UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003
¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 1-13726
Chesapeake Energy Corporation
(Exact Name of Registrant as Specified in Its Charter)
| Oklahoma |
73-1395733 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 6100 North Western Avenue Oklahoma City, Oklahoma |
73118 | |
| (Address of principal executive offices) |
(Zip Code) |
(405) 848-8000
Registrant’s telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
At May 13, 2003, there were 214,039,915 shares of our $.01 par value common stock outstanding.
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003
| Page | ||||
| PART I. Financial Information |
||||
| Item 1. |
Consolidated Financial Statements (Unaudited): |
|||
| Consolidated Balance Sheets at March 31, 2003 and December 31, 2002 |
3 | |||
| Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002 |
4 | |||
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 |
5 | |||
| 6 | ||||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||
| Item 3. |
27 | |||
| Item 4. |
31 | |||
| PART II. Other Information |
||||
| Item 1. |
32 | |||
| Item 2. |
32 | |||
| Item 3. |
32 | |||
| Item 4. |
32 | |||
| Item 5. |
32 | |||
| Item 6. |
32 | |||
2
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
(Unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| ($ in thousands) |
||||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ |
38,004 |
|
$ |
247,637 |
| ||
| Restricted cash |
|
333 |
|
|
82 |
| ||
| Accounts receivable: |
||||||||
| Oil and gas sales |
|
228,797 |
|
|
109,246 |
| ||
| Joint interest, net of allowance of $1,432,000 and $1,433,000, respectively |
|
20,943 |
|
|
22,760 |
| ||
| Short-term derivatives |
|
622 |
|
|
16,498 |
| ||
| Related parties |
|
2,544 |
|
|
2,155 |
| ||
| Other |
|
16,064 |
|
|
13,471 |
| ||
| Deferred income tax asset |
|
12,304 |
|
|
8,109 |
| ||
| Short-term derivative instruments |
|
8,620 |
|
|
— |
| ||
| Inventory and other |
|
14,096 |
|
|
15,359 |
| ||
| Total Current Assets |
|
342,327 |
|
|
435,317 |
| ||
| PROPERTY AND EQUIPMENT: |
||||||||
| Oil and gas properties, at cost based on full-cost accounting: |
||||||||
| Evaluated oil and gas properties |
|
5,282,363 |
|
|
4,334,833 |
| ||
| Unevaluated properties |
|
148,282 |
|
|
72,506 |
| ||
| Less: accumulated depreciation, depletion and amortization |
|
(2,189,502 |
) |
|
(2,123,773 |
) | ||
|
|
3,241,143 |
|
|
2,283,566 |
| |||
| Other property and equipment |
|
163,015 |
|
|
154,092 |
| ||
| Less: accumulated depreciation and amortization |
|
(50,116 |
) |
|
(47,774 |
) | ||
| Total Property and Equipment |
|
3,354,042 |
|
|
2,389,884 |
| ||
| OTHER ASSETS: |
||||||||
| Deferred income tax asset |
|
— |
|
|
2,071 |
| ||
| Long-term derivative instruments |
|
17,319 |
|
|
2,666 |
| ||
| Long-term investments |
|
29,075 |
|
|
9,075 |
| ||
| Other assets |
|
26,819 |
|
|
36,595 |
| ||
| Total Other Assets |
|
73,213 |
|
|
50,407 |
| ||
| TOTAL ASSETS |
$ |
3,769,582 |
|
$ |
2,875,608 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Notes payable and current maturities of long-term debt |
$ |
— |
|
$ |
— |
| ||
| Accounts payable |
|
97,389 |
|
|
86,001 |
| ||
| Accrued interest |
|
50,128 |
|
|
35,025 |
| ||
| Derivative payable |
|
7,181 |
|
|
— |
| ||
| Short-term derivative instruments |
|
31,574 |
|
|
33,697 |
| ||
| Other accrued liabilities |
|
65,882 |
|
|
56,465 |
| ||
| Revenues and royalties due others |
|
88,380 |
|
|
54,364 |
| ||
| Total Current Liabilities |
|
340,534 |
|
|
265,552 |
| ||
| OTHER LIABILITIES: |
||||||||
| Long-term debt, net |
|
1,948,725 |
|
|
1,651,198 |
| ||
| Revenues and royalties due others |
|
14,646 |
|
|
13,797 |
| ||
| Long-term derivative instruments |
|
— |
|
|
30,174 |
| ||
| Asset retirement obligation |
|
46,438 |
|
|
— |
| ||
| Other liabilities |
|
6,328 |
|
|
7,012 |
| ||
| Deferred income taxes payable |
|
40,368 |
|
|
— |
| ||
| Total Other Liabilities |
|
2,056,505 |
|
|
1,702,181 |
| ||
| CONTINGENCIES AND COMMITMENTS (Note 3) |
||||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred Stock, $.01 par value, 10,000,000 shares authorized, |
||||||||
| 6.75% cumulative convertible preferred stock, 2,998,000 issued and outstanding at March 31, 2003 and December 31, 2002, entitled in liquidation to $149.9 million |
|
149,900 |
|
|
149,900 |
| ||
| 6.00% cumulative convertible preferred stock, 4,600,000 and 0 shares issued and outstanding at March 31, 2003 and December 31, 2002, entitled in liquidation to $230.0 million |
|
230,000 |
|
|
— |
| ||
| Common Stock, $.01 par value, 350,000,000 shares authorized, 218,820,805 and 194,936,912 shares issued at March 31, 2003 and December 31, 2002, respectively |
|
2,188 |
|
|
1,949 |
| ||
| Paid-in capital |
|
1,379,051 |
|
|
1,205,554 |
| ||
| Accumulated deficit |
|
(365,350 |
) |
|
(426,085 |
) | ||
| Accumulated other comprehensive loss, net of tax of $708,000 and $2,307,000, respectively |
|
(1,155 |
) |
|
(3,461 |
) | ||
| Less: treasury stock, at cost; 5,071,571 and 4,792,529 common shares at March 31, 2003 and December 31, 2002, respectively |
|
(22,091 |
) |
|
(19,982 |
) | ||
| Total Stockholders’ Equity |
|
1,372,543 |
|
|
907,875 |
| ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
3,769,582 |
|
$ |
2,875,608 |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
3
CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| (in thousands, except per share amounts) |
||||||||
| REVENUES: |
||||||||
| Oil and gas sales |
$ |
256,332 |
|
$ |
141,971 |
| ||
| Risk management income (loss) |
|
27,710 |
|
|
(79,468 |
) | ||
| Oil and gas marketing sales |
|
90,308 |
|
|
27,333 |
| ||
| Total Revenues |
|
374,350 |
|
|
89,836 |
| ||
| OPERATING COSTS: |
||||||||
| Production expenses |
|
31,457 |
|
|
22,060 |
| ||
| Production taxes |
|
18,597 |
|
|
5,216 |
| ||
| General and administrative |
|
5,665 |
|
|
4,294 |
| ||
| Oil and gas marketing expenses |
|
89,358 |
|
|
26,507 |
| ||
| Oil and gas depreciation, depletion and amortization |
|
76,614 |
|
|
48,619 |
| ||
| Depreciation and amortization of other assets |
|
3,684 |
|
|
3,110 |
| ||
| Total Operating Costs |
|
225,375 |
|
|
109,806 |
| ||
| INCOME (LOSS) FROM OPERATIONS |
|
148,975 |
|
|
(19,970 |
) | ||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest and other income |
||||||||