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Natural
Chesapeake
Letter to Shareholders
Dear Shareholders:
Last year was a momentous one for our company in many respects.
First and foremost, we generated remarkable financial results net
income of $456 million, operating cash flow of $305 million and a
$725 million increase in common equity. In addition, including our
recently completed Gothic Energy acquisition, Chesapeake's proved
reserves increased 37% to a record level of 1.7 trillion cubic feet of
natural gas equivalent, a 436% reserve replacement rate.
Second, our performance in the stock market was among the coun-
try's finest the 8th best performer on the NYSE, up 326% for the
year. Since reaching a low of $0.75 in early 1999, Chesapeake's stock
price has increased over 1 ,500%, one of the strongest performances
among all publicly traded companies during the past two years.
Third, we have successfully established Chesapeake as one of the top
five pure plays in the U.S. natural gas exploration and production
business. As we continue to grow our assets and improve our bal-
ance sheet, we believe Chesapeake's shareholders will enjoy another
exceptional year in 2001.
Ou Thoughts on the Natural Gas Business:
Strategy Shift
Chesapeake's strategic shift toward natural gas as our fuel of choice
in late 1997 did not occur by accident. To recall the context for this
decision, we had just reported an expensive $350 million failure in
our efforts to extend Chesapeake's highly successful Deep Giddings
Austin Chalk Trend from Texas into Louisiana, where we had hoped to
find as much as $5-b billion of oil and natural gas. Realizing that we