SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
(FEE REQUIRED)
For the fiscal year ended December 31, 2003
Or
[X] TRANSITION REPORT PURSUANT TO SECTON 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)
For the transition period from 7/1/03 to 12/31/03
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Commission File No. 1-13726
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
NOMAC DRILLING 401 (K) PLAN
6100 NORTH WESTERN AVENUE
OKLAHOMA CITY, OK 73118
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
NOMAC DRILLING CORPORATION
6100 NORTH WESTERN AVENUE
OKLAHOMA CITY, OK 73118
NOMAC DRILLING CORPORATION
401(K) PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
December 31, 2003
2
NOMAC DRILLING CORPORATION
401(K) PLAN
CONTENTS
DECEMBER 31, 2003
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PAGE
FINANCIAL STATEMENTS (UNAUDITED)
Statements of Net Assets Available for Benefits...............................1
Statements of Changes in Net Assets Available for Benefits....................2
Notes to Financial Statements.................................................3
SUPPLEMENTAL SCHEDULES
Schedule of Assets (Held at End of Year)......................................9
Schedule of Reportable Transactions..........................................10
3
NOMAC DRILLING CORPORATION
401(K) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS (UNAUDITED)
DECEMBER 31, 2003
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2003
----
ASSETS
Investments................................................. $ 276,145
Receivables
Dividends.............................................. 424
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Total assets................................... 276,569
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LIABILITIES
Accrued liabilities......................................... 7,823
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Net assets available for benefits.............. $ 268,746
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The accompanying notes are an integral part of these financial statements.
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NOMAC DRILLING CORPORATION
401(K) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (UNAUDITED) FOR THE
PERIOD JULY 1, 2003 (DATE OF INCEPTION) TO DECEMBER 31, 2003
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2003
----
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment income
Interest and dividends................................... $ 1,944
Net appreciation in fair value of investments............ 35,679
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Total investment income........................ 37,623
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Contributions
Employer................................................. 106,984
Participants............................................. 132,956
--------------
Total contributions........................... 239,940
--------------
Total additions............................... 277,563
--------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Benefits paid to participants............................... 986
Administrative expenses.................................. 7,831
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Total deductions............................... 8,817
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Net increase................................... 268,746
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NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year........................................... -
End of year................................................. $ 268,746
==============
The accompanying notes are an integral part of these financial statements.
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NOMAC DRILLING CORPORATION
401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
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1. DESCRIPTION OF THE PLAN
The following is a brief summary of the various provisions of the NOMAC
Drilling Corporation 401(K) Plan (the "Plan"). Participants should
refer to the Plan agreement for a complete description of the Plan's
provisions.
The financial statements are prepared in accordance with the Employee
Retirement Income Security Act of 1974 ("ERISA"). In accordance with
ERISA, such financial statements for 2003 are unaudited.
GENERAL
The Plan is a defined contribution plan that covers all employees of
NOMAC Drilling Corporation (the "Company").
CONTRIBUTIONS
Each year, participants may contribute up to 15 percent of pre-tax
annual compensation, as defined by the Plan. Participants may also
contribute amounts representing rollover distributions from other
qualified plans. The Company makes matching contributions of 100
percent of the first 6 percent of participant contributions. Profit
sharing contributions may be made at the discretion of the Company's
board of directors. No discretionary profit sharing contributions were
made in 2003. Contributions are subject to certain limitations.
The Company's matching contribution is used to purchase shares of
Chesapeake Energy Corporation Common Stock (the "Common Stock") on the
open market. Participants may also elect to direct all or a portion of
their contributions into the Common Stock. Participants may not
transfer or liquidate their investment in Common Stock arising from
employer contributions and earnings thereon until they elect to
withdraw from the Plan due to separation of service or elect an
in-service distribution upon attainment of age 59 1/2 .
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution and allocations of the Company's contribution and Plan
earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account
balance.
VESTING
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's matching and profit sharing
contributions plus actual earnings thereon is based on years of
credited service or participant's age. A participant will be 100
percent vested after five years of credited service.
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NOMAC DRILLING CORPORATION
401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
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PARTICIPANT NOTES RECEIVABLE
Participants may borrow from their accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their vested
account balance. Loan terms range from one to five years or up to ten
years for the purchase of a primary residence. The loans are
collateralized by the balance in the participant's account and bear
interest at the Prime Interest Rate. Principal and interest is paid
ratably through semi-monthly payroll deductions. Interest rates on
loans outstanding at December 31, 2003 were 10 percent.
PAYMENT OF BENEFITS
Upon termination of service due to death, retirement or separation from
service, a participant may elect to receive either a lump-sum amount
equal to the value of the participant's vested interest in his or her
account, annual installments, or have the value rolled over to another
qualified plan or IRA.
AMOUNTS FORFEITED
Forfeited nonvested amounts are first used to pay administrative
expenses of the Plan or to restore unvested amounts to re-employed
participants. Any remaining forfeitures are used to reduce Company
contributions into the Plan. Forfeited nonvested accounts totaled $736
at December 31, 2003. During 2003 forfeited nonvested accounts of $0
were used to pay administrative expenses of the plan and $0 were used
to reduce employer matching contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
method of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of net assets
available for benefits at the date of the financial statements and the
changes in net assets available for benefits during the reporting
period. Actual results could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of mutual funds
are valued at quoted market prices on the last business day of the
year. Chesapeake Energy Corporation common stock is valued at the
closing market price on the last business day of the year, according to
the New York Stock Exchange. Participant loans receivable are valued at
outstanding principal balance, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Investment income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
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NOMAC DRILLING CORPORATION
401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
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The Plan presents, in the statement of changes in net assets available
for benefits, the net appreciation (depreciation) in the fair value of
investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
RISKS AND UNCERTAINTIES
Investment securities are exposed to various risks, such as interest
rate, market, and credit risk. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that
changes in value of investment securities will occur in the near term
and that such changes could materially affect participants' account
balances and the amounts reported in the statement of net assets
available for benefits and the statement of changes in net assets
available for benefits.
3. INVESTMENTS
The following presents investments that represented five percent or
more of the Plan's net assets:
2003
----
Chesapeake Energy Corporation Common Stock......... $ 164,513*
Fidelity Freedom 2020.............................. 26,365
Fidelity Freedom 2030.............................. 15,173
* Balance includes nonparticipant-directed investments.
The Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
2003
----
Mutual funds....................................... $ 5,206
Common stocks...................................... 30,473
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$ 35,679
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NOMAC DRILLING CORPORATION
401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
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4. NONPARTICIPANT-DIRECTED INVESTMENTS
Investment in the Chesapeake Energy Corporation common stock includes
balances arising from nonparticipant-directed employer matching
contributions, as well as participant-directed contributions and
transfers from other investment options. Information about the net
assets and the significant components of the changes in net assets
relating to investments in the Chesapeake Energy Corporation common
stock is as follows:
2003
----
NET ASSETS
Chesapeake Energy Corporation Common Stock......... $ 164,513
==============
CHANGES IN NET ASSETS
Contributions...................................... $ 131,606
Dividend income.................................... 213
Net appreciation................................... 30,472
Benefits paid to participants...................... (357)
Transfers from (to) other investments options, net. 2,579
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$ 164,513
5. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of Chesapeake Energy Corporation
common stock. These transactions represent investments in the Company,
and, therefore, qualify as party-in-interest transactions. Further,
certain Plan investments are shares of mutual funds managed by Fidelity
Investments. Fidelity Management Trust Company is the trustee as
defined by the Plan, and, therefore, transactions in mutual funds
managed by Fidelity Investments qualify as party-in-interest
transactions.
6. TAX STATUS
The Plan received an Internal Revenue Service opinion letter dated
October 9, 2003 with respect to the prototype adopted by the Plan which
indicates that the Plan as designed at the date of the letter is in
compliance with the applicable requirements of the Internal Revenue
Code (the "IRC"). The Plan Administrator and the Plan's tax counsel
believe the Plan is currently designed and being operated in compliance
with the applicable requirements of the IRC. Therefore, no provision
for income taxes has been included in the Plan's financial statements.
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NOMAC DRILLING CORPORATION
401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
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7. PLAN TERMINATION
Although the Company has not expressed any intent to do so, the Company
reserves the right to change, amend or discontinue the Plan at any
time, subject to the provisions of ERISA. In the event of
discontinuance of the Plan, participants will become 100 percent vested
in their accounts.
8. CONCENTRATION OF INVESTMENTS
As of December 31, 2003 net assets available for benefits in the amount
of $164,513 and $109,289 were invested in Chesapeake Energy Common
Stock and mutual funds managed by Fidelity Investments, respectively.
9. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
as of December 31, 2003, as reflected in the accompanying financial
statements, to the Form 5500:
2003
----
Net assets available for benefits
per the financial statements..................... 268,746
Add: Accrued administrative expenses............... 7,823
Less: Accrued dividend income...................... (424)
$ 276,145
==============
The following is a reconciliation of administrative expenses for the
years ended December 31, 2003, as reflected in the accompanying
financial statements, to the Form 5500:
2003
----
Administrative expenses per the financial statements... $ 7,831
Add: Previous year accrued administrative expenses..... --
Less: Current year accrued administrative expenses..... (7,823)
Administrative expenses per the Form 5500 $ 8
==============
Administrative expenses are recorded on the Form 5500 when paid.
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NOMAC DRILLING CORPORATION
401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
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The following is a reconciliation of interest and dividend income for
the years ended December 31, 2003, as reflected in the accompanying
financial statements, to the Form 5500:
2003
----
Interest and dividends per the financial statements.....$ 1,944
Add: Previous year accrued interest and dividend income. --
Less: Current year accrued interest and dividend income. (424)
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Interest and dividends per the Form 5500 $ 1,520
==============
Dividend income was recorded on the Form 5500 when paid.
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NOMAC DRILLING CORPORATION
401(K) PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2003
SCHEDULE 1
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DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, COLLATERAL, CURRENT
LESSOR, OR SIMILAR PARTY PAR, OR MATURITY VALUE COST VALUE
*Chesapeake Energy/Nomac Corporation...... Common Stock $134,972 $ 164,513
*Fidelity Contra fund..................... Mutual Funds ** 946
*Fidelity Investment Grade Bonds.......... Mutual Funds ** 7,123
*Fidelity Independence Fund............... Mutual Funds ** 4,247
*Fidelity Low Prices Stock Fund........... Mutual Funds ** 1,472
*Fidelity Equity II Fund.................. Mutual Funds ** 2,252
*Fidelity Diversified International Fund.. Mutual Funds ** 4,815
*Fidelity Dividend Growth................. Mutual Funds ** 3,648
*Fidelity Mid-Cap Stocks.................. Mutual Funds ** 5,408
*Fidelity Freedom Income.................. Mutual Funds ** 3,596
*Fidelity Freedom 2000.................... Mutual Funds ** 1,050
*Fidelity Freedom 2010.................... Mutual Funds ** 12,834
*Fidelity Freedom 2020.................... Mutual Funds ** 26,365
*Fidelity Freedom 2030.................... Mutual Funds ** 15,173
*Fidelity Freedom 2040.................... Mutual Funds ** 10,545
*Fidelity Retirement Money Market......... Mutual Funds ** 4,234
*Spartan US Equity Index.................. Mutual Funds ** 5,581
*Participant Loans........................ Interest Rates Were 10 percent ** 2,343
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$ 276,145
============
* Identifies parties-in-interest.
** Identifies participant-directed investment options for which presentation of
cost in the Schedule of Assets (Held at End of Year) is not required.
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NOMAC DRILLING CORPORATION
401(K) PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
DECEMBER 31, 2003
SCHEDULE 2
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TOTAL TOTAL
NUMBER OF NUMBER OF PURCHASE SELLING NET GAIN
DESCRIPTION OF ASSET PURCHASES SALES PRICE PRICE (LOSS)
*Chesapeake Energy Corporation
Stock Purchases.......................... 18 -- $ 106,984 -- --
* Identifies parties-in-interest.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOMAC DRILLING CORPORATION
401(K) Plan
By: /S/ MARY WHITSON
-------------------------------------
Mary Whitson, Plan Administrator
Date: August 17, 2004
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