Chesapeake Energy 1998 Annual Report Download - page 83

of the effects on pro forma net income for future years. A summary of the Company's stock option activity and
related information follows:
63
The following table summarizes information about stock options outstanding at December 31, 1998:
The exercise of certain stock options results in state and federal income tax benefits to the Company related to
the difference between the market price of the common stock at the date of disposition (or sale) and the option price.
During 1998, the six months ended December 31, 1997 and fiscal 1997 and 1996, $0, $0, $4,808,000 and
$7,950,000, respectively, were recorded as adjustments to additional paid-in capital and deferred income taxes with
respect to such tax benefits.
10. Financial Instruments and Hedging Activities
The Company has only limited involvement with derivative financial instruments, as defined in Statement of
Financial Accounting Standards No. 119 "Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments", and does not use them for trading purposes. The Company's primary objective is to hedge a
portion of its exposure to price volatility from producing crude oil and naturalgas. These arrangements may expose
the Company to credit risk from its counterparties and to basis risk. The Company does not expect that the
counterparties will fail to meet their obligations given their high credit ratings.
Options Outstanding Options Exercisable
Number Weighted-Avg. Number
Range of Outstanding Remaining Weighted-Avg. Exercisable Weighted-Avg.
Exercise Prices (iF 12/31/98 Contractual Life Exercise Price (iF 12/31/98 Exercise Price
$00800 - 80.8556 1,243,185 3.85 $ 0.6434 1,243,185 $ 0.6434
$11300 - $11300 6,708,697 9.79 $ 1.1300 36,563 $ 1.1300
$12400 82.2511 2,047,254 5.45 $ 1.7603 1,349,704 $ 2.0293
$24311 -$73100 1,062,864 7.50 $ 4.5489 752,239 $ 4.4790
$87500 $87500 48,625 8.50 $ 8.7500 26,310 $ 8.7500
$106900 $106900 18,750 8.75 $106900 18,750 S 10.6900
$142500 $142500 28,500 8.32 $142500 7,125 $142500
$176667 - $176667 1,500 7.26 $ 17.6667 750 $ 17.6667
$258750 - $258750 1,000 7.95 $258750 500 $258750
$306250 - $306250 100,000 7.77 $306250 100.000 $306250
80.0800 - 830.6250 11,260,375 8.10 $ 1.8620 3,535,126 $ 2.9900
Year Ended June 30.
1997 1996
Options Weighted-Avg
Exercise Price Options Weighted-Avg
Exercise Price
Outstanding Beginning of Year 7,602,884 $4.66 6,828,592 $1.97
Granted 3,564,884 19.35 2,426,850 9.98
Exercised (1,197,998) 1.95 (1,574,046) 1.31
Cancelled/Forfeited (2,066,111) 22.26 (78,512) 2.61
Outstanding End of Year 7,903,659 7.09 7,602,884 4.66
Exercisable End of Year 3,323,824 2,974,3g6
Shares Authorized for Future Grants 5,212,056 713,826
Fair Value of Options Granted During the Year $7.51 $ 4.84
Year Ended December 31,
1998 Six Months Ended December 31,
1997
Options Weighted-Avg -Exercise Price Options Weighted-Avg Exercise Price
Outstanding Beginning of Period 8,330,381 $5.49 7,903,659 $ 7.09
Granted 14,580,063 $2.78 3,362,207 8.29
Exercised (108,761) $1.35 (219,349) 3.13
Cancelled/Forfeited (11,541,308). $5.64 (2,716,136) 13.87
Outstanding End of Period 11,260,375 $1.86 8,330,381 5.49
Exercisable End of Period 3,535,126 3,838,869
Shares Authorized for Future Grants 1,761,359 4,585,973
Fair Value of Options Granted During the Period $2.34 $ 4.98