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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):
NOVEMBER 12, 1997
HUGOTON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Kansas
(State or other jurisdiction of incorporation)
2-70924 48-1036256
(Commission File Number) (IRS Employer Identification No.)
301 N. Main, Suite 1900, Wichita, Kansas 67202
(Address of principal executive offices and Zip Code)
(316)262-1522
(Registrant's telephone number, including area code)
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INDEX
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PAGE
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Item 5. Other Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 7. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exhibit 2.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
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Item 5. Other Events.
On November 12, 1997, Hugoton Energy Corporation ("Hugoton"), a Kansas
corporation, entered into an Agreement and Plan of Merger (the "Agreement")
with Chesapeake Acquisition Corp. ("Chesapeake Acquisition"), a Kansas
corporation and a wholly-owned subsidiary of Chesapeake Energy Corporation
("Chesapeake Energy"), an Oklahoma corporation, pursuant to which Chesapeake
Acquisition will acquire Hugoton for shares of Common Stock of Chesapeake
Energy.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 2.1 - Press Release
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SIGNATURES
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 hereunto duly authorized.
HUGOTON ENERGY CORPORATION
Date: November 18, 1997 By: \s\
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W. Mark Womble, Executive Vice
President and Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
2.1 - Press Release
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EXHIBIT 2.1
[CHESAPEAKE ENERGY CORPORATION LETTERHEAD]
FOR IMMEDIATE RELEASE
NOVEMBER 13, 1997
CHESAPEAKE ENERGY CORPORATION ANNOUNCES
AGREEMENT TO ACQUIRE HUGOTON ENERGY
CORPORATION
OKLAHOMA CITY, OKLAHOMA, NOVEMBER 13, 1997 - Chesapeake Energy
Corporation (NYSE:CHK) and Hugoton Energy Corporation (NASDAQ:HUGO) today
announced that they have signed a definitive agreement to merge in a
stock-for-stock transaction. Hugoton has approximately 300 billion cubic feet
of gas equivalent (Bcfe) of proved reserves which together with Chesapeake's
proved reserves of 580 Bcfe (pro forma for the DLB and AnSon acquisitions) will
give Chesapeake total reserves of approximately 880 Bcfe. Of this amount,
approximately 65% will be proved developed reserves and Chesapeake's reserve to
production index (R/P) will increase to eight years. Hugoton's proved reserves
are 80% developed and will increase Chesapeake's proven reserves by more than
50%. The combined current production rate of Chesapeake and Hugoton will be
approximately 350 million cubic feet of gas (Mcfe) equivalent per day, or 125
Bcfe per year. The combination of Chesapeake and Hugoton should increase
Chesapeake's enterprise value to nearly $1.8 billion. The company will have a
strong balance sheet with $200 million in cash and investments. Pro forma for
the acquisitions, Chesapeake would have generated approximately $235 million in
EBITDA and $190 million in cash flow in calendar 1997.
The merger agreement provides for a fixed exchange ratio of 1.3 shares
of Chesapeake for each share of Hugoton stock, resulting in Hugoton's
shareholders owning approximately 26% of Chesapeake pro forma for the
transaction. Based on Chesapeake's closing price of $10.25 on November 12,
1997, Hugoton's 20.9 million fully-diluted shares outstanding, and the
assumption by Chesapeake of $105 million of Hugoton's debt, the transaction has
a total value of approximately $380 million. Chesapeake believes Hugoton's
unproven properties have a value of $50 million, implying an acquisition price
of approximately $1.10 per Mcfe for Hugoton's proved reserves.
TOM PRICE, JR.,VICE PRESIDENT
CORPORATE DEVELOPMENT
(405)848-8000, EXT. 267
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Chesapeake will acquire Hugoton by merging it into a subsidiary of
Chesapeake. Although both Hugoton and Chesapeake's Boards of Directors have
unanimously approved the transaction, the transaction is subject to approval by
both Chesapeake and Hugoton's shareholders. Floyd C. Wilson, Hugoton's Chairman
and Chief Executive Officer, Hugoton's Executive Vice President Jay W. Decker,
Comdisco, Inc., and partnerships associated with First Reserve Corporation
collectively own approximately 48% of Hugoton's outstanding common stock and
have agreed to vote in favor of the transaction. Aubrey K. McClendon and Tom L.
Ward collectively own 32% of Chesapeake's stock and have agreed to vote in
favor of the transaction. The transaction is expected to close in early 1998
and is expected to be accounted for as a pooling of interests and qualify as a
tax-free reorganization. Bear Stearns & Co. Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation acted as advisors to Chesapeake and Petrie
Parkman & Co., Inc. and Growth Capital Partners, Inc. acted as advisors to
Hugoton.
HUGOTON'S MANAGEMENT
COMMENT
Floyd C. Wilson, Hugoton's Chairman and Chief Executive Officer,
stated, "This merger combines Hugoton's long-lived reserves and strong
production base with Chesapeake's attractive drillbit inventory to create a
major independent capable of growing significantly faster than the industry
average. We are particularly enthusiastic about the recent success of
Chesapeake's refocused drilling program in the Louisiana Austin Chalk Trend and
the high potential of Chesapeake's exploratory program, both of which should
lead to significant increases in reserves, production and cash flow. The
structure of this transaction creates an excellent opportunity for our
shareholders to realize significant future value."
CHESAPEAKE'S MANAGEMENT
COMMENT
Aubrey K. McClendon, Chesapeake's Chairman and Chief Executive
Officer, said "The combination of Chesapeake and Hugoton creates a large
independent oil and gas producer that will be committed to growing its assets
through the drillbit and strategic acquisitions. Chesapeake's high potential
exploration program and Hugoton's stable base of Mid-Continent production
provide an attractive combination for Chesapeake and Hugoton's shareholders.
Chesapeake will continue to focus its drilling program on high-impact
exploration areas such as the Austin Chalk in Louisiana and Texas, the
Tuscaloosa Trend in Louisiana, the Deep Wilcox formation in Wharton County,
Texas, the Lovington area in New Mexico, and the Williston Basin in Montana and
North Dakota. In addition, the combination of Chesapeake and Hugoton's existing
Mid-Continent assets and Chesapeake's recently announced acquisitions of DLB
and AnSon will create a long-lived foundation of more than 500 bcfe of
Mid-Continent reserves. To realize the full value of this acquisition, we will
undertake a major exploitation program on these assets and we expect to
announce other property acquisitions in this area in the months ahead.
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"Our goal at Chesapeake is to build one of the premier North American
exploration and production companies. Chesapeake's vision of the oil and gas
industry for the year 2000 and beyond is centered around our belief that
significant size will be required to compete effectively as exploration programs
become more costly and complex, attractive leasing opportunities become fewer
and the industry talent pool shrinks. We also believe oil and natural gas
prices are likely to increase in the years ahead and we seek to control larger
amounts of oil and gas reserves in order to benefit from these anticipated
price increases. We intend to provide Chesapeake's shareholders with the
opportunity to prosper in this environment by aggressively building our company
through the drillbit and strategic producing property acquisitions. The next 15
years are likely to be a very rewarding time for large independent producers of
oil and gas. We have modified Chesapeake's strategy to provide greater growth
opportunities for our shareholders during this period."
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Chesapeake Energy Corporation is an Independent oil and natural gas
producer headquartered in Oklahoma City. The company's operations are focused
on exploratory and developmental drilling and producing property and corporate
acquisitions in major onshore producing areas of the United States and Canada.
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 its reserves,
the substantial capital expenditures required to fund its 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 fiscal year ended June 30, 1997.
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