Chesapeake Energy 1998 Annual Report Download - page 54

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Year 2000
Project. The Company has placed a high priority on proactively resolving computer or embedded chip problems
related to the "Year 2000" which may have adverse material effects on its continuing operations or cash flow. This
problem would be caused by the inability of a component (software, hardware or equipment with embedded
microprocessors) to correctly process date data in and between the 20th and 21St centuries, and therefore fail to
properly perform its intended functions and/or to exchange correct date data with other components. This problem
would most typically be caused by erroneous date calculations, which result from using two digits to signif' a year
(centuly implied), handling leap years incorrectly or the use of "special" values that can be confused with legitimate
calendar dates. The scope of the Year 2000 project includes conducting an inventory of the Company's software,
hardware and "embedded systems" equipment, assessing potential for failure and the associated risk, prioritizing the
need for remedial actions, identif'ing an appropriate action, then implementing and testing. In addition, the
Company is taking a similar approach to mitigating risks associated with the Year 2000 readiness of material
business partners (vendors, suppliers, customers, etc.). The project will also identify contingency plans to cope with
unexpected events resulting from Year 2000 issues.
Beginning in mid-1997, the Company began an assessment of its core fmancial and operational software
systems. Three critical systems were identified with date sensitivities: oil and gas fmancial accounting, production
accounting and land/lease administsation. A Year 2000 compliant release of the oil and gas fmancial accounting
package in use at the Company is available and has been scheduled for implementation during the third quarter of
1999. The production accounting system in use at the Company is also scheduled for upgrade to a Year 2000
compliant version during the first half of 1999. The timing of these upgrades have been scheduled to be concurrent
with the respective vendors' support requirements and to take advantage of additional feature or performance
enhancements. A project has been underway since early 1997 to implement a completely revamped version of the
land/lease administration package in use at the Company to provide significantly increased functionality and
reliability. The terms of this development arrangement stipulated Year 2000 compliance. Preliminary versions of
the system have been installed and are being tested. As part of the testing, Year 2000 compliance will be assured.
Assessment continues for lower priority software systems.
In addition, the Year 2000 compliant AS/400, on which the accounting package resides, was upgraded to
provide additional capacity in late 1997. Operating system upgrades will be implemented in the near future for the
Windows NT based servers to complete their remediation.
Other activities either already underway or scheduled include testing of desktop PCs, assessment of material
business partners and inventory of embedded systems in field locations. The following table summarizes the current
overall status of the project with anticipated completion dates:
In addition to the above, during the third quarter of 1999 the Company will develop an overall contingency plan
to assure continued operations which will include precautionary measures.
Cost. To date, the Company has incurred minimal consulting costs for Year 2000 project planning and scope
defmition. The Company plans to acquire a Year 2000 assessment and testing suite in early 1999 for approximately
$50,000 and to use contract staff to assist in the fmancial systems upgrade at a projected cost of $70,000. For
currently identified software systems requiring a Year 2000 upgrade, the vendor is providing that upgrade under the
terms of existing maintenance agreements, and thus no additional license or upgrade fees are required. In all cases
these upgrades had been previously scheduled to maintain desired vendor support and no upgrade project schedule
34
Phase
Assessmentl Remediation!
Comøonent Inventory Prioritizatjon Contingency
Software March 1999 May 1999 September 1999
Hardware March 1999 April 1999 June 1999
Business partners March 1999 May 1999 June 30, 1999
Embedded systems (non-IT systems) May 1999 June 1999 September 1999