Chesapeake Energy 2000 Annual Report Download - page 92

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) The purchase price reflects:
the issuance of 4.0 million shares of Chesapeake common stock, valued at $7.00 per share, the closing
price of Chesapeake common stock on the day the merger was announced, in exchange for all
outstanding shares of Gothic common stock (other than shares of Gothic common stock held by
Chesapeake);
the issuance of Chesapeake warrants and options to purchase 2.9 million shares of Chesapeake common
stock in exchange for all of the outstanding warrants and options to purchase shares of Gothic common
stock based on the exchange ratio of 0.1908 of a share of Chesapeake common stock for each share of
Gothic common stock;
Chesapeake's investment in Gothic preferred and common stock, which has a carrying value of $10.0
million;
Chesapeake's investment in Gothic debt. Chesapeake estimated the fair value of the Gothic Production
senior secured notes equalled 106% of their face value; and
the incurrence of acquisition costs of approximately $12.0 million.
Below is a summary of the purchase price allocation to the estimated fair value of the assets acquired and
liabilities assumed ($ in 000's):
To adjust DD&A expense of oil and gas properties using a rate of $0.92 per mcfe. This combined rate
reflects the impact of the allocation of purchase price to Gothic's proved oil and gas properties.
To adjust depreciation and amortization expense in connection with the allocation of purchase price to the
estimated fair value of Gothic's other property and equipment and other assets. A significant portion of Gothic's
depreciation and amortization expense was related to (1) telemetry assets which have been classified to oil and gas
properties (and depreciated accordingly), and (2) debt issue costs that will have no future value to Chesapeake.
The remaining fair value of other property and equipment will be depreciated over a three-year period.
To record tax effects of the pro forma adjustments at a statutory rate of 40% (federal and state).
-81-
Gothic
Book Value Estimated
Fair Value Pro Forma
Adjustment
Current assets $22,229 $22,287 $58
Property and equipment - proved properties 275,827 363,201 87,374
Property and equipment unproved properties 6,191 10,000 3,809
Accumulated DD&A (75,003) 75,003
Other property and equipment 4,737 150 (4,587)
Other assets 8,675 (8,675)
Current liabilities (11,209) (10,072) 1,137
Debt, less $112.4 million of Gothic notes held by Chesapeake (209,276) (215,710) (6,434)
Other liabilities (2,835) (2,835)
$19,336 $ 167,021 $147,685
Issuance of common stock $ 28,000
Investment in Gothic preferred and common stock 10,000
Fair value of Chesapeake warrants 1,500
Investment in Gothic senior secured discount notes 80,761
Investment in Gothic Production senior secured notes 34,760
Other acquisition costs 12,000
Purchase price $167,021