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) AUGUST 28, 1997
CHESAPEAKE ENERGY CORPORATION
(Exact name of Registrant as specified in its Charter)
OKLAHOMA 1-13726 73-1395733
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification 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
On August 28, 1997, Chesapeake Energy Corporation ("Chesapeake") issued a
press release announcing fiscal 1997 results. The August 28, 1997 press
release is filed herewith as Exhibit 99 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits. The following exhibit is filed herewith:
99 Press Release issued by the Registrant on August 28, 1997.
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 MARCUS C. ROWLAND
Marcus C. Rowland
Vice President - Chief Financial Officer
Dated: September 3, 1997
__________________________EXHIBIT INDEX______________________________
EXHIBIT DESCRIPTION METHOD OF FILING
99 Press Release issued by the Filed herewith electronically
Registrant on August 28, 1997.
CONTACT: MARC ROWLAND, CHIEF FINANCIAL OFFICER
(405)848-8000, EXT. 232
FOR IMMEDIATE RELEASE TOM PRICE, JR.,VICE PRESIDENT-
AUGUST 28, 1997 CORPORATE DEVELOPMENT
(405)848-8000, EXT. 257
CHESAPEAKE ENERGY CORPORATION
ANNOUNCES FISCAL 1997 RESULTS
OKLAHOMA CITY, OKLAHOMA, AUGUST 28, 1997 -- Chesapeake Energy Corporation
(NYSE:CHK) today reported preliminary financial results for the fiscal 1997
year ended June 30, 1997. For the year, Chesapeake expects to report a net
loss of $183 million, or $2.63 per common share, on total revenue of $280
million. This loss includes the impact of a $236 million asset writedown
recorded in the fourth quarter under the full cost method of accounting.
Excluding the impact of the writedown, net income after extraordinary items for
the year was $28 million, or $0.40 per common share. By comparison, in fiscal
1996, Chesapeake reported net income of $23 million, or $0.40 per common share,
on total revenue of $149 million. Operating cash flow for fiscal 1997
increased 80% to $163 million compared to $90 million in fiscal 1996.
Additional financial information will be available in Chesapeake's fiscal 1997
Form 10-K, which will be filed prior to September 30, 1997.
PRODUCTION VOLUMES AND RESERVE INFORMATION
During fiscal 1997, Chesapeake's oil and natural gas production totaled 79
billion cubic feet of natural gas equivalent (bcfe), a 31% increase over the 60
bcfe produced in fiscal 1996. During the fourth quarter, Chesapeake produced
21.3 bcfe, a 4% increase over the 20.5 bcfe produced in the fiscal 1997 third
quarter and a 21% increase over the 17.6 bcfe produced in the fourth quarter
last year.
As of June 30, 1997, Chesapeake's estimated proved reserves were 17.4 million
barrels of oil and 299 billion cubic feet of natural gas, or 403 bcfe, a 5%
decrease from last year's 425 bcfe of proved reserves. The company's estimated
proved undeveloped reserves, particularly in the Knox and Independence areas,
were negatively impacted in the fourth quarter by increased development costs
and decreased gas prices as of June 30. The present value of the estimated
future net revenue attributable to Chesapeake's proved reserves (before income
taxes and discounted at 10%) was $437 million.
FISCAL 1998 BUDGET, CASH RESOURCES, AND INVESTMENT PORTFOLIO
Chesapeake's fiscal 1998 capital expenditure budget is projected to be $250-275
million. This budget will be funded from the company's fiscal 1998 operating
cash flow and the company's June 30, 1997 cash and short term investments of
approximately $200 million. Additionally, during fiscal 1998, the company
expects to generate $100-125 million in cash (and realize $40-50 million of
pre-tax gains) from the sale of its strategic investments in the oil field
service and gas gathering and processing industries. As an additional cash
resource consideration, none of Chesapeake's debt has scheduled principal
payments during the next five years.
Chesapeake's strategic investments consists of three primary assets: (i) 39%
ownership of Bayard Drilling Technologies, Inc. (the largest private drilling
contractor in the U.S. and fifth largest overall); (ii) 50% interest in the
Louisiana Austin Chalk Gathering System (a joint venture with Mitchell Energy
and Development Corporation); and (iii) 15.5% interest in the Masters Creek Gas
Plant (a joint venture among Union Pacific Resources Corporation, Sonat Inc.,
Helmerich & Payne, Inc., and OXY USA, Inc.). On August 27, 1997, Bayard filed
a registration statement for an initial public offering of its common stock.
Chesapeake anticipates selling substantially all of its ownership in Bayard in
the IPO.
DRILLING PROGRAM UPDATE
Chesapeake is currently utilizing 25 rigs to conduct its fiscal 1998 drilling
program. Of these rigs, 10 are drilling in the Louisiana Trend, 4 are drilling
in the Giddings Field, 8 are drilling in southern Oklahoma, 2 are drilling in
New Mexico, and 1 is drilling in Montana.
LOUISIANA AUSTIN CHALK TREND UPDATE
In the Louisiana Austin Chalk Trend, Chesapeake is currently drilling 10 gross
(8.5 net) wells and is participating in an additional 17 gross (1.4 net) wells
operated by others:
Well # Well Name Area Operator Status
1. Addison 8 Masters Creek Chesapeake Drilling Vertically
2. Clark 23 St. Landry Chesapeake Preparing to Spud
3. Cypress 1 S. Brookeland Chesapeake Drilling Vertically
4. Giles 22 Masters Creek Chesapeake Drilling Horizontally
5. Labokay 26 Masters Creek Chesapeake Drilling Horizontally
6. Lord 1 Masters Creek Chesapeake Drilling Vertically
7. Lord 25 Masters Creek Chesapeake Drilling Horizontally
8. McRight 11 Masters Creek Chesapeake Drilling Horizontally
9. Rieckers 5 Masters Creek Chesapeake Preparing to Spud
10. Wahlder 29 Masters Creek Chesapeake Drilling Horizontally
11. Harmon 16 Baton Rouge Union Pacific Waiting on Pipeline
12. Crosby 12 Masters Creek Union Pacific Waiting on Pipeline
13. Crosby 13 Masters Creek Union Pacific Drilling Horizontally
14. Crosby "A" 22 Masters Creek Union Pacific Drilling Vertically
15. Crosby 27 Masters Creek Union Pacific Drilling Vertically
16. Exxon 2 Masters Creek Union Pacific Drilling Vertically
17. Johnson 24 Masters Creek Union Pacific Drilling Horizontally
18. Quinn 15 Masters Creek Union Pacific Drilling Vertically
19. Rice Land 14 S. Brookeland Union Pacific Completing
20. Goins 7 Masters Creek Sonat Completing
21. Hudson 2 Masters Creek Sonat Drilling Vertically
22. Maricle 14 Masters Creek Sonat Drilling Horizontally
23. Bullock "A" 5 Masters Creek OXY Drilling Vertically
24. Lambright "A" 4 Masters Creek OXY Drilling Vertically
25. Mid-State "A" 27 Masters Creek OXY Drilling Horizontally
26. Myers 17 St. Landry Belco Drilling Vertically
27. Merrick Estate 10 Baton Rouge Amoco Drilling Vertically
Initial production test data from five of Chesapeake's ten drilling wells and
eight of the 17 wells operated by others should be available by late September.
To date, 96 wells have been drilled or are drilling in the Louisiana Austin
Chalk Trend, of which 66 are located in the Masters Creek area. The tables
below summarize the activity currently known to Chesapeake in the Louisiana
Trend:
Masters Creek: Productive Abandoned Drilling Total
Chesapeake 15 1 8 24
Union Pacific 10 2 10 22
Sonat 5 0 5 10
Oxy 7 0 3 10
Belco 0 0 0 0
-- -- -- --
Masters Creek Industry
Totals 37 3 26 66
== == == ==
_______________
Includes wells producing and waiting on pipeline.
Non-Masters Creek: Productive Abandoned Drilling Total
Chesapeake 8 6 2 16
Union Pacific 3 1 1 5
Sonat 2 0 0 2
Oxy 1 0 1 2
Belco 3 1 1 5
-- -- -- --
Non-Masters Creek Industry
Totals 17 8 5 30
== == == ==
_______________
Includes wells producing and waiting on pipeline.
MANAGEMENT COMMENT
Aubrey K. McClendon, Chesapeake's Chief Executive Officer provided the
following summary: "While we are obviously disappointed with the financial
results of fiscal 1997, we believe our performance in fiscal 1998 will improve.
Because of our redirected Austin Chalk drilling program in Louisiana, ongoing
developmental drilling campaigns in southern Oklahoma and in Giddings, recent
exploration results in the Nesson project in North Dakota and the Lovington
project in New Mexico, and exploration initiatives in the Tuscaloosa in
Louisiana, the Wilcox in Louisiana and Texas, and the Deep Arbuckle in
Oklahoma, we believe fiscal 1998 will mark an important turnaround period for
Chesapeake.
We believe the keys to our recovery are in place: $300 million in cash and
expected investment realizations, a re-focused and lower risk drilling program,
and an experienced and motivated management team. We look forward to sharing
with you our anticipated improvement in corporate performance in fiscal 1998.
Additionally, Chesapeake's Board of Directors has recently approved the
repurchase of up to $50 million of the company's common stock. These purchases
may be made from time to time through open market transactions, privately
negotiated transactions, or block trades."
####
CHESAPEAKE ENERGY CORPORATION IS AN INDEPENDENT OIL AND NATURAL GAS PRODUCER
HEADQUARTERED IN OKLAHOMA CITY WHICH SPECIALIZES IN UTILIZING ADVANCED SEISMIC,
DRILLING AND COMPLETION TECHNOLOGIES TO DEVELOP NEW RESERVES OF OIL AND NATURAL
GAS. THE COMPANY'S OPERATIONS ARE FOCUSED ON EXPLORATORY AND DEVELOPMENTAL
DRILLING IN MAJOR ONSHORE PRODUCING AREAS OF THE UNITED STATES.
THE INFORMATION IN THIS RELEASE INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS
THAT ARE BASED ON ASSUMPTIONS THAT IN THE FUTURE MAY PROVE NOT TO HAVE BEEN
ACCURATE. THOSE STATEMENTS, AND CHESAPEAKE ENERGY CORPORATION'S BUSINESS AND
PROSPECTS, ARE SUBJECT TO A NUMBER OF RISKS, INCLUDING PRODUCTION VARIANCES
FROM EXPECTATIONS, VOLATILITY OF OIL AND GAS PRICES, THE NEED TO DEVELOP AND
REPLACE ITS RESERVES, THE SUBSTANTIAL CAPITAL EXPENDITURES REQUIRED TO FUND ITS
OPERATIONS, ENVIRONMENTAL RISKS, DRILLING AND OPERATING RISKS, RISKS RELATED TO
EXPLORATORY AND DEVELOPMENTAL DRILLING, UNCERTAINTIES ABOUT ESTIMATES OF
RESERVES, COMPETITION, GOVERNMENT REGULATION, AND THE ABILITY OF THE COMPANY TO
IMPLEMENT ITS BUSINESS STRATEGY. THESE AND OTHER RISKS ARE DESCRIBED IN THE
COMPANY'S DOCUMENTS AND REPORTS THAT ARE AVAILABLE FROM THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in 000's, except per share data)
(unaudited)
THREE MONTHS ENDED: June 30, 1997 June 30, 1996
-------------------------------- ----------------------------------
$ $/MCFE $ $/MCFE
--------------- --------------- --------------- ----------------
REVENUES:
Oil and gas sales 45,354 2.13 33,612 1.91
Oil and gas marketing sales 23,743 1.12 13,083 0.75
Oil and gas service operations - - 997 0.06
Interest and other 5,430 0.25 1,790 0.10
------------- ----------- ------------ ---------
Total revenues 74,527 3.50 49,482 2.82
------------- ----------- ------------ ---------
EXPENSES:
Production expenses and taxes 4,925 0.23 2,464 0.14
Oil and gas marketing expenses 23,845 1.12 12,898 0.73
Oil and gas service operations - - 632 0.04
Impairment of oil and gas properties 236,000 11.09 - -
Depreciation, depletion, and amortization
of oil and gas properties 42,358 1.99 15,631 0.89
Depreciation and amortization of other assets 1,073 0.05 1,006 0.06
General and administrative 2,582 0.12 1,481 0.08
Interest 8,680 0.41 3,962 0.23
------------- ----------- ------------ ---------
Total expenses 319,463 15.01 38,074 2.17
------------- ----------- ------------ ---------
Income (Loss) Before Income Taxes
and Extraordinary Item (244,936) (11.51) 11,408 0.65
Provision (Benefit) for Income Taxes (27,153) (1.28) 4,050 0.23
------------- ----------- ------------ ---------
Income (Loss) Before Extraordinary Item (217,783) (10.23) 7,358 0.42
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
applicable income tax - - - -
------------- ----------- ------------ ---------
NET INCOME (LOSS) (217,783) (10.23) 7,358 0.42
============= =========== ============ =========
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE (PRIMARY)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2.97) - 0.12 -
EXTRAORDINARY ITEM - - - -
------------- ----------- ------------ ---------
NET INCOME (LOSS) (2.97) - 0.12 -
============= =========== ============ =========
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE (FULLY DILUTED)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2.97) - 0.12 -
EXTRAORDINARY ITEM - - - -
------------- ----------- ------------ ---------
NET INCOME (LOSS) (2.97) - 0.12 -
============= =========== ============ =========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (IN 000'S)
PRIMARY 73,315 - 63,410 -
FULLY DILUTED 73,315 - 63,626 -
============= =========== ============ =========
OPERATING CASH FLOWS 34,495 1.62 28,045 1.60
============= =========== ============ =========
PRODUCTION AND PRICING DATA:
THOUSANDS OF BARRELS OF OIL (MBBL): 853 + 126% 377
MILLIONS OF CUBIC FEET OF GAS (MMCF): 16,168 + 6% 15,300
MILLIONS OF CUBIC FEET OF GAS EQUIVALENTS (MMCFE): 21,286 + 21% 17,562
AVERAGE PRICE/BARREL $ 19.10 + 1% $ 18.94
AVERAGE PRICE/MCF $ 1.80 + 4% $ 1.73
AVERAGE GAS EQUIVALENT PRICE/MCFE $ 2.13 + 12% $ 1.91
_______________
Income (loss) before extraordinary item, depreciation, depletion and amortization, income tax,
and impairment of oil and gas properties.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ IN 000'S, EXCEPT PER SHARE DATA)
(UNAUDITED)
FISCAL YEAR ENDED: JUNE 30, 1997 JUNE 30, 1996
-------------------------------- --------------------------------
$ $/MCFE $ $/MCFE
------------- ------------ ------------- --------------
REVENUES:
Oil and gas sales 192,920 2.45 110,849 1.84
Oil and gas marketing sales 76,172 0.97 28,428 0.47
Oil and gas service operations - - 6,314 0.11
Interest and other 11,223 0.15 3,831 0.06
------------- ------------ ------------- ----------
Total revenues 280,315 3.57 149,422 2.48
------------- ------------ ------------- ----------
EXPENSES:
Production expenses and taxes 15,107 0.19 8,303 0.14
Oil and gas marketing expenses 75,140 0.96 27,452 0.45
Oil and gas service operations - - 4,895 0.08
Impairment of oil and gas properties 236,000 3.00 - -
Depreciation, depletion, and amortization
of oil and gas properties 103,264 1.31 50,899 0.85
Depreciation and amortization of other assets 3,782 0.05 3,157 0.05
General and administrative 8,802 0.11 4,828 0.08
Interest 18,550 0.24 13,679 0.23
------------- ------------ ------------- ----------
Total expenses 460,645 5.86 113,213 1.88
------------- ------------ ------------- ----------
Income (Loss) Before Income Taxes
and Extraordinary Item (180,330) (2.29) 36,209 0.60
Provision (Benefit) for Income Taxes (3,573) (0.04) 12,854 0.21
------------- ------------ ------------- ----------
Income (Loss) Before Extraordinary Item (176,757) (2.25) 23,355 0.39
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
applicable income tax of $3,804 (6,620) (0.08) - -
------------- ------------ ------------- ----------
NET INCOME (LOSS) (183,377) (2.33) 23,355 0.39
============= ============ ============= ==========
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE (PRIMARY)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2.53) - 0.40 -
EXTRAORDINARY ITEM (0.10) - - -
------------- ------------ ------------- ----------
NET INCOME (LOSS) (2.63) - 0.40 -
============= ============ ============= ==========
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE (FULLY DILUTED)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2.53) - 0.40 -
EXTRAORDINARY ITEM (0.10) - - -
------------- ------------ ------------- ----------
NET INCOME (LOSS) (2.63) - 0.40 -
============= ============ ============= ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (IN 000'S)
PRIMARY 69,838 - 58,342 -
FULLY DILUTED 69,838 - 58,922 -
============= ============ ============= ==========
OPERATING CASH FLOWS 162,716 2.07 90,265 1.50
============= ============ ============= ==========
PRODUCTION AND PRICING DATA:
THOUSANDS OF BARRELS OF OIL (MBBL): 2,770 + 96% 1,413
MILLIONS OF CUBIC FEET OF GAS (MMCF): 62,005 + 20% 51,710
MILLIONS OF CUBIC FEET OF GAS EQUIVALENTS (MMCFE): 78,625 + 31% 60,190
AVERAGE PRICE/BARREL $ 20.93 + 17% $ 17.85
AVERAGE PRICE/MCF $ 2.18 + 31% $ 1.66
AVERAGE GAS EQUIVALENT PRICE/MCFE $ 2.45 + 33% $ 1.84
- ----------------
Income (loss) before extraordinary item, depreciation, depletion and amortization, income tax,
and impairment of oil and gas properties.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
SUMMARIZED CONSOLIDATED BALANCE SHEET
($ IN 000'S)
(UNAUDITED)
JUNE 30, 1997 JUNE 30, 1996
--------------- --------------
Cash and short-term investments $206,649 $51,638
Other current assets 90,956 57,535
--------------- --------------
Total current assets 297,605 109,173
Property and equipment 607,366 451,174
Other assets 44,097 11,988
--------------- --------------
TOTAL ASSETS $949,068 $572,335
=============== ==============
Current liabilities $146,326 $108,834
Long-term liabilities 515,853 285,734
Stockholders' equity 286,889 177,767
--------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $949,068 $572,335
=============== ==============
RESERVE DATA
JUNE 30, 1997
GAS
OIL GAS EQUIVALENT
(MBbl) (MMcf) (MMcfe)
--------- --------- ---------
Proved Developed Reserves 7,324 151,879 195,823
Proved Undeveloped Reserves 10,049 146,887 207,181
--------- --------- ---------
Total Proved Reserves 17,373 298,766 403,004
========= ========= =========
SEC PV 10% $437,386
Weighted Average Year-end
Pricing $18.38 $2.12