Chesapeake Energy 1993 Annual Report Download - 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 made concurrent with
planned changes in the Company s oil and gas operations described belos and was predicated on a
combination of business judgment and such planning
Management is of the opinion that the full cost method of accounting is preferable and more
appropriately reflects changes in the Companys evolving business plans including a reduced emphasis on
leasehold sale activities equipment sales and certain service operations provided to third parties as well as
more appropriately, reflecting the economic effects of the exploration for and development of the Company's
extensive undeveloped leasehold investment through increased emphasis on exploratory drilling activities
Further management believes that the full cost method is the predominant methodused by comparable
independent oil and gas companies and will improve comparability offinancial information with similarly
positioned independent oil and gas companies
The financial statements presented herein have given effect to the retroactive restatement of all prior
periods as a result of this change in accounting method The primary differences between the two accounting
methods as they relate to the Company include the accounting for sales of oil and gas properties and oil and
gas equipment, overhead and consulting fees, certain other services provided by the Company's. subsidiaries
and certain general and administrative expenses which are treated as adjustments to the carrying value of oil
and gas properties under full cost and are recognized currently, in the statement of operations under
successful efforts Additionally the computanon of depreciation depletion and amortization of oil and gas
properties is based on a composite unit of production method for full cost and a lease by lease unit of
production method for successful efforts, If the Company had not changed from,succesful efforts to full cost,
net income (loss) would have been ($3,360,000), $1,839,000, and $952,000 for each oftbeyears.endedJurie
30,1993, 1992, and 1991, respectively. Total revenues would, have been $25,614,000, $22,894,000, and
$13,764,000, and total costs and expenses would have been $29,853,000, $20,025,000, and $12,312,000 for
each of the years ended June 30 1993 1992 and 1991 respectively Earnings (loss) per common share under
successful efforts would have been ($1.00), $59, and $31, for each of the years endedJune 30, 1993,1992,
and 1991, respectively.
NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long term debt Consist of the following
June 30,
1993' 1992
($ in thousands)
Term note payableto Union Bank, interest of 7.5% per annum, collateralized
by producing oil and gas properties, payable in monthly installments through
September 1994 1Q.211 $
Note payable to Belco Oil & Gas Corp., interest at 9% per annum.
collateralized by non-producing leasehold, interest is due in quarterly
Jnstallments from April 1993 through January 1998, quarterly instalinients of
principal are due from April 1995 through January 1998 2,407
Note payable to a vendor., interest at 1% per annum, collateralized by oil and
gas tubulars payments are due 60 days from shipment of the tubulars 2 498
Note payable to a bank, interest at 7.75% per annum, collateralized by office
buildings, payments due in monthly installments through May 1998 777
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