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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 OCTOBER 31, 1997
(DATE OF EARLIEST EVENT REPORTED) (OCTOBER 22, 1997)
CHESAPEAKE ENERGY CORPORATION
(Exact name of Registrant as specified in its Charter)
OKLAHOMA 1-13726 73-1395733
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) 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)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On October 22, 1997, Chesapeake Energy Corporation ("Chesapeake") issued a
press release announcing agreements to acquire DLB Oil & Gas, Inc. and AnSon
Production Corporation, and completion of Masters Creek wells. The October 22,
1997 press release is filed herewith as Exhibit 99 and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits. The following exhibit is filed herewith:
99 Press Release issued by the Registrant on October 22, 1997.
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 MARCUS C. ROWLAND
Marcus C. Rowland
Vice President - Chief Financial Officer
Dated: October 31, 1997
__________________________EXHIBIT INDEX______________________________
EXHIBIT DESCRIPTION METHOD OF FILING
99 Press Release issued by Filed herewith electronically
the Registrant on October
22, 1997
CONTACT: MARC ROWLAND, CHIEF FINANCIAL OFFICER
(405)848-8000, EXT. 232
FOR IMMEDIATE RELEASE TOM PRICE, JR.,VICE PRESIDENT-
OCTOBER 22, 1997 CORPORATE DEVELOPMENT
(405)848-8000, EXT. 257
CHESAPEAKE ENERGY CORPORATION ANNOUNCES THE ACQUISITION OF
DLB OIL & GAS, INC. AND ANSON PRODUCTION CORPORATION;
AND COMPLETION OF MASTERS CREEK WELLS
OKLAHOMA CITY, OKLAHOMA, OCTOBER 22, 1997 -- Chesapeake Energy Corporation
(NYSE:CHK) today announced that it has agreed to acquire two Oklahoma City-
based independent oil and gas producers that own total proven reserves of
approximately 160 billion cubic feet of natural gas equivalent (Bcfe) for $193
million. These reserves are approximately 70% proved developed and will
increase the company's proven reserves by approximately 40%. Excluding the $17
million of pipeline and marketing assets discussed below, Chesapeake's
acquisition price is approximately $1.10 per Mcfe. In addition, these
acquisitions will establish a new core area of operations for Chesapeake in the
Anadarko Basin of western Oklahoma and will significantly increase the
company's inventory of drilling opportunities.
Chesapeake also announced three Masters Creek well completions. These are the
first wells which result from the company's refocused Louisiana Austin Chalk
Trend drilling program previously described in its June 27, 1997 press release.
DLB OIL & GAS, INC.
In the larger of the two acquisitions, Chesapeake has reached an agreement to
acquire by merger the Mid-Continent operations of DLB Oil & Gas, Inc., an
Oklahoma City-based, publicly traded independent oil and gas producer. To
complete this acquisition, Chesapeake will issue $65 million of common stock
and assume $85 million of liabilities. In its Mid-Continent division, DLB owns
approximately 130 Bcfe of proven reserves, significant probable and possible
reserves, nine gas gathering systems, and a gas marketing subsidiary based in
Houston, Texas. Chesapeake believes the gas gathering systems and gas
marketing assets have a value of approximately $10 million.
DLB's Mid-Continent operations include approximately 250 gross operated wells
and interests in approximately 525 non-operated wells, most of which are
concentrated in the Anadarko Basin Shelf of western Oklahoma. These properties
averaged 39 million cubic feet of gas equivalent production (Mmcfe) per day
during the quarter ended June 30, 1997. In addition, the acquisition of DLB
includes a large number of developmental and exploratory drillsites and an
extensive 3-D seismic data base covering the Anadarko Basin Shelf. DLB's
proven reserves have historically been evaluated by DeGolyer and MacNaughton
and H.J. Gruy and Associates, Inc.
Chesapeake will acquire DLB by merging a Chesapeake subsidiary into DLB. As
part of the merger, DLB's shareholders will receive the common stock of Bayard
Drilling Technologies, Inc. and WRT Energy, Inc. that is presently owned by
DLB. Currently DLB owns approximately three million shares of Bayard and 10.4
million shares of WRT. Under the terms of the merger, the outstanding shares
of DLB common stock will be converted into the right to receive the number of
shares of Chesapeake common stock determined by dividing $65 million by the
average of the closing prices of Chesapeake stock for the first 20 consecutive
trading days in the period commencing 25 trading days prior to the date of
DLB's special stockholders' meeting with respect to the merger (the "Average
Price"). At closing, Chesapeake may, at its option, deliver cash of $65
million in lieu of its common stock. In the event that the Average Price is
less than $7.50 per share, each of DLB and Chesapeake shall have the right, but
not the obligation, to terminate the merger agreement.
Both DLB's and Chesapeake's Boards of Directors have approved the transaction.
Although the transaction is subject to further approval by DLB's shareholders,
DLB's co-founders, Charles E. Davidson, Mark Liddell, and Mike Liddell, who
collectively own approximately 75% of DLB's outstanding common stock, have
agreed to vote in favor of the transaction. The transaction is expected to
close in January 1998. Donaldson, Lufkin & Jenrette Securities Corporation
acted as advisor to Chesapeake and Lehman Brothers Inc. acted as advisor to
DLB.
ANSON PRODUCTION CORPORATION
Chesapeake has also reached an agreement to acquire AnSon Production
Corporation, an Oklahoma City-based, privately owned independent oil and gas
producer. To complete this acquisition, Chesapeake will issue $43 million of
its common stock to acquire approximately 30 Bcfe of proven reserves,
significant probable and possible reserves, undeveloped mineral interests, and
a gas marketing subsidiary based in Oklahoma City. Chesapeake believes the
minerals and gas marketing subsidiary have a value of approximately $7 million.
AnSon's operations are concentrated in the Deep Anadarko Basin of western
Oklahoma, where it operates approximately 250 wells and owns an interest in
approximately 330 non-operated wells. These properties averaged approximately
13 Mmcfe of daily production during the quarter ended June 30, 1997 (7 Mmcfe
per day after the effect of a volumetric production payment). The effective
date of the AnSon acquisition is November 1, 1997 and it is expected to close
during the next 30 days. AnSon's proven developed reserves have historically
been evaluated by Netherland Sewell & Associates, Inc.
AnSon was founded in 1948 by Carl B. Anderson and during the past 50 years has
been one of the most active and successful developers of the Deep Anadarko
Basin under the leadership of Carl B. Anderson, Jr. and Carl B. Anderson, III.
The Anderson family also co-founded Bayard Drilling Technologies, Inc., which
is currently in registration for an initial public offering of its common
stock. The Anderson family will continue to own its New Mexico properties
under the name AnSon Energy, L.L.C. Donaldson, Lufkin & Jenrette Securities
Corporation served as Chesapeake's advisor in this transaction.
CHESAPEAKE COMPLETES FIRST THREE MASTERS CREEK WELLS OF FISCAL 1998
In operational news, Chesapeake recently completed the McRight 11, Johnson 12,
and Lord 25 wells in the Masters Creek area of the Louisiana Trend. These are
the first three wells completed by Chesapeake in Louisiana during fiscal 1998
that follow the company's previous announcement of its refocused Louisiana
drilling program.
The McRight 11 has produced approximately 39,000 barrels of oil (Bo) and
134,000 thousand cubic feet of gas (Mcf) during its first 23 days of
production. The well is currently flowing on a 22/64" choke with tubing
pressure of 6,450 psi. Chesapeake operates the McRight 11 and owns a 58%
working interest with Union Pacific Resources Corporation owning 40%.
The Johnson 12 has produced approximately 31,000 Bo and 92,000 Mcf during its
first 22 days of production. The well is currently flowing on a 22/64" choke
with tubing pressure of 6,200 psi. Chesapeake operates the Johnson 12 and owns
a 97% working interest.
The Lord 25 has produced 24,000 Bo and 115,000 Mcf during its first 16 days of
production. The well is currently flowing on a 19/64" choke with tubing
pressure of 6,200 psi. Chesapeake operates the Lord 25 and owns an 89% working
interest with Union Pacific Resources Corporation owning 8%.
Chesapeake expects to complete four new Masters Creek wells during the next 30
days, the Labokay 26, Lord 1, Wahlder 29, and the Addison 8. Chesapeake is
currently utilizing eight rigs to develop its approximate 300,000 acres of
leasehold in Masters Creek and is also drilling with one rig each in the South
Brookeland and St. Landry areas of the Louisiana Trend.
The timing of completion of these wells is later than previously anticipated,
and as a result, the company now expects production during its first quarter of
fiscal 1998 to be approximately 19.0 to 19.5 Bcfe.
MANAGEMENT COMMENT
Aubrey K. McClendon, Chesapeake's Chairman and Chief Executive Officer stated,
"We believe producing property and corporate acquisitions are an attractive
complement to our high potential drilling program. As exploration projects
throughout the oil and gas industry become larger, more costly to execute, and
more technologically challenging, further consolidation of the industry is
likely to occur. We believe this continuing industry consolidation will
present numerous opportunities for Chesapeake to acquire assets on which we can
leverage our strong technological skill set.
With the DLB and AnSon acquisitions, we believe the company's financial
strength and future growth potential has been enhanced in a number of ways.
First, we will increase our proven reserve base by approximately 40% to over
550 Bcfe at attractive acquisition prices in areas with which the company is
familiar. Second, we believe these transactions will be accretive to
Chesapeake's fiscal 1998 per share calculations of earnings, cash flow from
operations, and net asset value. Third, we acquired these assets using
approximately 56% equity and 44% debt, a financial structure that we believe
strengthens Chesapeake's balance sheet. Fourth, we have acquired more than one
hundred undrilled locations to augment our existing inventory of drilling
opportunities. Finally, the transactions add a number of talented exploration
professionals to the Chesapeake team. Given the limited number of experienced
engineers, geologists, geophysicists, and landmen available today, we are
especially pleased to add to our existing talent base from DLB and AnSon."
####
CHESAPEAKE ENERGY CORPORATION IS AN INDEPENDENT OIL AND NATURAL GAS PRODUCER
HEADQUARTERED IN OKLAHOMA CITY WHICH SPECIALIZES IN UTILIZING ADVANCED SEISMIC,
DRILLING AND COMPLETION TECHNOLOGIES TO DEVELOP NEW RESERVES OF OIL AND NATURAL
GAS. THE COMPANY'S OPERATIONS ARE FOCUSED ON EXPLORATORY AND DEVELOPMENTAL
DRILLING IN MAJOR ONSHORE PRODUCING AREAS OF THE UNITED STATES.
THE INFORMATION IN THIS RELEASE INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS
THAT ARE BASED ON ASSUMPTIONS THAT IN THE FUTURE MAY PROVE NOT TO HAVE BEEN
ACCURATE. THOSE STATEMENTS, AND CHESAPEAKE ENERGY CORPORATION'S BUSINESS AND
PROSPECTS, ARE SUBJECT TO A NUMBER OF RISKS, INCLUDING PRODUCTION VARIANCES
FROM EXPECTATIONS, UNCERTAINTIES ABOUT ESTIMATES OF RESERVES, VOLATILITY OF
OIL AND GAS PRICES, THE NEED TO DEVELOP AND REPLACE ITS RESERVES, THE
SUBSTANTIAL CAPITAL EXPENDITURES REQUIRED TO FUND ITS OPERATIONS, ENVIRONMENTAL
RISKS, DRILLING AND OPERATING RISKS, RISKS RELATED TO EXPLORATORY AND
DEVELOPMENTAL DRILLING, COMPETITION, GOVERNMENT REGULATION, AND THE ABILITY OF
THE COMPANY TO IMPLEMENT ITS BUSINESS STRATEGY. THESE AND OTHER RISKS ARE
DESCRIBED IN THE COMPANY'S DOCUMENTS AND REPORTS THAT ARE AVAILABLE FROM THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE REPORT FILED ON
FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1997.