Edgar Filing: SEVEN SEAS PETROLEUM INC

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

SEVEN SEAS PETROLEUM INC.

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(Name of Issuer)

Ordinary Shares, par value $.001

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(Title of Class of Securities)

G80550109
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(CUSIP Number)

Shannon Self, Esquire
Commercial Law Group, P.C.
2725 Oklahoma Tower
210 Park Avenue
Oklahoma City, Oklahoma 73102
(405) 232-3001

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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

August 15, 2001

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(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]

NOTE: Six (6) copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.

* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).

Page 1 of 8 Pages

CUSIP NO. G80550109

(1) Name of Reporting Person Chesapeake Energy
Corporation
S.S. or I.R.S. Identification No. of Above Person 73-1395733

(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(See Instructions) (b) [x]

(3) SEC Use Only

(4) Source of Funds (See Instructions) WC

(5) Check if Disclosure of Legal Proceedings is Required [ ]
Pursuant to Items 2(d) or 2(e)

(6) Citizenship or Place of Organization Oklahoma

Number of Shares (7) Sole Voting Power 12,619,500
Beneficially Owned (8) Shared Voting Power -
By Each Reporting (9) Sole Disposition 12,619,500
Person With: (10) Shared Dispositive Power -

(11) Aggregate Amount Beneficially Owned by Each 12,619,500
Reporting Person

(12) Check if the Aggregate Amount in Row (11) Excludes [ ]
Certain Shares (See Instructions)

(13) Percent of Class Represented by Amount in Row (11) 25.0%

(14) Type of Reporting Person (See Instructions) CO

Page 2 of 8 Pages

CUSIP NO. G80550109

Item 1. Security and Issuer.

The ordinary shares, par value $.001 (the "Ordinary Shares"), of Seven
Seas Petroleum Inc., a Cayman Islands exempted company limited by
shares ("Seven Seas"). Seven Seas' principal executive offices are
located at Suite 1700, 5555 San Felipe, Houston, Texas 77056.

Item 2. Identity and Background.

Chesapeake Energy Corporation, an Oklahoma corporation ("Chesapeake
Energy"), is located at 6100 North Western Avenue, Oklahoma City,
Oklahoma 73118, and is primarily engaged in the ownership, development
and operation of oil and gas assets in North America. The executive
officers and directors of Chesapeake Energy are set forth below.

Aubrey K. McClendon
Chairman of the Board and Chief Executive Officer
6100 North Western
Oklahoma City, Oklahoma 73118

Tom L. Ward
Director, Chief Operating Officer and President
6200 North Western
Oklahoma City, Oklahoma 73118

Marcus C. Rowland
Chief Financial Officer and Executive Vice President
6100 North Western
Oklahoma City, Oklahoma 73118

Martha A. Burger
Treasurer and Senior Vice President
6100 North Western
Oklahoma City, Oklahoma 73118

Michael A. Johnson
Senior Vice President
6100 North Western
Oklahoma City, Oklahoma 73118

Edgar F. Heizer, Jr.
Director
c/o Chesapeake Energy Corporation
6100 North Western
Oklahoma City, Oklahoma 73118

Page 3 of 8 Pages

CUSIP NO. G80550109

Breene M. Kerr
Director
c/o Chesapeake Energy Corporation
6100 North Western
Oklahoma City, Oklahoma 73118

Shannon Self
Director
c/o Chesapeake Energy Corporation
6100 North Western
Oklahoma City, Oklahoma 73118

Frederick B. Whittemore
Director
c/o Chesapeake Energy Corporation
6100 North Western
Oklahoma City, Oklahoma 73118

Chesapeake Energy and each of the listed individuals have not, during
the last five years, been convicted in a criminal proceeding and have
not been or become subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws. Each individual is a United States citizen.

Item 3. Source and Amount of Funds or Other Consideration

Pursuant to that certain Note Purchase and Loan Agreement dated
effective July 9, 2001 (the "Loan Agreement"), Chesapeake Energy agreed
to purchase a $22.5 million 12% secured note due 2004 issued by Seven
Seas (the "Chesapeake Loan"), accompanied by a warrant to purchase
Ordinary Shares of Seven Seas. The funding of the Chesapeake Loan was
conditioned on the extension of a second $22.5 million secured bridge
loan by certain shareholders of Seven Seas on similar terms (the
"Shareholder Loans") pending the completion of a rights offering by
Seven Seas (the "Rights Offering"). The Rights Offering will grant to
Seven Seas' shareholders the right to participate on a prorata basis in
the purchase of $22.5 million of Seven Seas' Series A Senior Secured
Notes (the "Series A Notes") and warrants to purchase 12,619,500
Ordinary Shares on terms substantially similar to those under the
Chesapeake Loan and the accompanying warrant. The proceeds from the
Rights Offering will be used to pay the Shareholder Loans. If there is
insufficient participation by Seven Seas' shareholders in the Rights
Offering to sell all of the Series A Notes, the participants in the
Shareholder Loans have agreed to acquire any shortfall through an
exchange of the Shareholder Loans.

The Chesapeake Loan was funded on July 24, 2001, and is evidenced by
that certain Promissory Note executed by Seven Seas and dated July 23,
2001, in the amount of $22.5 million. As partial consideration for the

Page 4 of 8 Pages

CUSIP NO. G80550109

Chesapeake Loan, Seven Seas granted to Chesapeake Energy the right to
purchase 12,619,500 Ordinary Shares as evidenced by that certain
Amended and Restated Warrant No. 1 dated July 23, 2001 (the "Warrant").
The Warrant amends and restates in its entirety the original warrant
issued as part of the Chesapeake Loan in order to correct the number of
securities covered by the Warrant due to a calculation error in the
original warrant of approximately 7,000 shares. The Chesapeake Loan was
funded by Chesapeake Energy from working capital and general corporate
funds, one of the sources of which is the revolving bank facility
maintained by Chesapeake Energy and its subsidiary entities.

Item 4. Purpose of Transaction

The Chesapeake Loan and the Warrant were acquired by Chesapeake Energy
as investments. Chesapeake Energy may in the future: (a) purchase
additional Ordinary Shares, debt securities or other equity securities
of Seven Seas; (b) sell all or part of the Warrant or the Ordinary
Shares acquired through the exercise of the Warrant; (c) communicate
with management of Seven Seas regarding Seven Seas' business plans and
operations; or (d) enter into additional transactions in connection
with Seven Seas or Seven Seas' assets.

In connection with the Chesapeake Loan, Chesapeake Energy was granted:
(x) the right to request the appointment of up to two directors to
Seven Seas' board of directors; (y) the preemptive right to acquire
equity securities to be issued by Seven Seas in the future; and (z) the
right to require Mr. Robert A. Hefner III ("Hefner") and Ramiiilaj, A
Limited Partnership, a Texas limited partnership, affiliated with
Hefner ("Ramiiilaj" and together with Hefner, the "Hefner Parties"), to
purchase a portion of the Chesapeake Loan and the Warrant if the amount
of Series A Notes purchased by the Hefner Parties as part of the Rights
Offering is less than $10.0 million. Hefner is the Chairman of the
Board of Seven Seas. As part of the transaction Seven Seas pledged all
of the outstanding capital stock of all of Seven Seas' subsidiaries to
secure the Chesapeake Loan, the Shareholder Loans and the Series A
Notes.

In addition, the Loan Agreement and the documents evidencing the pledge
of the capital stock of Seven Seas' subsidiaries impose a number of
affirmative and negative covenants on Seven Seas and Seven Seas'
subsidiaries which are normally included in lending transactions
similar to the Chesapeake Loan. To date Chesapeake Energy has not
exercised any of the foregoing rights. Except as set forth above,
Chesapeake Energy has no present plans or intentions relating to the
transactions described in subparagraphs (a) through (d) of Item 4 of
Schedule 13D.

Item 5. Interest in Securities of the Issuer.

(a) Under the terms of the Warrant Chesapeake Energy has the right to
acquire up to 12,619,500 Ordinary Shares at any time after October 15,
2001, and before June 30, 2008. Based on the 37,858,501 Ordinary Shares
reflected as issued and outstanding in Seven Seas' Form 10Q\A filed on
May 16, 2001, the Ordinary Shares which can be acquired by

Page 5 of 8 Pages

CUSIP NO. G80550109

Chesapeake Energy under the Warrant would represent 25.0% of the
outstanding Ordinary Shares after giving effect to the exercise of the
Warrant.

(b) Chesapeake Energy has the sole power to dispose of the Warrant and
will have the sole right to vote or dispose of the Ordinary Shares to
be received on the exercise of the Warrant.

(c) Chesapeake Energy acquired the Warrant effective July 23, 2001, in
connection with the Chesapeake Loan. The Warrant permits Chesapeake
Energy to acquire 12,619,500 Ordinary Shares for $22.5 million, which
results in an exercise price for each Ordinary Share of approximately
$1.78295. As part of the Chesapeake Loan, Chesapeake Energy and the
Hefner Parties entered into the Loan Purchase Agreement dated effective
July 23, 2001 (the "LPA"). Under the LPA, if the Hefner Parties
purchase less than $10.0 million of Series A Notes in the Rights
Offering Chesapeake Energy can require the Hefner Parties to purchase
that portion of the Chesapeake Loan and the Warrant which would result
in the Hefner Parties holding Series A Notes and a portion of the
Chesapeake Loan in the aggregate principal amount of $10.0 million.

(d) Inapplicable

(e) Inapplicable

Item 6. Contracts, Agreements, Underwritings or Relationships With Respect to
Securities of the Is suer.

Under that certain Shareholder's Rights Agreement between Seven Seas
and Chesapeake Energy dated July 23, 2001 (the "Shareholder's
Agreement"), Chesapeake Energy has the preemptive right to participate
in future equity issuances by Seven Seas, has the right to request the
appointment of two directors to Seven Seas' board of directors and the
right to attend and observe all board meetings of Seven Seas and Seven
Seas' subsidiaries. Under the LPA, the Hefner Parties agree to: (a)
vote any Ordinary Shares held by the Hefner Parties for the persons
which Chesapeake Energy requests be appointed to Seven Seas' board of
directors under the Shareholder's Agreement; and (b) purchase a portion
of the Chesapeake Loan as described in Item 5(c) above. Under a
Registration Rights Agreement between Seven Seas and Chesapeake Energy
dated July 23, 2001, the holders of at least 25.0% of the Ordinary
Shares underlying the Warrant can request the registration of such
Ordinary Shares.

Item 7. Materials to be filed as Exhibits.

1. Warrant No. 1 dated July 23, 2001, between Seven Seas Petroleum Inc.
and Chesapeake Energy Corporation is filed as Exhibit No. 4(B) to the
Form 10Q filed by Seven Seas Petroleum Inc. on August 14, 2001, and is
incorporated herein by reference.

Page 6 of 8 Pages

CUSIP NO. G80550109

2. Amended and Restated Warrant No. 1 dated July 23, 2001, between Seven
Seas Petroleum Inc. and Chesapeake Energy Corporation is attached
hereto as Exhibit 99.1.

3. Shareholder's Rights Agreement dated July 23, 2001, between Seven Seas
Petroleum Inc. and Chesapeake Energy Corporation is filed as Exhibit
No. 4(C) to the Form 10Q filed by Seven Seas Petroleum Inc. on August
14, 2001, and is incorporated herein by reference.

4. Loan Purchase Agreement dated effective July 23, 2001, among Chesapeake
Energy Corporation, Robert A. Hefner III and Ramiiilaj, A Limited
Partnership, is attached hereto as Exhibit 99.2.

5. Registration Rights Agreement dated July 23, 2001, between Seven Seas
Petroleum Inc. and Chesapeake Energy Corporation is filed as Exhibit
No. 4(D) to the Form 10Q filed by Seven Seas Petroleum Inc. on August
14, 2001, and is incorporated herein by reference.

6. Note Purchase and Loan Agreement dated effective July 9, 2001, among
Chesapeake Energy Corporation, Seven Seas Petroleum Inc., and the
subsidiaries of Seven Seas Petroleum Inc., is filed as Exhibit No.
10(A) to the Form 10Q filed by Seven Seas Petroleum Inc. on August 14,
2001, and is incorporated herein by reference.

7. First Amendment to Note Purchase and Loan Agreement dated effective
July 9, 2001, among Chesapeake Energy Corporation, Seven Seas Petroleum
Inc., and the subsidiaries of Seven Seas Petroleum Inc., is filed as
Exhibit No. 10(B) to the Form 10Q filed by Seven Seas Petroleum Inc.
on August 14, 2001, and is incorporated herein by reference.

8. Security Agreement dated effective July 23, 2001 between Seven Seas
Petroleum Inc. and Chesapeake Energy Corporation is filed as Exhibit
No. 10(C) to the Form 10Q filed by Seven Seas Petroleum Inc. on August
14, 2001, and is incorporated herein by reference.

9. Deeds of Mortgage Over Shares dated July 23, 2001 between Seven Seas
Petroleum Inc. and Chesapeake Energy Corporation is filed as Exhibit
No. 10(D) to the Form 10Q filed by Seven Seas Petroleum Inc. on August
14, 2001, and is incorporated herein by reference.

Page 7 of 8 Pages

CUSIP NO. G80550109

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.

DATED: August 27, 2000

Chesapeake Energy Corporation, an Oklahoma
corporation

By /s/ Aubrey K. McClendon
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Aubrey K. McClendon, Chairman of the Board
and Chief Executive Officer

Page 8 of 8 Pages

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
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99.1 Amended and Restated Warrant No. 1

99.2 Loan Purchase Agreement