Earnings Report
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Monday May 3, 6:11 pm Eastern Time
Company Press Release
SOURCE: Chesapeake Energy Corporation
Chesapeake Energy Corporation Reports First Quarter 1999 Results
OKLAHOMA CITY, May 3 /PRNewswire/ -- Chesapeake Energy Corporation
(NYSE: CHK - news) reported its first quarter 1999 financial and
operating results today. For the quarter, Chesapeake increased its
production by 45% to 33.3 bcfe compared to 23.0 bcfe for the first
quarter of 1998. Based on an mcfe price realization of $1.56 during
the 1999 first quarter, Chesapeake generated $13.4 million of cash
flow from operations, $33.3 million of ebitda (cash flow from
operations plus interest expense), and a net loss of $12.0 million
($0.17 per common share). During the first quarter of 1998,
Chesapeake realized $2.19 per mcfe and generated $26.2 million of
cash flow from operations, $36.9 million of ebitda, and a net loss of
$256.5 million (including a $250.0 million asset impairment charge).
The table below summarizes Chesapeake's key statistics during the
quarter and compares them to the first and fourth quarters of 1998:
Three Months Ended
3/31/99 12/31/98 3/31/98
Days in the quarter 90 92 90
Average daily production
(in mmcfe) 370.1 367.6 255.1
Natural gas production (in bcf) 25.7 25.4 15.9
Average gas sales price ($/mcf) 1.48 1.79 2.06
Oil production (in mbbls) 1,273 1,407 1,176
Average oil sales price ($/bbl) 10.92 11.04 14.84
Natural gas equivalent
production (in bcfe) 33.3 33.8 23.0
Gas equivalent sales price
($/mcfe) 1.56 1.80 2.19
Gas as % of total production 77.1 75.0 69.3
General and administrative
costs ($/mcfe) 0.12 0.15 0.19
Production taxes and lease
expenses ($/mcfe) 0.48 0.49 0.41
Depletion of oil and gas
properties ($/mcfe) 0.70 1.10 1.36
Interest expense ($/mcfe) 0.60 0.60 0.47
Cash flow from operations
($ in millions) 13.4 19.5 26.2
Ebitda ($ in millions) 33.3 39.8 36.9
Net income ($ in millions) (12.0) (425.1) (256.5)
Net income breakeven
price ($/mcfe) 1.92 2.39 2.46
Budget Information and 1999 Forecasts
Chesapeake has established its 1999 capital budget at approximately
$115 million, allocated $90 million for drilling, leasehold and
seismic expenditures and $25 million for acquisitions. The company
anticipates funding this level of cap-ex from cash on hand, cash flow
from operations, and proceeds from miscellaneous asset sales.
Chesapeake's 1999 base budget assumes a realized gas equivalent price
of $1.96 per mcfe, production of 120-125 bcfe (approximately 80% of
which will be natural gas), lease operating expenses (including
production taxes) of $0.47 per mcfe, interest costs of $0.65 per
mcfe, and general and administrative costs of $0.13 per mcfe,
resulting in a total operating cost structure for the year estimated
at $1.25 per mcfe. Because of projected higher oil and gas prices,
lower finding costs, and anticipated drilling successes, Chesapeake
believes it will replace 150-200% of its 1999 production and its
proved reserves will increase during the year from 1,091 bcfe at
December 31, 1998 to approximately 1150-1200 bcfe by year-end 1999.
Since late 1998, Chesapeake has received $41 million from its non-
core asset sales program. During the remainder of 1999, the company
expects to sell an additional $50 million in non-core assets.
Management Comment
Chesapeake's Chief Executive Officer, Aubrey K. McClendon,
commented, ''We are pleased that OPEC's recent actions have produced
almost a 70% increase in oil prices in less than two months.
Nevertheless, we remain much more bullish on the fundamentals for
North American natural gas. With only 368 active natural gas rigs
drilling today (40% below last year at this time), annual U.S.
depletion rates approaching 20-25%, and significant increases in gas
demand on the way from new gas-fired power plants, we believe the
fundamentals for natural gas producers are especially compelling.
Because of Chesapeake's 87% natural gas reserve concentration, the
company's asset value, cash flow and earnings have significant
leverage to improving natural gas prices. In fact, for each $0.10
increase in natural gas prices, Chesapeake's earnings and cash flow
increase by approximately $0.10 per share and net asset value
increases by approximately $0.50 per share.''
Management Teleconference
Chesapeake's management will host a teleconference tomorrow morning,
Tuesday, May 4 at 9:00 a.m. EDT to review the 1999 first quarter's
results. Please call 719-457-2653 between 8:45 and 9:00 a.m. EDT on
May 4 if you would like to participate. Participation will be limited
to the first 200 callers. For those unable to participate, a replay
of the call will be available from 6:00 p.m. Tuesday, May 4 to 6:00
p.m. Tuesday, May 18. Access to the replay will be available by
dialing 719-457-0820 and using passcode #671160.
The information in this release includes certain forward-looking
statements that are based on assumptions that in the future may prove
not to have been accurate. Those statements, and Chesapeake Energy
Corporation's business and prospects, are subject to a number of
risks, including production variances from expectations,
uncertainties about estimates of reserves, volatility of oil and gas
prices, the need to develop and replace reserves, the substantial
capital expenditures required to fund operations, environmental
risks, drilling and operating risks, risks related to exploratory and
developmental drilling, competition, government regulation, and the
ability of the company to implement its business strategy. These and
other risks are described in the company's documents and reports that
are available from the United States Securities and Exchange
Commission, including the report filed on Form 10-K for the year
ended December 31, 1998.
Chesapeake Energy Corporation is an independent oil and natural gas
producer headquartered in Oklahoma City. The company's operations are
focused on developmental drilling and property acquisitions in three
major onshore natural gas producing areas of the United States and
Canada. The company's Internet address is www.chesapeake-energy.com.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
($ in 000's, except per share data)
(unaudited)
THREE MONTHS ENDED: March 31, 1999 March 31, 1998
$ $/Mcfe $ $/Mcfe
REVENUES:
Oil and gas sales 51,806 1.56 50,241 2.19
Oil and gas marketing sales 13,871 0.42 26,524 1.16
Total revenues 65,677 1.98 76,765 3.35
OPERATING COSTS:
Production expenses 13,992 0.42 7,894 0.34
Production taxes 1,990 0.06 1,544 0.07
Oil and gas marketing expenses 13,285 0.40 26,261 1.14
Depreciation, depletion, and
amortization of oil and
gas properties 23,153 0.70 31,342 1.36
Depreciation and amortization
of other assets 2,166 0.07 1,380 0.06
General and administrative 4,024 0.12 4,380 0.19
Impairment of oil and gas
properties --- --- 250,000 10.89
Total operating costs 58,610 1.77 322,801 14.05
INCOME (LOSS) FROM
OPERATIONS: 7,067 0.21 (246,036) (10.70)
OTHER INCOME (EXPENSE)
Interest and other income 873 0.03 224 0.01
Interest expense (19,890) (0.60) (10,688) (0.47)
(19,017) (0.57) (10,464) (0.46)
Loss Before Income Taxes (11,950) (0.36) (256,500) (11.16)
Income Tax Benefit --- --- --- ---
NET LOSS (11,950) (0.36) (256,500) (11.16)
Preferred Stock Dividends (4,026) (0.12) --- ---
Net Loss Available to
Common Shareholders (15,976) (0.48) (256,500) (11.16)
Loss Per Common Share (Basic
and Assuming Dilution) (0.17) --- (3.19) ---
Average Common Shares and Common
Equivalent Shares Outstanding
Basic and Assuming Dilution 96,710 --- 80,330 ---
Cash Flow from Operations (A) 13,369 0.40 26,222 1.14
EBITDA (B) 33,259 1.00 36,910 1.61
Thousands of barrels of
oil (MBbl): 1,273 + 8% 1,176
Millions of cubic feet
of gas (MMcf): 25,674 + 61% 15,907
Millions of cubic feet of gas
equivalents (Mmcfe): 33,312 + 45% 22,963
Mmcfe per day 370.1 + 45% 255.1
Average price/barrel $10.92 - 26% $14.84
Average price/Mcf $1.48 - 28% $2.06
Average gas equivalent price/Mcfe $1.56 - 29% $2.19
(A) Income before income tax, depreciation, depletion and amortization,
and impairment of oil and gas properties and other assets.
(B) Earnings before income tax, interest expense, depreciation, depletion
and amortization, and impairment of oil and gas properties and other
assets.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
($ in 000's, except per share data)
(unaudited)
THREE MONTHS ENDED: March 31, 1999 December 31, 1998
$ $/Mcfe $ $/Mcfe
REVENUES:
Oil and gas sales 51,806 1.56 60,925 1.80
Oil and gas marketing sales 13,871 0.42 24,608 0.73
Total revenues 65,677 1.98 85,533 2.53
OPERATING COSTS:
Production expenses 13,992 0.42 14,427 0.43
Production taxes 1,990 0.06 2,154 0.06
Oil and gas marketing expenses 13,285 0.40 24,322 0.72
Depreciation, depletion,
and amortization
of oil and gas properties 23,153 0.70 37,333 1.10
Depreciation and amortization
of other assets 2,166 0.07 2,256 0.07
General and administrative 4,024 0.12 5,207 0.15
Impairment of oil and gas
properties --- --- 360,000 10.65
Impairment of other assets --- --- 45,000 1.33
Total operating costs 58,610 1.77 490,699 14.51
INCOME (LOSS) FROM OPERATIONS: 7,067 0.21 (405,166) (11.98)
OTHER INCOME (EXPENSE)
Interest and other income 873 0.03 353 0.01
Interest expense (19,890) (0.60) (20,319) (0.60)
(19,017) (0.57) (19,966) (0.59)
Loss Before Income Taxes (11,950) (0.36) (425,132) (12.57)
Income Tax Benefit --- --- --- ---
NET LOSS (11,950) (0.36) (425,132) (12.57)
Preferred Stock Dividends (4,026) (0.12) (4,026) (0.12)
Net Loss Available to
Common Shareholders (15,976) (0.48) (429,158) (12.69)
Loss Per Common Share (Basic
and Assuming Dilution) (0.17) --- (4.44) ---
Average Common Shares and Common
Equivalent Shares Outstanding
Basic and Assuming Dilution 96,710 --- 96,710 ---
Cash Flow from Operations (A) 13,369 0.40 19,457 0.58
EBITDA (B) 33,259 1.00 39,776 1.18
Thousands of barrels of
oil (MBbl): 1,273 - 9% 1,407
Millions of cubic feet of
gas (MMcf): 25,674 + 1% 25,373
Millions of cubic feet
of gas equivalents (Mmcfe): 33,312 - 1% 33,815
Mmcfe per day 370.1 + 1% 367.6
Average price/barrel $10.92 - 1% $11.04
Average price/Mcf $1.48 - 17% $1.79
Average gas equivalent
price/Mcfe $1.56 - 13% $1.80
(A) Income before income tax, depreciation, depletion and amortization,
and impairment of oil and gas properties and other assets.
(B) Earnings before income tax, interest expense, depreciation, depletion
and amortization, and impairment of oil and gas properties and other
assets.
SOURCE: Chesapeake Energy Corporation
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