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EXPAND ENERGY Corp Annual Report, Year Ended Jun 30, 1996

Filing Date
Filed September 30, 1996
Period End
June 30, 1996
In the record · 2016–202610-K1310-Q328-K189

EXE filed 13 annual reports (10-K), 32 quarterly reports (10-Q) and 189 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Oct ’18Oct ’18
  2. Bankruptcy8-K · Jun ’20Jun ’20
  3. Deal closed8-K · Mar ’22Mar ’22
  4. Material agreement8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed September 30, 1996. Cited figures are marked; the original filing is the authoritative source.

This Form 10-K covers Chesapeake Energy Corporation's fiscal year ended June 30, 1996.

The filing names the company Chesapeake Energy; the ticker EXE refers to its later successor, Expand Energy. The company is an independent oil and gas producer that uses horizontal drilling and 3-D seismic to develop fractured carbonate reservoirs, mainly the Austin Chalk in Texas and Louisiana and the Golden Trend and Knox fields in Oklahoma. Fiscal 1996 was a breakout year.

Total revenue rose 122% to $149.4 milliona, net income reached $23.4 million ($0.80 per primary share), and oil and gas sales rose 94% to $110.8 million on 89% higher production of 60.2 Bcfe. Proved reserves grew 76% to 425 Bcfe, about four times annual production, and the present value of proved reserves (10% discount) was $547 million at year-end prices of $20.90 per barrel and $2.41 per Mcf. Growth was funded with external capital.

The company raised about $99.5 millionb in equity in April 1996 and issued $120 million of 9.125% Senior Notes, and it spent roughly $336 million on net development, exploration and acquisitions, mostly in the Louisiana Trend, where it holds about 1 million acres. Leverage rose: long-term debt was $268 million, long-term debt was 60% of total capitalization, and interest expense climbed to $13.7 million. Working capital was only about $0.3 million.

Ratings were Ba3 from Moody's and B+ from S&P, both upgraded during the year. The company has never paid cash dividends and its credit agreements prohibit them.

For investors, the key points are rapid reserve and production growth, low finding costs relative to peers, and a fiscal 1997 capital budget of about $300 millionc that is largely discretionary. Risks include heavy reliance on a few purchasers (Aquila took 38% of oil and gas sales), an expanding high-cost oil-prone exposure in the Louisiana Trend and Williston Basin, a rising interest burden, and the inherent uncertainty of reserve estimates, which are largely proved undeveloped.

02—Key points

Key Highlights

  1. Revenue grew 122% to $149.4 million and net income rose to $23.4 million ($0.80 per primary share) from $11.7 million in fiscal 1995.
  2. Oil and gas production rose 89% to 60.2 Bcfe, with gas making up about 86% of volumes; average realized price was $1.84 per Mcfe.
  3. Proved reserves increased 76% to 425 Bcfe (about four times annual production), with a present value of $547 million (10% discount).
  4. Per-unit operating costs were about $1.07 per Mcfe, against an operating margin of about $0.77 per Mcfe, according to management.
  5. Total capital spending was about $336 million, funded by $120 million of 9.125% Senior Notes, roughly $99.5 million of April 1996 equity, and operating cash flow of $121 million.
  6. Long-term debt reached $268 million (60% of total capital), with working capital of only $0.3 million, and debt was rated Ba3/B+ after upgrades.
  7. Fiscal 1997 capital budget is about $300 million, with $125 million planned for the Louisiana Trend and roughly 900 drilling locations identified at year-end 1996.

03—Questions

Frequently Asked Questions

  1. How fast did Chesapeake grow in fiscal 1996?

    Total revenue rose to $149.4 million from $67.3 million, net income rose to $23.4 million from $11.7 million, and production rose 89% to 60.2 Bcfe. Proved reserves grew from 242 Bcfe to 425 Bcfe during the year.

  2. What drove the reserve growth, and how was it financed?

    Growth came from drilling, mainly in the downdip Giddings Field, the Knox area of Oklahoma, and the Louisiana Austin Chalk Trend, plus a purchase of reserves from Amerada Hess for $35 million. Financing came from a $120 million Senior Note offering, about $99.5 million of common stock sold in April 1996, and cash flow from operations of $121 million.

  3. What are the main risks for investors?

    Key risks include high leverage (long-term debt of $268 million and a thin $0.3 million of working capital), rising interest expense, and reliance on three purchasers, with Aquila alone accounting for 38% of oil and gas sales. Most proved reserves are undeveloped, and the filing warns that reserve estimates can change materially. Expansion into the oilier, higher-cost Louisiana Trend and Williston Basin is expected to raise operating costs and finding costs.

  4. Does Chesapeake pay dividends, and what are its capital plans?

    Chesapeake has never paid cash dividends and does not plan to in the foreseeable future. Its credit agreements restrict dividends. The fiscal 1997 capital budget is about $300 million, largely discretionary, and the company expects its operating cash flow, existing cash and credit facilities to cover it absent a significant increase in drilling.

04—Continue

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