Exhibit 12
CHESAPEAKE ENERGY CORPORATION
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(dollars in 000’s)
Year Ended Dec. 31, 1998 | Year Ended Dec. 31, 1999 | Year Ended Dec. 31, 2000 | Year Ended Dec. 31, 2001 | Year Ended Dec. 31, 2002 | Three Months Ended March 31, 2003 | ||||||||||||||||
EBITDA | |||||||||||||||||||||
Income before income taxes and extraordinary item |
| (920,520 | ) |
| 35,030 |
| 196,162 |
| 438,365 |
|
| 67,140 |
| 114,711 |
| ||||||
Interest |
| 68,249 |
|
| 81,052 |
| 86,256 |
| 98,321 |
|
| 111,280 |
| 35,027 |
| ||||||
Writedown of oil and gas property |
| 826,000 |
|
| — |
| — |
| — |
|
| — |
| — |
| ||||||
Writedown of other assets |
| 55,000 |
|
| — |
| — |
| — |
|
| — |
| — |
| ||||||
Risk Management Income (Loss) |
| — |
|
| — |
| — |
| (84,789 | ) |
| 88,018 |
| (27,710 | ) | ||||||
Impairments of investments in securities |
| — |
|
| — |
| — |
| 10,079 |
|
| — |
| — |
| ||||||
Gain on sale of Canada |
| — |
|
| — |
| — |
| (27,000 | ) |
| — |
| — |
| ||||||
Loss on investment in Seven Seas |
| — |
|
| — |
| — |
| — |
|
| 17,201 |
| — |
| ||||||
Loss on repurchases of Chesapeake debt |
| — |
|
| — |
| — |
| — |
|
| 2,626 |
| — |
| ||||||
Gothic Stand-by Credit Facility Costs |
| — |
|
| — |
| — |
| 3,392 |
|
| — |
| — |
| ||||||
DD&A |
| 154,720 |
|
| 102,854 |
| 108,772 |
| 181,565 |
|
| 235,198 |
| 80,298 |
| ||||||
EBITDA |
| 183,449 |
|
| 218,936 |
| 391,190 |
| 619,933 |
|
| 521,463 |
| 202,326 |
| ||||||
Income before income taxes and extraordinary item | $ | (920,520 | ) | $ | 35,030 | $ | 196,162 | $ | 438,365 |
| $ | 67,140 | $ | 114,711 |
| ||||||
Interest |
| 68,249 |
|
| 81,052 |
| 86,256 |
| 98,321 |
|
| 111,280 |
| 35,027 |
| ||||||
Amortization of capitalized interest |
| 12,240 |
|
| 1,047 |
| 1,226 |
| 1,784 |
|
| 1,804 |
| 522 |
| ||||||
Bond discount amortization (a) |
| — |
|
| — |
| — |
| — |
|
| — |
| — |
| ||||||
Loan cost amortization |
| 2,516 |
|
| 3,338 |
| 3,669 |
| 4,022 |
|
| 4,962 |
| 1,618 |
| ||||||
Earnings | $ | (837,515 | ) | $ | 120,467 | $ | 287,313 | $ | 542,492 |
| $ | 185,186 | $ | 151,878 |
| ||||||
Interest expense | $ | 68,249 |
| $ | 81,052 | $ | 86,256 | $ | 98,321 |
| $ | 111,280 | $ | 35,027 |
| ||||||
Capitalized interest |
| 6,470 |
|
| 3,356 |
| 2,452 |
| 4,719 |
|
| 4,976 |
| 1,927 |
| ||||||
Bond discount amortization (a) |
| — |
|
| — |
| — |
| — |
|
| — |
| — |
| ||||||
Loan cost amortization |
| 2,516 |
|
| 3,338 |
| 3,669 |
| 4,022 |
|
| 4,962 |
| 1,618 |
| ||||||
Fixed Charges | $ | 77,235 |
| $ | 87,746 | $ | 92,377 | $ | 107,062 |
| $ | 121,218 | $ | 38,572 |
| ||||||
Preferred Stock Dividends | |||||||||||||||||||||
Preferred Dividend Requirements | $ | 12,077 |
| $ | 16,711 | $ | 8,484 | $ | 2,050 |
| $ | 10,117 | $ | 3,526 |
| ||||||
Ratio of income before provision for taxes to Net Income (b) |
| N/A |
|
| 1.05 |
| N/A |
| 1.66 |
|
| 1.67 |
| 1.61 |
| ||||||
Subtotal—Preferred Dividends | $ | 12,077 |
| $ | 17,597 | $ | 8,484 | $ | 3,411 |
| $ | 16,861 | $ | 5,687 |
| ||||||
Combined Fixed Charges and Preferred Dividends | $ | 89,312 |
| $ | 105,343 | $ | 100,861 | $ | 110,473 |
| $ | 138,079 | $ | 44,259 |
| ||||||
Ratio of Earnings to Fixed Charges |
| — |
|
| 1.4 |
| 3.1 |
| 5.1 |
|
| 1.5 |
| 3.9 |
| ||||||
Insufficient coverage | $ | 914,750 |
| $ | — | $ | — | $ | — |
| $ | — | $ | — |
| ||||||
Ratio of Earnings to Combined Fixed Charges and Preferred Dividends |
| — |
|
| 1.1 |
| 2.8 |
| 4.9 |
|
| 1.3 |
| 3.4 |
| ||||||
Insufficient coverage | $ | 926,827 |
| $ | — | $ | — | $ | — |
| $ | — | $ | — |
| ||||||
RATIO OF EBITDA TO INT. EXP | |||||||||||||||||||||
EBITDA |
| 183,449 |
|
| 218,936 |
| 391,190 |
| 619,933 |
|
| 521,463 |
| 202,326 |
| ||||||
Interest expense |
| 68,249 |
|
| 81,052 |
| 86,256 |
| 98,321 |
|
| 111,280 |
| 35,027 |
| ||||||
Ratio |
| 2.7 |
|
| 2.7 |
| 4.5 |
| 6.3 |
|
| 4.7 |
| 5.8 |
| ||||||
RATIO OF EBITDA TO INT. EXP plus DIVIDENDS | |||||||||||||||||||||
EBITDA |
| 183,449 |
|
| 218,936 |
| 391,190 |
| 619,933 |
|
| 521,463 |
| 202,326 |
| ||||||
Dividends on preferred stock |
| 12,077 |
|
| 16,711 |
| 8,484 |
| 2,050 |
|
| 10,117 |
| 3,526 |
| ||||||
Interest expense |
| 68,249 |
|
| 81,052 |
| 86,256 |
| 98,321 |
|
| 111,280 |
| 35,027 |
| ||||||
Ratio |
| 2.3 |
|
| 2.2 |
| 4.1 |
| 6.2 |
|
| 4.3 |
| 5.2 |
| ||||||
Financial Results—Non Guarantors | |||||||||||||||||||||
Income from Continuing Ops. |
| (5,964 | ) |
| 5,565 |
| 5,189 |
| 3,440 |
|
| 1,412 |
| (64 | ) | ||||||
Interest |
| 382 |
|
| 96 |
| 35 |
| 2 |
|
| 10 |
| — |
| ||||||
Writedown of oil and gas properties |
| 8,000 |
|
| — |
| — |
| — |
|
| — |
| — |
| ||||||
DD&A |
| 126 |
|
| 475 |
| 181 |
| 80 |
|
| 1,820 |
| 525 |
| ||||||
EBITDA |
| 2,544 |
|
| 6,136 |
| 5,405 |
| 3,522 |
|
| 3,242 |
| 461 |
| ||||||
PRO FORMA FINANCIAL DATA—ratio of ebitda to interest expense (Restr. Subs. Only) | |||||||||||||||||||||
EBITDA |
| 180,905 |
|
| 212,800 |
| 385,785 |
| 616,411 |
|
| 518,221 |
| 201,865 |
| ||||||
Interest expense—actual |
| 67,867 |
|
| 80,956 |
| 86,221 |
| 98,319 |
|
| 111,270 |
| 35,027 |
| ||||||
Interest expense—new issue |
| — |
|
| — |
| — |
| |||||||||||||
Ratio |
| 2.7 |
|
| 2.6 |
| 4.5 |
| 6.3 |
|
| 4.7 |
| 5.8 |
| ||||||
PRO FORMA FINANCIAL DATA—ratio of ebitda to interest expense and dividends (Restr. Subs. Only) | |||||||||||||||||||||
EBITDA |
| 180,905 |
|
| 212,800 |
| 385,785 |
| 616,411 |
|
| 518,221 |
| 201,865 |
| ||||||
Interest expense—actual |
| 67,867 |
|
| 80,956 |
| 86,221 |
| 98,319 |
|
| 111,270 |
| 35,027 |
| ||||||
Interest expense—new issue | |||||||||||||||||||||
Preferred Stock Dividend |
| 12,077 |
|
| 16,711 |
| 8,484 |
| 2,050 |
|
| 10,117 |
| 3,526 |
| ||||||
Total interest expense and preferred stock div |
| 79,944 |
|
| 97,667 |
| 94,705 |
| 100,369 |
|
| 121,387 |
| 38,553 |
| ||||||
Ratio |
| 2.3 |
|
| 2.2 |
| 4.1 |
| 6.1 |
|
| 4.3 |
| 5.2 |
|
(a) | Bond discount excluded since its included in interest expense |
(b) | Represents income (loss) before income taxes and extraordinary item divided by income (loss) before extraordinary item, which adjusts dividends on preferred stock to a pre-tax basis. |
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