Chesapeake Energy 1994 Annual Report Download - page 45

marketing of oil and gas production. The remaining
interests were owned by other oil and gas producers and
marketers. In January 1994, the company began to market
a significant amount of its oil and gas production through
Wickford. The company sold its interest in Wickford to
the other owners in July 1994. For fiscal 1994, Wickford
marketed 28%, or $6.2 million, of the company's total oil
and gas sales. Oil and gas sales receivables from Wickford
were $1.8 million at June 30, 1994, and are reflected as oil
and gas receivables on the accompanying consolidated
balance sheet. The company's investment in Wickford is
accounted for using the equity method.
The company has assigned carried interests in oil and gas
properties to certain of its employees and consultants.
During the year ended June 30, 1992, the company ceased
assigning such interests.
During the year ended June 30, 1992, CI and TLW were
engaged as consultants to the company at a monthly fee of
$10,000 to both CI and TLW The company recorded
$240,000 as general and administrative expense in the
accompanying statement of operations for the year ended
June 30, 1992, related to these consulting arrangements.
The consulting engagement terminated on July 1, 1992.
During the year ended June 30, 1992, the company
leased two of its office buildings from CI and TLW and
recorded $120,000 as general and administrative expense
in the accompanying statements of operations related to
these leases. These monthly charges ceased effective
December 31, 1991, at which time CI and TLW
transferred the buildings and certain furniture and fixtures
to the company, as part of the Combination for a total
consideration of approximately $1,290,000 which
included assumption of certain indebtedness as well as the
assumption of two notes payable to a bank, which were
collateralized by the buildings. During the year ended June
30, 1993, the notes were paid in full.
NOTE 7. EMPLOYEE BENEFIT PLANS
Effective October 1, 1989, the company established a
401(K) profit sharing plan (the "401(K) Plan"). On
December 1, 1993, the company amended the plan and
established the Chesapeake Energy Savings and Incentive
Plan (the "Savings and Incentive Plan") with Massachusetts
Mutual Life Insurance Company. Eligible employees may
make voluntary contributions to the Savings and Incentive
Plan which are matched by the company up to 2.5% of the
employees' salary. The amount of employee contributions
is limited as specified in the Savings and Incentive Plan.
The company may, at its discretion, make additional
contributions to the Savings and Incentive Plan. The
company contributed $70,000, $44,000 and $17,000 to
the Savings and Incentive Plan during the fiscal years ended
June 30, 1994, 1993 and 1992, respectively.
NOTE 8. MAJOR CUSTOMERS
Sales to individual customers constituting 10% or more
of total oil and gas sales were as follows:
Management believes that the loss of any of the above
customers would not have a material impact on the
company's results of operations or its financial position.
NOTE 9. STOCKHOLDERS' EQUITY
On March 31, 1994, the company completed a Senior
Note Offering of $47.5 million principal amount of Senior
Notes and Warrants for 486,875 shares of the company's
common stock (see Notes 2 and 3). The Warrants were
valued at $3.04 million and are recorded as common stock
warrants and paid-in capital on the consolidated balance
sheets. As part of the Senior Note Offering, the company
issued 8,000 Units to TCW in exchange for preferred
stock, common stock warrants and an overriding royalty
interest.
In February 1993, the company completed an initial
public offering of 2,300,000 shares of its common stock at
$12 per share. The total proceeds were $27.6 million with
YEAR AMOUNT PERCENT OF
OIL AND
GAS SALES
1994 Wickford Energy
($ IN THOUSANDS)
Marketing, L.C. $6,190 28%
GPM Gas Corporation $6,105 27%
Plains Marketing and
Transportation, Inc. $2,659 12%
Texaco Exploration &
Production, Inc. $2,249 10%
1993 Plains Marketing and
Transportation, Inc. $2,579 22%
GPM Gas Corporation $2,039 18%
Mobil Oil Corporation $1,775 15%
Total Petroleum, Inc. $1,380 12%
Texaco Exploration &
Production, Inc. $1,368 12%
1992 Plains Marketing and
Transportation, Inc. $4,937 47%
CHESAPEAKE ENERGY CORPORATION 43