Chesapeake Energy 1993 Annual Report Download - page 5

capital budget for new wells of only$7.4 million, we
were still able to replace. 1 76% of our production in
1993
This was achieved even though the increased drilling
activity that resulted from our IPO did not
materially affect.o'ur.operating results in fiscal 1993.
However, we are now seeing the benefits of
increased drilling activity In the first quarter of
fiscal 1994, net production was up .56% compared'
V.. to the first fiscal quarter of 1993. For all of fiscal
1.994, we anticipate increasing producfion volumes
by more than 50% over the previous year. This
trend shbuld provide excellent .earnings and cash
flow increases, creating strong momentum, for per
share value growth. .V
FINANCIAL RESULTS .V
Despite reporting a loss of $365,000 in fiscal 1993,
we believe the strength of our management team
and our, strategy of growth through drilling will
translate into 'improved financial results in fiscal:
1994.
To a large degree,' the company's earnings decline in
1993 was the result of a special charge of$1.3.
million as a provision for litigation expen,se'and legal
settlements. Although distasteful, the settlements
have nowallowed management to focus its efforts
on enhancing shareholder value, through the
development:of the company's large reserve base.
During the past fOur'
fiscal yeals w have.
increased our
revenues from $0.6
millionto $18.0
million? increased our
annual production
frOm 0.2 BCFE to
4.3 .BCFE', increased
total assets from $7.5
million'to $77.8
million, and enlarged
our proved reserve
.base from 10.9 BCFE to 137.5' BCFE. These fOur-'
year growth rates are among the highest in the
independent energy sector. As our capital
'requirements are met, we expect. impressive rates of
growth.to continue.
OUTLOOK FOR OUR FUTURE
Some of our pçer are spreading their drillig
budgets across both domestic and international
drilling projects. We believe this is' an inappropriate
strategy for a medium-sized independent producer.
'Therefore, Chesapeake has focused, virtually all, of its
fiscal 1994 capital budget on developmental drilling
in the Giddings and Golden Trend Fields, two of
the most active fields in the nation and areas where
we have historically performed well
'Our goals for 1994 and beyond remain,, ambitious.
We believe the rest of the decade will be rewarding
for well-managed, gas-leveraged cornpanie that have
"demonstrated the capability to grow through .
drilling. We will continue to concentrate on, areas
where we have competitive advantages such, as the
Giddings and Golden Trend Fields We intend to
increase our asset base and financial strength
through continued acquisition and development of
strategic leasehold blocks where we can utilize our
geologicaland engineering strengths tp deliver
attractive financial results.
We emphasize to all of our current and prospective
'shareholders that we are dedicated to creating
consistent and sustained growth in' shareholder
value. With management owning more. than .50% of
'the outstanding common shares, the financial
interests of management and shareholders are truly
aligned. ".
We are grateful to our dedicated employees.for their
hard wOrk and strong performance during a
challenging year, We also wish to thank our
drectors fOr their leadership and counsel and our
'shareholders for their continued confidence. We
encourage you to share our enthusiasm for,'
Chesapeake's future. .
Aubrey K. McClendon.
Chairman and ChiefExecutive Officer
//&
ToiL..Ward
President and Chief Operating Officer