SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 5, 2002
(DECEMBER 4, 2002)
CHESAPEAKE ENERGY CORPORATION
(Exact name of Registrant as specified in its Charter)
OKLAHOMA 1-13726 73-1395733
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
6100 NORTH WESTERN AVENUE, OKLAHOMA CITY, OKLAHOMA 73118
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(Address of principal executive offices) (Zip Code)
(405) 848-8000
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(Registrant's telephone number, including area code)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
Chesapeake Energy Corporation ("Chesapeake") issued a Press Release on
December 4, 2002 announcing an agreement to acquire $300 million of
Mid-Continent Gas Reserves from ONEOK, Inc. The following was included in the
press release:
OKLAHOMA CITY, OKLAHOMA, DECEMBER 4, 2002 - Chesapeake Energy Corporation
(NYSE:CHK) today announced that it has agreed to acquire $300 million of
Mid-Continent gas assets through an acquisition of a wholly-owned subsidiary of
Tulsa-based ONEOK, Inc. (NYSE:OKE). Based on its own internal engineers'
estimates, Chesapeake believes that it will acquire approximately 200 billion
cubic feet of gas equivalent (bcfe) of proved gas reserves and current gas
production of approximately 47,000 thousand cubic feet of gas equivalent (mcfe)
per day in the ONEOK transaction. The proved reserves have a
reserves-to-production index of 11.0 years, are 94% natural gas and are 88%
proved developed. After allocating $25 million of the purchase price to
unevaluated leasehold for probable and possible reserves, Chesapeake's
acquisition cost per mcfe of proved reserves will be $1.38. The acquisition is
expected to close on January 31, 2003 and is subject to satisfaction of
customary closing conditions.
ASSET HISTORY AND DESCRIPTION
ONEOK and its affiliates have a long operating history in Oklahoma,
commencing with the drilling of their first gas supply wells in eastern
Oklahoma's Arkoma Basin in the early 1900's to provide retail gas service in
Oklahoma. Through value-added drilling and strategic acquisitions over a number
of years, ONEOK has developed one of the highest-quality natural gas asset bases
in the Mid-Continent and owns substantial interests in a number of fields in the
Anadarko and Arkoma Basins that are very significant to Chesapeake, including:
South Panola, Red Oak, Wilburton, Brooken and Quinton in the Arkoma Basin and
Hugoton, Watonga-Chickasha, Carpenter, Strong City, Clinton, Arapaho, Morewood,
Thomas, Eakly, Verden, Sahara, Bradley, Golden Trend and Springer in the
Anadarko Basin. Of the properties being acquired, 87% are located within
townships in which Chesapeake already owns properties. Chesapeake believes that
the consolidation of assets in these fields will result in numerous operational
efficiencies and enhanced drilling opportunities.
MANAGEMENT COMMENTS
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We
are very pleased to announce our most recent acquisition of Mid-Continent gas
assets. The ONEOK acquisition fits perfectly with our existing Mid-Continent
assets and with Chesapeake's business strategy of creating value by acquiring
and developing low-cost, long-lived natural gas assets in the Mid-Continent
region of the U.S. This transaction will increase our company's proved reserves
to almost 2.5 tcfe and our current production to over 565,000 mcfe per day.
Based on the results achieved from our previous acquisitions in the
Mid-Continent, we expect to substantially increase the value of ONEOK's reserves
through additional drilling, lower administrative costs and reduced operating
costs.
Since January 1998, our company has discovered or acquired over three tcfe
of proved natural gas reserves at the very attractive average cost of less than
$1.20 per mcfe. As a result, Chesapeake has become the largest producer of
natural gas in the Mid-Continent, one of the ten largest independent gas
producers in the U.S. and one of the most profitable companies in the industry.
We believe the combination of our successful acquisition and drilling programs,
high revenue realizations, low operating costs and value-added hedging
strategies will enable Chesapeake to continue generating top-tier returns to our
investors. In the past three years, Chesapeake has delivered the second best
stock price performance in the industry and one of the top 10 performances among
all NYSE-listed companies. Today's announcement provides further evidence of our
ongoing commitment to creating industry-leading value through further
consolidation of high-quality gas assets in the Mid-Continent."
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include estimates and give our
current expectations or forecasts of future events. They are based on our
historical operating trends, our existing commodity hedging position and our
current estimate of proved reserves. Although we believe our forward-looking
statements are reasonable, they can be affected by inaccurate assumptions or by
known or unknown risks and uncertainties. For example, statements concerning the
fair values of derivative contracts and their estimated contribution to our
future results of operations are based upon market information as of a specific
date. These market prices are subject to significant volatility. Factors that
could cause actual operating and financial results to differ materially from
expected results include the volatility of oil and gas prices, our substantial
indebtedness, our commodity price risk management activities, the cost and
availability of drilling and production services, our ability to replace
reserves, the availability of capital, uncertainties inherent in evaluating our
own reserves and the reserves we acquire, drilling and operating risks and other
risk factors described in the company's 2001 annual report on Form 10-K and
subsequent filings with the Securities and Exchange Commission.
Chesapeake Energy Corporation is one of the 10 largest independent natural
gas producers in the U.S. Headquartered in Oklahoma City, the company's
operations are focused on exploratory and developmental drilling and producing
property acquisitions in the Mid-Continent region of the United States. The
company's Internet address is www.chkenergy.com.
Chesapeake issued an additional Press Release on December 4, 2002
announcing a common stock offering. The following was included in the press
release:
OKLAHOMA CITY, OKLAHOMA, DECEMBER 4, 2002 - Chesapeake Energy Corporation
(NYSE:CHK) today announced that it intends to commence a proposed public
offering of 20 million shares of common stock.
Chesapeake intends to use the net proceeds of the offering to finance, in
part, the recently announced acquisition of natural gas properties from ONEOK,
Inc., which is scheduled to close in January 2003, or in the event the ONEOK
acquisition is not consummated, proceeds will be used for general corporate
purposes including possible future acquisitions.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include estimates and give our
current expectations or forecasts of future events. Although we believe our
forward-looking statements are reasonable, they can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties.
Chesapeake Energy Corporation is one of the 10 largest independent natural
gas producers in the U.S. Headquartered in Oklahoma City, the company's
operations are focused on exploratory and developmental drilling and producing
property acquisitions in the Mid-Continent region of the United States.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHESAPEAKE ENERGY CORPORATION
By: /s/ Aubrey K. McClendon
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Aubrey K. McClendon
Chairman of the Board and
Chief Executive Officer
Dated: December 5, 2002