Chesapeake Energy (CHK)

Additional Oilfield Service Investments

Chesapeake recently agreed to purchase one of the leading drilling contractors in the Appalachian Basin. The company is currently utilizing two of the contractor’s 15 rigs and through this acquisition will gain enhanced operational flexibility in expanding activity levels in the basin. This acquisition bolsters the scale and operating capabilities of the company’s 100% owned drilling rig subsidiary, Nomac Drilling Corporation. To date, Chesapeake has invested approximately $400 million to build or acquire 57 drilling rigs (including the pending acquisition of the Appalachian Basin drilling contractor) and is building 22 additional rigs. In total, Chesapeake’s drilling rig fleet should reach 79 rigs by the end of the 2007 first quarter, which would rank Nomac as one of the six largest drilling rig contractors in the U.S.

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Chesapeake’s direct rig ownership is complemented by its $63 million in investments in two private drilling rig contractors, DHS Drilling Company and Mountain Drilling Company, in which Chesapeake owns approximately 45% and 49%, respectively. DHS owns 16 rigs and Mountain owns four rigs and has ordered another six rigs for delivery later in 2006 and 2007. Chesapeake’s rig investments have served as an effective hedge to rising service costs and have also provided competitive advantages in making acquisitions and in developing its own leasehold on a more timely and efficient basis.