Chesapeake Energy 1998 Annual Report Download - page 57

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If the swap arrangements listed above had been settled on December 31, 1998, the Company would have
incurred a loss of $0.8 million.
As of December 31, 1998, the Company had the following oil swap arrangements for periods after December
1998: NYMEX Heating Oil
Minus
Monthly NYMEX.Crude Oil
Volume Index Strike Price
Months (Bbls) (per Ebli
January 1999 217,000 $ 2.957
February 1999 196,000 2.957
March 1999 155,000 2.900
If the swap arrangements listed above had been settled on December 31, 1998, the Company would have
incurred a loss of $0.2 million Subsequent to December 31, 1998, the Company settled the swap arrangements
listed above for the periods of January 1999 and February 1999 resulting in a $0.4 million loss.
In addition to commodity hedging transactions related to the Company's oil and gas production, CEMI
periodically enters into various hedging transactions designed to hedge against physical purchase commitments
made by CEMI. Gains or losses on these transactions are recorded as adjustments to Oil and Gas Marketing Sales in
the consolidated statements of operations and are not considered by management to be material.
Interest Rate Risk
The Company also utilizes hedging strategies to manage fixed-interest rate exposure. Through the use of a swap
arrangement, the Company believes it can benefit from stable or falling interest rates and reduce its current interest
expense. For the year ended December 31, 1998, the Company's interest rate swap resulted in a $07 million
reduction of interest expense.
The table below presents principal cash flows and related weighted average interest rates by expected maturity
dates. As of December 31, 1998, the carrying amounts of short-term borrowings are representative of fair values
because of the short-term maturity of these instruments. The fair value of the long-term debt has been estimated
based on quoted market prices.
37
December 31, 1998
Expected Fiscal Year of Maturity
1999 2000 2001 2002 2003 Thereafter Total Fair Value
Liabilities: (S in millions)
Short-term debt - variable rate $25 $$ - $ - $$$ 25 $ 25
Average interest rate 7.75% -,
Long-term debt, including current
portion fixed rate $$ - $$$$ 920 $920 $655
Average interest rate -9.1%