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.