Chesapeake Energy 2000 Annual Report Download - page 30

ITEM 2. Properties
Chesapeake focuses its natural gas exploration, development and acquisition efforts in four areas: (i) the
Mid-Continent (consisting of Oklahoma, western Arkansas, southwestern Kansas and the Texas Panhandle),
representing 71% of our proved reserves, (ii) the Gulf Coast region consisting primarily of the Deep Giddings
Field in Texas and the Austin Chalk and Tuscaloosa Trends in Louisiana, representing 12% of our proved
reserves, (iii) the Helmet area in northeastern British Columbia, representing 12% of our proved reserves, and
(iv) the Permian Basin region of southeastern New Mexico, representing 2% of our proved reserves. In
addition, we have oil exploration and development programs in portions of North Dakota, Montana, and
Saskatchewan, Canada that comprise the Williston Basin.
During the year ended December 31, 2000, we participated in 360 gross (177.3 net) wells, 175 of which
we operated. A summary of our drilling activities, capital expenditures and property sales by primary operating
area is as follows:
Gross Net Capital Expenditures - Oil and Gas Properties
Wells Wells Sale of
Drilled Drilled Drilling Leasehold Sub-Total Acquisitions Properties Total
Chesapeake's proved reserves increased 12% during 2000 to an estimated 1,355 bcfe at December 31,
2000, compared to 1,206 bcfe of estimated proved reserves at December 31, 1999 (see note 11 of notes to
consolidated financial statements in Item 8).
Chesapeake's strategy for 2001 is to continue developing our natural gas assets through exploratory and
developmental drilling and by selectively acquiring strategic properties in our core operating areas. We have
budgeted approximately $310 million for drilling, acreage acquisition, seismic and related capitalized internal
costs, and based on our cash flow assumptions, we will have $250 to $325 million available for acquisitions,
debt repayment and general corporate purposes. Our budget is frequently adjusted based on changes in oil and
gas prices, drilling results, drilling costs and other factors.
Primary Operating Areas
Mid-Continent. Chesapeake's Mid-Continent proved reserves of 967 bcfe represented 71% of our total
proved reserves as of December 31, 2000, and this area produced 78.3 bcfe, or 58% of our 2000 production.
During 2000, we invested approximately $109.1 million to drill 311(149.8 net) wells in the Mid-Continent.
We anticipate spending approximately 60% to 70% of our total budget for exploration and development
activities in the Mid-Continent region during 2001. We anticipate the Mid-Continent will contribute
approximately 116 bcfe of production during 2001, or 65% of expected total production.
Gulf Coast. Chesapeake's Gulf Coast proved reserves (consisting primarily of the Deep Giddings Field
in Texas and the Austin Chalk and Tuscaloosa Trends in Louisiana) represented 158 bcfe, or 12% of our total
proved reserves as of December 31, 2000. During 2000, the Gulf Coast assets produced 35.2 bcfe, or 26% of
our total production. During 2000, we invested approximately $21.5 million to drill 12 (6.4 net) wells in the
Gulf Coast. In 2001, we anticipate the Gulf Coast will contribute approximately 38 bcfe of production, or 21%
of expected total production. We anticipate spending approximately 15% to 20% of our total budget for
exploration and development activities in the Gulf Coast region during 2001.
Helmet. Chesapeake's Canadian proved reserves of 159 bcfe represented 12% of our total proved
reserves at December 31, 2000. During 2000, production from Canada was 12.1 bcfe, or 9% of our total
production. During 2000, we invested approximately $13.6 million to drill 14 (6.9 net) wells, install various
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($ in thousands)
Mid-Continent 311 149.8 $ 92,087 $17,034 $109,121 $74,320 $(1,239) $182,202
Gulf Coast 12 6.4 16,982 4,490 21,472 4,590 26,062
Canada 14 6.9 11,905 1,664 13,569 -13,569
Permian Basin 13 8.8 10,230 3,398 13,628 13,628
Other areas 10 5.4 24,960 710 25,670 (290) 25,380
Total 360 177.3 $156,164 $27,296 $183,460 $78,910 $(1,529) $260,841