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): June 11, 2009
CHESAPEAKE
ENERGY CORPORATION
(Exact
name of Registrant as specified in its Charter)
|
Oklahoma
|
|
1-13726
|
|
73-1395733
|
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File No.)
|
|
(IRS
Employer Identification No.)
|
|
6100
North Western Avenue, Oklahoma City, Oklahoma
|
|
73118
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
|
(405)
848-8000
|
|
|
|
(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
8 – Other Events
Item
8.01 Other Events.
On June 11,
2009, Chesapeake Energy Corporation (“Chesapeake”) entered into a perpetual
Multi-Counterparty Secured Hedging Facility (the “Hedge Facility”) with 13
institutions, as Initial Hedge Counterparties (“Hedge Counterparties”), with
Barclays Bank PLC serving as the Hedge Facility Calculation Agent and Wells
Fargo Bank, National Association serving as the Hedge Facility Collateral
Agent. Chesapeake also entered into an associated ISDA Master
Agreement with each of the Hedge Counterparties under substantially similar
terms as required in order for each Hedge Counterparty to become party to the
Hedge Facility. The Hedge Facility allows Chesapeake to enter into
financially settled natural gas, oil, natural gas basis and oil basis hedges
with the Hedge Counterparties. The Hedge Facility will consolidate
and replace the six secured bi-lateral commodity hedge facilities that
Chesapeake and its affiliates currently have in place.
Chesapeake’s obligations under the
Hedge Facility will be secured primarily by its proved reserves pledged to the
Collateral Agent on behalf of the Hedge Counterparties (the “Reserves”) as well
as guarantees from certain of its affiliates. The Hedge
Counterparties’ obligations under the Hedge Facility will be secured by cash or
short-term U.S. Treasury instruments to the extent that any mark-to-market
amounts they owe to Chesapeake exceed defined thresholds.
The maximum volume-based trading
capacity under the Hedge Facility is governed by the expected production of the
Reserves and volume-based trading limits are applied separately to price and
basis hedges. In addition, there are volume-based sub-limits for
natural gas and oil hedges. Each individual Hedge Counterparty’s trading
capacity and availability to trade under the Hedge Facility (which may and does
vary amongst the Hedge Counterparties) is governed by a pre-set i) maximum
volume of contracts and/or, ii) maximum mark-to-market-based exposure level to
Chesapeake. Based on the participation of the initial 13 Hedge
Counterparties, at inception the Hedge Facility will have a maximum of $9.835
billion of mark-to-market-based capacity and 368,813 contracts of volume-based
trading capacity. Chesapeake may add Reserves at any time in
order to increase its trading capacity under the Hedging Facility and has
significant flexibility with regard to releases and/or substitutions of Reserves
from the Facility, provided that certain collateral coverage and other
requirements are met.
The minimum required trading capacity
of the Hedging Facility is 125,000 contracts, provided that Chesapeake may
reduce the trading capacity to zero contracts at any time. In such a
circumstance, the Hedge Facility allows Chesapeake greater flexibility in
releasing Reserves from the Hedge Facility than in the normal course, provided
certain collateral coverage and other requirements are met.
It is anticipated
that any existing commodity hedges of all 13 Hedge Counterparties will be
assigned, novated and/or transferred into the Hedge Facility over the coming
months as Reserves are added to the Hedge
Facility.
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/
JENNIFER M. GRIGSBY |
|
|
|
Jennifer
M. Grigsby
Senior
Vice President, Treasurer and Corporate
Secretary
|
Date: June
17, 2009