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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X| Filed by Registrant.
[ | Filed by Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-12
GOTHIC ENERGY CORPORATION
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if other than Registrant)
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0-11. 1) Title of each class of securities to which transaction
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
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was paid previously. Identify the previous filing by registration
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<PAGE> 2
GOTHIC ENERGY CORPORATION
NEWS FOR IMMEDIATE RELEASE
OCTOBER 26, 2000
GOTHIC ENERGY CORPORATION ANNOUNCES
THIRD QUARTER 2000 FINANCIAL RESULTS
Tulsa,Oklahoma...GOTHIC ENERGY CORPORATION (OTC BULLETIN BOARD: GOTH) today
announced the financial results for the three and nine month periods ended
September 30, 2000.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
Natural gas and oil sales for the three months ended September 30, 2000 were
$21.2 million compared to $13.6 million for the same period last year, an
increase of 56%. This increase was due primarily from higher commodity prices in
the natural gas and oil industry during 2000. On a natural gas equivalent basis,
the Company's net production volumes were 7.1 Bcfe for the three months ended
September 30, 2000, compared to 6.4 Bcfe in 1999. Natural gas production volume
for the three months ended September 30, 2000 was 6.9 Bcf, compared to 6.1 Bcf
produced during the same period in 1999. Gothic's average natural gas sales
price for the three months ended September 30, 2000 was $3.00 per Mcf compared
to $2.08 per Mcf in the prior year period. Oil production volume for the three
months ended September 30, 2000 was 29 MBbls, compared to 45 MBls for the three
months ended September 30, 1999. Gothic's average oil sales price for the three
months ended September 30, 2000 was $20.14 per Bbl compared to $19.07 per Bbl in
the prior year period.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 60% to $17.0 million for the three months ended September 30, 2000
from $10.6 million for the same period in 1999. Cash flow from operations before
changes in working capital for the three months ended September 30, 2000 was
$10.2 million, compared to cash flow from operations before changes in working
capital of $4.0 million for the same period in 1999. The Company recorded net
income of $1.3 million (a loss of $0.05 per share after preferred dividends and
amortization of preferred discount costs) for the three months ended September
30, 2000 compared to a net loss of $4.3 million ($0.37 per share) for the prior
year period.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
Production for the nine months ended September 30, 2000 was 20.2 Bcfe, compared
to 19.7 Bcfe for the same period in 1999. Total revenues for the first nine
months of 2000 increased 42% to $55.1 million as compared to $38.8 million for
the first nine months of 1999. The increase in revenues for the nine-month
period was primarily due to higher commodity prices in the natural gas and oil
industry in 2000. Gothic's EBITDA for the nine months ended September 30, 2000
increased 50% to $43.0 million from $28.7 million for the same period in 1999.
<PAGE> 3
Net loss for the nine months ended September 30, 2000 was $2.1 million ($.46 per
share) compared to a net loss of $14.8 million ($1.27 per share) for the nine
months ended September 30, 1999. Gothic's cash flow from operations before
changes in working capital for the nine months ended September 30, 2000 was
$22.8 million, compared to $9.7 million for the nine months ended September 30,
1999.
HEDGING ACTIVITIES
In July 1999 the Company entered into a costless collar agreement with respect
to the production of 50,000 MMBTU per day during the period of November 1999
through March 2000, which placed a floor of $2.30 per MMBTU and a ceiling of
$3.03 per MMBTU. Collar arrangements limit the benefits the Company will realize
if actual prices rise above the ceiling price. These arrangements provide for
the Company to exchange a floating market price for a fixed range contract
price. Payments are made by the Company when the floating price exceeds the
fixed range for a contract month and payments are received when the fixed range
price exceeds the floating price. The commodity reference price for the contract
was the Panhandle Eastern Pipeline Company, Texas, and Oklahoma Mainline Index.
In August 1999, the Company entered into a hedge agreement covering 10,000
barrels of oil per month at a price of $20.10 per barrel. This hedge was in
effect from September 1999 through August 2000. Gain and losses on such natural
gas and oil contracts are reflected in revenues when the natural gas or crude
oil is sold.
Additionally, in January 2000, Gothic entered into a hedge agreement covering
50,000 MMBTU per day at a fixed price of $2.435 per MMBTU. This hedge was in
effect from April 2000 through October 2000. In February 2000, Gothic entered
into a hedge agreement covering 20,000 MMBTU per day at a fixed price of $2.535
per MMBTU for April 2000 and $2.555 per MMBTU for May 2000. This hedge was in
effect for the months of April and May 2000. The commodity price for both
contracts was the Panhandle Eastern Pipeline Company, Texas, Oklahoma Mainline
Index.
In September 2000, the Company entered into hedge contracts for the months of
November and December 2000, for 60,000 MMBTU per day at a price of $4.88 and
$5.00, respectively. The commodity price for both contracts is the Panhandle
Eastern Pipeline Company, Texas, Oklahoma Mainline Index. Hedging activities
reduced third quarter 2000 realized prices by $1.23 per Mcf and $11.07 per
barrel, and reduced natural gas and oil sales by $8.1 million. Hedging
activities reduced the nine months ended September 30, 2000 realized prices by
$0.62 per Mcf and $7.23 per barrel, and reduced natural gas and oil sales by
$12.9 million.
CURRENT OPERATIONS
After the drilling and completion of 33 gross wells (11 net wells) in 2000, the
Company had an additional 7 wells in various stages of drilling, completion or
evaluation at September 30, 2000. Since September 30, 2000, two of those wells
have been completed and are on-line and producing.
The Company estimates that net ultimate reserves of 23.9 Bcfe are attributable
to the wells completed by September 30, 2000. The Company estimates the drilling
activities during the first nine months of 2000 have resulted in replacement of
119% of production through September 30, 2000 at an average finding cost of $.75
Mcfe. The Company exited the third quarter with a daily run rate of 79 Mmcfe and
is currently producing approximately 81 Mmcfe per day.
<PAGE> 4
CHESAPEAKE MERGER
On June 30, 2000 Gothic entered into a letter of intent to merge into Chesapeake
Energy Corporation. The parties executed a definitive merger agreement on
September 8, 2000 and Gothic has scheduled a special meeting of shareholders to
vote on the merger on December 12, 2000. The merger will result in Gothic being
a wholly owned subsidiary of Chesapeake, with Gothic's common shareholders,
excluding shareholdings of Chesapeake, receiving 4.0 million shares of
Chesapeake in exchange for their Gothic shares. The merger is expected to be
completed promptly after shareholder approval and other closing conditions have
been fulfilled, but no later than January 2001.
Gothic Energy Corporation and Chesapeake Energy Corporation have filed with the
Securities and Exchange Commission a proxy statement/prospectus in preliminary
form and plan to file a definitive proxy statement/prospectus and other relevant
documents concerning the proposed merger transaction. The proxy
statement/prospectus will be sent to shareholders of Gothic Energy Corporation
on or about November 2, 2000, seeking their approval of the proposed
transaction. We urge our shareholders to carefully read the definitive proxy
statement/prospectus, and any other relevant documents filed with the SEC,
because they will contain important information. Investors may obtain free of
charge, a copy of the preliminary and definitive proxy statement/prospectus and
other documents filed by Gothic Energy Corporation or by Chesapeake Energy
Corporation with the SEC at the SEC's website, www.sec.gov. In addition,
documents filed with the SEC by Gothic Energy Corporation will be available,
free of charge upon written request to Gothic Energy Corporation, 6120 South
Yale Avenue, Suite 1200, Tulsa, Oklahoma, 74136. Documents filed with the SEC by
Chesapeake Energy Corporation will be available, free of charge from Chesapeake
Energy Corporation, 6100 North Western Avenue, Oklahoma City, Oklahoma, 73118.
This press release may contain projections and other forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Any such projections or statements reflect the Company's current views
with respect to future events and financial performance. No assurances can be
given, however, that these events will occur or that such projections will be
achieved and actual results could differ materially from those projected. A
discussion of important factors that could cause actual results to differ
materially from those projected is included in the Company's periodic reports
filed with the Securities and Exchange Commission.
Gothic Energy Corporation is an oil and gas acquisition, exploitation,
development and production company headquartered in Tulsa, Oklahoma. Additional
information may be obtained by contacting officers of the company, Michael Paulk
or Steven Ensz at the corporate headquarters. Gothic is located at 6120 South
Yale Avenue, Suite 1200, Tulsa, Oklahoma, 74136, telephone number (918)
749-5666, facsimile (918) 749-5882.
<PAGE> 5
GOTHIC ENERGY CORPORATION
SUMMARIZED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRODUCTION DATA
Oil (MBbls) 29 45 108 120
Natural gas (MMcf) 6,879 6,104 19,520 18,995
Natural gas equivalent (MMcfe) 7,053 6,374 20,168 19,715
Oil ($/Bbl) $ 20.14 $ 19.07 $ 21.35 $ 15.86
Gas ($/Mcf) $ 3.00 $ 2.08 $ 2.60 $ 1.85
INCOME STATEMENT DATA
REVENUES
Oil and gas $ 21, 244 $ 13,556 $ 53,107 $ 36,973
Well operations 660 594 2,016 1,853
-------- -------- -------- --------
TOTAL REVENUES 21,904 14,150 55,123 38,826
EXPENSES
Lease operating 3,387 2,477 7,830 7,073
General and administrative 1,240 1,078 3,216 3,062
Investment banking and related fees 306 -- 1,091 --
-------- -------- -------- --------
EBITDA 16,971 10,595 42,986 28,686
Depreciation, depletion & amortization (5,597) (5,456) (15,572) (16,108)
Interest and financing costs (10,141) (9,473) (29,631) (28,200)
Other, net 92 38 141 855
-------- -------- -------- --------
NET INCOME (LOSS) 1,325 (4,296) (2,076) (14,767)
Preferred dividend 1,953 1,738 5,668 5,029
Preferred dividend - amortization of preferred
discount 462 462 1,386 1,385
-------- -------- -------- --------
NET LOSS AVAILABLE FOR COMMON SHARES $ (1,090) $ (6,496) $ (9,130) $(21,181)
======== ======== ======== ========
PER SHARE DATA
Net loss - basic and diluted $ (0.05) $ (0.37) $ (0.46) $ (1.27)
======== ======== ======== ========
Weighted average shares outstanding-basic and
diluted 21,830 17,463 19,742 16,683
======== ======== ======== ========
BALANCE SHEET DATA
Cash and cash equivalents $ 12,823 $ 2,946
Other current assets 17,447 9,512
Total assets 256,063 237,583
Current liabilities 35,212 20,155
Long term debt, net 318,751 312,297
Stockholders' equity (101,222) (98,671)
Total liabilities and stockholders' equity 256,063 237,583
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