Chesapeake Energy 1993 Annual Report Download - page 37

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Oil and Gas Reserve Quantities (Unaudited). The Reserve Information presented below is based
upon reports prepared by the independent petroleum engineering firm of Lee Keeling & Associates Inc as
of June 30 1991 and by Williamson Petroleum Consultants Inc ( Williamson ) as of October 1 1992
(adjusted to June 30 1992 b} the Company) and June 30 1993 The information is presented in accordance
with regulations prescribed by the Securities and Exchange Commission The Company emphasizes that
reserve estimates are inherently imprecise The Company s reserve estimates were generally based upon
extrapolation of historical production trends analogy to similar properties and volumetric calculations
Accordingly these estimates are expected to change and such changes could be material as future
information becomes available
Proved oil and gas reserves represent 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 developed oil
and gas reserves are those expected to be 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.
Standardized Measure of Discounted Future Net Cash Flows (Unaudited). SFAS No., 69 prescribes
guidelines for computing a standardized measure of future net cash flows and changes therein relating to
estimated proved reserves The Company has followed these guidelines which are briefly discussed below
Future cash, inflows and future production and development costs are determined by applying yearend
prices and costs to the estimated quantities of oil and gas to be produced Estimated future income taxes are
computed using current statutory income tax rates including consideration for the current tax basis of the
properties and related carryforwards giving effect to permanent differences and tax credits The resulting
future net cash flows are reduced to present value' amounts by applying a 10% annual discount factor.
The assumptions used to compute the standardized measure are those prescribed by the Financial
Accounting Standards Board and as such do not necessarily reflect the Companys expectations of actual
revenue to be derived from those reserves nor their present worth The limitations inherent in the reserve
quantity estimation process as discussed previously are equally applicable to the standardized measure
computations since these estimates are the basis for the valuation process
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June 30, 1993 June 30, 1992 June 30, 1991
Oil'
(mbbl) Gas
(mmd) Oil .. Gas
(mbbl) (mmcf) Oil
(mbbl) Gas
(mmct)
Proved reserves beginning of year 11147 68618 3212 17334 969 5052
Extensions discoveries and other additions 1 576 15 078 10 140 60 745 2 418 12 872
Revisions of previous estimate (2 793) (118) (1 843) (8222) (12) 56
Production (276) (2 677) (374) (1 252) (163) (646)
Sale of reserves in place (32) (1 142) ---
Purchase of undeveloped reserves in place 412 13
Proved reserves, end of year. 9,622 79763 11,147 68.618 3,212 .......7,334
Proved developed reserves, end of year 830 :11,893 1,049 ::l'l,492 1,054 .7,244