Chesapeake's History
Founded in 1989, Completed IPO in 1993
Chesapeake was founded in 1989 by our CEO, Aubrey K. McClendon, and our former President and COO, Tom L. Ward, with only a $50,000 initial investment and an objective to build a sizeable natural gas exploration and production company. With assistance from several industry and financial partners, we enjoyed initial success from our strategy of focusing on drilling horizontal natural gas wells in the unconventional reservoirs in the Golden Trend and Sholem Alechem fields in south central Oklahoma and in the Giddings field in southeast Texas. Chesapeake rapidly grew its reserves and production and in February 1993 we completed an IPO to help fund our growth at a split adjusted price of $1.33 per share.
Texas Austin Chalk Success
In 1994, Chesapeake made a major deep natural gas discovery in the Deep Giddings portion of the historically unpredictable Austin Chalk trend that launched a major growth phase for the company. Through extensive use of horizontal drilling technology and 3-D seismic data, Chesapeake had outstanding success from this high-pressured, high-production rate formation and from 1994 to 1996 we were able to deliver the most impressive growth rate in our industry and best stock price performance in the U.S.
Operational Disappointments and Commodity Price Collapse
Chesapeake, along with several other companies in the industry, attempted to extend the Austin Chalk play from southeast Texas into western and central Louisiana but ultimately failed as the play eventually was found to be less prolific and consistent than in Texas due to unanticipated geological and engineering challenges in addition to high drilling costs. Concurrently, natural gas and oil prices collapsed and added to Chesapeake’s financial and operational challenges. From late 1997 to mid-1999, natural gas prices were roughly halved from $2.50 per mcf to $1.25 per mcf and oil prices fell 50% from about $23.00 per bbl to below $11.00 per bbl. As a result, Chesapeake’s stock price fell from a split-adjusted high of $34.44 in mid-1997 to a low of $0.63 in early 1999.
Corporate Reinvention
As a result of our challenges in the late 1990’s, we substantially modified our strategy away from being solely a drillbit-oriented, short-reserve life Austin Chalk-focused natural gas producer and returned to our roots in the Mid-Continent. Our redefined strategy still focused on natural gas, but targeted a more diversified, longer reserve-life and lower risk asset base and, for the first time, incorporated acquisitions into our business plan.
The Modern Chesapeake - Second-Largest Independent Producer of U.S. Natural Gas
Through the consistent execution of our simple and highly effective revamped strategy, Chesapeake has rapidly grown through a relatively equal balance of acquisitions and drilling. We were one of the first companies to recognize and capitalize on tightening supply/demand fundamentals and the permanent upward shift in U.S. natural gas prices that began in 2000. In addition, we were among the first to recognize that improvements in horizontal drilling and completion technologies would enable the industry to develop vast new supplies of natural gas from unconventional reservoirs such as fractured carbonates, tight sandstone and shales such as the Barnett Shale. As a result, since early 1998, we have been one of the most active consolidators of onshore U.S. natural gas assets, having purchased approximately 7.0 tcfe of proved reserves at a total cost of approximately $18.4 billion. In conjunction with strong production additions through low-risk development drilling and deep natural gas exploration, Chesapeake has now become the third-largest producer of natural gas in the U.S. (second among independents) and one of the top natural gas resource plays in America with over 13.9 million net leasehold acres, an estimated 33,700 net drilling locations in inventory and the most active drilling program in the U.S.