Chesapeake Energy 1997 Annual Report Download - page 6
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Please find page 6 of the 1997 Chesapeake Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Chesapeake and believe future drilling successes will increase our
company's value. Determined to prove that fiscal 1997's drilling
results were an aberration, we have embarked on what the com-
pany believes is the appropriate road to recovery in fiscal 1998.
Road to Recovery
What is this road to recovery and why should shareholders
have filith in management's ability to navigate this road? First,
the company continues to have substantial financial resources to
develop its two million acre onshore U.S. leasehold inventory
and ro complete the 3-D seismic studies which will help high-
grade our drilling efforts. Including the expected monetization
during the second quarter of fiscal 1998 of our 30% investment
in Bayard Drilling Technologies, Inc. (the fifth largest onshore
drilling contractor in the U.S. and presently in registration for
its IPO), we have more than $200 million of cash and invest-
ments to conduct our future drilling programs. Additionally,
we have structured our long-term debt so that it has an average
life of nine years with none
of it scheduled to mature
until 2002.
Second, we have reduced
significantly the scope of our
exploration program in
1993 1994 995 1996 1997 Louisiana. Although this may
Total Revenue Growth reduce the potential for hitting
home runs with our drilling efforts, we hope to continue target-
ing production increases of 10-15% per year while incurring
lower risk. We plan to achieve this lower risk profile by delaying
our drilling activities outside of Masters Creek and letting our
200,000
150,000
£100,000
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LETTER To SHAREHOLDERS
CHESAPEAKE ENERGY CORPORATION
competitors establish the
economic viability of a particu-
lar area. Our plan is then to
begin developing the compa-
ny's leasehold in the new area
at a lower risk than if we had
drilled the initial well.
We are also modif'ing
our historical approach of achieving growth exclusively through
993 1994 1995 I
Cash Flow Growth
U-
.While the oii and gas industry remains a high-risk business with many short-
term ups and downs, we believe the Chesapeake management team has made the
necessary adjustments to achieve success for our company in the years ahead."
the drillbit by selectively acquiring underdeveloped producing
properties and undercapitalized companies. We believe the
imposing and increasing costs of conducting 3-D seismic and
horizontal drilling programs, combined with the limited num-
ber of people experienced in utilizing these technologies, will
require a consolidation of the independent oil and gas industry.
We believe this trend will create attractive acquisition opporttmi
ties for Chesapeake, especially given the qua lity experience, and
depth of our management and technical teams.
During the past five years, we have built Chesapeake into a
drilling leader with some of the best engineering, geoscientific,
land, and financial talent in the industry Furthermore, with an
almost 40% equity stake in the company, our management
team and directors are clearly motivated to return Chesapeake
to its historic performance level.
Many current shareholders may be aware that we experi-
enced similar challenges in fiscal 1994 as investors lost
confidence in our ability to make the transition from a small
Oklahoma-based development company to a large multi-state
exploration company As many of you know, we made that
transition and increased shareholder value significantly While
the oil and gas industry remains a high-risk business with many
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