Chesapeake Energy (ticker: CHK, exchange: New York Stock Exchange (.N))
News Release -
24-Feb-2003
Chesapeake Energy Corporation Posts Strong Results for 2002; Oil and Gas Production and Proved Reserves Set RecordsPrinter Friendly Version (pdf format)
OKLAHOMA CITY, Feb 24, 2003 /PRNewswire-FirstCall via COMTEX/ -- Company Reports Fourth Quarter 2002 Net Income Available to Common Shareholders of $24 Million, Discretionary Cash Flow of $125 Million and Ebitda of $157 Million on Revenue of $255 Million and Production of 50 Bcfe Company Reports Full-Year 2002 Net Income Available to Common Shareholders of $30 Million, Discretionary Cash Flow of $410 Million and Ebitda of $521 Million on Revenue of $738 Million and Production of 181 Bcfe Chesapeake
Energy Corporation (NYSE: CHK) today reported its financial and operating
results for the fourth quarter of 2002 and for the full-year 2002. For the
fourth quarter, Chesapeake generated net income available to common shareholders
of $23.7 million ($0.13 per fully diluted common share), discretionary cash flow
(defined as cash flow from operating activities before changes in assets and
liabilities and certain non-cash items) of $125.4 million and ebitda (defined as
discretionary cash flow plus interest expense) of $156.7 million on revenue of
$255.4 million.
The company's fourth quarter 2002 net income available to common shareholders of
$23.7 million included a $0.6 million after-tax risk management loss (a non-cash
item related to the application of SFAS 133 to certain of the company's hedging
contracts), a $7.4 million after-tax loss from the impairment of the company's
investment in the securities of Seven Seas Petroleum, Inc. and a $0.8 million
after-tax loss from the early extinguishment of certain Chesapeake debt
securities. Without these items, Chesapeake's net income to common shareholders
in the fourth quarter of 2002 would have been $32.5 million ($0.18 per fully
diluted common share).
Production for the fourth quarter of 2002 was 49.5 billion cubic feet of natural
gas equivalent (bcfe), comprised of 43.9 billion cubic feet of natural gas (bcf)
(89%) and 0.94 million barrels of oil (mmbo) (11%). Oil and natural gas
production increased 20% from the fourth quarter of 2001 and 6% compared to the
third quarter of 2002. Approximately 9% of the 2.8 bcfe production increase in
the 2002 fourth quarter was attributable to acquisitions closed during the
fourth quarter. The fourth quarter of 2002 marked Chesapeake's sixth consecutive
quarter of production growth compared to six consecutive quarters of production
declines in the industry.
Average prices realized during the fourth quarter of 2002 after hedging were
$24.67 per barrel of oil (bo) and $4.00 per thousand cubic feet of natural gas
(mcf), for a realized gas equivalent price of $4.01 per thousand cubic feet of
natural gas equivalent (mcfe). Hedging activities (excluding the effects of Risk
Management Income or Loss) decreased fourth quarter 2002 oil price realizations
by $2.3 million ($2.41 per bo) and increased fourth quarter 2002 gas price
realizations by $14.2 million ($0.32 per mcf), for a total fourth quarter 2002
revenue increase from hedging activities of $11.9 million ($0.24 per mcfe).
The table below summarizes Chesapeake's key statistics during the 2002 fourth
quarter and compares them to the 2002 third quarter and the 2001 fourth quarter:
Three Months Ended:
12/31/02 9/30/02 12/31/01
Average daily production (in mmcfe) 538 507 450
Gas as % of total production 89 89 88
Natural gas production (in bcf) 43.9 41.4 36.5
Average realized gas price ($/mcf) 4.00 3.39 3.88
Oil production (in mbbls) 941 872 807
Average realized oil price ($/bbl) 24.67 25.67 24.07
Natural gas equivalent production (in bcfe) 49.5 46.7 41.4
Gas equivalent realized price ($/mcfe) 4.01 3.49 3.90
General and administrative costs ($/mcfe) .11 .08 .10
Production taxes ($/mcfe) .21 .15 .04
Lease operating expenses ($/mcfe) .54 .53 .47
Interest expense ($/mcfe) .63 .61 .61
DD&A of oil and gas properties ($/mcfe) 1.28 1.25 1.16
Discretionary cash flow ($ in millions) 125.4 102.0 112.7
Discretionary cash flow ($/mcfe) 2.53 2.19 2.72
Ebitda ($ in millions) 156.7 130.4 138.0
Ebitda ($/mcfe) 3.17 2.79 3.34
Net income to common
shareholders ($ in millions) 23.7 14.1 41.3
Chesapeake Reports Full-Year 2002 Results
For the full-year 2002, Chesapeake generated net income available to common
shareholders of $30.2 million ($0.17 per fully diluted common share),
discretionary cash flow of $410.2 million and ebitda of $521.5 million on
revenue of $737.8 million.
The company's 2002 net income available to common shareholders of $30.2 million
included a $52.8 million after-tax risk management loss (a non-cash item related
to the application of SFAS 133 to certain of the company's hedging contracts), a
$10.3 million after-tax loss from the impairment of the company's investment in
the securities of Seven Seas Petroleum, Inc. and a $1.6 million after-tax loss
from the early extinguishment of certain Chesapeake debt securities. Without
these items, Chesapeake's net income to common shareholders in 2002 would have
been $94.9 million ($0.55 per fully diluted common share).
Production for the full year 2002 was 181.5 bcfe, comprised of 160.7 bcf and
3.47 mmbo. Oil and natural gas production increased 12% from 2001, marking
Chesapeake's 11th consecutive year of production growth. Average prices realized
during 2002 after hedging were $25.22 per bo and $3.54 per mcf, for a realized
gas equivalent price of $3.61 per mcfe. Hedging activities (excluding the
effects of Risk Management Income or Loss) decreased 2002 oil price realizations
by $1.1 million ($0.32 per bo) and increased 2002 gas price realizations by
$97.1 million ($0.61 per mcf), for a total 2002 revenue increase from hedging
activities of $96.0 million ($0.53 per mcfe).
The table below summarizes Chesapeake's key statistics during 2002 and compares
them to the two prior years' results:
Year Ended:
12/31/02 12/31/01 12/31/00
Average daily production (in mmcfe) 497 442 367
Gas as % of total production 89 89 86
Natural gas production (in bcf) 160.7 144.2 115.8
Average realized gas price ($/mcf) 3.54 4.56 3.36
Oil production (in mbbls) 3,466 2,880 3,068
Average realized oil price ($/bbl) 25.22 26.92 26.39
Natural gas equivalent production (in bcfe) 181.5 161.5 134.2
Gas equivalent realized price ($/mcfe) 3.61 4.56 3.50
General and administrative costs ($/mcfe) .10 .09 .10
Production taxes ($/mcfe) .17 .20 .19
Lease operating expenses ($/mcfe) .54 .47 .37
Interest expense ($/mcfe) .61 .61 .64
DD&A of oil and gas properties ($/mcfe) 1.22 1.07 .75
Discretionary cash flow ($ in millions) 410.2 521.6 304.9
Discretionary cash flow ($/mcfe) 2.26 3.23 2.27
Ebitda ($ in millions) 521.5 619.9 391.2
Ebitda ($/mcfe) 2.87 3.84 2.92
Net income to common
shareholders ($ in millions) 30.2 215.4 453.7*
*Includes $265.0 million related to the reversal of a deferred tax
valuation allowance recorded in the fourth quarter of 2000.
Chesapeake Reports Excellent 2002 Finding Costs and Reserve Replacement Ratio;
Reaches Record Level of Proved Oil and Natural Gas Reserves
Chesapeake began 2002 with estimated proved reserves of 1,780 bcfe and ended the
year with 2,205 bcfe, an increase of 425 bcfe, or 24%. Reserve replacement
during the year was 606 bcfe, or 335%, at an all-in finding cost of $1.31 per
mcfe. Reserve additions through acquisitions totaled 275 bcfe at a cost of $1.38
per mcfe (including $0.23 per mcfe from non-cash tax basis step-ups). Reserve
additions through drilling (including price and performance revisions) were 333
bcfe at a cost of $1.21 per mcfe, for a reserve replacement ratio of 183%.
Excluding revisions related to higher oil and gas prices, Chesapeake's 2002
finding costs through the drillbit were $1.57 per mcfe. Pro forma for the ONEOK
acquisition, which closed on January 31, 2003, the company's proved reserves at
year-end 2002 were 2,401 bcfe.
Of the company's estimated proved reserves at year-end 2002, 74% were proved
developed compared to 71% last year. In addition, 73% of this year's estimated
proved reserves were prepared by outside engineers compared to 71% last year.
As of December 31, 2002, the company's estimated future net cash flows
discounted at 10% before taxes (PV-10) were $3.72 billion using field
differential adjusted prices of $30.18 per bo (from $31.25 NYMEX) and $4.28 per
mcf (from $4.60 NYMEX). Last year's PV-10 was $1.65 billion using field
differential adjusted prices of $18.82 per bo (from $19.84 NYMEX) and $2.51 per
mcf (from $2.74 NYMEX).
Full Year 2003 Forecasts And Cap-Ex Budget
Chesapeake's revised forecasts and estimates will be released tomorrow morning
in a new Outlook dated February 25, 2003.
Management Summary
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "Despite a
21% decrease in realized oil and gas prices in 2002 compared to 2001, Chesapeake
posted very strong operational and financial results for the year. Our success
in 2002 resulted from a series of key management decisions made during the past
four years that have positioned the company to be a prime beneficiary of today's
supply-constrained energy environment. These decisions involved product strategy
(we favor gas over oil), geographic strategy (our focus on the Mid-Continent
provides significant economies of scale and high returns on investment),
business strategy (we are adept at both drilling for new reserves and acquiring
existing reserves) and risk management strategy (our hedging results have been
among the best in the industry).
The impact of these decisions is strongly reflected in our 2002 results and also
in our four-year results from year-end 1998 through 2002. During this period,
Chesapeake believes its track record of value-added growth has been one of the
best in the independent exploration and production business:
-- Production increased from 130 bcfe in 1998 to 181 bcfe in 2002,
a compound annual growth rate (CAGR) of 9%;
-- Proved reserves increased from 1,091 bcfe in 1998 to 2,205 bcfe in
2002, a CAGR of 19%;
-- Reserves were replaced at the average annual rate of 282% and finding
costs averaged only $1.04 per mcfe while adding 1,936 bcfe through
acquisitions and drilling;
-- Ebitda increased from $183 million in 1998 to $521 million in 2002 and
discretionary cash flow grew from $115 million in 1998 to $410 million
in 2002, CAGRs of 30% and 37%, respectively;
-- Net income available to common shareholders during the four-year period
totaled $716 million and shareholders' equity increased by
$1.2 billion; and
-- Gains from hedging from 1998 to 2002 have exceeded $180 million and the
company's 2003 hedges have also captured historically high oil and
natural gas prices.
During these four years of exceptional achievement, Chesapeake has become the
largest producer of natural gas in the Mid-Continent, among the eight largest
independent gas producers in the U.S. and one of the most profitable producers
of natural gas in the industry per unit of production. We believe the
combination of our successful product and geographic strategies, our value-added
risk management strategy, our balanced acquisition and drilling programs, our
high quality assets and our low operating costs will enable Chesapeake to
continue delivering one of the industry's best track records of value creation
in the years to come."
Conference Call Information
Chesapeake's management invites your participation in a conference call tomorrow
morning, February 25, at 9:00 a.m. EST to discuss the contents of this release.
Please call 913-981-5533 between 8:50 and 9:00 a.m. EST on February 25 if you
would like to participate in the call. For those unable to participate in the
call, a replay will be available by calling 719-457-0820 between 12:00 p.m. EST
on Tuesday, February 25 through midnight on Monday, March 10. The passcode for
the replay is 720863. The conference call will also be simulcast live on the
Internet and can be accessed by visiting Chesapeake's website at
www.chkenergy.com and selecting "Conference Call" under the "Investor Relations"
link.
This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements include estimates and give our current
expectations or forecasts of future events. They are based on our historical
operating trends, our existing commodity hedging position and our current
estimate of proved reserves. Although we believe our forward-looking statements
are reasonable, they can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties. For example, statements concerning the fair
values of derivative contracts and their estimated contribution to our future
results of operations are based upon market information as of a specific date.
These market prices are subject to significant volatility. Factors that could
cause actual operating and financial results to differ materially from expected
results include the volatility of oil and gas prices, our substantial
indebtedness, our commodity price risk management activities, the cost and
availability of drilling and production services, our ability to replace
reserves, the availability of capital, uncertainties inherent in evaluating our
own reserves and the reserves we acquire, drilling and operating risks and other
risk factors described in the company's 2002 annual report on Form 10-K and
subsequent filings with the Securities and Exchange Commission.
Chesapeake Energy Corporation is one of the 10 largest independent natural gas
producers in the U.S. Headquartered in Oklahoma City, the company's operations
are focused on exploratory and developmental drilling and producing property
acquisitions in the Mid-Continent region of the United States. The company's
Internet address is www.chkenergy.com .
CHESAPEAKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in 000's, except per share data)
(unaudited)
THREE MONTHS ENDED: December 31, December 31,
2002 2001
$ $/mcfe $ $/mcfe
REVENUES:
Oil and gas sales 198,462 4.01 161,339 3.90
Risk management income (loss) (1,023) (0.02) (9,926) (0.24)
Oil and gas marketing sales 57,981 1.17 25,662 0.62
Total revenues 255,420 5.16 177,075 4.28
OPERATING COSTS:
Production expenses 26,939 0.55 19,441 0.47
Production taxes 10,167 0.21 1,661 0.04
General and administrative 5,688 0.11 4,335 0.10
Oil and gas marketing expenses 56,900 1.15 25,036 0.61
Depreciation, depletion,
and amortization of oil
and gas properties 63,458 1.28 47,998 1.16
Depreciation and amortization
of other assets 3,520 0.07 2,709 0.06
Total operating costs 166,672 3.37 101,180 2.44
INCOME FROM OPERATIONS 88,748 1.79 75,895 1.84
OTHER INCOME (EXPENSE):
Interest and other income (3) (0.00) 1,493 0.03
Interest expense (31,314) (0.63) (25,344) (0.61)
Loss on investment in Seven Seas (12,431) (0.25) --- ---
Impairment of investment in securities --- --- (10,079) (0.24)
Gain on sale of Canadian subsidiary --- --- 27,000 0.65
Loss on early extinguishment of debt (1,273) (0.03) --- ---
Total other income (expense) (45,021) (0.91) (6,930) (0.17)
Income Before Income Taxes 43,727 0.88 68,965 1.67
Income Tax Expense 17,488 0.35 26,340 0.64
NET INCOME 26,239 0.53 42,625 1.03
Preferred Stock Dividends (2,529) (0.05) (1,322) (0.03)
NET INCOME AVAILABLE
TO COMMON SHAREHOLDERS 23,710 0.48 41,303 1.00
EARNINGS PER COMMON SHARE:
Basic $ 0.14 $ 0.25
Assuming dilution $ 0.13 $ 0.23
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic 170,118 164,616
Assuming dilution 195,733 182,725
CHESAPEAKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in 000's, except per share data)
(unaudited)
TWELVE MONTHS ENDED: December 31, December 31,
2002 2001
$ $/mcfe $ $/mcfe
REVENUES:
Oil and gas sales 655,454 3.61 735,529 4.56
Risk management income (loss) (88,018) (0.48) 84,789 0.52
Oil and gas marketing sales 170,315 0.94 148,733 0.92
Total revenues 737,751 4.07 969,051 6.00
OPERATING COSTS:
Production expenses 98,191 0.54 75,374 0.47
Production taxes 30,101 0.17 33,010 0.20
General and administrative 17,618 0.10 14,449 0.09
Oil and gas marketing expenses 165,736 0.91 144,373 0.89
Depreciation, depletion,
and amortization of oil
and gas properties 221,189 1.22 172,902 1.07
Depreciation and amortization
of other assets 14,009 0.08 8,663 0.06
Total operating costs 546,844 3.02 448,771 2.78
INCOME FROM OPERATIONS 190,907 1.05 520,280 3.22
OTHER INCOME (EXPENSE):
Interest and other income 7,340 0.04 2,877 0.02
Interest expense (111,280) (0.61) (98,321) (0.61)
Loss on investment in Seven Seas (17,201) (0.10) --- ---
Impairment of investment in securities --- --- (10,079) (0.06)
Gain on sale of Canadian subsidiary --- --- 27,000 0.17
Loss on early extinguishment of debt (2,626) (0.01) --- ---
Gothic standby credit facility costs --- --- (3,392) (0.02)
Total other income (expense) (123,767) (0.68) (81,915) (0.50)
Income Before Income Taxes
and Extraordinary Item 67,140 0.37 438,365 2.72
Income Tax Expense 26,854 0.15 174,959 1.09
NET INCOME BEFORE EXTRAORDINARY ITEM 40,286 0.22 263,406 1.63
EXTRAORDINARY ITEM:
Loss on early extinguishment
of debt, net of applicable income tax --- --- (46,000) (0.28)
NET INCOME 40,286 0.22 217,406 1.35
Preferred Stock Dividends (10,117) (0.05) (2,050) (0.02)
NET INCOME AVAILABLE
TO COMMON SHAREHOLDERS 30,169 0.17 215,356 1.33
EARNINGS PER COMMON SHARE:
Basic $ 0.18 $ 1.33
Assuming dilution $ 0.17 $ 1.25
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Basic 166,910 162,362
Assuming dilution (A) 172,714 173,981
(A) Diluted shares outstanding for the twelve months ended December 31,
2002 does not include the effect of the assumed conversion at the
beginning of the period of the outstanding or converted preferred
stock, as the effect was antidilutive.
CHESAPEAKE ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in 000's)
(unaudited)
December 31, December 31,
2002 2001
Cash and cash equivalents $ 247,719 $ 124,960
Other current assets 187,598 236,423
TOTAL CURRENT ASSETS 435,317 361,383
Property and equipment (net) 2,389,884 1,785,581
Deferred tax asset 2,071 67,781
Other assets 48,336 72,023
TOTAL ASSETS $ 2,875,608 $2,286,768
Current liabilities $ 265,552 $ 173,381
Long term debt 1,651,198 1,329,453
Revenue and royalties due others 13,797 12,696
Long term derivative instruments 30,174 ---
Other long term liabilities 7,012 3,831
TOTAL LIABILITIES 1,967,733 1,519,361
STOCKHOLDERS' EQUITY 907,875 767,407
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,875,608 $2,286,768
COMMON SHARES OUTSTANDING 190,144 164,742
CHESAPEAKE ENERGY CORPORATION
RECONCILIATION OF CERTAIN FINANCIAL MEASURES
(in 000's)
(unaudited)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002 2001 2000
CASH PROVIDED BY OPERATING ACTIVITIES $ 432,531 $ 553,737 $ 314,640
Adjustments:
Changes in assets and liabilities (20,014) (35,174) (8,836)
Miscellaneous non-cash items (2,334) 3,049 (870)
DISCRETIONARY CASH FLOW 410,183 521,612 304,934
Interest Expense 111,280 98,321 86,256
EBITDA $ 521,463 $ 619,933 $ 391,190
FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 2001 2000
CASH PROVIDED BY OPERATING ACTIVITIES $ 78,873 $ 112,781 $ 139,926
Adjustments:
Changes in assets and liabilities 49,345 (1,402) (25,075)
Miscellaneous non-cash items (2,786) 1,298 (459)
DISCRETIONARY CASH FLOW 125,432 112,677 114,392
Interest Expense 31,314 25,344 21,899
EBITDA $ 156,746 $ 138,021 $ 136,291
SOURCE Chesapeake Energy Corporation
CONTACT: Marc Rowland, Executive Vice President and Chief Financial
Officer, +1-405-879-9232, or Tom Price, Jr., Senior Vice President Corporate
Development, +1-405-879-9257, both of Chesapeake Energy Corporation
|
Chesapeake Energy
