Chesapeake Energy 1997 Annual Report Download - page 71

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Costs Incurred in Oil and Gas Acquisition, Exploration and Development
Costs incurred in oil and gas property acquisition, exploration and development activities which have
been capitalized are summarized as follows:
Results of Operations from Oil and Gas Producing Activities (unaudited)
The Company's results of operations from oil and gas producing activities are presented below for the
years ended June 30, 1997, 1996 and 1995, respectively. The following table includes revenues and expenses
associated directly with the Company's oil and gas producing activities. It does not include any allocation of
the Company's interest costs and, therefore, is not necessarily indicative of the contribution to consolidated net
operating results of the Company's oil and gas operations.
Production costs include lease operating expenses and production taxes.
The imputed income tax provision is hypothetical (at the statutory rate) and determined without regard
to the Company's deduction for general and administrative expenses, interest costs and other income tax
credits and deductions.
Capitalized costs, less accumulated amortization and related deferred income taxes, shall not exceed an
amount equal to the sum of the present value of estimated future net revenues less estimated future
expenditures to be incurred in developing and producing the proved reserves, less any related income tax
effects. At June 30, 1997, capitalized costs of oil and gas properties exceeded the estimated present value of
future net revenues for the Company's proved reserves, net of related income tax considerations, resulting in a
fourth quarter writedown in the carrying value of oil and gas properties of $236 million.
Oil and Gas Reserve Quantities (unaudited)
The reserve information presented below is based upon reports prepared by the independent petroleum
engineering firm of Williamson Petroleum Consultants, Inc. ("Williamson") and the Company's petroleum
engineers as of June 30, 1997, 1996 and 1995. The reserves evaluated internally by the Company constituted
54
June 30,
1997 1996 1995
($ in thousands)
Development costs $187,736 $138,188 $ 78,679
Exploration costs 136,473 39,410 14,129
Acquisition costs:
Unproved properties 140,348 138,188 24,437
Proved properties 24,560
Capitalized internal costs 3,905 1,699 586
Proceeds from sale of leasehold, equipment and other (3,095) (6,167) (11,953)
Total $465,367 $335,878 $105,878
June 30,
1997 1996 1995
($ in thousands)
Oil and gas sales $ 192,920 $110,849 $ 56,983
Production costs (a) (15,107) (8,303) (4,256)
Impairment of oil and gas properties (236,000)
Depletion and depreciation (103,264) (50,899) (25,410)
Imputed income tax (provision) benefit(b) 60,544 (18,335) (9,561)
Results of operations from oil
and gas producing activities $(lOO,907) $33,312 $ 17,756