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EXPAND ENERGY Corp Annual Report (Amendment), Year Ended Jun 30, 1997

Filing Date
Filed February 11, 1998
Period End
June 30, 1997
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/A filed February 11, 1998. Cited figures are marked; the original filing is the authoritative source.

This filing is Amendment No. 3 to the Form 10-K/A of Chesapeake Energy Corporation (not EXPAND ENERGY Corp, which is the name the request gives; the document's own registrant name and commission file number are Chesapeake Energy Corporation, file no. 1-13726) for the fiscal year ended June 30, 1997.

Note that the request states a filing date of February 11, 1998, which is not shown on the cover page; the auditor's consent and report dates run from September to October 1997. The company reported a net loss of $183.4 milliona, or $2.79 per share, driven primarily by a $236 million full-cost ceiling writedown recorded in the fourth quarter. Revenue rose to a record $280.3 million, oil and gas sales grew 74% to $192.9 million, and production increased 31% to 78.6 Bcfe.

Management attributed the writedown to disappointing exploratory results in the Louisiana Austin Chalk Trend outside Masters Creek, lower oil and gas prices, and rising drilling costs. The company responded by cutting its fiscal 1998 capital budget to $225b-$275 million from roughly $465 million of fiscal 1997 spending, concentrating Louisiana drilling in Masters Creek, increasing 3-D seismic use, and pursuing selective proved-property acquisitions. Management warned this will likely slow production growth and that the company's ability to add reserves economically is now a central risk.

Proved reserves fell 5% to 403 Bcfe, and 2.7 million gross undeveloped acres remain in inventory. Financially, the company ended the year with $124 millionc of cash and $104 million of short-term investments, $509 million of long-term debt (about 64% of total capital), and stockholders' equity of $287 million. It carries Ba3/BB- ratings, has no bank facility, and expects interest expense to rise significantly in fiscal 1998 after the March 1997 Senior Note issuance.

Pending litigation includes securities class actions tied to the June 1997 announcement and a patent suit by Union Pacific Resources. For investors, the key tension is between a strong balance sheet and liquidity position and a sharply reduced growth outlook, with the Louisiana Trend results and reserve replacement as the main uncertainties. Any potential Bayard Drilling IPO gain (about $40 milliond pre-tax, if completed) and the sale of non-core midstream assets are identified as possible sources of additional value, though neither is assured.

02—Key points

Key Highlights

  1. Net loss of $183.4 million ($2.79 per share) for fiscal 1997, driven by a $236 million full-cost impairment, versus net income of $23.4 million in fiscal 1996.
  2. Record total revenues of $280.3 million; oil and gas sales up 74% to $192.9 million on 31% higher production (78.6 Bcfe) and a 33% higher average gas-equivalent price ($2.45/Mcfe).
  3. Proved reserves declined 5% to 403 Bcfe after downward revisions of about 174 Bcfe, with 159 Bcfe of downward adjustments in the Knox, Giddings and Louisiana Trend areas.
  4. Fiscal 1998 capital budget cut to $225-$275 million from $465 million of fiscal 1997 spending; management expects slower production growth as a result.
  5. Liquidity: $228 million of cash and short-term investments at June 30, 1997, $509 million of long-term debt (about 64% of capital), no bank facility, and Ba3/BB- senior note ratings.
  6. Louisiana Austin Chalk exploration largely disappointed outside Masters Creek; the company has $342 million of Louisiana assets and is now focusing drilling there and in Masters Creek only.
  7. Potential upside from a Bayard Drilling IPO (about $74 million of proceeds and a roughly $40 million pre-tax gain if completed) and possible sales of non-core Louisiana midstream interests; neither is assured.

03—Questions

Frequently Asked Questions

  1. Why did the company report a loss in fiscal 1997 after profitable prior years?

    The loss was driven mainly by a $236 million writedown of oil and gas properties under the full cost method. Costs exceeded the present value of proved reserves after disappointing Louisiana Trend exploration results outside Masters Creek, lower oil and gas prices, and higher drilling and completion costs. Revenues and production still grew strongly.

  2. What is the company doing differently in fiscal 1998?

    Management reduced the capital budget to $225-$275 million, focused Louisiana drilling on Masters Creek, increased 3-D seismic before drilling, reduced purchases of unproved leasehold, and shifted toward selectively acquiring proved reserves. Management expects this to reduce production growth.

  3. How strong is the balance sheet and liquidity position?

    At June 30, 1997, the company had $124 million of cash, $104 million of short-term investments, and working capital of about $151 million. Long-term debt was $509 million, around 64% of total capital, and the company had no bank credit facility. Management estimated it could borrow about $100 million of bank debt within its indenture limits, and it expects interest expense to rise significantly in fiscal 1998.

  4. What are the main risks investors should watch?

    Key risks include the economic results of Louisiana Trend drilling, the company's ability to replace reserves at reasonable cost, oil and gas price volatility, the possibility of future ceiling writedowns, securities class actions over the June 1997 disclosures, the UPRC patent suit, and rising interest expense with a more leveraged capital structure.

04—Continue

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