Press Releases
The following was released today by Chesapeake Energy Corporation:
Chesapeake Energy Corporation
A conference call is scheduled for Friday morning, April 27, 2001 at 8:00 am CDT to discuss the release. The telephone number to access the conference call is 913.981.4911.
For those unable to participate in the conference call, a replay will be available for audio playback at 11:00 am CDT on April 27, 2001, and will run through midnight Thursday, May 10, 2001. The number to access the conference call replay is 719.457.0820; passcode for the replay is 709290.
The conference call will also be simulcast live on the internet and can be accessed either by going directly to the Chesapeake website at http://www.chkenergy.com/ and selecting "Shareholder Information", or by going directly to http://www.vcall.com/. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will be available for approximately ninety days thereafter.
The company also has scheduled the internet webcast of its presentation at the Independent Petroleum Association of America conference on Thursday, April 19, 2001 at 3:30 pm EDT. Interested parties may also access that simulcast by visiting our website and selecting "Shareholder Information."
Chesapeake Energy Corporation is among 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 http://www.chkenergy.com/.
CHESAPEAKE ENERGY CORPORATION
OUTLOOK
April 16, 2001
Quarters Ending March 31 and June 30, 2001; Years Ending December 31, 2001 and 2002.
We have adopted a policy of providing investors with guidance on certain factors that affect our future financial performance. As of April 16, 2001, we are using the following key operating assumptions in our projections for the first two quarters of 2001 and full years 2001 and 2002. Please note that our outlook now incorporates earnings per share estimates. The key operating assumptions for 2001 include the completion of the merger with Gothic Energy Corporation which occurred on January 16, 2001.
Qrtr Ending Qrtr Ending Year Ending Year Ending
March 31, June 30, Dec. 31, Dec. 31,
2001 2001 2001 2002
Estimated
Production
Oil - Mbo 600 - 675 700 - 750 2,750 - 3,250 3,000 - 3,500
Gas - Bcf 35 - 36 34 - 36 154 - 160 162 - 168
Gas
Equivalent -
Bcfe 38.5 - 40 38.5 - 41 170 - 180 183 - 187
Estimated
NYMEX Prices
Oil - $/Bo $28.73 $25.00 $25.43 $23.00
Gas - $/Mcf $7.05 $5.12 $5.61 $4.19
Estimated
Differentials
to NYMEX
Prices
Oil - $/Bo -$0.80 -$0.80 -$0.80 -$0.80
Gas - $/Mcf -$0.50 -$0.40 -$0.40 -$0.35
Estimated Hedging
Effects (based
on expected
NYMEX prices above)
Oil - $/Bo +$0.89 +$3.24 +$2.80 +$0.47
Gas - $/Mcf -$0.89 -$0.09 -$0.18 +$0.32
Estimated Realized
Prices (includes
hedging)
Oil - $/Bo $29.28 $27.44 $27.38 $22.67
Gas - $/Mcf $5.60 $4.63 $4.97 $4.16
Gas Equivalent -
$/Mcfe $5.53 $4.62 $4.92 $4.11
Operating Costs
per Mcfe
Production
expense $0.45 - 0.50 $0.45 - 0.50 $0.45 - 0.50 $0.45 - 0.50
Production
taxes
(6.5% of
O&G
revenues) $0.38 - 0.42 $0.28 - 0.32 $0.32 - 0.35 $0.23 - 0.27
General and
admini-
strative $0.09 - 0.11 $0.09 - 0.11 $0.10 - 0.11 $0.09 - 0.11
DD&A - oil
and gas $0.90 - 0.93 $0.96 - 0.99 $1.00 - 1.06 $1.08 - 1.12
Depreciation
of other
assets $0.05 - 0.06 $0.05 - 0.06 $0.05 - 0.06 $0.05 - 0.06
Interest
expense $0.66 - 0.70 $0.74 - 0.78 $0.58 - 0.62 $0.45 - 0.49
Other Income
and expense
per mcfe(B)(C)
Marketing gross
profit $0.02 - 0.04 $0.02 - 0.04 $0.02 - 0.04 $0.02 - 0.04
Other
income $0.01 - 0.03 $0.01 - 0.03 $0.01 - 0.05 $0.01 - 0.05
Book Tax Rate -
primarily
deferred 35 - 40% 35 - 40% 35 - 40% 35 - 40%
Equivalent
shares
outstanding
Basic 157,500 m 162,200 m 162,500 m 166,000 m
Diluted 170,800 m 170,800 m 171,000 m 173,000 m
Earnings per
share -
fully
diluted $0.40 - 0.42 $0.27 - 0.29(C) $1.43 - 1.48(C) $1.10 - 1.15
Capital Expenditures:
Drilling $75,000 - $78,000 - $300,000 - $315,000 -
$80,000 m $82,000 m $325,000 m $345,000 m
Sensitivity to
price change -
for each $1.00/bbl
PV 10% $15 mm(A) $15 mm(A) $15 mm(A) $15 mm(A)
Cash flow
from
operations $0.7 mm(A) $0.7 mm(A) $2.5 - $3.0 mm(A)$2.5 - $3.0 mm(A)
Sensitivity to
price change -
for each $0.10/mcf
PV 10% $72 mm $72 mm $72 mm $72 mm
Cash flow from
operations $4.0 mm $4.0 mm $15 - $16 mm $15 - $16 mm
(A) Current reserves inclusive of Gothic reserves.
(B) Does not include non-recurring charges of an estimated $3.4 million
(pre-tax) related to the Gothic acquisition in quarter ended 3/31/01.
(C) Does not include an anticipated extraordinary charge of $44 mm
(after-tax) related to early debt extinguishment in quarter ended
6/30/01.
Commodity Hedging Activities
Periodically the Company utilizes hedging strategies to hedge the price of a portion of its future oil and gas production. These strategies include:
(i) swap arrangements that establish an index-related price above
which the Company pays the counterparty and below which the
Company is paid by the counterparty,
(ii) the purchase of index-related puts that provide for a "floor"
price below which the counterparty pays the Company the amount by
which the price of the commodity is below the contracted floor,
(iii) the sale of index-related calls that provide for a "ceiling"
price above which the Company pays the counterparty the amount by
which the price of the commodity is above the contracted ceiling,
(iv) basis protection swaps, which are arrangements that guarantee the
price differential of oil or gas from a specified delivery point
or points, and
(v) collar arrangements that establish an index-related price below
which the counterparty pays the Company and a separate index-
related price above which the Company pays the counterparty.
Commodity markets are volatile, and as a result, Chesapeake's hedging activity is dynamic. As market conditions warrant, the Company may elect to settle a hedging transaction prior to its scheduled maturity date and, as a result, realize a gain or loss on the transaction.
Results from commodity hedging transactions are reflected in oil and gas sales to the extent related to the Company's oil and gas production. The Company only enters into commodity hedging transactions related to the Company's oil and gas production volumes or CEMI's physical purchase or sale commitments. Gains or losses on crude oil and natural gas hedging transactions are recognized as price adjustments in the months of related production.
The Company has entered into the following "no-cost" natural gas collar transactions:
Estimated NYMEX-Index NYMEX-Index
Monthly % of Floor Price Ceiling Price
Volume (mmbtu) Production (per mmbtu) (per mmbtu)
2001
April 1,800,000 15% $4.00 $6.08
May 1,860,000 16% 4.00 6.08
June 2,400,000 19% 4.25 6.26
July 2,480,000 19% 4.25 6.26
August 2,480,000 19% 4.25 6.26
September 2,400,000 18% 4.25 6.26
October 1,860,000 13% 4.00 6.08
November 1,800,000 13% 4.00 6.08
December 1,860,000 13% 4.00 6.08
Totals/Averages 18,940,000 16% $4.11 $6.16
2002
January 620,000 5% $4.00 $5.75
February 560,000 5% 4.00 5.75
March 620,000 4% 4.00 5.75
April 1,200,000 9% 4.00 5.38
May 1,240,000 9% 4.00 5.38
June 1,200,000 9% 4.00 5.38
July 1,240,000 9% 4.00 5.38
August 1,240,000 9% 4.00 5.38
September 1,200,000 9% 4.00 5.38
October 1,240,000 9% 4.00 5.38
November 600,000 5% 4.00 5.75
December 620,000 4% 4.00 5.75
Totals/Averages 11,580,000 7% $4.00 $5.53
The Company has entered into the following natural gas swap arrangements:
NYMEX-
Monthly Estimated Index
Months Volume % of Strike Price
(MMBtu) Production (per MMBtu)
January 2001 4,960,000 40% $6.03
February 2001 5,320,000 49% 6.12
March 2001 4,650,000 36% 5.11
April 2001 5,400,000 46% 4.84
May 2001 (A) 8,060,000 69% 4.97
June 2001 (A) 6,600,000 53% 5.04
July 2001 (A) 6,820,000 51% 5.05
August 2001 (A) 6,820,000 51% 5.05
September 2001 (A) 6,600,000 50% 5.02
October 2001 (A) 4,340,000 31% 5.58
November 2001 (A) 4,200,000 30% 5.90
December 2001 (A) 4,340,000 30% 6.01
January 2002 (A) 4,650,000 34% 5.98
February 2002 (A) 4,200,000 33% 5.78
March 2002 (A) 4,650,000 33% 5.43
April 2002 (A) 5,700,000 42% 4.85
May 2002 (A) 5,890,000 42% 4.81
June 2002 (A) 5,700,000 42% 4.80
July 2002 (A) 5,890,000 42% 4.81
August 2002 (A) 5,890,000 42% 4.81
September 2002 (A) 5,700,000 42% 4.81
October 2002 (A) 5,890,000 42% 4.80
November 2002 (A) 2,100,000 16% 4.97
December 2002 (A) 2,170,000 15% 5.06
Totals/Averages
(2001 & 2002 combined) 126,540,000 35% 5.23
(A) Cap swap - limits payment by counter party to $1.00-$1.50/mmbtu.
The Company has entered into crude oil swap arrangements designed to hedge 5,000 barrels per day at a NYMEX Index strike price of $29.76 per barrel in January through December 2001, and 10,000 barrels per month at an average price of $29.12 per barrel.
The information in this release includes certain forward-looking statements that are based on assumptions that in the future may prove not to have been accurate. Those statements, and Chesapeake Energy Corporation's business and prospects, are subject to a number of risks, including production variances from expectations, uncertainties about estimates of reserves, volatility of oil and gas prices, the need to develop and replace reserves, the substantial capital expenditures required to fund operations, environmental risks, drilling and operating risks, risks related to exploratory and developmental drilling, competition, government regulation, and the ability of the company to implement its business strategy. These and other risks are described in the company's documents and reports that are available from the United States Securities and Exchange Commission, including those discussed under Risk Factors in the report filed on Form 10-K for the year ended December 31, 2000.
SOURCE: Chesapeake Energy Corporation
Contact: Marc Rowland, Executive Vice President and Chief Financial
Officer, 405-879-9232, or Tom Price, Jr., Senior Vice President, Corporate
Development, 405-879-9257, both of Chesapeake Energy Corporation
Website: http://www.chkenergy.com/
Company News On-Call: http://www.prnewswire.com/comp/138877.html or fax,
800-758-5804, ext. 138877
