Chesapeake Energy (CHK)

In March 2008, after two years of geoscientific, petrophysical and engineering research, we announced the discovery of the Haynesville Shale, a new unconventional natural gas discovery in East Texas and Northwest Louisiana, which we believe will likely become the nation’s largest natural gas producer by 2015 and perhaps one of the five largest natural gas fields in the world over time. Following this announcement, we accelerated our development of the Haynesville Shale as well as our other

unconventional natural gas resource plays in the Barnett Shale, Fayetteville Shale and Marcellus Shale and increased our leasehold acquisition efforts in all four shale plays.

By June 30, 2008, our average daily production of natural gas and oil had increased by almost 19% from the beginning of the year, an exceptional accomplishment for an exploration and production company of our size, and our stock price was trading around $65 per share—more than a 60% increase from December 31, 2007.

On July 1, 2008, we announced the first of four transactions (three joint ventures and one sale) from which the Company received $10.3 billion in cash and future drilling credits for a portion of our undeveloped leasehold in four shale plays acquired at a cost of $1.7 billion. Because we use the full cost accounting method rather than successful efforts for our natural gas and oil exploration and production activities, instead of generating an $8.6 billion gain on our income statement in 2008 we were required to decrease our basis in our natural gas and oil assets by the amount of such gain. In addition, the pricing associated with these transactions implied that the value of our remaining ownership in the Haynesville, Fayetteville and Marcellus Shale plays was approximately $26 billion. On July 2, 2008 our stock price traded at an all-time high of $74.00 per share and the near-month natural gas price on NYMEX peaked the following day at $13.577 per mcf.

Despite our subsequent announcement of the remaining three joint venture/sale transactions, the equity markets and commodity markets continued to decline through the remainder of 2008 and into 2009. The graph below compares the movement of the S&P 500 and Chesapeake’s common stock price (normalized at a 100 start) on the left vertical axis with natural gas prices (24-month average strip pricing) on the right vertical axis, demonstrating that until the past month, Chesapeake’s stock price could not escape the downward gravitational pull of natural gas prices:

Other notable 2008 accomplishments are indicated below:

Total revenue increased 49% to $11.6 billion in 2008 from $7.8 billion in 2007.

Total assets increased 25% to $38.4 billion in 2008 from $30.7 billion in 2007.

Natural gas and oil production increased 18% to 843 bcfe in 2008 from 714 bcfe in 2007.

Proved natural gas and oil reserves increased 11% to 12.1 tcfe in 2008 from 10.9 tcfe in 2007.

We moved up to #324 in the Fortune 500 (Fortune magazine’s annual ranking of America’s largest corporations) for 2008 and enjoyed the following additional rankings within the Fortune 500:

#13 for fastest growth in profits (5 years)

#34 for most profitable (return on revenues)

#37 for total return to shareholders (5 years)

#40 for total return to shareholders (10 years)

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We were recognized for the second year in a row on the Fortune 100 Best Companies to Work For^® 2009 list.

We were awarded the 2009 Governor’s Pinnacle Award by the Oklahoma Safety Council for overall excellence in safety and health. This is the most prestigious award granted annually by the Oklahoma Safety Council.

We were awarded the 2009 Compass Award from the Oklahoma Business Ethics Consortium for best practices in reinforcing ethical behavior.

Mr. McClendon was recognized as the third best CEO in the oil and gas exploration and production industry by Institutional Investor Magazine in April 2009.