8-KOther Events

EXPAND ENERGY Corp 8-K Report (Dec 5, 2002)

Filed December 5, 2002For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (CHK) filed an 8-K on December 5, 2002, to update its 2003 forecast. The primary driver for the revision is the anticipated acquisition of Mid-Continent gas properties from ONEOK, Inc., with a projected closing date of January 31, 2003. This acquisition is expected to significantly boost production volumes, with the updated forecast now projecting 207-212 billion cubic feet of gas equivalent (bcfe) for 2003, an increase from the previous 190-195 bcfe projection. In addition to the production increase, the company also announced a significant after-tax loss of $7.5 million related to the write-down of its investment in Seven Seas Petroleum Inc.'s senior secured debt. This write-down revises the carrying value from $20.0 million to $7.5 million and follows a previously reported $3.0 million impairment of its equity position in Seven Seas. Investors should note that these projections are forward-looking statements and subject to risks and uncertainties, including commodity price volatility and the potential impact of selling or trading Permian Basin assets.

Key Highlights

  • 1Chesapeake Energy Corporation (CHK) updated its 2003 forecast based on the planned acquisition of $300 million in Mid-Continent gas properties from ONEOK, Inc.
  • 2The acquisition is expected to close on January 31, 2003, and is projected to increase 2003 production to 207-212 bcfe (91% gas), up from the previous 190-195 bcfe (90% gas) guidance.
  • 3Projected per unit operating expenses are largely stable, with lease operating expenses revised slightly downward.
  • 4Marketing and other income and interest expense projections were slightly increased.
  • 5The company anticipates an average 2003 tax rate of 40%, expected to be deferred.
  • 6Guidance may need modification if Chesapeake successfully trades or sells its Permian Basin assets in 2003.
  • 7CHK will report a $7.5 million after-tax loss from a write-down of its investment in Seven Seas Petroleum Inc.'s senior secured debt, reducing its carrying value to $7.5 million.

Frequently Asked Questions

The primary reason for the updated 2003 forecast is the anticipated acquisition of $300 million of Mid-Continent gas properties from ONEOK, Inc., which is expected to close on January 31, 2003.

The acquisition is expected to significantly increase production. Chesapeake's updated 2003 forecast projects production of 207-212 billion cubic feet of gas equivalent (bcfe), compared to the previous projection of 190-195 bcfe.

Chesapeake expects to report a $7.5 million after-tax loss from writing down the carrying value of its investment in Seven Seas Petroleum Inc.'s senior secured debt from $20.0 million to $7.5 million. This is in addition to a prior $3.0 million impairment of its equity position in Seven Seas.

Yes, the company stated that if it is successful in trading or selling its Permian Basin assets in 2003, the current guidance may need to be modified. Additionally, all forward-looking statements are subject to risks and uncertainties, including commodity price volatility, the cost of services, capital availability, and other factors outlined in the company's filings.