Chesapeake Energy 1993 Annual Report Download

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Chesapeake
Energy
Corporation
Annual

Table of contents

  • Page 1
    Chesapeake Energy Corporation Annual

  • Page 2
    ...I Letter to Shareholders 2 Primary Operating Areas 4 Directors and Officers 7 Corporate Information 8 SECTION II Selected Financial Data 2 Management's Discussion and Analysis 3 Independent Auditor's Report 12 Consolidated Financial Statements 13-16 Notes to Consolidated Financial Statements 17-28

  • Page 3
    .... OKLAHOMA CITY I. A LINDSAY QLDEN TfD GIDDINGS (Navasota River) BRYAN HAT WE DO Chesapeake utilizes its advanced technological expertise in the drilling of vertical and horizontal wells .to exploit areas of proven hydrocarbon production. It teams with major oil companies and well-capitalized...

  • Page 4
    ... Offering of 2.3 million shares of the company's common stock. This offering allowed the company to significantly reduce long term debt and improve working capital. Additionally, in early 1994.Chesapeake plans to begin operatiOns on a horizontal drilling project in southern Oklahoma with Texaco and...

  • Page 5
    ...-sized independent producer. 'Therefore, Chesapeake has focused, virtually all, of its fiscal 1994 capital budget on developmental drilling in the Giddings and Golden Trend Fields, two of the most active fields in the nation and areas where we have historically performed well FINANCIAL RESULTS...

  • Page 6
    ... Texas, one of the most active oil .apdgas.fields in the nation. Since 1991, Chesapeake, Union Pacific and others have drilled more than 600 horizontal wells in Giddings with a total capital investment of approximately $800 million. UNION PA cIFIC AGREEMENT The primary producing zone in this...

  • Page 7
    ... capital investment of approximately $350 million Georgetown HORIZONTAL TECHNOLOGY DEVELOPMENTS In the last two years, the technology enabling Chesapeake and others to drill profitable horizontal wells in the Giddings Field has advanced rapidly in three major areas. First, Chesapeake's geologists...

  • Page 8
    ... as those from its other wells in Giddings:. As a result of the Union Pacific financing discussed above, Chesapeake intends to accelerate its drilling in the Navasota River areaduring fiscal 1994. Ultimately, the company believes as many as 60 horizontal wells can be drilledin the Navasota...

  • Page 9
    ... Officer' J. Mark Lester Vice President Exploration Breeñe M. Kerr Chairman and Presiden 'Kerr Consolidated Shannon T. Self. Partner Self Gidde.n.c Steven C. Dixon Vice hesident Exploration Lees, Inc. David 'M. Herritt Vice President Drilling and Production Steven 'J. Clark Treasurer...

  • Page 10
    ...STOCK Chesapeake Energy Corporation common stock began trading February 4, 1993, and is listed: on the NASDAQ National Market System under the :symbol CSPK. At September 27, 1993, there were approximately 40 shareholders of record and 450 beneficial owners of the common stock. DIVIDENDS The company...

  • Page 11
    esapeake Energy Corporation inancia ection

  • Page 12
    ... Consolidated Financial Statements and related notes included elsewhere in this report SELECTED FINANCIAL DATA: Year Ended June 30, 1990 1991 1992 1993 (S in thQusands, excepiper share data) Statement of Operations Data: Revenues: Oil and gas sales .. $ Oil and gas service operations Interest...

  • Page 13
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview General In February 1993, the Company completed an initial public offering of 2,300,000 shares of its Common Stock. The offering allowed the Company to improve its financial condition through payment of ...

  • Page 14
    ... efforts method of accounting, it would have reported a loss for fiscal 1993 of approximately $3.4 million, or $1.00 per weighted average common share outstanding. The following unaudited financial information reflects on a quarterly basis for fiscal 1993 the Company's results of operations after...

  • Page 15
    ... 1991. The loss infiscal 1993 was largely a result of a $1.3 million' charge for legal expense and provision for litigation settlements.. The higher earnings i.n fiscal 1992 as compared,to fiscal 1991 reflect the Company's growth during the last half of fiscal 1992; Oil and Gas Sales. During fiscal...

  • Page 16
    ..., the Company participated in a greater number of wells providing more third party contractual services which resulted in a higher level of service operations revenues and related costs and expenses than in fiscal 1993 or 1991. As a result of the adoption of the full cost method of accounting, oil...

  • Page 17
    ...related costs of operations necessitated by the growth of the Company during the period Further the increase in fiscal 1993 is partially attributed to non-capitalized travel, legal, accounting and engineering costs incurred in preparation for the Company's initial public offering of its Common Stock...

  • Page 18
    ... ratio of 1.75-to-i and, a net worth ratio of i-to-i. The Company must limit its annual. general and administrative expenses to no more than $5.0 million. In the event the Company raises additional capital, the Company is obligated to apply a portion of the net proceeds to reduce the Belco loan. At...

  • Page 19
    ..., primarily development of oil and gas wells, which were financed by short-term debt, primarily accounts payable. On a successful efforts basis, the Company's working capital deficit at March 31, 1993, was $1.4 million. The only difference between the two methods for such purpose is that the full...

  • Page 20
    ...affected by changes in oil and gas prices The Company s ability to obtain additional capital on ...issue any audit reports During the period of Andersen s engagement there was no disagreement between the Company and Andersen on any matter of accounting principles or practices financial statement...

  • Page 21
    ... Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules Page Report of Independent Accountants Consolidated Financial Statements: Consolidated Balance Sheets June 30, 1993 and 1992 Consolidated Statements of Operations Years. Ended June 30, 1993, 1992 and 1991...

  • Page 22
    ... of Chesapeake Energy Corporation and its subsidiaries (the Company ) at June 30 1993 and 1992 and the results of their operations and their cash flows for each of the three years in the period ended June 30 1993 in conformity with generally accepted accounting principles These financial statements...

  • Page 23
    CHESAPEAKE ENERGY CORPQRATIONAND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June30, 1993 1992 (I in thousands,) CURRENT ASSETS: Cash and cash equivalents Accounts receivable: Trade net of allowance for doubtful accounts of $584 000 and 5405 000 Related parties Inventory Other TOTAL CURRENT ...

  • Page 24
    ...2 119 ProductiOn expenses and taxes Oil and gas service operations Oil & gas depreciation, depletion and amortization Depreciation and amortization of other assets General and administrative net Provision for legal and other settlements Interest and other Totalcost and expenses INCOME (LOSS) BEFORE...

  • Page 25
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 30, 1993 1992 1991 ($. in thousands). CASH FLOWS FROM. OPERATING ACTIVITIES NET INCOME (LOSS)ADJUSTMENTS TO RECONCILE NE1 INCOME (t05S) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: ($ .365) 5...

  • Page 26
    CHESAPEAKE ENERGY :COpJ)OpTION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended June 30, 1993 1992 1991 ($ in thousand.). PREFERRED STOCK Balance, beginning of period Issuance of 576,923 shares of preferred stock Balance, end of period COMMON STOCK $ 6 6 Balance, ...

  • Page 27
    ... and oil field service operations previously conducted by Chesapeake Operating Inc ( COl ) Chesapeake Exploration Company ( CEX) Lindsay Oil Field Supph Inc and subsidiaries of those entities (collectively referred to as the Combined Entities ) along with certain office buildings interests in...

  • Page 28
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements OtherProperty and Equipment. Otherproperty and equipment primarily consists of vehicles, oil and gas servicing equipment, office: buildings, and office equipment. Major renewals and betterments are capitalized...

  • Page 29
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements ACCOUNTING CHANGE During the fourth quarter of 1993, the Company changed ts method of accounting for its' investment in oil and gas properties from the successful efforts to full cost method, This change was ...

  • Page 30
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements June30,' 1993 1992 Notes payable to vendors participating in the vendor financing programs, interest at 7% per annum, collateralized, by interesis in certain producing oil and gas- properties, payable in ...

  • Page 31
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements In April 1993 the Company entered into a $15000000 oil and gas reserve-based reducing revolving credit facility with Union Bank. This loan is secured by the Company's interest in various producing oil and gas ...

  • Page 32
    ... out of such sales although there can be no assurance that claims will not be asserted in the future The Company has employment contracts with its two principal shareholders and its chief financial officer which provide for annual base salaries bonus compensation and various benefits The contracts...

  • Page 33
    ... and employees of the Company have acquired working interests in certain of the Company's oil and gas properties. The owners of such working interests are required to pay their proportionate share of all costs. As of June 30, 1993, 1992 and 1991 the Company had accounts receivable from these...

  • Page 34
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements $57,300 and $120,000. respectively, as general and administrative expense in the accompanying statements of operations related-to these leases. These monthly chargesceased effective December 31. 1991. at which...

  • Page 35
    ... Energy Corporation 1992 Incentive Stock Option Plan ("ISO") and the Chesapeake Energy Corporation 1992 Nonstatutory Stock Option Plan ("NQO"); The ISO plan is for employees of the Company and the NQO plan is for consultants and directors of the Company. In February 1993, the Company granted...

  • Page 36
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements 10. DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES Net Capitalized Costs. Evaluated and unevaluated capitalized costs related to the Company's oil and gas producing activities are summarized as follows: ,...

  • Page 37
    ... recovered through existing wells with existing equipment and operating methods, Presented below is a summary of changes. in estimated reserves of the Company adjusted to June .30, 1992 by the Company based upon the report prepared by Williamson as of October '1,.. 1992. June 30, 1993 June 30, 1992...

  • Page 38
    CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements The following summary sets forth the Company's future net cash flows relating to proved oil,and gas reserves based on the standardazed measure prescribed in SFAS No 69 Years Ended June 3O, 1993 1992 1991 (f ...

  • Page 39
    Chesapeake Energy Corporation 6104 North Western Post Office Box 18496 Oklahoma City, Oklahoma 73154-0496 405/848-8000 FAX 405/ 843-0573