Chesapeake Energy 2000 Annual Report Download - page 80

properties we operate. The industry concentration has the potential to impact our overall exposure to credit risk,
either positively or negatively, in that the customers may be similarly affected by changes in economic, industry or
other conditions. We generally require letters of credit for receivables from customers which are judged to have sub-
standard credit, unless the credit risk can otherwise be mitigated. The cash and cash equivalents are deposited with
major banks or institutions with high credit ratings.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments." We have determined the estimated fair value amounts by using available market information and
valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of
fair value. The use of different market assumptions or valuation methodologies may have a material effect on the
estimated fair value amounts.
The carrying values of items comprising current assets and current liabilities approximate fair values due to the
short-term maturities of these instruments. We estimate the fair value of our long-term (including current
maturities), fixed-rate debt using primarily quoted market prices. Our carrying amount for such debt at
December 31, 1999 and 2000 was $921.4 million and $920.7 million, respectively, compared to approximate fair
values of $838.7 million and $894.7 million, respectively. The carrying value of other long-term debt approximates
its fair value as interest rates are primarily variable, based on prevailing market rates. We estimate the fair value of
our convertible preferred stock, which was issued in April 1998, using quoted market prices. Our carrying amount
for such preferred stock at December 31, 1999 and 2000 was $229.8 million and $31.2 million, compared to an
approximate fair value of $119.0 million and $49.6 million, respectively.
11. Disclosures About Oil And Gas Producing Activities
Net Capitalized Costs
Evaluated and unevaluated capitalized costs related to Chesapeake's oil and gas producing activities are
summarized as follows:
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Unproved properties not subject to amortization at December 31, 1999 and 2000 consisted mainly of lease
acquisition costs. We capitalized approximately $6.5 million, $3.5 million and $2.4 million of interest during 1998,
1999 and 2000, respectively, on significant investments in unproved properties that were not yet included in the
December 31, 1999 U.S. Canada Combined
($ in thousands)
Oil and gas properties:
Proved $ 2,193,492 $121,856 $ 2,315,348
Unproved 36,225 3,783 40,008
Total 2,229,717 125,639 2,355,356
Less accumulated depreciation, depletion and amortization (1,645,185) (25,357) (1,670,542)
Net capitalized costs $584,532 $100,282 $684,814
December 31, 2000 U.S. Canada Combined
($ in thousands)
Oil and gas properties:
Proved $ 2,453,316 $137,196 $ 2,590,512
Unproved 23,673 2,012 25,685
Total 2,476,989 139,208 2,616,197
Less accumulated depreciation, depletion and amortization (1,737,892) (32,935) (1,770,827)
Net capitalized costs $739,097 $106,273 $845,370