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Chesapeake Locks in 71% of 2006 Gas at $9.43/MMBtu

Chesapeake Energy Corp. over the past month increased its hedge position, locking in an average Nymex price of $9.49/MMBtu for 721 Bcf of natural gas production over the next three years.

As of Feb. 10 Oklahoma City-based Chesapeake has now hedged 71%, 36% and 22% of its anticipated 2006, 2007 and 2008 gas production through Nymex swaps at $9.43/MMBtu, $9.85/MMBtu and $9.10/MMBtu, respectively.

"The hedging positions that Chesapeake has entered into for 2006, 2007 and 2008 have a current positive mark-to-market value of approximately $725 million," said CEO Aubrey McClendon. "In addition, the mark-to-market liability of the hedges assumed in the CNR [Columbia Natural Resources LLC] acquisition have declined by almost $100 million since the date of the acquisition on Nov. 14, 2005."

Previously, as of Jan. 17, Chesapeake's natural gas was 58% hedged for 2006 at $9.38/MMBtu, 23% hedged for 2007 at $9.72, and 13% hedged for 2008 at $8.82.

Additionally, as of Feb. 10, Chesapeake has now hedged approximately 7.665 million bbls of oil during the next three years at an average Nymex price of $61.97/bbl.

The company acquired Columbia Natural Resources from Triana Energy Holdings LLC in a $2.95 billion deal ($2.2 billion cash and $0.75 billion liabilities) (see Daily GPI, Nov. 17, 2005). In other news, Chesapeake announced the resignation of co-founder Tom Ward, president and COO, effective Feb. 10. Ward said that he plans to pursue other business ventures and philanthropic interests, Reuters reported. Steven Dixon, senior vice president of production, was named to succeed Ward as COO.

Chesapeake will report fourth quarter and full-year 2005 results Feb. 23.

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