Chesapeake Energy 2000 Annual Report Download - page 7

2000 (+37%)
pertorming stock in America during that three-year period) was the
company extraordinary drilling success in its Navasota River and
Independence project areas. Located in Brazos, Grimes and
Washington Counties, Texas, Chesapeake's Deep Giddings wells
developed over 600 bcfe of proved reserves, an amount that at
today's prices would create over $3 billion in value.
Virtually all of this gas was produced from the Austin Chalk, the
uppermost of a series of tour deep fractured carbonate reservoirs.
The other three, the Georgetown, Edwards, and Glen Rose, were
largely ignored as potential drilling targets because of the enormous
productivity of the Austin Chalk. As production from the company's
Chalk wells began to deplete, Chesapeake's geoscientists initiated a
project to test the exciting potential of these deeper zones.
The company's first two deeper wells have demonstrated the tremen-
dous potential of at least one of the deeper zones, the Georgetown.
Both of these wells generated sufficient revenues in just their first 30
days of production to completely pay for their drilling costs.
Although they have only been producing on average for less than
four months, the wells have generated 5.1 bcfe of production and
total revenues of $30 million compared to total costs of $7 million.
These are ideal wells to be drilling in today's natural gas price
environment.
While the company does not expect all of its Georgetown wells to be
of this same quality, we believe the combination of our 100,000
leasehold acres in the Deep Giddings area and today's $5+ natural
gas prices mandate an acceleration of our Georgetown drilling. As ot
this date, Chesapeake has decided to increase its Deep Giddings
commitment from one to 4-5 rigs to broadly test our prospective
Georgetown acreage. Based on initial results and our expertise in
drilling deep horizontal wells, we are optimistic that the Georgetown,
and possibly the other two deeper zones in Giddings, have the
potential to make a significant contribution to the company's produc-
tion and reserves in 2001 and beyond.
Aubrey K. McClendon
Tom L. Ward
April 12, 2001
Feb,un,y 4, 09d3 (CUX PU Outej has I5Ii31. 2101
Chesapeake
Dow Jones
NASDAQ
S&P 500
Looking Ahead
As we look ahead to what should be a terrific environment for
Chesapeake and our shareholders, we believe it's worth repeating
our conclusion from last year's leffer to you: "As this decade unfolds,
we believe investors will increasingly envision this 21st century as
the age of natural gas. Just as great wealth was created during the
20th century in the age of oil and in the 19th century as the age of
coal, we believe investors will greatly profit from embracing the
tremendous potential of the natural gas industry." A year later, we still
feel the same way and believe many more investors share our view.
The year 2000 was a pivotal and rewarding year for our company. In
just 12 years, Chesapeake has progressed from a $50,000 start up to
one of the largest and most profitable natural gas producers in the
industry. And in just the eight years since our IPO, $100 invested in
Chesapeake would today have grown to $657, compared to $287
if invested in the DJIA, $263 in the NASDAQ and $258 in the S&P
500. Although we are proud of Chesapeake's past track record of value
creation, we believe the years ahead can be even more rewarding.
Best regards,
Chesapeake 5
Sin thousands)
1998
1999 (+20%)
(+121%)
2000