Chesapeake Boosts Production by 11% in 2010

Chesapeake provided a preliminary 2010 operational report and a 2011-12 strategic and financial plan update. The company's daily production for the 2010 fourth quarter averaged approximately 2.9 billion cubic feet of natural gas equivalent (bcfe), a decrease of 4% below the 3.0 bcfe produced per day in the 2010 third quarter and an increase of 11% over the 2.6 bcfe of daily production in the 2009 fourth quarter. At the end of the 2010 third quarter, the company sold future production through a volumetric production payment covering a portion of its Barnett Shale assets, including approximately 350 mmcfe per day of production in the 2010 fourth quarter. Excluding this sale, the company's 2010 fourth quarter production would have increased 7% sequentially and 25% year over year.

Chesapeake's average daily production of 2.9 bcfe for the 2010 fourth quarter consisted of approximately 2.6 billion cubic feet of natural gas (bcf) (88% on a natural gas equivalent basis) and 59.5 thousand barrels of oil and natural gas liquids (NGLs) (12% on a natural gas equivalent basis). For the 2010 fourth quarter, the company's year-over-year growth rate of natural gas production was 5% and its year-over-year growth rate of oil and NGLs production was 100%.

Chesapeake's daily production for the 2010 full year averaged approximately 2.8 bcfe, an increase of 14% over the 2.5 bcfe of daily production for the 2009 full year. The 2010 full year was Chesapeake's 21st consecutive year of sequential production growth.

Company Reports Preliminary Estimate of Year-End 2010 Proved Reserves of Approximately 16.9 Tcfe, an 18% Year-over-Year Increase

Chesapeake reported a preliminary estimate of year-end 2010 proved reserves, based on the trailing 12-month average price required under Securities and Exchange Commission (SEC) rules, of approximately 16.9 trillion cubic feet of natural gas equivalent (tcfe), an increase of approximately 2.6 tcfe, or 18%, over its year-end 2009 estimated proved reserves of 14.3 tcfe. This growth occurred despite net divestitures of approximately 1.4 tcfe of proved reserves during 2010. During 2010, the company added approximately 4.8 tcfe of proved reserves through the drillbit (including extensions, discoveries and performance-related revisions) at an estimated drilling and completion cost of less than $1.15 per thousand cubic feet of natural gas equivalent and added approximately 200 bcfe of proved reserves associated with positive price-related revisions. The company replaced its 1.0 tcfe of production with approximately 3.6 tcfe of proved reserves for a net proved reserve increase of 2.6 tcfe and a proved reserve replacement rate of approximately 350%.

Company Provides Update on 2011-12 Hedging Positions

To provide protection against potentially weak natural gas prices in 2011, Chesapeake has enhanced its hedging position since its previous hedging update on November 3, 2010. The company has now hedged approximately 96% of its expected 2011 natural gas production at the average price of $5.84 per thousand cubic feet (mcf). In addition, the company has now hedged approximately 17% of its expected natural gas production in 2012 at the average price of $6.19 per mcf, including approximately 29% of its expected natural gas production in the first half of 2012 at the average price of $6.19.

The company often uses the sale of out-year call options to enhance the price of its near-term swaps. Details of the company's quarter-end hedging positions, including sold call options, are provided in the company's Form 10-Q and Form 10-K filings with the SEC. Depending on changes in natural gas and oil futures markets and management's view of underlying natural gas and oil supply and demand trends, Chesapeake may increase or decrease some or all of its hedging positions at any time in the future without notice.

2011-12 Strategic and Financial Plan Updated; Company Plans to Reduce Long-Term Debt by 25% by Substantially Reducing Leasehold Spending and By Reducing its Two-Year Production Growth Rate to 25% from its Previously Planned Growth Rate of 30-40% Through Asset Monetizations

Having built what the company believes is the industry's largest U.S. natural gas and oil resource base, Chesapeake is now focusing on executing its updated 2011-12 strategic and financial plan, "the 25/25 Plan," while continuing to transition its production mix towards more liquids. This 25/25 Plan features reducing the company's long-term debt by 25% over the next two years by substantially reducing leasehold spending and through various asset monetizations, which will reduce the company's planned two-year production growth rate to 25% from its previously planned 30-40% growth rate. Furthermore, Chesapeake does not intend to issue any common or preferred stock to achieve its debt reduction objective.

Management Comment

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are excited to announce our updated 2011-12 strategic and financial plan that features our plan of 25% long-term debt reduction while also delivering what we believe will be best-in-class 25% production growth. This plan represents a fundamental shift from our aggressive asset accumulation of the past few years to a multi-year period of asset harvest, characterized by a clear focus on capital discipline and maximizing returns. We believe we have assembled the best assets in the U.S. and have the technology, experience and financial and human capital to convert these assets into rapidly growing production, proved reserves and cash flow. Successful execution of our 25/25 Plan should very substantially reward our shareholders in both the short and longer term."