Chesapeake Energy 1999 Annual Report Download - page 67

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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:
NYMEX - Index
Volume Strike Price
Months (MMBtu1 (per MMBtu
April 2000 8,900,000 $ 2.593
May2000 3,410,000 2.737
June 2000 3,300,000 2.737
July2000 3,410,000 2.741
August 2000 3,410,000 2.741
September 2000 2,100,000 2.696
October2000 2,170,000 2.696
Subsequent to December 31, 1999, the Company entered into the following crude oil swap arrangements
designed to hedge a portion of the Company's domestic crude oil production for periods after December 1999:
Monthly NYMEX-Index
Volume Strike Price
Months (Bbls) (per Bbl)
March2000 183,000 $27512
April 2000 89,000 27.25 1
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 and sale
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 tobe 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. During 1999, the Company's interest rate swap resulted in a $2.0 million reduction of interest expense.
The terms of the swap agreement are as follows:
If the floating rate is less than the fixed rate, the counterparty will pay the Company accordingly. If the floating rate
exceeds the fixed rate, the Company will pay the counterparty.
-57-
Hedging Gains (Losses)
Month Gas Oil Total
January 2000 $-$(995) $(995)
February 2000 -(1,061) (1,061)
March2000 689 (851) (162)
April 2000 71 (647) (576)
May 2000 73 (668) (595)
June 2000 71 (647) (576)
July2000 73 (231) (158)
August 2000 73
September 2000 71 71
October 2000 73
$1.194 $ (5100) $ (3906)
Months Notional Amount Fixed Rate Floating Rate
May 1998 April 2001 $230,000,000 7% Average of three-month Swiss Franc LIBOR,
Deutsche Mark and Australian Dollar plus 300
basis points
May 2001 April 2008 $230,000,000 7% U.S. three-month LIBOR plus 300 basis points