Chesapeake Energy 2000 Annual Report Download - page 112

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The following unaudited table, which is based on reports of Lee Keeling and Associates, Inc., sets forth proved
natural gas and oil reserves:
Standardized Measure of Discounted Future Net Cash Flows
Future net cash inflows are based on the future production of proved reserves of natural gas and crude oil as
estimated by Lee Keeling and Associates, Inc., independent petroleum engineers, by applying current prices of
natural gas and oil to estimated future production of proved reserves. The average prices used in determining future
cash inflows for natural gas and oil as of December 31, 2000, were $10.19 per mcf, and $26.54 per barrel,
respectively. These prices were based on the adjusted cash spot price for natural gas and oil at December 31, 2000.
These prices are significantly higher than the average natural gas and oil price ($5.88 per mcf and $25.00 per barrel)
received by Gothic during December 2000, and the prices Gothic expects to receive during 2001. Future net cash
flows are then calculated by reducing such estimated cash inflows by the estimated future expenditures (based on
current costs) to be incurred in developing and producing the proved reserves and by the estimated future income
taxes.
Estimated future income taxes are computed by applying the appropriate year-end statutory tax rate to the
future pretax net cash flows relating to Gothic's estimated proved natural gas and oil reserves. The estimated future
income taxes give effect to permanent differences and tax credits and allowances.
Included in the estimated standardized measure of future cash flows are certain capital projects (future
development costs). Gothic estimates the capital required to develop its undeveloped natural gas and oil reserves
during 2001 to be approximately $30.0 million. If such capital is not employed, the estimated future cash flows will
be negatively impacted.
The following table sets forth Gothic's unaudited estimated standardized measure of discounted future net cash
flows.
-101-
1998 1999 2000
mbbls mmcf mbbls mmcf mbbls mmcf
Proved Reserves:
Beginning of year 3,585 127,460 1,761 306,668 1,922 289,191
Revisions of previous estimates (872) 39,577 319 6,598 50 32,051
Purchases of reserves in place 1,362 233,007 1,402 172
Production (257) (24,455) (158) (25,477) (135) (26,309)
Sales of reserves in place (2,057) (68,921) (69) (4,198)
End of year 1,761 306,668 1,922 289,191 1,768 290,907
Proved Developed:
Beginning of year 2,503 91,690 1,523 254,762 1,683 251,631
End of year 1,523 254,762 1,683 251,631 1,567 245,472
For the Years Ended December 31,
1998 1999 2000
($ in thousands)
Cash Flows Relating to Proved Reserves:
Future cash inflows $ 573,604 $ 596,216 $3,005,450
Future production costs (141,253) (139,458) (350,371)
Future development costs (37,028) (26,969) (42,260)
Future income tax expense (47,264) (30,113) (843,629)
348,059 399,676 1,769,190
Ten percent annual discount factor (169,297) (201,291) (911,617)
Standardized measure of discounted future net cash flows $ 178,762 $ 198,385 $857,573