Chesapeake Energy 1998 Annual Report Download - page 55

has been accelerated to achieve Year 2000 compliance, nor has any project been deferred because ofYear 2000
concerns or efforts. An accurate cost cannot be determined prior to conclusion of the Assessment/Prioritization
phase, but it is expected total project expenditures, including the use of outside consultants, should not exceed $1
million This does not include any costs which may be assessed by joint venture partners on properties not operated
by the Company.
Risks/Contingency. The failure to remediate critical systems (software, hardware or embedded systems), or the
failure of a material business partner to resolve critical Year 2000 issues, could have a serious adverse impact on the
ability of the Company to continue operations and meet obligations. At the current time, it is believed that any
interruption in operation will be minor and short-lived and will pose no safety or environmental risks. However,
until all assessment phases have been completed, it is impossible to accurately identify the risks, quantify potential
impacts or establish a contingency plan. The Company has not yet clearly identified the most reasonably likely
worst case scenario if the Company and material business partners do not achieve Year 2000 compliance on a
timely basis. The Company currently intends to complete its contingency planning by September 30, 1999, with
testing and training to take place early in the fourth quarter.
Recently Issued Accounting Standards
On June 15, 1998, the Financial Accounting Standards Board issued FAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"). FAS 133 establishes a new model for accounting for derivatives
and hedging activities and supersedes and amends a number of existing standards. FAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999.
FAS 133 standardizes the accounting for derivative instruments by requiring thatall derivatives be recognized as
assets and liabilities and measured at fair value. The accounting for changes in the fair value of derivatives (gains
and losses) depends on (i) whether the derivative is designated and qualifies as a hedge, and (ii) the type of hedging
relationship that exists. Changes in the fair value of derivatives that are not designated as hedges or that do not meet
the hedge accounting criteria in FAS 133 are required to be reported in earnings. In addition, all hedging
relationships must be designated, reassessed and documented pursuant to the provisions of FAS 133. The Company
has not yet determined the impact that adoption of FAS 133 will have on the fmancial statements.
Forward Looking Statements
This Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act
of 1933 and Section 21 E of the Securities Exchange Act of 1934. All statements other than statements of historical
facts included in this Form 10-K, including, without linjitation, statements regarding oil and gas reserve estimates,
planned capital expenditures, expected oil and gas production, the Company's fmancial position, business strategy
and other plans and objectives for future operations, expected future expenses, realization of deferred tax assets, and
Year 2000 compliance efforts, are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Factors that could cause actual results to differ materially from those
expected by the Company, including, without limitation, factors discussed under Risk Factors in Item 1 of this Form
10-K, are substantial indebtedness, impairment of asset value, need to replace reserves, substantial capital
requirements, ability to supplement capital resources with asset sales, fluctuations. in the prices of oil and gas,
uncertainties inherent in estimating quantities of oil and gas reserves, projecting future rates of production and the
timing of development expenditures, competition, operating risks, restrictions imposed by lenders, liquidity and
capital requirements, the effects of governmental and environmental regulation, pending patent and securities
litigation, adverse changes in the market for the Company's oil and gas production and the Company's ability to
successfully address Year 2000 issues. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the
result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after
the date hereof, including, without limitation, changes in the Company's business strategy or planned capital
expenditures, or to reflect the occurrence of unanticipated events.
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