Chesapeake Energy 1994 Annual Report Download - page 44

continuation of salary and benefits for the respective terms
of the agreements in the event of termination of
employment without cause. One agreement expires
February 28, 1995, and the others expire June 30, 1995.
Due to the nature of the oil and gas business, the
company and its subsidiaries are exposed to possible
environmental risks. The company has implemented
various policies and procedures to avoid environmental
contamination and risks from environmental
contamination. The company is not aware of any potential
environmental issues or claims.
NOTE 5. INCOME TAXES
As discussed in Note 1, the company has adopted SFAS
No. 109. The components of the income tax provision for
each of the periods are as follows (in thousands of dollars):
Deferred income taxes are provided to reflect temporary
differences in the basis of net assets for income tax and
financial reporting purposes. The tax effected temporary
differences and tax loss carryforwards which comprise
deferred taxes are as follows:
At June 30, 1994, the company had net operating loss
carryforwards of approximately $36 million available to
offset future federal income taxes payable to the extent
regular income taxes payable exceeds alternative minimum
taxes payable. These loss carryforward amounts will expire
during the years 2007 through 2009. The company also
had a percentage depletion carryforward of approximately
$2.3 million at June 30, 1994, which is available to offset
future federal income taxes payable and has no expiration
date.
NOTE 6. RELATED PARTY TRANSACTIONS
Certain directors, shareholders 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, 1994, 1993 and 1992 the
company had accounts receivable from these directors,
shareholders and employees of $1,671,000, $1,580,000,
and $0, respectively. The aggregate average receivable
balance due from these parties for the years ended June 30,
1994, 1993, and 1992 approximated $1,331,000,
$1,153,000, and $3,779,000, respectively.
During fiscal 1994, 1993, and 1992, the company
incurred legal expenses of $631,000, $723,000, and
$507,000, respectively, for legal services provided by the
law firm of which a director is a member.
From September 1993 to July 1994, the company
owned a 40% interest in, and was represented on the
operating committee of Wickford Energy Marketing, L.C.
("Wickford"), a limited liability company engaged in the
YEARS ENDED JUNE 30, 1994 1993 1992
($ IN THOUSANDS)
Computed "expected"
income tax provision
(benefit) $1,753 $(l58) $ 927
Tax percentage depletion (780)
Partnership operations prior
to the Combination 299
Other 277 59 111
$1,250 $(99) $1,337
YEARS ENDED JUNE 30, 1994 1993 1992
)$ IN THOUSANDS)
Deferred tax liabilities:
Acquisition, exploration
and development costs
and related
depreciation, depletion
and amortization $(15,872) $(6,295) $(2,449)
Deferred tax assets:
Net operating loss
carryforwards 12,879 5,332 1,387
Percentage depletion
carryforward 780
13,659 5,332 1,387
Total Noncurrent $ (2,213) $ (963) $(1,062)
)$ IN THOUSANDS)
Current $$$145
Deferred 1,250 (99) 1,192
Total $1,250 $ (99) $1,337
42 CHESAPEAKE ENERGY CORPORATION
YEARS ENDED JUNE 30, 1994 1993 1992
The effective income tax rate differed from the computed
"expected" federal income tax rate on earnings before
income taxes for the following reasons: