Chesapeake Energy (CHK)

Forward Gas Sale

In connection with the acquisition of CER in August 2003, the Company assumed an obligation under forward gas sales agreements with Mahonia II Limited (Mahonia) to deliver a total of 86.7 Bcf of natural gas to Mahonia through 2006. The obligation, for which no future compensation will be forthcoming, was adjusted to its estimated fair value at the date of acquisition based upon the cost expected to be incurred to satisfy the obligations under the contract, as determined by an outside valuation firm. These contracts are recorded as a prepaid forward gas sales liability, with the related income recognized at time of delivery. During the nine-month period ended September 30, 2005 and 2004, 19.3 and 32.6 Bcf of natural gas were delivered, representing approximately $58.4 and $110.7 million in revenues respectively. As of September 30, 2005, 11.1 Bcf of natural gas remains to be delivered.

Forward Gas Sale

As part of the acquisition agreement with Columbia Energy Group, the Company assumed a forward gas sales obligation with Mahonia II Limited (Mahonia). Under the terms of the agreement, the Company is required to sell and deliver certain quantities of natural gas during the term of the contract, which continues through February 2006. As such, this contract is recorded as forward gas sale at its estimated fair value at the date of acquisition less amounts delivered through December 31, 2004. Deliveries, sales prices, and revenue to be recognized by year have been included in the summary of significant accounting policies in Note 2.