SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
CANAAN ENERGY CORPORATION
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per Unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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[Canaan Energy Corporation]
For further information contact:
Sue Barnard, Corporate Secretary
(405) 604-9205
sue.barnard@canaanenergy.com
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NEWS RELEASE
CHESAPEAKE ENERGY CORPORATION ANNOUNCES AGREEMENT
TO ACQUIRE CANAAN ENERGY CORPORATION
FOR $18.00 PER SHARE IN CASH
Company Acquires 100 Bcfe of Proved Reserves, 50 Bcfe of
Probable and Possible Reserves and 22,000 Mmcfe Per
Day of Gas Production for $118 Million
OKLAHOMA CITY, OKLAHOMA, APRIL 22, 2002 - Chesapeake Energy Corporation
(NYSE:CHK) and Canaan Energy Corporation (Nasdaq:KNAN) today jointly announced
that Chesapeake has agreed to acquire the 4.5 million shares of fully diluted
Canaan common stock not already owned by Chesapeake for $18.00 per share in
cash. Including assumed debt (net of stock option proceeds and working capital)
of approximately $33 million and $4 million of Canaan common stock previously
acquired by Chesapeake at $12.00 per share, the estimated total cost of the
transaction will be $118 million. Chesapeake intends to pay for the transaction
from cash on hand.
Chesapeake values Canaan's estimated 100 billion cubic of natural gas equivalent
(bcfe) of proved reserves at $1.14 per mcfe after allocation of $4 million of
the purchase price to Canaan's undeveloped leasehold inventory and other assets.
Canaan's proved reserves are 91% natural gas, 74% proved developed and are
located almost exclusively in Chesapeake's core Mid-Continent operating area.
Based on current production rates of 22,000 thousand cubic feet of natural gas
equivalent (mcfe) per day (8 bcfe per year), Canaan's reserves-to-production
ratio is an attractive 12.5.
Chesapeake's estimated proved reserves at the end of 2001 were 1.8 tcfe. Because
of successful drilling during the first quarter and increased commodity prices,
Chesapeake's estimated proved reserves at March 31, 2002 have increased to 1.9
tcfe. The Canaan transaction will increase Chesapeake's proved reserves by 5% to
2.0 tcfe and will increase Chesapeake's previously projected production for 2002
by 4 bcfe to 172 bcfe (assuming the transaction closes in the
third quarter). Chesapeake's previously projected production for 2003 of 175
bcfe will increase by 8 bcfe to 183 bcfe.
Management Comments
Aubrey K. McClendon, Chesapeake's Chairman and Chief Executive Officer
commented, "We are pleased to announce this negotiated acquisition of Canaan.
This acquisition fits perfectly with Chesapeake's business strategy of creating
value by acquiring and developing low-cost, long-lived natural gas assets in the
Mid-Continent region of the U.S. Canaan has built a strong foundation of gas
production and an attractive inventory of drilling projects, which Chesapeake
intends to develop more aggressively than Canaan could have.
Although we originally offered $12.00 per share, we were provided the
opportunity to review Canaan's assets through negotiation with Canaan's
management. We were impressed with what we saw and agreed to increase our offer
to the mutually acceptable price of $18.00 per share. The transaction is
expected to close in the third quarter of 2002 and will be accretive to
Chesapeake's asset value, cash flow and EBITDA in the second half of 2002, in
2003 and beyond."
John K. Penton, Canaan's President and Chief Operating Officer, commented, "We
are pleased to enter into this transaction with Chesapeake. This transaction
creates value for both companies and we enthusiastically recommend that our
shareholders join us in voting for this merger."
Terms and Conditions
Although definitive purchase documents have been signed and both Boards of
Directors have unanimously approved the transaction, the agreement is subject to
normal regulatory approvals and a Canaan shareholder vote. Completion of the
transaction is expected in the third quarter of 2002.
Canaan presently has 4.4 million common shares outstanding, plus employee and
director options of 0.5 million shares. Of the outstanding shares, Chesapeake
owns 0.3 million shares. Canaan's management and directors have agreed to vote
their 1.2 million common shares in favor of the agreement.
Chesapeake will record the transaction using purchase accounting. In addition,
under certain circumstances, Canaan has agreed to provide Chesapeake with a $5.0
million break-up fee in the event the transaction is not completed. CIBC World
Markets advised Canaan in the transaction.
Conference Call Information
Chesapeake's management invites your participation in its regularly scheduled
earnings release conference call on Tuesday, April 30, 2002 at 9:00 am EDT. In
addition to discussing first quarter results and the outlook for the remainder
of 2002, the company will discuss the Canaan transaction and other important
operational developments. You may participate in the call by dialing
913-981-5533 or listen to the call on the Internet by visiting our homepage at
chkenergy.com and clicking on the link under Shareholder Information or by going
directly to Vcall.com. In addition, a replay of the call will be available by
dialing 719-457-0820 through May 13. The passcode for the replay is 563827.
Canaan Energy Corporation ("Canaan") and the Directors and Executive Officers of
Canaan may be deemed to be participants in any solicitation of proxies in
connection with seeking approval of holders of common stock of Canaan of the
proposed acquisition of Canaan by Chesapeake Energy Corporation. A description
of the interests of the Directors and Executive Officers of Canaan is set forth
in the proxy statement on Schedule 14A for Canaan's 2001 annual meeting of
shareholders filed with the Securities and Exchange Commission. The Directors
and Executive Officers as a group beneficially own approximately 1,167,000
shares of Canaan common stock, which constitutes approximately 27% of the shares
outstanding. All of such Directors and Executive Officers have agreed to vote in
favor of the merger. For additional information about the interest of the
foregoing participants in the transaction, please refer to the preliminary and
definitive proxy statements, which will be filed with the SEC, in connection
with the solicitation described above. Securityholders are urged to read the
proxy statement when it is available because it will contain important
information. Investors and securityholders can obtain a free copy of the proxy
statement (when it is available) and other relevant documents on the SEC's web
site at www.sec.gov. The proxy statement and related materials may also be
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obtained for free, when filed and available, by directing such request to Canaan
at 405-604-9200.
Chesapeake Energy Corporation is one of the largest independent natural gas
producers in the U.S. Headquartered in Oklahoma City, the company's operations
are focused on developmental drilling and property acquisitions in the
Mid-Continent region of the United States. The company's Internet address is
www.chkenergy.com.
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Canaan Energy Corporation is an independent oil and gas exploration and
production company headquartered in Oklahoma City, Oklahoma. Canaan trades on
the NASDAQ NMS under the symbol KNAN. The company's Internet address is
www.canaanenergy.com