Chesapeake Energy Corporation Announces Fiscal 1997 Results
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OKLAHOMA CITY, Okla., Aug. 28 /PRNewswire/ -- Chesapeake Energy
Corporation (NYSE:CHK) today reported preliminary financial results for the
fiscal 1997 year ended June 30, 1997. For the year, Chesapeake expects to
report a net loss of $183 million, or $2.63 per common share, on total revenue
of $280 million. This loss includes the impact of a $236 million asset
writedown recorded in the fourth quarter under the full cost method of
accounting. Excluding the impact of the writedown, net income after
extraordinary items for the year was $28 million, or $0.40 per common share.
By comparison, in fiscal 1996, Chesapeake reported net income of $23 million,
or $0.40 per common share, on total revenue of $149 million. Operating cash
flow for fiscal 1997 increased 80% to $163 million compared to $90 million in
fiscal 1996. Additional financial information will be available in
Chesapeake's fiscal 1997 Form 10-K, which will be filed prior to September 30,
1997.
Production Volumes and Reserve Information
During fiscal 1997, Chesapeake's oil and natural gas production totaled
79 billion cubic feet of natural gas equivalent (bcfe), a 31% increase over
the 60 bcfe produced in fiscal 1996. During the fourth quarter, Chesapeake
produced 21.3 bcfe, a 4% increase over the 20.5 bcfe produced in the fiscal
1997 third quarter and a 21% increase over the 17.6 bcfe produced in the
fourth quarter last year.
As of June 30, 1997, Chesapeake's estimated proved reserves were
17.4 million barrels of oil and 299 billion cubic feet of natural gas, or
403 bcfe, a 5% decrease from last year's 425 bcfe of proved reserves. The
company's estimated proved undeveloped reserves, particularly in the Knox and
Independence areas, were negatively impacted in the fourth quarter by
increased development costs and decreased gas prices as of June 30. The
present value of the estimated future net revenue attributable to Chesapeake's
proved reserves (before income taxes and discounted at 10%) was $437 million.
Fiscal 1998 Budget, Cash Resources, and Investment Portfolio
Chesapeake's fiscal 1998 capital expenditure budget is projected to be
$250-275 million. This budget will be funded from the company's fiscal 1998
operating cash flow and the company's June 30, 1997 cash and short term
investments of approximately $200 million. Additionally, during fiscal 1998,
the company expects to generate $100-125 million in cash (and realize
$40-50 million of pre-tax gains) from the sale of its strategic investments in
the oil field service and gas gathering and processing industries. As an
additional cash resource consideration, none of Chesapeake's debt has
scheduled principal payments during the next five years.
Chesapeake's strategic investments consists of three primary assets:
(i) 39% ownership of Bayard Drilling Technologies, Inc. (the largest private
drilling contractor in the U.S. and fifth largest overall); (ii) 50% interest
in the Louisiana Austin Chalk Gathering System (a joint venture with Mitchell
Energy and Development Corporation); and (iii) 15.5% interest in the Masters
Creek Gas Plant (a joint venture among Union Pacific Resources Corporation,
Sonat Inc., Helmerich & Payne, Inc., and OXY USA, Inc.). On August 27, 1997,
Bayard filed a registration statement for an initial public offering of its
common stock. Chesapeake anticipates selling substantially all of its
ownership in Bayard in the IPO.
Drilling Program Update
Chesapeake is currently utilizing 25 rigs to conduct its fiscal 1998
drilling program. Of these rigs, 10 are drilling in the Louisiana Trend,
4 are drilling in the Giddings Field, 8 are drilling in southern Oklahoma,
2 are drilling in New Mexico, and 1 is drilling in Montana.
Louisiana Austin Chalk Trend Update
In the Louisiana Austin Chalk Trend, Chesapeake is currently drilling
10 gross (8.5 net) wells and is participating in an additional 17 gross
(1.4 net) wells operated by others:
Well # Well Name Area Operator Status
1. Addison 8 Masters Creek Chesapeake Drilling Vertically
2. Clark 23 St. Landry Chesapeake Preparing to Spud
3. Cypress 1 S. Brookeland Chesapeake Drilling Vertically
4. Giles 22 Masters Creek Chesapeake Drilling
Horizontally
5. Labokay 26 Masters Creek Chesapeake Drilling
Horizontally
6. Lord 1 Masters Creek Chesapeake Drilling Vertically
7. Lord 25 Masters Creek Chesapeake Drilling
Horizontally
8. McRight 11 Masters Creek Chesapeake Drilling
Horizontally
9. Rieckers 5 Masters Creek Chesapeake Preparing to Spud
10. Wahlder 29 Masters Creek Chesapeake Drilling
Horizontally
11. Harmon 16 Baton Rouge Union Pacific Waiting on Pipeline
12. Crosby 12 Masters Creek Union Pacific Waiting on Pipeline
13. Crosby 13 Masters Creek Union Pacific Drilling
Horizontally
14. Crosby "A" 22 Masters Creek Union Pacific Drilling Vertically
15. Crosby 27 Masters Creek Union Pacific Drilling Vertically
16. Exxon 2 Masters Creek Union Pacific Drilling Vertically
17. Johnson 24 Masters Creek Union Pacific Drilling
Horizontally
18. Quinn 15 Masters Creek Union Pacific Drilling Vertically
19. Rice Land 14 S. Brookeland Union Pacific Completing
20. Goins 7 Masters Creek Sonat Completing
21. Hudson 2 Masters Creek Sonat Drilling Vertically
22. Maricle 14 Masters Creek Sonat Drilling
Horizontally
23. Bullock "A" 5 Masters Creek OXY Drilling Vertically
24. Lambright "A" 4 Masters Creek OXY Drilling Vertically
25. Mid-State "A" 27 Masters Creek OXY Drilling
Horizontally
26. Myers 17 St. Landry Belco Drilling Vertically
27. Merrick Estate 10 Baton Rouge Amoco Drilling Vertically
Initial production test data from five of Chesapeake's ten drilling wells
and eight of the 17 wells operated by others should be available by late
September.
To date, 96 wells have been drilled or are drilling in the Louisiana
Austin Chalk Trend, of which 66 are located in the Masters Creek area. The
tables below summarize the activity currently known to Chesapeake in the
Louisiana Trend:
Masters Creek: Productive* Abandoned Drilling Total
Chesapeake 15 1 8 24
Union Pacific 10 2 10 22
Sonat 5 0 5 10
Oxy 7 0 3 10
Belco 0 0 0 0
Masters Creek Industry
Totals 37 3 26 66
Non-Masters Creek: Productive* Abandoned Drilling Total
Chesapeake 8 6 2 16
Union Pacific 3 1 1 5
Sonat 2 0 0 2
Oxy 1 0 1 2
Belco 3 1 1 5
Non-Masters Creek
Industry Totals 17 8 5 30
*Includes wells producing and waiting on pipeline.
Management Comment
Aubrey K. McClendon, Chesapeake's Chief Executive Officer provided the
following summary: "While we are obviously disappointed with the financial
results of fiscal 1997, we believe our performance in fiscal 1998 will
improve. Because of our redirected Austin Chalk drilling program in
Louisiana, ongoing developmental drilling campaigns in southern Oklahoma and
in Giddings, recent exploration results in the Nesson project in North Dakota
and the Lovington project in New Mexico, and exploration initiatives in the
Tuscaloosa in Louisiana, the Wilcox in Louisiana and Texas, and the Deep
Arbuckle in Oklahoma, we believe fiscal 1998 will mark an important turnaround
period for Chesapeake.
We believe the keys to our recovery are in place: $300 million in cash
and expected investment realizations, a re-focused and lower risk drilling
program, and an experienced and motivated management team. We look forward to
sharing with you our anticipated improvement in corporate performance in
fiscal 1998.
Additionally, Chesapeake's Board of Directors has recently approved the
repurchase of up to $50 million of the company's common stock. These
purchases may be made from time to time through open market transactions,
privately negotiated transactions, or block trades."
Chesapeake Energy Corporation is an independent oil and natural gas
producer headquartered in Oklahoma City which specializes in utilizing
advanced seismic, drilling and completion technologies to develop new reserves
of oil and natural gas. The company's operations are focused on exploratory
and developmental drilling in major onshore producing areas of the United
States.
The information in this release includes certain forward-looking
statements that are based on assumptions that in the future may prove not to
have been accurate. Those statements, and Chesapeake Energy Corporation's
business and prospects, are subject to a number of risks, including production
variances from expectations, volatility of oil and gas prices, the need to
develop and replace its reserves, the substantial capital expenditures
required to fund its operations, environmental risks, drilling and operating
risks, risks related to exploratory and developmental drilling, uncertainties
about estimates of reserves, competition, government regulation, and the
ability of the company to implement its business strategy. These and other
risks are described in the company's documents and reports that are available
from the United States Securities and Exchange Commission. |
