.30. In addition, Chesapeake expects to
report a $25-30 million pre-tax gain on the sale of its Canadian assets and a
$10 million pre-tax non-cash loss on the disposition of its 49% of RAM Energy's
common stock. The company's tax rate should average 40%, which should be
virtually all deferred.
The company's current 2002 guidance projects production of 162-166 bcfe (88%
gas) and per mcfe lease operating expenses of $0.50-0.55, production taxes of
$0.21-0.24, 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 $1.20-1.30. The company expects
its 2002 tax rate to average 40%, which should be virtually all deferred.
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
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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 December 4, 2001 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.
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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
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AUBREY K. MCCLENDON
Chairman of the Board and
Chief Executive Officer
Dated: December 5, 2001
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