Chesapeake Amends Haynesville Shale JV Agreement

On February 20, 2009, Chesapeake and Plains Exploration & Production (PXP) agreed to amend their Haynesville Shale joint venture agreement. In the amendment, Chesapeake granted PXP a one-time option to avoid paying the last $800 million of PXP's $1.65 billion drilling carry obligation to Chesapeake, which represents approximately 25% of the original joint venture transaction consideration. The amendment includes three key features.

First, the option may only be exercised by PXP during the two-week period from June 15, 2010 through June 30, 2010. Second, should PXP elect to exercise the option, PXP will be required to convey 50% of all of its Haynesville Shale joint venture assets to Chesapeake as of December 31, 2010, including all investments in leasehold, production and reserves at that date. Chesapeake estimates PXP's investment in the Haynesville Shale assets as of December 31, 2010 will likely range from $3.0 billion to $3.2 billion and believes the value of these assets at that time will be substantially greater than the cost basis. Third, until December 31, 2010, PXP's obligations to both pay for 50% of Chesapeake's drilling costs in the Haynesville Shale joint venture and participate in each well in which Chesapeake participates remain unchanged and are mandatory.

"We are pleased to be able to assist our very good partner PXP in obtaining greater financial flexibility on terms useful to them and favorable to us," said Aubrey K. McClendon, Chesapeake's CEO. "We were open to accommodating our joint venture partner's request for a modification of the original agreement because of our great respect for PXP and our desire to be a supportive partner. While we would be happy for PXP to exercise its one-time option in June 2010, we anticipate it will not do so since it would then have to forfeit 50% of its anticipated $3.0 billion to $3.2 billion investment in the premier U.S. shale play."