Chesapeake Energy 2005 Annual Report Download - page 15

LOOKING FORWARD As I conclude this letter and reflect with
a sense of accomplishment and gratitude on Chesapeake’s performance
during the past 13 years, I remain very optimistic about the continued
success of the company and our ability to continue delivering value to
our shareholders. We have the commitment and talents of over 3,500
top-notch employees, an engaged and insightful Board, a time-tested
and successful business strategy, a value-added risk-management
program, a steadily improving balance sheet and increasingly valuable
onshore U.S. natural gas assets. Chesapeake also offers an entrepreneurial
and experienced management team that has proven itself capable of
creating industry-leading value through a full range of commodity cycle
challenges in building a $20 billion enterprise from an initial $50,000
investment in just 16 years.
We are off to a great start in delivering another successful year of
performance to our shareholders in 2006. In the first three months of
the year, we have already closed or negotiated $1 billion of acquisitions,
commenced drilling almost 500 operated and non-operated new wells,
sold our stock in Pioneer Drilling Corporation for a $115 million pre-
tax gain, established new production records of over 1.5 bcfe per day
and reached the record level of 7.8 tcfe of proved reserves and 8.8 tcfe
of risked unproved reserves. In addition, we were recently added to the
S&P 500 Index and were also included in the Fortune 500 list for the
first time.
While presently weak relative to oil prices, we believe U.S. natural
gas prices should strengthen later this year because of tight supply and
demand fundamentals in both U.S. natural gas and world oil markets.
“These supply and
demand imbalances
cannot be quickly,
easily or cheaply fixed,
and as a result, we
believe the stage is set
for an extended period
of strong (and volatile)
oil and natural gas
prices. In this
environment, we
believe Chesapeake
can continue leading
the way in delivering
exceptional growth,
value and opportunity
to our shareholders in
2006 and beyond.”
CHK 2005 ANNUAL REPORT 11
These supply and demand imbalances cannot be quickly, easily
or cheaply fixed, and as a result, we believe the stage is set for an
extended period of strong (and volatile) oil and natural gas prices.
In this environment, we believe Chesapeake can continue leading
the way in delivering exceptional growth, value and opportunity to
our shareholders in 2006 and beyond.
Best regards,
Aubrey K. McClendon
Chairman and Chief Executive Officer
March 31, 2006
1Ebitda is net income (loss) before cumulative effect of accounting change, income
tax expense (benefit), interest expense, and depreciation, depletion and amortization
expense.
2Operating cash flow is net cash provided by operating activities before changes
in assets and liabilities.
3Ranking is according to Zack’s Investment Research (Zack’s) based on stock price
performance from 12/31/98 to 12/31/05 of nearly 3,000 companies tracked by
Zack’s with market capitalizations over $50 million on 12/31/98.
4PV-10 is the present value (10% discount rate) of estimated future gross revenue
to be generated from the production of proved reserves, net of production and
future development costs, using assumed prices and costs. Please see page 11
of our Form 10-K for information on the standardized measure of future net cash
flow pursuant to SFAS 69.