This excerpt taken from the CHK 8-K filed Mar 24, 2008.
Increases Natural Gas Hedging Positions
Due to higher recovery expectations in various plays and increased drilling activity levels, the company has raised its 2008 and 2009 production forecasts by 30 and 100 mmcfe per day, respectively. Accordingly, Chesapeake now expects its average daily production rate to increase in 2008 by approximately 21% over its 2007 average rate to 2,370 mmcfe per day and in 2009 by approximately 16% to 2,740 mmcfe per day. These are increases of 5% and 33%, respectively, over 2008 and 2009 production growth levels of 20% and 12% projected by the company last month.
In response to the strength of natural gas prices experienced during early March, the company added to its 2008 and 2009 natural gas hedging position and began to hedge a portion of its expected production in 2010.
Chesapeake currently has hedged, using swaps, approximately 71%, 40% and 12% of its expected 2008, 2009 and 2010 natural gas production at average NYMEX prices of $8.77, $9.13 and $9.34 per mcf, respectively. Additionally, the company has hedged, using collars, approximately 6% of its expected 2008 and 2009 natural gas production at an average NYMEX floor price of $7.88 per mcf and an average NYMEX ceiling price of $9.64 per mcf in 2008 and an average NYMEX floor price of $8.22 per mcf and an average NYMEX ceiling price of $10.70 per mcf in 2009. Depending on changes in oil and natural gas futures markets and management’s view of underlying oil and natural gas supply and demand trends, Chesapeake may either increase or decrease its hedging positions at any time in the future without notice.