<PAGE> 1
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) MAY 5, 1999 (MAY 3, 1999)
--------------------------
CHESAPEAKE ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
OKLAHOMA 1-13726 73-1395733
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer Identification No.)
of incorporation) File Number)
6100 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> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On May 3, 1999, Chesapeake Energy Corporation ("Chesapeake") issued a
press release to report first quarter 1999 results. The May 3, 1999 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 May 3, 1999.
2
<PAGE> 3
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
BY: /s/ AUBREY K. MCCLENDON
------------------------------
AUBREY K. MCCLENDON,
Chairman of the Board and
Chief Executive Officer
Dated: May 4, 1999
3
<PAGE> 4
EXHIBIT INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
99 Press Release issued by the Registrant on May 3, 1999.
</TABLE>
<PAGE> 1
CONTACT: MARC ROWLAND,
CHIEF FINANCIAL OFFICER
(405) 879-9232
FOR IMMEDIATE RELEASE TOM PRICE, JR.,VICE PRESIDENT-
MAY 3, 1999 CORPORATE DEVELOPMENT
(405) 879-9257
CHESAPEAKE ENERGY CORPORATION
REPORTS FIRST QUARTER 1999 RESULTS
OKLAHOMA CITY, OKLAHOMA, MAY 3, 1999 - Chesapeake Energy Corporation (NYSE: CHK)
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 $250.0 million asset impairment
charge).
The table below summarizes Chesapeake's key statistics during the quarter and
compares them to the first and fourth quarters of 1998:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
3/31/99 12/31/98 3/31/98
------- -------- -------
<S> <C> <C> <C>
Days in the quarter 90 92 90
Average daily production (in mmcfe) 370.1 367.6 255.1
Natural gas production (in bcf) 25.7 25.4 15.9
Average gas sales price ($/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
</TABLE>
<PAGE> 2
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
$0.50 per share."
MANAGEMENT TELECONFERENCE
Chesapeake's management will host a teleconference tomorrow morning, Tuesday,
May 4 at 9:00 a.m. EDT to review the 1999 first quarter's results. Please call
719-457-2653 between 8:45 and 9:00 a.m. EDT on May 4 if you would like to
participate. Participation will be limited to the first 200 callers. For those
unable to participate, a replay of the call will be available from 6:00 p.m.
Tuesday, May 4 to 6:00 p.m. Tuesday, May 18. Access to the replay will be
available by dialing 719-457-0820 and using passcode #671160.
<PAGE> 3
The information in this release includes certain forward-looking statements that
are based on assumptions that in the future may prove not to have been accurate.
Those statements, and Chesapeake Energy Corporation's business and prospects,
are subject to a number of risks, including production variances from
expectations, uncertainties about estimates of reserves, volatility of oil and
gas prices, the need to develop and replace reserves, the substantial capital
expenditures required to fund operations, environmental risks, drilling and
operating risks, risks related to exploratory and developmental drilling,
competition, government regulation, and the ability of the company to implement
its business strategy. These and other risks are described in the company's
documents and reports that are available from the United States Securities and
Exchange Commission, including the report filed on Form 10-K for the year ended
December 31, 1998.
Chesapeake Energy Corporation is an independent oil and natural gas producer
headquartered in Oklahoma City. The company's operations are focused on
developmental drilling and property acquisitions in three major onshore natural
gas producing areas of the United States and Canada. The company's Internet
address is www.chesapeake-energy.com.
<PAGE> 4
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
($ IN 000'S, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED: MARCH 31, 1999 MARCH 31, 1998
- ------------------------------------------------------------------------------------------------------------------
$ $/MCFE $ $/MCFE
--------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
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 (1) 13,369 0.40 26,222 1.14
=============== =============== ============== ===========
EBITDA (2) 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% $2.19
- ------------------------------------------------------- --------------- --------------- -------------- -----------
</TABLE>
(1) Income before income tax, depreciation, depletion and amortization, and
impairment of oil and gas properties and other assets.
(2) Earnings before income tax, interest expense, depreciation, depletion and
amortization, and impairment of oil and gas properties and other assets.
<PAGE> 5
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
($ IN 000'S, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED: MARCH 31, 1999 DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------
$ $/MCFE $ $/MCFE
--------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
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 (1) 13,369 0.40 19,457 0.58
=============== =============== ============== ===========
EBITDA (2) 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
- ------------------------------------------------------- --------------- --------------- -------------- -----------
</TABLE>
(1) Income before income tax, depreciation, depletion and amortization, and
impairment of oil and gas properties and other assets.
(2) Earnings before income tax, interest expense, depreciation, depletion and
amortization, and impairment of oil and gas properties and other assets.
