8-KOther Events

EXPAND ENERGY Corp 8-K Report (Jun 25, 2003)

Filed June 25, 2003For Securities:EXEEXEELEXEEWEXEEZ

Summary

Chesapeake Energy Corporation (CHK) announced on June 25, 2003, a significant expansion of its Mid-Continent natural gas operations through the acquisition of Oxley Petroleum Company and other smaller transactions for a total of $220 million. This strategic move adds an estimated 135 billion cubic feet of equivalent (bcfe) proved reserves and increases current production by approximately 35 million cubic feet of natural gas equivalent (mmcfe) per day. The company highlighted that the acquisition cost per mcfe of proved reserves is attractive at $1.33, with lower anticipated operating expenses compared to its peer group. Furthermore, Chesapeake has raised its 2003 production forecast and provided an initial production outlook for 2004, indicating robust growth. The company has also substantially increased its hedging positions for both oil and natural gas through 2007, aiming to lock in favorable pricing and further strengthen financial performance. These actions underscore Chesapeake's strategy of consolidating high-quality assets in the Mid-Continent region and capitalizing on successful exploration efforts.

Key Highlights

  • 1Acquisition of Oxley Petroleum and other assets for $220 million, adding an estimated 135 bcfe of proved reserves.
  • 2Acquisition cost of proved reserves estimated at $1.33 per mcfe, with lower expected lease operating expenses ($0.45/mcfe) than 2002 ($0.54/mcfe) and peer group ($0.70/mcfe).
  • 3Increased 2003 production forecast to 255-260 bcfe (up 6% from previous guidance).
  • 4Provided initial 2004 production forecast of 275-280 bcfe.
  • 5Substantially increased natural gas and oil hedging positions for 2003-2007 to lock in favorable prices.
  • 6Consolidation strengthens Chesapeake's position in the Anadarko and Arkoma Basins, with 82% of acquired properties in townships where Chesapeake already has interests.
  • 7Chesapeake reinforces its position as Oklahoma's largest natural gas producer with an estimated 16% market share in 2003.

Frequently Asked Questions

Chesapeake Energy is acquiring Oxley Petroleum Company, a privately-owned natural gas company, along with several other smaller acquisitions. These transactions collectively add approximately 135 billion cubic feet of equivalent (bcfe) in proved reserves and increase current production by about 35 million cubic feet of natural gas equivalent (mmcfe) per day, primarily focusing on natural gas assets in the Mid-Continent region, specifically the Anadarko and Arkoma Basins.

Chesapeake Energy intends to finance these acquisitions using a combination of its existing cash on hand and short-term borrowings from its $350 million bank credit facility.

The acquisitions are part of Chesapeake's strategy to consolidate high-quality natural gas assets in the Mid-Continent region, particularly in areas where it already has significant operations like the Arkoma Basin and the Greater Mayfield area of the Anadarko Basin. The company believes this consolidation will lead to operational efficiencies, enhanced drilling opportunities, and increased scale, reinforcing its position as a leading independent natural gas producer.

These transactions, along with strong drilling results, have led Chesapeake to increase its 2003 production forecast by 6% to a range of 255-260 bcfe. The company is also providing an initial production forecast for 2004, projecting 275-280 bcfe. Additionally, the second half of 2003 production is now expected to exceed 740 mmcfe per day.