Press Releases
Chesapeake Energy Corporation
After allocating $339 million of the $796 million purchase price to unproven assets, Chesapeake's acquisition cost for the 264 bcfe of internally estimated proved reserves will be approximately $1.73 per thousand cubic feet of natural gas equivalent (mcfe). Based on the company's projected development plan, which includes $909 million of anticipated future drilling and development costs, Chesapeake estimates that its all-in cost of acquiring and developing the 660 bcfe of total reserves will be $2.58 per mcfe.
Based on the current purchase price, the acquisitions are located 34% in the Barnett Shale, 34% in South Texas, 12% in the Permian Basin, 11% in the Mid-Continent and 9% in East Texas. Chesapeake's Barnett Shale acreage now exceeds 73,000 net acres (95% of which is in Johnson County) on which it has drilled 54 wells to date and believes it can drill an additional 750-850 wells. On average, Chesapeake has developed 2.3 bcfe per well with its Barnett Shale wells to date. In the Barnett, Chesapeake currently operates 155 wells and has five rigs drilling new wells. The company intends to increase its Barnett Shale rig count to 10 rigs by mid-2006 and to 12-15 rigs by year-end 2006.
Pro forma for these acquisitions and our previously announced acquisition of Columbia Natural Resources, L.L.C., Chesapeake believes that its estimated proved oil and natural gas reserves as of September 30, 2005 will increase to approximately 7.6 trillion cubic feet of natural gas equivalent (tcfe) and its unproven reserves will increase to approximately 7.4 tcfe. The proved reserves associated with the acquisitions have a reserves-to-production index estimated at 13.4 years, are approximately 91% natural gas and have current lease operating expenses of approximately $0.59 per mcfe.
Chesapeake has hedged 100% of the 920 barrels of current daily oil production from the acquired properties at average NYMEX oil prices of $65.43, $65.56 and $63.94 per barrel for 2006, 2007 and 2008, respectively. In addition, the company has hedged 70%, 100% and 100%, respectively, of the 48,700 mmcf of current daily gas production from the acquired properties at average NYMEX gas prices of $9.48, $9.85 and $9.23 per mmbtu for 2006, 2007 and 2008, respectively. All of the oil and natural gas hedges are at prices well above those used by Chesapeake to evaluate the acquisitions.
Chesapeake has recently closed three of the transactions for approximately $486 million in cash and expects to close the remaining acquisitions by February 28, 2006. The pending acquisitions are subject to customary closing conditions and purchase price adjustments, but are not conditioned on the closing of any of the other transactions. Chesapeake intends to finance the acquisitions initially by using its bank credit facility and ultimately by issuing a balance of senior notes and equity securities during 2006 for any acquisition amounts that exceed the company's cash flow less E&P capital expenditures. The company has attached as Schedule "A" to this press release its updated Outlook for 2006 and 2007 which replaces its previous Outlook dated December 6, 2005 (which is attached as Schedule "B" to this press release for investors' convenience).
Chesapeake Also Agrees to Acquire 13 Drilling Rigs from Martex Drilling
Company, L.L.P. for $150 Million
Through its wholly-owned subsidiary Nomac Drilling Corporation, Chesapeake has also recently agreed to acquire 13 drilling rigs and related assets from Martex Drilling Company, L.L.P., a privately-held drilling contractor with operations in East Texas and North Louisiana, for $150 million. Chesapeake is acquiring the rigs to accelerate its drilling activity in the Barnett Shale, Ark-La-Tex and Fayetteville Shale regions, areas where rigs are in especially short supply. With the ownership of more rigs, Chesapeake believes it can accelerate the conversion of its large inventory of proved undeveloped, probable and possible reserves in these areas into producing wells.
Chesapeake currently leases one of the 13 Martex rigs and an E&P affiliate of Martex, Camterra Resources, Inc. is leasing two of the 13 rigs through early 2008. The other 10 rigs are all subject to contracts of up to one year in length and as the existing rig contracts expire, Chesapeake anticipates using the rigs for its own account. With the addition of the 13 Martex rigs, Chesapeake anticipates owning approximately 60 drilling rigs by year-end 2006 and should therefore be able to meet approximately 60% of its drilling needs by year-end 2006 with its own rigs. The closing of the Martex acquisition is subject to purchase price adjustments and customary closing conditions, including the expiration or termination of the waiting period under the Hart- Scott-Rodino Antitrust Improvements Act of 1976. The parties expect to file pre-merger notification forms with the Federal Trade Commission this week and will request early termination of the statutory 30-day waiting period.
Management Comment
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are pleased to announce these recent acquisitions for several reasons. First, they will add to our large and growing presence in the Barnett Shale, South Texas, Permian Basin, Mid-Continent and East Texas regions, all areas of strategic importance to Chesapeake. Second, these acquisitions have all of the attributes of successful previous Chesapeake transactions -- acquisitions from private companies of low-cost, high-margin natural gas properties that have significant exploitation and exploration potential. We are confident that Chesapeake can deliver significant shareholder value from the acquired properties for years to come.
"In addition, the acquisition of Martex will create significant value for the company by enabling us to more quickly convert our extensive inventory of Barnett Shale, Ark-La-Tex and Fayetteville Shale drilling locations into producing assets. We also believe that by owning approximately 60 of our own rigs by year-end 2006, we can create even greater advantages for our company by partially hedging our exposure to any increases in drilling costs, by drilling our wells more efficiently, by competing even more effectively in the acquisitions market where significant future drilling is required and by meeting lease drilling deadlines with greater certainty. In doing so, we can potentially avoid possible expiration of our own leases and improve our ability to acquire other leases that might otherwise expire because of lack of drilling rig availability."
This press release includes "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 give our current expectations or forecasts of future events. They include the acquisitions announced in this press release and related financing plans, estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, and statements concerning anticipated cash flow and liquidity, business strategy and other plans and objectives for future operations. Disclosures concerning the fair value 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 results to differ materially from expected results are described under "Risk Factors" in our prospectus supplement dated December 8, 2005 filed with the Securities and Exchange Commission on December 12, 2005. They include the volatility of oil and gas prices; adverse effects our level of indebtedness and preferred stock could have on our operations and future growth; our ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the timing of development expenditures; our ability to replace reserves and sustain production; uncertainties in evaluating oil and gas reserves of acquired properties and associated potential liabilities; our ability to operate successfully in the Appalachian Basin and integrate newly acquired Columbia Natural Resources into our business; unsuccessful exploration and development drilling; declines in the values of our oil and gas properties resulting in ceiling test write-downs; lower prices realized on oil and gas sales and collateral required to secure hedging liabilities resulting from our commodity price risk management activities; and drilling and operating risks. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release, and we undertake no obligation to update this information.
Our production forecasts are dependent upon many assumptions, including estimates of production decline rates from existing wells and the outcome of future drilling activity. Also, our internal estimates of reserves, particularly those in the properties recently acquired or proposed to be acquired where we may have limited review of data or experience with the reserves, may be subject to revision and may be different from estimates by our external reservoir engineers at year-end. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.
The SEC has generally permitted oil and gas companies, in filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use the terms "probable", "possible" or "unproven" to describe volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC's guidelines may prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the company. While we believe our calculations of unproven drillsites and estimation of unproven reserves have been appropriately risked and are reasonable, such calculations and estimates have not been reviewed by third party engineers or appraisers.
The announcement of a proposed acquisition financing plan in this press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities nor shall there be any sale of securities in any state which offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state. The terms of any such offerings have not been decided.
Chesapeake Energy Corporation is the second largest independent producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and property acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast, Barnett Shale, Ark-La-Tex and Appalachian Basin regions of the United States. The company's Internet address is http://www.chkenergy.com/ .
SCHEDULE "A"
CHESAPEAKE'S OUTLOOK AS OF JANUARY 17, 2006
Quarter Ending March 31, 2006; Year Ending December 31, 2006; Year Ending December 31, 2007.
We have adopted a policy of periodically providing investors with guidance on certain factors that affect our future financial performance. As of January 17, 2006, we are using the following key assumptions in our projections for the first quarter of 2006, the full-year 2006 and the full-year 2007.
The primary changes from our December 6, 2005 Outlook are in italicized bold in the table and are explained as follows:
1) We have updated the projected effect of changes in our hedging
positions since our December 6, 2005 Outlook.
2) We have updated our expectations for future NYMEX oil and gas prices
based on current market conditions in order to illustrate hedging
effects only.
3) We have included the effects of the financing completed in
December 2005 as well as conversions of preferred stock to common
stock since December 6, 2005.
4) We have updated for operational and financial effects of the
acquisitions and anticipated financing of these acquisitions as
described in our press release dated January 17, 2006.
5) We have shown our projections for the quarter ending March 31, 2006
for the first time.
Quarter Ending Year Ending Year Ending
3/31/2006 12/31/2006 12/31/2007
Estimated Production:
Oil - Mbo 1,900 7,700 7,750
Gas - Bcf 121-131 530-540 572-582
Gas Equivalent - Bcfe 132-142 576-586 619-629
Daily gas equivalent
midpoint -in Mmcfe 1,522 1,593 1,709
NYMEX Prices (for
calculation of realized
hedging effects only):
Oil - $/Bo $56.67 $53.54 $50.00
Gas - $/Mcf $9.48 $8.00 $7.00
Estimated Differentials
to NYMEX Prices:
Oil - $/Bo 6-8% 6-8% 6-8%
Gas - $/Mcf 10-15% 8-12% 8-12%
Estimated Realized Hedging
Effects (based on expected
NYMEX prices above):
Oil - $/Bo $2.00 $3.88 $1.45
Gas - $/Mcf $1.51 $1.12 $0.87
Operating Costs per Mcfe
of Projected Production:
Production expense $0.75 - 0.80 $0.77 - 0.82 $0.80 - 0.85
Production taxes
(generally 6.5% of
O&G revenues) (a) $0.52 - 0.56 $0.45 - 0.50 $0.40 - 0.45
General and
administrative $0.11 - 0.13 $0.11 - 0.13 $0.11 - 0.13
Stock-based
compensation
(non-cash) $0.07 - 0.09 $0.08 - 0.10 $0.10 - 0.12
DD&A - oil and gas $2.12 - 2.18 $2.15 - 2.20 $2.25 - 2.30
Depreciation of other
assets $0.10 - 0.12 $0.10 - 0.12 $0.11 - 0.13
Interest expense (b) $0.52 - 0.57 $0.52 - 0.57 $0.53 - 0.58
Other Income and Expense
per Mcfe:
Marketing and other
income $0.02 - 0.04 $0.02 - 0.04 $0.02 - 0.04
Book Tax Rate
(approximately
95% deferred) 36.5% 36.5% 36.5%
Equivalent Shares
Outstanding:
Basic 365 mm 366 mm 371 mm
Diluted 431 mm 432 mm 436 mm
Capital Expenditures:
Drilling, leasehold
and seismic $575 - 625 mm $2,800 - 3,000 mm $3,100-3,300 mm
(a) Severance tax per mcfe is based on NYMEX prices of $57.50 per bo and
natural gas prices ranging from $9.00 to $9.80 per mcf during
Q1 2006, $53.00 per bo and $7.50 to $8.50 per mcf during calendar
2006 and $50.00 per bo and $6.65 to $7.65 per mcf during calendar
2007.
(b) Does not include gains or losses on interest rate derivatives
(SFAS 133).
Commodity Hedging Activities
The company utilizes hedging strategies to hedge the price of a portion of its future oil and gas production. These strategies include:
(i) For swap instruments, we receive a fixed price for the hedged
commodity and pay a floating market price, as defined in each
instrument, to the counterparty. The fixed-price payment and the
floating-price payment are netted, resulting in a net amount due
to or from the counterparty.
(ii) For cap-swaps, Chesapeake receives a fixed price and pays a
floating market price. The fixed price received by Chesapeake
includes a premium in exchange for a "cap" limiting the
counterparty's exposure. In other words, there is no limit to
Chesapeake's exposure but there is a limit to the downside
exposure of the counterparty.
(iii) Basis protection swaps are arrangements that guarantee a price
differential of oil or gas from a specified delivery point.
Chesapeake receives a payment from the counterparty if the price
differential is greater than the stated terms of the contract and
pays the counterparty if the price differential is less than the
stated terms of the contract.
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 lock in the gain or loss on the transaction.
Chesapeake enters into oil and natural gas derivative transactions in order to mitigate a portion of its exposure to adverse market changes in oil and natural gas prices. Accordingly, associated gains or loses from the derivative transactions are reflected as adjustments to oil and gas sales. All realized gains and losses from oil and natural gas derivatives are included in oil and gas sales in the month of related production. Pursuant to SFAS 133, certain derivatives do not qualify for designation as cash flow hedges. Changes in the fair value of these non-qualifying derivatives that occur prior to their maturity (i.e. because of temporary fluctuations in value) are reported currently in the consolidated statement of operations as unrealized gains (losses) within oil and gas sales.
Following provisions of SFAS 133, changes in the fair value of derivative instruments designated as cash flow hedges, to the extent effective in offsetting cash flows attributable to hedged risk, are recorded in other comprehensive income until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized currently in oil and natural gas sales.
We have not reflected any of the derivative positions acquired from CNR in the following tables. We have recorded such positions at fair value in the purchase price allocation as a liability on the date of acquisition. Changes in fair value subsequent to the acquisition date for the derivative positions assumed will result in adjustments to our oil and gas revenues only upon cash settlement and only to the extent the cash settlement differs from the original liability recorded.
The company currently has in place the following natural gas swaps:
% Hedged
Avg.
Avg. NYMEX
NYMEX Gain Price Open Swap
Strike (Loss) Including Positions as a
Open Price from Open & Assuming Gas % of Estimated
Swaps Of Open Locked Locked Production Total
in Bcf's Swaps Swaps Positions in Bcf's of: Gas Production
2006:
Q1 93.5 $10.81 -$0.09 $10.72 126.0 74%
Q2 75.5 $8.79 -$0.08 $8.71 132.0 57%
Q3 76.4 $8.79 -$0.07 $8.72 137.0 56%
Q4 64.7 $9.08 -$0.07 $9.01 140.0 46%
Total 2006
(1) 310.1 $9.46 -$0.08 $9.38 535.0 58%
Total 2007 131.2 $9.81 -$0.09 $9.72 577.0 23%
Total 2008 78.7 $8.82 --- $8.82 604.0 13%
(1) Certain hedging arrangements include swaps with knockout prices
ranging from $3.75 to $5.50 covering 43.0 bcf in 2006.
Note: Not shown above are collars covering 0.2 bcf of production in 2006
at a weighted average floor and ceiling of $6.00 and $9.70 and call
options covering 7.3 bcf of production in 2006 at a weighted average
price of $12.50, 7.3 bcf of production in 2007 at a weighted average
price of $12.50 and 7.3 bcf of production in 2008 at a weighed average
price of $12.50.
The company has also entered into the following natural gas basis protection swaps:
Assuming Gas
Production in
Volume in Bcf's NYMEX less*: Bcf's of: % Hedged
2006 130.1 $0.32 535 24%
2007 137.2 0.33 577 24%
2008 118.6 0.27 604 20%
2009 86.6 0.29 634 14%
Totals 472.5 $0.30 2,350 20%
* weighted average
The company has entered into the following crude oil hedging arrangements:
% Hedged
Assuming Oil Open Swap Positions
Open Swaps Avg. NYMEX Production as % of Total
in mbo's Strike Price in mbo's of: Estimated Production
2006:
Q1 1,109.5 $60.03 1,900.0 58%
Q2 1,153.0 $60.27 1,920.0 60%
Q3 1,104.0 $60.56 1,940.0 57%
Q4 1,058.0 $60.30 1,940.0 55%
Total 2006(1) 4,424.5 $60.29 7,700.0 57%
Total 2007 1,182.5 $59.79 7,750.0 15%
Total 2008 549.0 $63.94 7,800.0 7%
(1) Certain hedging arrangements include swaps with knockout prices
ranging from $40.00 to $42.00 covering 501.5 mbo in 2006.
SCHEDULE "B"
CHESAPEAKE'S PREVIOUS OUTLOOK AS OF DECEMBER 6, 2005
(PROVIDED FOR REFERENCE ONLY)
NOW SUPERSEDED BY OUTLOOK AS OF JANUARY 17, 2006
Quarter Ending December 31, 2005; Year Ending December 31, 2005; Year Ending December 31, 2006; Year Ending December 31, 2007.
We have adopted a policy of periodically providing investors with guidance on certain factors that affect our future financial performance. As of December 6, 2005, we are using the following key assumptions in our projections for the fourth quarter of 2005, the full-year 2005, the full-year 2006 and the full-year 2007.
The primary changes from our October 31, 2005 Outlook are in italicized bold in the table and are explained as follows:
1) We have updated the projected effect of changes in our hedging
positions since our October 31, 2005 Outlook.
2) We have updated our expectations for future NYMEX oil and gas prices
based on current market conditions in order to illustrate hedging
effects only.
3) We have included the effects of the financings completed in November
2005 as well as conversions of preferred stock to common stock since
September 30, 2005.
Quarter Ending Year Ending Year Ending Year Ending
12/31/2005 12/31/2005 12/31/2006 12/31/2007
Estimated Production:
Oil - Mbo 1,950 7,650 7,700 7,750
Gas - Bcf 112-114 416-419 512-522 553-563
Gas Equivalent - Bcfe 124-126 462-465 558-568 599-609
Daily gas equivalent
midpoint - in Mmcfe 1,359 1,270 1,543 1,655
NYMEX Prices (for
calculation of realized
hedging effects only):
Oil - $/Bo $60.20 $56.60 $50.00 $50.00
Gas - $/Mcf $13.00 $8.64 $7.00 $7.00
Estimated Differentials
to NYMEX Prices:
Oil - $/Bo 6-8% 6-8% 6-8% 6-8%
Gas - $/Mcf 10-15% 8-12% 8-12% 8-12%
Estimated Realized
Hedging Effects (based
on expected NYMEX
prices above):
Oil - $/Bo -$2.85 -$4.31 $4.94 $0.35
Gas - $/Mcf -$2.59 -$0.66 $1.53 $0.57
Operating Costs per Mcfe
of Projected Production:
Production expense $0.70-0.74 $0.68-0.72 $0.77-0.82 $0.80-0.85
Production taxes
(generally 6.5% of
O&G revenues) (a) $0.60-0.64 $0.45-0.50 $0.40-0.45 $0.40-0.45
General and
administrative $0.10-0.12 $0.10-0.12 $0.11-0.13 $0.11-0.13
Stock-based
compensation
(non-cash) $0.03-0.05 $0.03-0.05 $0.08-0.10 $0.10-0.12
DD&A - oil and gas $2.05-2.10 $1.85-1.95 $2.15-2.20 $2.25-2.30
Depreciation of
other assets $0.10-0.12 $0.09-0.11 $0.10-0.12 $0.11-0.13
Interest
expense (B) $0.48-0.52 $0.45-0.49 $0.48-0.53 $0.50-0.55
Other Income and
Expense per Mcfe:
Marketing and
other income $0.02-0.04 $0.02-0.04 $0.02-0.04 $0.02-0.04
Book Tax Rate
(approximately
95% deferred) 36.5% 36.5% 36.5% 36.5%
Equivalent Shares
Outstanding:
Basic 346 mm 322 mm 361 mm 365 mm
Diluted 406 mm 375 mm 427 mm 431 mm
Capital Expenditures:
Drilling, leasehold
and seismic $575-625 $2,000-2,200 $2,700-2,900 $3,100-3,300
mm mm mm mm
(a) Severance tax per mcfe is based on NYMEX prices of $60.00 per bo and
natural gas prices ranging from $9.00 to $11.30 per mcf during Q4
2005, $60.00 per bo and natural gas prices ranging from $7.25 to
$12.50 per mcf during calendar 2005, $50.00 per bo and $6.75 to
$7.60 per mcf during calendar 2006 and 2007.
(b) Does not include gains or losses on interest rate derivatives
(SFAS 133).
Commodity Hedging Activities
The company utilizes hedging strategies to hedge the price of a portion of its future oil and gas production. These strategies include:
(i) For swap instruments, we receive a fixed price for the hedged
commodity and pay a floating market price, as defined in each
instrument, to the counterparty. The fixed-price payment and the
floating-price payment are netted, resulting in a net amount due to
or from the counterparty.
(ii) For cap-swaps, Chesapeake receives a fixed price and pays a
floating market price. The fixed price received by Chesapeake
includes a premium in exchange for a "cap" limiting the
counterparty's exposure. In other words, there is no limit to
Chesapeake's exposure but there is a limit to the downside exposure
of the counterparty.
(iii) Basis protection swaps are arrangements that guarantee a price
differential of oil or gas from a specified delivery point.
Chesapeake receives a payment from the counterparty if the price
differential is greater than the stated terms of the contract and
pays the counterparty if the price differential is less than the
stated terms of the contract.
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 lock in the gain or loss on the transaction.
Chesapeake enters into oil and natural gas derivative transactions in order to mitigate a portion of its exposure to adverse market changes in oil and natural gas prices. Accordingly, associated gains or loses from the derivative transactions are reflected as adjustments to oil and gas sales. All realized gains and losses from oil and natural gas derivatives are included in oil and gas sales in the month of related production. Pursuant to SFAS 133, certain derivatives do not qualify for designation as cash flow hedges. Changes in the fair value of these non-qualifying derivatives that occur prior to their maturity (i.e. because of temporary fluctuations in value) are reported currently in the consolidated statement of operations as unrealized gains (losses) within oil and gas sales.
Following provisions of SFAS 133, changes in the fair value of derivative instruments designated as cash flow hedges, to the extent effective in offsetting cash flows attributable to hedged risk, are recorded in other comprehensive income until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized currently in oil and natural gas sales.
We have not reflected any of the derivative positions acquired from CNR in the following tables. We have recorded such positions at fair value in the purchase price allocation as a liability on the date of acquisition. Changes in fair value subsequent to the acquisition date for the derivative positions assumed will result in adjustments to our oil and gas revenues only upon cash settlement and only to the extent the cash settlement differs from the original liability recorded.
The company currently has in place the following natural gas swaps:
% Hedged
Avg.
Avg. NYMEX
NYMEX Gain Price Open Swap
Strike (Loss) Including Positions as a
Open Price from Open & Assuming Gas % of Estimated
Swaps Of Open Locked Locked Production Total
in Bcf's Swaps Swaps Positions in Bcf's of: Gas Production
2005:
Q4 2005 (1) 86.9 $8.46 -$0.13 $8.33 113.0 77%
2006:
Q1 84.0 $10.45 -$0.10 $10.35 122.0 69%
Q2 65.5 $8.55 -$0.09 $8.46 127.0 52%
Q3 66.2 $8.54 -$0.08 $8.46 132.0 50%
Q4 55.9 $8.77 -$0.09 $8.68 136.0 41%
Total
2006 (1) 271.6 $9.18 -$0.09 $9.09 517.0 53%
Total 2007 71.0 $9.61 -$0.17 $9.44 558.0 13%
Total 2008 37.5 $8.56 --- $8.56 585.0 6%
(1) Certain hedging arrangements include swaps with knockout prices
ranging from $3.75 to $5.50 covering 20.1 bcf in 2005 and $3.75 to
$5.50 covering 43.0 bcf in 2006.
Note: Not shown above are collars covering 1.4 bcf of production in 2005 at a weighted average floor and ceiling of $3.49 and $5.27 and 0.2 bcf of production in 2006 at a weighted average floor and ceiling of $6.00 and $9.70 and call options covering 1.8 bcf of production in 2005 at a weighted average price of $5.86, 7.3 bcf of production in 2006 at a weighted average price of $12.50, 7.3 bcf of production in 2007 at a weighted average price of $12.50 and 7.3 bcf of production in 2008 at a weighed average price of $12.50.
The company has also entered into the following natural gas basis protection swaps:
Assuming Gas
Production in
Volume in Bcf's NYMEX less*: Bcf's of: %Hedged
4th Quarter 2005 49.4 $ 0.27 113 44%
2006 130.1 0.32 517 25%
2007 137.2 0.33 558 25%
2008 118.6 0.27 585 20%
2009 86.6 0.29 615 14%
Totals 521.9 $ 0.30 2,388 22%
* weighted average
The company has entered into the following crude oil hedging arrangements:
% Hedged
Assuming Oil Open Swap Positions
Open Swaps Avg. NYMEX Production as % of Total
in mbo's Strike Price in mbo's of: Estimated Production
2005:
Q4 2005 (1) 1,073.5 $54.97 1,950.0 55%
2006:
Q1 1,035.0 $59.71 1,900.0 54%
Q2 1,016.5 $59.60 1,920.0 53%
Q3 966.0 $59.83 1,940.0 50%
Q4 920.0 $59.45 1,940.0 47%
Total
2006 (1) 3,937.5 $59.65 7,700.0 51%
Total 2007 635.0 $54.29 7,750.0 8%
(1) Certain hedging arrangements include swaps with knockout prices
ranging from $26.00 to $42.00 covering 276 mbo in 2005 and $40.00 to
$42.00 covering 501.5 mbo in 2006.
SOURCE: Chesapeake Energy Corporation
CONTACT: Jeffrey L. Mobley, CFA, Vice President, Investor Relations and
Research, +1-405-767-4763, or
Executive Vice President and Chief Financial Officer, +1-405-879-9232, or
Web site: http://www.chkenergy.com/
