Chesapeake Energy added 240 Bcfe of proved Midcontinent gas reserves and 45 MMcfe/d of production through three acquisitions announced Tuesday totaling $249 million, which will be paid in cash. The acquired assets have a reserves-to-production index of 14.2 years, are 81% natural gas and are 83% proved developed, the company said.

Two of the three deals have recently closed: a $42 million buy from an unnamed large independent producer and a $76 million acquisition from RAM Energy Inc. Chesapeake recently terminated its letter of intent to acquire all of RAM’s common stock. The third acquisition, which is scheduled to close on Dec. 18, is a $131 million purchase of Sapient Energy Corp., a Tulsa-based privately-owned Midcontinent gas producer.

Chesapeake CEO Aubrey K. McClendon said the acquisitions are “an excellent fit with our existing Midcontinent assets… Based on the results achieved from our previous acquisitions in the Midcontinent, we are confident Chesapeake will substantially increase the value of the acquired reserves through additional drilling, more efficient operations and lower administrative costs.”

Chesapeake also announced it will see significant gains from its hedging program this year and over the next two years. For the first nine months of 2001, its hedging program added $41 million to its oil and gas revenue, and based on futures prices as of Nov. 29, the market value of Chesapeake’s remaining 2001-03 hedges was $210 million. Of this amount, the company has locked in $100 million through receipt of payment for its October and November 2001 settlements and by lifting certain hedges early for future months of production. The remaining $110 million represents open positions, virtually all of which are with Morgan Stanley. None of Chesapeake’s past or present hedging positions have been executed with or through Enron Corp. or any of its subsidiaries or affiliates, the company said.

“Since January 1998, we have discovered or acquired over 2,200 Bcfe of proved natural gas reserves at the very attractive average cost of $1.09/Mcfe,” said McClendon. “As a result, Chesapeake has become the second largest producer of natural gas in the Midcontinent, among the 10 largest independent gas producers in the U.S. and one of the most profitable producers of natural gas in the industry.”

Chesapeake’s guidance for the fourth quarter includes production of 40 Bcfe (89% gas). In addition, Chesapeake expects to report a $25-30 million pre-tax gain on the sale of its Canadian assets and a $10 million pre-tax non-cash loss on the disposition of its 49% of RAM Energy’s common stock. Its current 2002 guidance projects production of 162-166 Bcfe (88% gas).

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