Chesapeake Energy 2004 Annual Report Download - page 20

Glossary
Bbl One stock tank barrel, or 42 U.S. gallons liquid
volume, used herein in reference to crude oil or other
liquid hydrocarbons.
Bcf Billion cubic feet of natural gas.
Bcfe Billion cubic feet of natural gas equivalent.
DD&A Depreciation, depletion and amortization.
Developed Acreage The number of acres which
are allocated or assignable to producing wells or wells
capable of production.
Development Well A well drilled within the proved
area of an oil or gas reservoir to the depth of a
stratigraphic horizon known to be productive.
Dry Hole or Dry Well A well found to be incapable
of producing either oil or gas in sufficient quantities to
justify completion as an oil or gas well.
EUR The estimated ultimate oil and natural gas
recovery from a well.
Exploratory Well A well drilled to find and produce
oil or gas in an unproved area, to find a new reservoir
in a field previously found to be productive of oil or gas
in another reservoir, or to extend a known reservoir.
Finding Costs The capital costs associated with
finding and developing oil and gas reserves.
Formation An identifiable single geologic horizon.
Fracture Stimulation Action taken to increase
the inherent productivity of a prospective formation
through the hydraulic injection of water, diesel or CO2
at high rates.
Full-Cost Pool The full-cost pool consists of all
costs associated with property acquisition, exploration,
and development activities for a company using the
full-cost method of accounting. Additionally, any internal
costs that can be directly identified with acquisition,
exploration and development activities are included.
Any costs related to production, general corporate
overhead or similar activities are not included.
G&A Expenses General and administrative expenses.
Gross Acres or Gross Wells The total acres or
wells, as the case may be, in which a working interest
is owned.
Horizontal Wells Wells which are drilled at angles
greater than 70 degrees from vertical.
Increased Density A well drilled in addition to
the number of wells permitted under normal spacing
regulations to accelerate recovery or prevent loss of
reserves.
Independent Producer A nonintegrated producer
of oil and gas with no refining or retail marketing
operations.
Lease Operating Expenses (LOE) The costs of
maintaining and operating property and equipment on
a producing oil and gas lease.
Mbbls One thousand barrels of oil.
Mcf One thousand cubic feet of natural gas.
Mmcf One million cubic feet of natural gas.
Mmcfe One million cubic feet of natural gas equivalent;
a unit of measurement which combines oil, natural gas
liquids and natural gas. Oil and natural gas liquids are
converted to natural gas based upon their relative energy
content at the rate of 6 mcf for each barrel of oil or
natural gas liquids.
Net Acres or Net Wells The sum of fractional
working interest owned in gross acres of gross wells.
Operating Costs The sum of lease operating costs,
production taxes and G&A expenses.
Payzone The producing formation of a well.
Present Value (PV 10) When used with respect to
oil and gas reserves, present value is the estimated future
gross revenue to be generated from the production of
proved reserves, net of estimated production and future
development costs, using prices and costs in effect
at the determination date, without giving effect to
non-property related expenses such as general and
administrative expenses, debt service and future income
tax expense, or to depreciation, depletion and amorti-
zation, discounted using an annual discount rate
of 10%.
Productive Well A well that is producing oil or
natural gas or that is capable of production.
Proved Developed Reserves Reserves that can
be expected to be recovered through existing wells with
existing equipment and operating methods.
Proved Reserves The estimated quantities of crude
oil, natural gas and natural gas liquids which geological
and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known
reservoirs under existing economic and operating
conditions.
Proved Undeveloped Location A site on which
a development well can be drilled consistent with spacing
rules for purposes of recovering proved undeveloped
reserves.
Proved Undeveloped Reserves Reserves that
are expected to be recovered from new wells drilled to
a known reservoir(s) on undrilled acreage, or from
existing wells where a relatively major expenditure is
required for recompletion.
Reserve Life The term in years required to deplete
the company’s proved oil and gas reserve base on current
production rates.
Royalty Interest An interest in an oil and gas
property entitling the owner to a share of oil or gas
production free of costs of production.
Tcf One trillion cubic feet of natural gas.
Tcfe One trillion cubic feet of natural gas equivalent.
3-D Seismic Advanced technology method of detecting
accumulations of hydrocarbons identified by the
collection and measurement of the intensity and timing
of sound waves transmitted into the earth as they reflect
back to the surface.
Undeveloped Acreage Lease acreage on which
wells have not been drilled or completed to a point that
would permit the production of commercial quantities
of oil and gas, regardless of whether such acreage
contains proved reserves.
Unproved Reserves Reserves that are not proven,
often referred to as probable or possible reserves.
Working Interest The operating interest which
gives the owner the right to drill, produce and conduct
operating activites on the property and a share of
production.
Corporate Governance
CHESAPEAKE ENERGY CORPORATION ANNUAL REPORT 2004
16
Our Board of Directors is responsible to our shareholders for the oversight of the company
and for the implementation and operation of an effective and sound corporate governance
environment. We believe that effective corporate governance contributes to long-term
corporate performance. An effective governance structure should reinforce a culture of
corporate integrity, foster the company’s pursuit of long-term strategic goals of growth and
profit and, most importantly, ensure quality and continuity of corporate leadership. Our
directors will continue to be diligent in their efforts to preserve the public trust while
fostering the long-term success of the company.