Chesapeake Energy 1999 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 1999 Chesapeake Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 87

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87

the purchase of index-related puts that provide for a "floor" price below which the counterparty pays
the Company the amount by which the price of the commodity is below the contracted floor,
the sale of index-related calls that provide for a "ceiling" price above which the Company pays the
counterparty the amount by which the price of the commodity is above the contracted ceiling, and
basis protection swaps, which are arrangements that guarantee the price differential of oil or gas from a
specified delivery point or points.
Results from commodity hedging transactions are reflected in oil and gas sales to the extent related to the
Company's oil and gas production. The Company only enters into commodity hedging transactions related to the
Company's oil and gas production volumes or CEMI's physical purchase or sale commitments. Gains or losses on
crude oil and natural gas hedging transactions are recognized as price adjustments in the months of related
production.
As of December 31, 1999, the Company had the following open natural gas swap arrangements designed to
hedge a portion of the Company's domestic gas production for periods after December 1999:
Volume
Months (MMBtu)
April 2000 600,000
May 2000 620,000
June2000 600,000
July 2000 620,000
August 2000 620,000
September 2000 600,000
October 2000 620,000
If the swap arrangements listed above had been settled on December 31, 1999, the Company wou
a gain of $0.5 million.
As of December 31, 1999, the Company hadno open oil swap arrangements.
The Company has also closed transactions designed to hedge a portion of the Company's domestic oil and
natural gas production. The net unrecognized losses resulting from these transactions, $3.9 million as of December
31, 1999, will be recognized as price adjustments in the months of related production. These hedging gains and
losses are set forth below ($ in thousands):
Subsequent to December 31, 1999, the Company entered into the following natural gas swap arrangements designed
to hedge a portion of the Company's domestic gas production for periods after December 1999:
-28-
Month Hedging Gains (Losses)
Gas Oil Total
January 2000
February2000
March2000
April 2000
May 2000
June 2000
July2000
August 2000
September 2000
October 2000
$
689
71
73
71
73
73
71
73
$(995) $(995)
(1,061) (1,061)
(851) (162)
(647) (576)
(668) (595)
(647) (576)
(231) (158)
73
71
73
$1194 $(5.100) $(3.906)
NYMEX-Index
Strike Price
(ner MMBtu)
$ 2.50
2.50
2.50
2.50
2.50
2.50
2.50
ld have incurred