Chesapeake Energy 1997 Annual Report Download - page 70

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
investment grade, unless the credit risk can otherwise be mitigated. The cash and investments in debt
securities are with major banks or institutions with high credit ratings.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with
the requirements of Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts have been determined by the Company using
available market information and valuation methodologies. Considerable judgment is required in interpreting
market data to develop the estimates of fair value. The use of different market assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
The carrying values of items comprising current assets and current liabilities approximate fair values due
to the short-term maturities of these instruments. The carrying value of financial instruments included in
noncurrent other assets approximates fair value at June 30, 1997. The Company estimates the fair value of its
long-term, fixed-rate debt using quoted market prices. The Company's carrying amount for such debt at
June 30, 1997 and 1996 was $508.9 million and $255.6 million, respectively, compared to approximate fair
values of $514.1 million and $261.2 million, respectively. The carrying value of other long-term debt
approximates its fair value as interest rates are primarily variable, based on prevailing market rates.
11. 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:
Unproved properties not subject to amortization at June 30, 1997 and 1996 consisted mainly of lease
acquisition costs. The Company capitalized approximately $12,935,000 and $6,428,000 of interest during the
years ended June 30, 1997 and 1996 on significant investments in unproved properties that were not being
depreciated, depleted, or amortized and on which exploration or development activities were not in progress.
The Company will continue to evaluate its unevaluated properties, however, the timing of the ultimate
evaluation and disposition of the properties has not been determined.
53
June 30,
1997 1996
($ in thousands)
Oil and gas properties:
Proved
Unproved $865,516
128,505 $363,213
165,441
Total 994,021 528,654
Less accumulated depreciation, depletion and amortization (431,983) (92,720)
Net capitalized costs $562,038 $435,934