UNITED STATES
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)
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DECEMBER 27, 2004 (DECEMBER 27, 2004)
CHESAPEAKE ENERGY CORPORATION
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(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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
SECTION 7 - REGULATION FD
ITEM 7.01 - REGULATION FD DISCLOSURE.
On December 27, 2004, Chesapeake Energy Corporation issued a press release
announcing an agreement to acquire BRG Petroleum Corporation and related
partnerships and announcing the closing of an acquisition by Chesapeake Energy
Corporation of certain properties from Hallwood Energy Corporation. The press
release is attached as Exhibit 99.1.
SECTION 8 - OTHER EVENTS
ITEM 8.01 - OTHER EVENTS.
On December 27, 2004, Chesapeake Energy Corporation announced that it has
entered into an agreement to acquire privately-held BRG Petroleum Corporation
and related partnerships for $325 million in cash. In this transaction,
Chesapeake anticipates acquiring an internally estimated 223 billion cubic feet
of natural gas equivalent proved reserves (bcfe) and net production of
approximately 30 million cubic feet of natural gas equivalent production (mmcfe)
per day from 477 existing wells. The company has hedged 67% of BRG's current gas
production at NYMEX gas prices of $7.42 per mmbtu and $7.45 per mmbtu for 2005
and 2006, respectively.
BRG's properties are concentrated in the Mid-Continent and Ark-La-Tex
regions. In these areas, Chesapeake has identified over 200 proved undeveloped
drilling locations on BRG's leasehold. The drilling locations are concentrated
in the Sahara gas resource play in Northwest Oklahoma and in the East Texas
Cotton Valley gas resource play in Nacogdoches County, Texas.
The BRG acquisition is expected to close on February 1, 2005 and is subject
to customary closing conditions and purchase price adjustments. Chesapeake
intends to finance the acquisition from cash on hand and by using its bank
credit facility. Chesapeake is negotiating to expand its bank credit facility to
$1 billion and extending the maturity of the facility to 2010.
On December 15, 2004, Chesapeake closed its $292 million acquisition of
Barnett Shale properties from Hallwood Energy Corporation. In the Hallwood
acquisition, Chesapeake acquired Hallwood's 18,000 North Block asset in Johnson
County, Texas. Through this transaction, Chesapeake acquired an internally
estimated 135 bcfe of proved reserves and net production of approximately 25
mcfe per day. Chesapeake is currently utilizing two rigs to further develop the
North Block asset and is participating as non-operator in two rigs operated by
Hallwood that are operating on Hallwood's South Block, in which CHK owns a 44%
working interest.
This current report on Form 8-K includes "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 give our
current expectations or forecasts of future events. They include estimates of
oil and gas reserves, expected oil and gas production, business strategy and
other plans and objectives for future operations. Disclosures concerning
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 results to differ materially from expected
results include the volatility of oil and gas prices; adverse effects our
substantial indebtedness and preferred stock obligations could have on our
operations and future growth; our ability to compete effectively against strong
independent oil and gas companies and majors; possible financial losses and
significant collateral requirements as a result of our commodity price and
interest rate risk management activities; uncertainties inherent in estimating
quantities of oil and gas reserves, including reserves we acquire; projecting
future rates of production and the timing of development expenditures; exposure
to potential liabilities of acquired properties and companies; our ability to
replace reserves; the availability of capital; writedowns of oil and gas
carrying values if commodity prices decline; environmental and other claims in
excess of insured amounts resulting from drilling and production operations; and
the loss of key personnel. We caution you not to place undue reliance on these
forward-looking statements, which speak only as of the date of this press
release, and we undertake no obligation to update this information.
Our production forecasts are dependent upon many assumptions, including
estimates of production decline rates from existing wells and the undertaking
and outcome of future drilling activity, which may be affected by significant
commodity price declines or drilling cost increases. Also, our internal
estimates of reserves, particularly those in the properties proposed to be
acquired where we may have limited review of data or experience with the
reserves, may be subject to revision and may be different from estimates by our
external reservoir engineers at year-end. Although we believe the expectations,
estimates and forecasts reflected in these and other forward-looking statements
are reasonable, we can give no assurance they will prove to have been correct.
They can be affected by inaccurate assumptions and data or by known or unknown
risks and uncertainties.
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SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 - FINAL STATEMENTS AND EXHIBITS.
(c) Exhibits
EXHIBIT NO. DOCUMENT DESCRIPTION
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99.1 Press Release dated December 27, 2004.
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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 hereunto 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
Date: December 27, 2004
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EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION
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99.1 Press Release dated December 27, 2004.
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