Chesapeake Energy (CHK)

Rig Fleet Expected to Reach 60 Rigs by Year-End 2006

OKLAHOMA CITY, OKLAHOMA, JANUARY 17, 2006 – Chesapeake Energy Corporation (CHK:NYSE) today announced that it has entered into agreements with seven private companies to acquire oil and natural gas assets located in its Barnett Shale, South Texas, Permian Basin, Mid-Continent and East Texas regions for an aggregate purchase price of approximately $796 million in cash. Through these transactions, Chesapeake anticipates acquiring 54 million cubic feet of natural gas equivalent (mmcfe) production per day and an internally estimated 660 billion cubic feet of natural gas equivalent (bcfe) reserves, which are comprised of 264 bcfe of proved reserves and 396 bcfe of probable and possible reserves. On the acquired properties, Chesapeake has identified 260 proved undeveloped and 480 probable and possible drilling locations.

After allocating $339 million of the $796 million purchase price to unproven assets, Chesapeake’s acquisition cost for the 264 bcfe of internally estimated proved reserves will be approximately $1.73 per thousand cubic feet of natural gas equivalent (mcfe). Based on the company’s projected development plan, which includes $909 million of anticipated future drilling and development costs, Chesapeake estimates that its all-in cost of acquiring and developing the 660 bcfe of total reserves will be $2.58 per mcfe.

anticipated future drilling and development costs, Chesapeake estimates that its all-in cost of acquiring and developing the 660 bcfe of total reserves will be $2.58 per mcfe.

Based on the current purchase price, the acquisitions are located 34% in the Barnett Shale, 34% in South Texas, 12% in the Permian Basin, 11% in the Mid-Continent and 9% in East Texas. Chesapeake’s Barnett Shale acreage now exceeds 73,000 net acres (95% of which is in Johnson County) on which it has drilled 54 wells to date and believes it can drill an additional 750-850 wells. On average, Chesapeake has developed 2.3 bcfe per well with its Barnett Shale wells to date. In the Barnett, Chesapeake currently operates 155 wells and has five rigs drilling new wells. The company intends to increase its Barnett Shale rig count to 10 rigs by mid-2006 and to 12-15 rigs by year-end 2006.

Pro forma for these acquisitions and our previously announced acquisition of Columbia Natural Resources, L.L.C., Chesapeake believes that its estimated proved oil and natural gas reserves as of September 30, 2005 will increase to approximately 7.6 trillion cubic feet of natural gas equivalent (tcfe) and its unproven reserves will increase to approximately 7.4 tcfe. The proved reserves associated with the acquisitions have a reserves-to-production index estimated at 13.4 years, are approximately 91% natural gas and have current lease operating expenses of approximately $0.59 per mcfe.

Chesapeake has hedged 100% of the 920 barrels of current daily oil production from the acquired properties at average NYMEX oil prices of $65.43, $65.56 and $63.94 per barrel for 2006, 2007 and 2008, respectively. In addition, the company has hedged 70%, 100% and 100%, respectively, of the 48,700 mmcf of current daily gas production from the acquired properties at average NYMEX gas prices of $9.48, $9.85 and $9.23 per mmbtu for 2006, 2007 and 2008, respectively. All of the oil and natural gas hedges are at prices well above those used by Chesapeake to evaluate the acquisitions.

Chesapeake has recently closed three of the transactions for approximately $486 million in cash and expects to close the remaining acquisitions by February 28, 2006. The pending acquisitions are subject to customary closing conditions and purchase price adjustments, but are not conditioned on the closing of any of the other transactions. Chesapeake intends to finance the acquisitions initially by using its bank credit facility and ultimately by issuing a balance of senior notes and equity securities during 2006 for any acquisition amounts that exceed the company’s cash flow less E&P capital expenditures. The company has attached as Schedule “A” to this press release its updated Outlook for 2006 and 2007 which replaces its previous Outlook dated December 6, 2005 (which is attached as Schedule “B” to this press release for investors’ convenience).

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