Chesapeake Energy Corporation

Capex

In addition to potential acquisitions in 2008, CHK expects to:

– Invest ~$4.6 billion through the drillbit
– Find an estimated 2.3 tcfe @ $2.00/mcfe through the drillbit
– Produce an estimated ~850 bcfe
– Replace 850 bcfe of proved reserves and add ~1.4 tcfe of proved  reserves (newly drilled reserves could be sold for at least $3.50/mcfe ~$5.0 billion of value)

In March 2008, Chesapeake increased its capital expenditure plans for 2008 and 2009. In light of higher per well reserve recovery expectations and decreasing per well costs in key shale plays, the company announced plans to increase its drilling activity levels in each of 2008 and 2009. Specifically, Chesapeake plans to increase its current drilling activity levels in the Fort Worth Barnett Shale, Fayetteville Shale and Haynesville Shale plays by 24 operated rigs by year-end 2008.

As a result of the Haynesville Shale discovery and other new discoveries and projects, the company also plans to increase its leasehold expenditures to more fully capture the value of the plays and projects recently identified by Chesapeake. Chesapeake currently plans to spend an additional $275 million and $675 million for drilling and leasehold in 2008 and 2009, respectively, as compared to its previously announced spending plans.

Production

Chesapeake Energy Corporation reported production and proved reserves for the 2007 fourth quarter and full year. Daily production for the 2007 fourth quarter averaged 2.219 billion cubic feet of natural gas equivalent (bcfe), an increase of 193 million cubic feet of natural gas equivalent (mmcfe), or 10%, over the 2.026 bcfe produced per day in the 2007 third quarter and an increase of 566 mmcfe, or 34%, over the 1.653 bcfe of daily production in the 2006 fourth quarter.

Chesapeake's 2007 fourth quarter production of 204.2 bcfe was comprised of 187.8 billion cubic feet of natural gas (bcf) (92% on a natural gas equivalent basis) and 2.74 million barrels of oil and natural gas liquids (mmbbls) (8% on a natural gas equivalent basis). Chesapeake's average daily production for the quarter of 2.219 bcfe consisted of 2.041 bcf of natural gas and 29,728 barrels of oil and natural gas liquids (bbls).

The company's sequential and year-over-year growth rates for its 2007 fourth quarter natural gas production were 10% and 35%, respectively, while the company's sequential and year-over-year growth rates for its oil production were 2% and 23%, respectively. The 2007 fourth quarter was Chesapeake's 26th consecutive quarter of sequential U.S. production growth. Over these 26 quarters, Chesapeake's U.S. production has increased 467%, for an average compound quarterly growth rate of 7% and an average compound annual growth rate of 30%. Chesapeake's daily production for the 2007 full year averaged 1.957 bcfe, an increase of 372 mmcfe, or 23%, over the 1.585 bcfe of daily production for the 2006 full year.

Chesapeake's 2007 full-year production of 714.3 bcfe was comprised of 655.0 bcf (92% on a natural gas equivalent basis) and 9.882 mmbbls (8% on a natural gas equivalent basis). Chesapeake's average daily production for the 2007 full year of 1.957 bcfe consisted of 1.794 bcf and 27,074 bbls. The company's growth rate for its 2007 full-year natural gas production was 24% and its growth rate for 2007 full-year oil production was 14%. The 2007 full year was Chesapeake's 18th consecutive year of sequential production growth.

The company's daily production for the full-year 2006 averaged 1.585 bcfe, an increase of 301 mmcfe, or 23%, over the 1.284 bcfe of daily production for the full-year 2005. Chesapeake's full-year 2006 production of 578.4 bcfe was comprised of 526.5 bcf  (91% on a natural gas equivalent basis) and 8.65 mmbbls (9% on a natural gas equivalent basis). Chesapeake's average daily production for the full-year 2006 of 1.585 bcfe consisted of 1.442 bcf of natural gas and 23,710 bbls of oil. The full-year 2006 was Chesapeake's 17th consecutive year of sequential production growth.

Reserves

Oil and Natural Gas Proved Reserves Reach Record Level of 10.9 Tcfe; Drilling and Acquisition Costs for 2007 Full-Year Average $2.08 per Mcfe; Company Adds 1.9 Tcfe for a Reserve Replacement Rate of 369%

Chesapeake began 2007 with estimated proved reserves of 8.956 trillion cubic feet of natural gas equivalent (tcfe) and ended the year with 10.879 tcfe, an increase of 1.923 tcfe, or 21%. During the year, Chesapeake replaced its 714 bcfe of production with an estimated 2.637 tcfe of new proved reserves for a reserve replacement rate of 369%. Reserve replacement through the drillbit was 2.468 tcfe, or 346% of production (including 1.248 tcfe of positive performance revisions and 97 bcfe of positive revisions resulting from oil and natural gas price increases between December 31, 2006 and December 31, 2007) and 94% of the total increase. Reserve replacement through the acquisition of proved reserves completed during the year was 377 bcfe, or 53% of production and 14% of the total increase. Proved reserves divestments during the year totaled 208 bcfe for proceeds of $1.1 billion at a sales price of $5.49 per mcfe.

Chesapeake began 2006 with estimated proved reserves of 7.521 trillion cubic feet of natural gas equivalent (tcfe) and ended the year with 8.956 tcfe, an increase of 1.435 tcfe, or 19%. During 2006, Chesapeake replaced its 578 bcfe of production with an estimated 2.013 tcfe of new proved reserves for a reserve replacement rate of 348%.

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