Chesapeake Energy 2000 Annual Report Download - page 44

(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 SFAS 133 are required to be reported in
earnings. In addition, all hedging relationships must be designated, reassessed and documented pursuant to the
provisions of SFAS 133. We will fully adopt SFAS 133 on January 1, 2001, the effective date as amended by
SFAS 138. SFAS 133 is expected to increase volatility of stockholders' equity, reported earnings (losses) and
other comprehensive income. If we had adopted SFAS 133 on December 31, 2000, Chesapeake would have
recorded an additional $9.3 million in current assets and $98.6 million in current liabilities related to our
existing oil and gas hedges based on the forward price curve in effect at December 31, 2000. The net liability
of $89.3 million related to qualifying hedge instruments would have been charged to other comprehensive
income which appears in the equity section of the balance sheet. After adoption, Chesapeake will be required
to recognize any hedge ineffectiveness in the income statement each period.
Forward-Looking Statements
This report 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. Forward-looking statements give our
current expectations or forecasts of future events. They include statements regarding oil and gas reserve
estimates, planned capital expenditures, the drilling of oil and gas wells and future acquisitions, expected oil
and gas production, cash flow and anticipated liquidity, business strategy and other plans and objectives for
future operations, expected future expenses and utilization of net operating loss carryforwards.
Although we believe the expectations and forecasts reflected in these and other forward-looking
statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected
by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual
results to differ materially from expected results are described under "Risk Factors" in Item 1 and include:
the volatility of oil and gas prices,
our substantial indebtedness,
our commodity price risk management activities,
our ability to replace reserves,
the availability of capital,
uncertainties inherent in estimating quantities of oil and gas reserves,
projecting future rates of production and the timing of development expenditures,
uncertainties in evaluating oil and gas reserves of acquired properties and associated potential
liabilities,
drilling and operating risks,
our ability to generate future taxable income sufficient to utilize our NOLs before expiration,
future ownership changes which could result in additional limitations to our NOLs,
adverse effects of governmental and environmental regulation,
losses possible from pending or future litigation,
the strength and financial resources of our competitors,
the loss of officers or key employees, and
conflicts of interest our chief executive officer and chief operating officer may have as a result of
their participation in company wells and their substantial stock ownership.
We caution you not to place undue reliance on these forward-looking statements, which speak only as of
the date of this report, and we undertake no obligation to update this information. We urge you to carefully
review and consider the disclosures made in this and our other reports filed with the SEC that attempt to
advise interested parties of the risks and factors that may affect our business.
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