Chesapeake Energy 2000 Annual Report Download - page 41

The $169.6 million increase from 1999 to 2000 and the $50.4 million increase from 1998 to 1999 were due
primarily to increased oil and gas revenues resulting from higher prices.
Cash Flows from Investing Activities. Cash used in investing activities increased to $330.0 million in
2000, compared to $159.8 million in 1999 and $548.1 million in 1998. During 2000, Chesapeake invested
$188.8 million for exploration and development drilling, $78.9 million for the acquisition of oil and gas
properties, and received $1.5 million related to divestitures of oil and gas properties. During 2000, we invested
$36.7 million in the purchase of Gothic notes and acquisition related costs. Also in 2000, we invested $7.9
million in Advanced Drilling Technologies, L.L.C., a 50% owned drilling company joint venture. Additionally
in 2000, we invested $4.0 million to construct a new building at our Oklahoma City complex. We anticipate
the availability of this additional office space will reduce our general and administrative costs in future years.
In 1999, we invested $153.3 million for exploration and development drilling, $49.9 million for the acquisition
of oil and gas properties, and received $45.6 million related to divestitures of oil and gas properties. During
1998, $279.9 million was used to acquire certain oil and gas properties and companies with oil and gas
reserves. During 1998, we invested $259.7 million for exploratory and developmental drilling. Also during
1998, we sold our 19.9% stake in Pan East Petroleum Corp. to Poco Petroleums, Ltd. for approximately $21.2
million.
Cash Flows from Financing Activities. Cash used in financing activities was $22.9 million in 2000,
compared to cash provided of $19.0 million in 1999 and $363.8 million in 1998. During 2000, we made
additional borrowings under our bank credit facility of $244.0 million and made repayments under this facility
of $262.5 million. Also in 2000, we paid $8.3 million in connection with an exchange of our preferred stock for
our common stock and paid cash dividends of $4.6 million on our preferred stock. In connection with our
purchase of Gothic notes, we received $7.1 million cash from the sellers of Gothic notes pursuant to make-
whole provisions included in the purchase agreements. These provisions required payments to be made by the
sellers to us or additional payments to be made by us to the sellers, depending upon changes in market value of
our common stock during a specified period pending registration of our common stock issued tothe sellers of
Gothic notes. During 1999, we made additional borrowings under our bank credit facility of $116.5 million and
made repayments under this facility of $98.0 million. During 1998, we retired $85 million of debt assumed at
the completion of the DLB Oil & Gas, Inc. acquisition, $120 million of debt assumed at the completion of the
Hugoton Energy Corporation acquisition, $90 million of senior notes, and $170 million of borrowings made
under our bank credit facility. Also during 1998, we issued $500 million in senior notes and $230 million in
preferred stock. We also repurchased common stock and preferred stock for $30 million.
Financial Flexibility and Liquidity
Chesapeake had working capital of $4.2 million at December 31, 2000 including a restricted cash balance
of $3.5 million. We have a $100 million revolving bank credit facility which matures in July 2002, with a
committed borrowing base of $100 million. As of December 31, 2000, we had borrowed $25 million under this
facility and had $31.5 million of the facility securing various letters of credit. Borrowings under the facility are
collateralized by certain producing oil and gas properties and bear interest at a variable rate, which was 9.3%
per annum as of December 31, 2000. Interest is payable quarterly calculated at .50% to 1.25%, depending on
utilization, plus the higher of (a) the Union Bank of California reference rate or (b) the federal funds rate
plus .50% per year. We may elect to convert a portion of our borrowings to interest calculated under a London
Interbank Offered Rate (LIBOR) plus 2.00% to 2.75%, depending on utilization. We are required to pay a
commitment fee on the unused portion of the borrowing base equal to 0.375% per annum due quarterly.
During 2000, we obtained a standby commitment for a $275 million credit facility, consisting of a $175
million term loan and a $100 million revolving credit facility which, if needed, would have replaced our
existing revolving credit facility. The term loan was available to provide funds to repurchase any of Gothic
Production Corporation's 11.125% senior secured notes tendered following the closing of the Gothic
acquisition pursuant to a change-of-control offer to purchase. In February 2001, we purchased $1.0 million of
notes tendered for 101% of such amount. We did not use the standby credit facility and the commitment
terminated on February 23, 2001. Chesapeake incurred $3.2 million of costs for the standby facility.
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