Chesapeake Energy 2000 Annual Report Download - page 18

Acreage
The following table sets forth as of December 31, 2000 the gross and net acres of both developed and
undeveloped oil and gas leases which we hold. "Gross" acres are the total number of acres in which we own a
working interest. "Net" acres refer to gross acres multiplied by our fractional working interest. Acreage
numbers are stated in thousands and do not include our options to acquire additional leasehold which have not
been exercised.
As of December 31, 2000, Gothic held an interest in approximately 480,000 (229,000 net) acres, almost
all of which was in the Mid-Continent.
Marketing
Chesapeake's oil production is sold under market sensitive or spot price contracts. Our natural gas
production is sold to purchasers under percentage-of-proceeds and percentage-of-index contracts or by direct
marketing to end users or aggregators. By the terms of the percentage-of-proceeds contracts, we receive a
percentage of the resale price received by the purchaser for sales of residue gas and natural gas liquids
recovered after gathering and processing our gas. The residue gas and natural gas liquids sold by these
purchasers are sold primarily based on spot market prices. The revenue we receive from the sale of natural gas
liquids is included in natural gas sales. Under percentage-of-index contracts, the price per mmbtu we receive
for our gas at the wellhead is tied to indexes published in Inside FERC or Gas Daily. During 2000, sales to
Aquila Southwest Pipeline Corporation of $54.9 million accounted for 12% of our total oil and gas sales.
Management believes that the loss of this customer would not have a material adverse effect on our results of
operations or our financial position. No other customer accounted for more than 10% of total oil and gas sales
in 2000.
Chesapeake Energy Marketing, Inc., a wholly-owned subsidiary, provides marketing services including
commodity price structuring, contract administration and nomination services for Chesapeake, its partners and
other oil and natural gas producers in certain geographical areas in which we are active. CEMI is a reportable
segment under SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information." See
note 8 of notes to consolidated financial statements in Item 8.
Hedging Activities
We utilize hedging strategies to hedge the price of a portion of our future oil and gas production and to
manage fixed interest rate exposure. See Item 7A - Quantitative and Qualitative Disclosures About Market
Risk.
Risk Factors
You should carefully consider the following risk factors in addition to the other information included in
this report. Each of these risk factors could adversely affect our business, operating results and financial
condition, as well as adversely affect the value of an investment in our common stock or other securities.
Oil and gas prices are volatile. A decline in prices could adversely affect our financial results, cash flows, access
to capital and ability to grow.
Our revenues, operating results, profitability, future rate of growth and the carrying value of our oil and
gas properties depend primarily upon the prices we receive for our oil and gas. Prices also affect the amount of
cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The
-7-
Developed Undeveloped Total Developed
and Undeveloped
Gross Net Gross Net Gross Net
Mid-Continent 1,748,880 676,237 427,289 231,293 2,176,169 907,530
Gulf Coast 225,182 133,595 485,33! 436,132 710,513 569,727
Canada 102,838 51,328 638,125 308,719 740,963 360,047
Permian Basin 7,307 4,582 33,717 16,731 41,024 21,313
Other areas 41,049 13,036 607,185 382,738 648,234 395,774
Total 2,125,256 878,778 2,191,647 1,375,613 4,316,903 2,254,391