SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 26, 1996
CHESAPEAKE ENERGY CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 1-13726 73-1395733
(State or other jurisdiction (Commission (IRS Employer Identification No.)
of incorporation) File Number)
6104 North Western Avenue, Oklahoma City, Oklahoma 73118
(Address of principal executive offices) (Zip Code)
(405) 848-8000
(Registrant's telephone number, including area code)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. Other Events
On July 26, 1996, Chesapeake Energy Corporation ("Chesapeake") issued a
press release announcing an operations update. The July 26, 1996 press
release is filed herewith as Exhibit 99 and incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits. The following exhibit is filed herewith:
99 Press Release issued by the Registrant on July 26, 1996.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHESAPEAKE ENERGY CORPORATION
MARCUS C. ROWLAND
By: Marcus C. Rowland
Vice President - Chief Financial Officer
Dated: August 1, 1996
<PAGE>
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EXHIBIT INDEX
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Exhibit No. Description Method of Filing
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<S> <C> <C>
99 Press Release issued by the Filed herewith
Registrant on July 26, 1996. electronically
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FOR IMMEDIATE RELEASE
JULY 26, 1996
CONTACT: MARC ROWLAND, CHIEF FINANCIAL OFFICER
(405)848-8000, EXT. 232
TOM PRICE, JR., VICE PRESIDENT-
CORPORATE DEVELOPMENT
(405)848-8000, EXT. 257
CHESAPEAKE ENERGY CORPORATION ANNOUNCES
OPERATIONS UPDATE
OKLAHOMA CITY, OKLAHOMA, JULY 26, 1996 -- Chesapeake Energy Corporation
(NYSE:CHK) today provided the following information on its company-wide
operational activity.
Louisiana Austin Chalk Trend Update
On June 30, 1996, Chesapeake initiated oil and natural gas sales from the
James #7-1, the company's first Louisiana Trend well. During its first two
weeks of production, the well averaged 1,500 barrels of oil (BO) and
7 million cubic feet of natural gas (MMCF) per day from the downdip Austin
Chalk lateral. Ten days ago, production commenced from the updip lateral
and the well's combined production from both laterals has since increased to
a daily average of 2,600 BO and 10 MMCF. Cumulative production from the well
through July 24 was approximately 47,000 BO and 200 MMCF.
Chesapeake has also recently tested the Cloud #9-1, the company's second
Louisiana Trend well. Located four miles to the west of the James, the Cloud
tested at daily rates of 2,200 BO and 15 MMCF. The well is currently shut-in
waiting on a pipeline connection and is expected to begin producing in
September.
The Lyles #31-1, Chesapeake's third Louisiana Trend well, is located twelve
miles to the east of the James on a 25,000 acre leasehold block. While
drilling, the Lyles encountered favorable shows of oil and natural gas,
but also encountered significant indications of formation water. Although
other Austin Chalk wells in the Giddings Field and Louisiana Trend
routinely produce large amounts of formation water, Chesapeake believes it is
unlikely that the Lyles will be as productive as the James and the Cloud. The
company plans to test the Lyles during the next 30-60 days after production and
water-handling facilities have been installed.
Chesapeake's fourth Louisiana Trend well, the Rice-Land Lumber #33-1, is
building the curve for the horizontal portion of the well and is expected
to begin drilling in the Austin Chalk within the next several weeks. The
company's fifth Louisiana Trend well, the Lawton #25-1 is located 13 miles
west of the James and has encountered encouraging shows of oil and natural
gas in the updip lateral and will soon begin drilling the downdip lateral.
Chesapeake believes it will be able to commence production from the Lawton in
September or October. Chesapeake's sixth Louisiana Trend well, the Lord #19-1,
is located two miles south of the James well and is drilling vertically. The
company's seventh Louisiana Trend well, the Martin #11-1, is located midway
between the Cloud and the James and will spud during the next two weeks.
The company plans to add three rigs to its Louisiana drilling program in August
and one additional rig every other month during the first half of fiscal 1997.
During this period, Chesapeake anticipates initiating operations on approxi-
mately 15 additional Louisiana Trend wells, two of which are targeted to
test both the Austin Chalk and the deeper Tuscaloosa formation.
Louisiana Trend Leasing Activity and Gas Infrastructure Update
To reflect the continuing evolution of its Louisiana Trend activity, Chesapeake
has now divided its one million net acres of leasehold into six project areas,
named from west to east as follows: South Brookeland, Leesville, Masters Creek,
St. Landry, Baton Rouge, and Livingston. Chesapeake anticipates initiating
drilling operations on at least one well in each of these areas during the
first half of fiscal 1997.
Chesapeake has recently reached an agreement in principle with Union Pacific
Resources (NYSE: UPR) whereby Chesapeake would acquire a 15% interest in UPR's
proposed Masters Creek natural gas processing plant. The transaction is ex-
pected to be completed in the near future. The Masters Creek plant is
designed as a 100 MMCF per day cryogenic processing plant that will extract
natural gas liquids from wells in the Masters Creek area and should increase
wellhead netback pricing. To acquire this ownership, Chesapeake would
dedicate a portion of its Masters Creek leasehold position to the plant
and would pay its proportionate share of the plant's estimated cost of $40-50
million. Chesapeake is continuing its discussions and negotiations with several
other gas processing and pipeline companies on additional Louisiana Trend gas
infrastructure projects.
Giddings Field Update
Chesapeake's drilling success continues in the downdip Giddings Field. The
company has now drilled 78 wells in Navasota River, 25 wells in Independence,
and four wells in South Navasota River. The company is currently utilizing
three rigs to develop its leasehold in Navasota River, three rigs in South
Navasota River, and two rigs in Independence. The company is particularly
encouraged by the initial drilling results in the South Navasota River area
where its first four wells are collectively producing approximately 37 MMCF
per day.
Oklahoma Update
In the Knox and Golden Trend Fields of southern Oklahoma, Chesapeake is
utilizing eight rigs to develop its large inventory of undrilled locations.
Of particular significance, two of the rigs are drilling the industry's
first horizontal tests in these fields. The Golden Trend horizontal well
will test the Sycamore formation and the Knox horizontal well will test the
Hunton formation. If successful, these horizontal wells could substantially
enhance the rates of return from drilling in these areas by increasing well
productivity while decreasing the amount of capital needed for further
development.
In the Sholem Alechem area, Chesapeake is employing three rigs to continue
developing its inventory of undrilled locations. One of these rigs is drilling
the industry's first horizontal test of the McLish, a fractured carbonate
formation located approximately 1,800 feet deeper than the Sycamore
formation, the target of Chesapeake's other horizontal drilling in Sholem
Alechem.
Chesapeake is also currently drilling with one rig in the Arkoma Basin to
develop its Spiro and Jackfork prospects. Additionally, Chesapeake is
expanding its 3-D seismic activity in Oklahoma with one project completed in
Knox, two more planned for Knox, one project underway in the Golden Trend,
and one planned for Sholem Alechem.
Williston Basin Report
In a rapidly expanding oil project in the Williston Basin, Chesapeake has
acquired a substantial leasehold position in the horizontal Red River "B"
play in Bowman and Slope Counties, North Dakota and in Fallon County
Montana. Chesapeake's leasehold in this area totals approximately 325,000
net acres and was acquired at a cost of approximately $12 million with
net revenue interests averaging 85%. Approximately 70 Red River "B"
horizontal wells have been drilled to date in this project area with industry
publications reporting per well reserve expectations of 250,000 to 500,000
BO and completed well costs of approximately $900,000. Chesapeake anticipates
drilling its initial horizontal Red River "B" wells during the first
quarter of fiscal 1997.
Additionally, in Richland and Roosevelt Counties, Montana, Chesapeake has
acquired approximately 50,000 net acres in various Red River vertical prospects.
The company has acquired and evaluated its initial 3-D seismic surveys in the
area and plans to drill its first Red River vertical tests during the first
quarter of fiscal 1997.
Capital Expenditure Budget and Reserve Report Update
During fiscal 1996, Chesapeake's capital expenditures totaled $170 million for
drilling and completion activities and $120 million for acreage acquisition.
Chesapeake's present capital expenditure budget for fiscal 1997 is $240
million for drilling and completion activities and $50 million for acreage
acquisition. The company's present intention is to fund these capital
expenditures through a combination of cash flow from operations, cash on
hand, and existing credit facilities. Chesapeake's preliminary fiscal 1996
financial results and June 30, 1996 reserve report information will be
available in a press release and conference call scheduled for August 29, 1996.
Chesapeake Energy Corporation is an independent energy producer headquartered
in Oklahoma City. The company focuses on utilizing advanced drilling and
completion technologies to develop significant new oil and natural gas
discoveries 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 exploration and development drilling, uncertainties about esti-
mates 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 reports that are available from the United States Securities
and Exchange Commission.
