Chesapeake Energy 1997 Annual Report Download - page 65

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
At June 30, 1997, the Company had regular tax net operating loss carryforwards of approximately
$300 million and alternative minimum tax net operating loss carryforwards of approximately $45 million
These loss carryforward amounts will expire during the years 2007 through 2012. The Company also had a
percentage depletion carryforward of approximately $2.8 million at June 30, 1997, which is available to offset
future federal income taxes payable and has no expiration date.
In accordance with certain provisions of the Tax Reform Act of 1986, a change of greater than 50% of the
beneficial ownership of the Company within a three-year period (an "Ownership Change") would place an
annual limitation on the Company's ability to utilize its existing tax carryforwards. Under regulations issued by
the Internal Revenue Service, the Company has had an Ownership Change. However, management believes
this will not result in a significant limitation of the utilization of the tax carryforwards.
Related Party Transactions
Certain directors, shareholders and employees of the Company have acquired working interests in certain
of the Company's oil and gas properties. The owners of such working interests are required to pay their
proportionate share of all costs. As of June 30, 1997, 1996 and 1995 the Company had accounts receivable for
these costs of $7.4 million, $2.9 million and $4.4 million, respectively.
During fiscal 1997, 1996 and 1995 the Company incurred legal expenses of $207,000, $347,000 and
$516,000, respectively, for legal services provided by the law firm of which a director is a member.
Employee Benefit Plans
The Company maintains the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan, a
401(k) profit sharing plan. Eligible employees may make voluntary contributions to the plan which are
matched by the Company up to 10% of the employees' annual salary with the Company's common stock. The
amount of employee contributions is limited as specified in the plan. The Company may, at its discretion,
make additional contributions to the plan. The Company contributed $603,000, $187,000 and $95,000 to the
plan during the fiscal years ended June 30, 1997, 1996 and 1995, respectively.
Major Customers
Sales to individual customers constituting 10% or more of total oil and gas sales were as follows:
Management believes that the loss of any of the above customers would not have a material impact on
the Company's results of operations or its financial position.
48
Year Amount Percent of
oil and gas sales
($ in thousands)
1997 Aquila Southwest Pipeline Corporation $53,885 28%
Koch Oil Company $29,580 15%
GPM Gas Corporation $27,682 14%
1996 Aquila Southwest Pipeline Corporation $41,900 38%
GPM Gas Corporation $28,700 26%
Wickford Energy Marketing, L.C. $18,500 17%
1995 Aquila Southwest Pipeline Corporation $18,548 33%
Wickford Energy Marketing, L.C. $15,704 28%
GPM Gas Corporation $11,686 21%