In the third quarter of 2003, Chesapeake generated net income available to common shareholders of $81.9 million ($0.33 per fully diluted common share), operating cash flow of $247.7 million (defined as cash flow from operating activities before changes in assets and liabilities) and ebitda of $285.3 million (defined as income before income taxes, interest expense, and depreciation, depletion and amortization expense) on revenue of $454.5 million.
The company's 2003 third quarter net income available to common shareholders included a $0.4 million ($0.00 per share) after-tax non-cash unrealized gain recorded in oil and gas sales resulting from the application of SFAS 133 to the company's oil and natural gas derivative contracts that do not qualify for hedge accounting. In addition, interest expense included a $1.9 million ($0.01 per share) after-tax non-cash unrealized loss resulting from the application of SFAS 133 to the company's interest rate derivative contracts that do not qualify for hedge accounting.
During the third quarter, Chesapeake produced 71.0 billion cubic feet of natural gas equivalent (bcfe), which compares favorably to the 46.7 bcfe produced in the 2002 third quarter and the 67.3 produced in the 2003 second quarter. The 2003 third quarter's 71.0 bcfe of production was comprised of 63.7 billion cubic feet of natural gas (bcf) (90% on a natural gas equivalent basis) and 1.2 million barrels of oil and natural gas liquids (mmbo) (10% on a natural gas equivalent basis). Chesapeake's average daily production rate for the quarter was 772 million cubic feet of natural gas equivalent production (mmcfe), which consisted of 692 mmcf of gas and 13,220 barrels of oil and natural gas liquids.
Oil and natural gas production in the 2003 third quarter increased 52% year-over-year from the 2002 third quarter and 5.4% sequentially from the 2003 second quarter. Of the 3.6 bcfe in sequential production growth during the third quarter, 34% was internally generated organic drillbit growth. This 1.2 bcfe of organic sequential production growth equals a sequential quarterly organic growth rate of just under 2% and an annualized organic growth rate of 8%. The 2003 third quarter was Chesapeake's ninth consecutive quarter of sequential production growth. During the past nine quarters, Chesapeake's production has increased 81%, for an average sequential quarterly growth rate of 7% and an annualized growth rate of 30%.
Average prices realized during the 2003 third quarter (including realized gains or losses from oil and gas derivatives, but excluding unrealized gains or losses on such derivatives) were $26.20 per barrel of oil (bo) and $4.92 per thousand cubic feet of natural gas (mcf), for a realized gas equivalent price of $4.86 per thousand cubic feet of natural gas equivalent (mcfe). Chesapeake's realized pricing differentials to NYMEX during the quarter averaged a negative $2.07 per bo and a negative $0.44 per mcf. Realized gains or losses from hedging activities generated a $1.68 loss per bo and a $0.31 gain per mcf.
