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Article Excerpt
Company Reports 2005 First Quarter Net Income Available to Common Shareholders of $120 Million on Revenue of $783 Million and Production of 105 Bcfe
Oil and Natural Gas Production Reaches 1,162 Mmcfe Per Day, a 34% Increase Over 2004 First Quarter and 4% Over Sequential 2004 Fourth Quarter; 2005 Total Production Growth Expected to Exceed 24%, 2005 Organic Growth Expected to Exceed 10%
Proved Reserves Reach 5.4 Tcfe From 2005 First Quarter Proved Reserve Adds of 532 Bcfe; Reserve Replacement Equals 609% at the Drilling and Acquisition Cost of $1.20 Per Mcfe; Proved Reserves Now Expected to Exceed 6.0 Tcfe By Year-End 2005
OKLAHOMA CITY, May 2 /PRNewswire-FirstCall/ -- Chesapeake Energy Corporation today reported financial and operating results for the first quarter of 2005. For the quarter, Chesapeake generated net income available to common shareholders of $119.5 million ($0.36 per fully diluted common share), operating cash flow of $505.5 million (defined as cash flow from operating activities before changes in assets and liabilities) and ebitda of $431.0 million (defined as income before income taxes, interest expense, and depreciation, depletion and amortization expense) on revenue of $783.5 million and production of 104.6 billion cubic feet of natural gas equivalent (bcfe).
The company's 2005 first quarter net income available to common shareholders and ebitda include certain items that are not typically included in published estimates of the company's financial results by many securities analysts. Such items and their after-tax effects on first quarter reported results are described as follows:
* an unrealized mark-to-market loss of $72.4 million resulting from the company's oil and natural gas and interest rate hedging programs; and * a $0.6 million loss resulting from the early extinguishment of certain Chesapeake debt securities.
Adjusted for the above-mentioned losses, Chesapeake's net income to common shareholders in the 2005 first quarter would have been $192.6 million ($0.56 per fully diluted common share) and ebitda would have been $549.1 million. The foregoing items do not affect the calculation of operating cash flow. A reconciliation of operating cash flow, ebitda and adjusted net income to comparable financial measures calculated in accordance with generally accepted accounting principles is presented on pages 11-12 of this release.
Oil and Natural Gas Production Sets Record for 15th Consecutive Quarter; 2005 First Quarter Average Daily Production Increases 34% Over 2004 First Quarter and 4% Over Sequential 2004 Fourth Quarter
Daily production for the 2005 first quarter averaged 1,162 million cubic feet of natural gas equivalent (mmcfe), an increase of 295 mmcfe, or 34%, over the 867 mmcfe produced per day in the 2004 first quarter and an increase of 43 mmcfe, or 4%, over the 1,119 mmcfe produced per day in the 2004 fourth quarter. Of the 295 mmcfe daily increase in year-over-year production, 60% came from organic growth and 40% from acquisitions, making the company's trailing 12 month organic growth rate 20%. Of the 43 mmcfe daily increase in sequential quarterly production, 60% came from organic growth and 40% from acquisition growth, making the company's quarterly organic growth rate 2.3%. The company's 2005 first quarter production exceeded its February 22, 2005 forecasted mid-point production by 3.1 bcfe, or 3%, because of stronger than projected drilling and operational results.
Chesapeake's 2005 first quarter production of 104.6 bcfe was comprised of 94.1 billion cubic feet of natural gas (bcf) (90% on a natural gas equivalent basis) and 1.75 million barrels of oil and natural gas liquids (mmbo) (10% on a natural gas equivalent basis). Chesapeake's average daily production rate for the quarter of 1,162 mmcfe consisted of 1,046 mmcf of gas and 19,400 barrels of oil and natural gas liquids.
The 2005 first quarter was Chesapeake's 15th consecutive quarter of production growth. During these 15 quarters, Chesapeake's U.S. production has increased 190%, for an average compound quarterly growth rate of 7.4% and an average compound annual growth rate of 32.6%.
Oil and Natural Gas Proved Reserves Reach Record Level of 5.4 Tcfe; Drilling and Acquisition Costs are $1.20 per Mcfe as Company Adds 532 Bcfe and Replaces Production by 609%
Chesapeake began 2005 with estimated proved reserves of 4.902 trillion cubic feet of natural gas equivalent (tcfe) and ended the first quarter with 5.434 tcfe, an increase of 532 bcfe, or 11%. During the 2005 first quarter, the company replaced its 105 bcfe of production with an estimated 637 bcfe of new proved reserves, for a reserve replacement rate of 609% at a drilling and acquisition cost of $1.20 per thousand cubic feet of natural gas equivalent (mcfe). Reserve replacement through the drillbit was 333 bcfe, or 318% of production (including 45 bcfe from positive performance revisions and 30 bcfe from oil and natural gas price increases), or 52% of the total increase, at a cost of $1.13 per mcfe. Reserve replacement through acquisitions was 304 bcfe, or 291% of production, or 48% of the total increase, at a cost of $1.26 per mcfe.
Total costs incurred during the 2005 first quarter were $1.87 per mcfe, which includes drilling, completion, acquisition, seismic, leasehold, capitalized internal costs, non-cash tax basis step-up from the BRG corporate acquisition ($120 million, or $0.19 per mcfe), asset retirement obligations and all other capitalized miscellaneous costs. These costs exclude future development costs of proved undeveloped reserves. A complete reconciliation of finding and acquisition cost information and a roll forward of proved reserves is presented on page 9 of this release.
As of March 31, 2005, the company's estimated future net cash flows discounted at 10% before taxes (PV-10) from its proved reserves were $14.2 billion using field differential adjusted prices of $51.38 per bo (based on a NYMEX quarter-end price of $55.32 per bo) and $6.65 per mcf (based on a NYMEX quarter-end price of $7.17 per mcf). Chesapeake's PV-10 changes by approximately $236 million for every $0.10 per mcf change in gas prices and approximately $43 million for every $1.00 per bo change in oil prices.
These figures above do not include 206 bcfe of estimated proved reserves associated with $459 million of acquisitions that were announced on April 12, 2005, but not yet closed as of March 31, 2005.
Average Prices Realized, Hedging Results and Hedging Positions Detailed
Average prices realized during the 2005 first quarter (including realized gains or losses from oil and gas derivatives,...
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