Chesapeake Energy 1999 Annual Report Download - page 24

ITEM 2. Properties
The Company focuses its natural gas exploration, development and acquisition efforts in three areas: (i) the Mid-
Continent (consisting of Oklahoma, western Arkansas, southwestern Kansas and the Texas Panhandle), (ii) the
onshore Gulf Coast in Texas and Louisiana, and (iii) the Helmet area in northeastern British Columbia. In addition,
Chesapeake has active oil exploration and development programs in southeast New Mexico; and in portions of North
Dakota; Montana; and Saskatchewan, Canada which comprise the Williston Basin.
During the year ended December 31, 1999 ("1999"), the Company participated in 211 gross (119.7 net) wells,
135 of which were Company operated. A summary of the Company's drilling activities, capital expenditures and
property sales by primary operating area is as follows ($ in thousands):
Capital Expenditures - Oil and Gas Properties
The Company's proved reserves increased 11% to an estimated 1,206 Bcfe at December 31, 1999, compared to
1,091 Bcfe of estimated proved reserves at December 31, 1998 (see Note 11 of Notes to Consolidated Financial
Statements in Item 8).
The Company's strategy for 2000 is to continue developing its natural gas assets by drilling, selective
acquisitions and miscellaneous property divestitures. Accordingly, the Company has established a capital
expenditure budget of $170-$190 million, including approximately $l30-$140 million allocated to drilling, acreage
acquisition, seismic and related capitalized internal costs, and $40-$50 million for acquisitions, debt repayment and
general corporate. purposes. This budget is subject to adjustment based on drilling results, oil and gas prices, and
other factors.
Primary Operating Areas
Mid-Continent Region. The Company's Mid-Continent proved reserves of 758 Bcfe represented 63% of the
Company's total proved reserves as of December 31, 1999 and this area produced 70 Bcfe, or 52% of the
Company's 1999 production.
During 1999, the Company invested approximately $56 million to drill 169 gross (95.3 net) wells in the Mid-
Continent. The Company anticipates spending approximately 55%-60% of its total budget for exploration and
development activities in the Mid-Continent region during 2000. The Company anticipates the Mid-Continent will
contribute approximately 79 Bcfe of production during 2000, or 56% of expected total production.
Gulf Coast. The Company's Gulf Coast proved reserves, consisting of the Austin Chalk Trend in Texas and
Louisiana, the Wharton County area in Texas, and the Tuscaloosa Trend in Louisiana, represented 190 Bcfe, or 15%
of the Company's total proved reserves as of December 31, 1999. During 1999, the Gulf Coast assets produced 45
Bcfe, or 34% of the Company's total production. The Company anticipates the Gulf Coast will contribute
approximately 39 Bcfe of production during 2000, or 28% of expected total production.
During 1999, the Company invested approximately $22 million to drill 10 gross (3.7 net) wells in the Gulf Coast.
For 2000, the Company anticipates spending approximately 1 5%-20% of its total budget for exploration and
development activities in the Gulf Coast region.
Helmet Area. The Company's Canadian proved reserves of 178 Bcfe represented 15% of the Company's total
proved reserves at December 31, 1999. During 1999, production from Canada was 12 Bcfe, or 9% of the
-14-
Gross
Wells
Drilled
Net
Wells
Drilled Drill me Leasehold Sub-Total Acciuisitions Sale of
Properties Total
Mid-Continent 169 95.3 $ 55,670 $ 12,478 $ 68,148 $47,364 $ (36,702) $78,810
Gulf Coast 10 3.7 22,049 8,288 30,337 629 (2,628) 28,338
Canada 12 7.5 27,380 1,982 29,362 4,100 (813) 32,649
All other areas 20 13.2 24,106 1,315 25,421 (5,492) 19.929
Total 211 119.7 $129 205 $2.4063 $153 268 $52,093 $ (45,635) $ 159 726