• 2nd largest independent producer of U.S. natural gas:
(trail only Devon Energy), #5 overall (includes majors, utilities and pipelines)
• #1 driller in U.S.:
#1 deep driller, 74 operated rigs, 72 non-operated rigs, collector of 10% of all daily drilling info generated in the U.S., #2 driller in Texas
• Active consolidator in focused area:
$9.9 billion since ’98, $2.1 billion in ’04, $4.5 billion to date in ’05
• Increasing production:
1,270 mmcfe/day projected ’05 production - 28% YOY increase; 1,543 mmcfe/day projected ’06 production - 22% YOY increase
• Increasing reserves:
7.1 tcfe of proved reserves at 6/30/05, 92% natural gas, 64% proved developed, 13.8 year R/P
• Upside potential:
6.4 tcfe of non-proved reserve potential in: i) conventional, ii) unconventional gas resource and iii) emerging gas resource plays: 12-year drilling inventory
• Industry leading leasehold and seismic position:
7.6 mm acres of U.S. onshore leasehold plus 10.9 mm acres of 3-D seismic
• $20.2 billion EV:
$15.0 billion equity value, $5.2 billion long-term debt
• 2006 estimates: ebitda $3,506 mm;
operating cash flow $3,219 mm; net income $1,226 mm
• Investor value:
4.7 x operating cash flow, 5.8x ebitda, 12.2x P/E ratio
• Top stock price performance:
CHK up 27 x in 12 years as a public company, #2 performer among mid and large-cap E&P companies during that period
• Agreed to acquire Columbia Natural Resources, LLC (CNR) for $2.2 billion in cash and assume approximately $75 million working capital deficit and liabilities related to prepaid sales and hedging agreements
- Proved reserves: 1.1 tcfe for $1.5 billion = $1.45/mcfe(1)
- Probable/possible reserves and unevaluated leasehold: 1.4 tcfe and 4.1 mm net acres for $500 mm
- Midstream: 6,500 miles of gathering lines for $175 mm
• All-in cost to develop 2.5 tcfe of 3P reserves = $2.48/mcfe(1)
• 99% natural gas; 70% proved developed reserves; 125 mmcfe current daily production rate; 23-year r/p ratio (16 years on proved developed)
• Premium gas price realizations of ~$0.50/mmbtu over NYMEX vs. up to $4.00/mmbtu discounts to NYMEX currently in various southwestern and western basins
• Attractive lease operating and future development costs: $1.35/mcfe and $2.35/mcfe
• New core area in perhaps the last frontier for American onshore gas exploration
• Substantial upside identified:
- Acceleration of drilling; enhance PV of inventory; plan to triple capex to over $200 mm in 2006
• 1,316 PUDs and 8,119 probable and possible drillsites
- Deeper drilling potential in largely underexplored basin: <1% of more than 400,000 wells drilled below 7,500 feet
• Plays to CHK’s deep drilling expertise
• Recent industry success in Trenton/Black River play in NY
• Will hedge at least 50% of CNR’s estimated base production through 12/08
2Q05 Record Quarterly Results
• Increased production to 1,244 mmcfe/day
- 31% YOY and 7% sequential growth (16th consecutive quarterly increase)
- Exceeded mid-point of forecast by 3.7 bcfe
- Annualized first half 2005 organic growth rate of 10.2%
• Strong quarterly financial performance
- Revenues reached $1,048 mm
- $565 mm in adjusted EBITDA(1)
- $513 mm in operating cash flow(1)(2)
- $174 million adjusted net income to common ($2.00 per fully diluted common share annualized)
• Increased reserves to 6.0 tcfe (or 1 billion barrel oil equivalent!)
- Proved reserves up 22% year to date to 6.0 tcfe (3)
- Added 948 bcfe in first half of 2005 at a drilling and acquisition cost of $1.49/mcfe
- 535% reserve replacement rate
- Pre-tax SEC PV10% of $14.6 billion for proved reserves (using NYMEX prices of $56.73/bbl and $7.08/mcf)
- Non-proved reserves increased by 25% to 5.0 tcfe
• Announced acquisition of 294 bcfe of 3P reserves and 33 mmcfe/d of production for $410 mm from four privately-held companies, including remaining 56% share of Hallwood/CHK South Block AMI in Johnson County, Texas Barnett Shale sweet spot
• Made further drilling rig investments to mitigate rising oilfield service costs
- Up approximately $150 mm on various drilling rig investments to date
