Chesapeake Energy (CHK)

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 83 drilling rigs and related equipment for $677 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for lease payments of approximately $95 million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we can exercise an early purchase option after six or seven years or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic lease equal to the fair market rental value of the rigs as determined at the time of renewal. As of December 31, 2008, Chesapeake’s drilling subsidiaries had committed to acquire 23 rigs and had incurred costs of $64 million as of that date. The total remaining cost of the rigs is estimated to be approximately $267 million. Our intent is to sell and lease back those rigs as they are delivered if acceptable leasing arrangements are available to us.

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 83 drilling rigs and related equipment for $677 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for lease payments of approximately $95 million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we can exercise an early purchase option after six or seven years or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic lease equal to the fair market rental value of the rigs as determined at the time of renewal. As of March 31, 2009, Chesapeake’s drilling subsidiaries had committed to acquire 11 rigs by the end of 2009 and had incurred costs of $68 million as of that date. The total remaining cost of the rigs is estimated to be approximately $83 million. Our intent is to sell and lease back those rigs as they are delivered if acceptable leasing arrangements are available to us. Commitments related to rig lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of March 31, 2009, the minimum aggregate future rig lease payments were approximately $597 million.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 83 drilling rigs and related equipment for $677 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for lease payments of approximately $95 million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we can exercise an early purchase option after six or seven years or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic lease equal to the fair market rental value of the rigs as determined at the time of renewal. As of December 31, 2008, Chesapeake’s drilling subsidiaries had committed to acquire 23 rigs and had incurred costs of $64 million as of that date. The total remaining cost of the rigs is estimated to be approximately $267 million. Our intent is to sell and lease back those rigs as they are delivered if acceptable leasing arrangements are available to us.

Rig Leases

FACE="Times New Roman" SIZE="2">In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 83 drilling rigs and related equipment for $677 million and entered into a master lease agreement under which we agreed to lease the
rigs from the buyer for initial terms of seven to ten years for lease payments of approximately $95 million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded
as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we can exercise an early purchase option after six or seven years or on the expiration of the
lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic lease equal to the fair market rental value of the rigs as
determined at the time of renewal. As of December 31, 2008, Chesapeake’s drilling subsidiaries had committed to acquire 23 rigs and had incurred costs of $64 million as of that date. The total remaining cost of the rigs is estimated
to be approximately $267 million. Our intent is to sell and lease back those rigs as they are delivered if acceptable leasing arrangements are available to us.

FACE="Times New Roman" SIZE="2">Compressor Leases

In 2007 and 2008, our compression subsidiary sold a significant portion of its
existing compressor fleet, consisting of 1,443 compressors, for $303 million and entered into a master lease agreement. The term of the agreement varies by buyer ranging from seven to ten years for aggregate lease payments of approximately $37
million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to natural gas and
oil marketing expenses over the lease term. Under the leases, we can exercise an early purchase option after six to nine years or we can purchase the compressors at expiration of the lease for the

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 81 drilling rigs and related equipment for $660 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for lease payments of approximately $90 million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we can exercise an early purchase option after six or seven years or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic lease equal to the fair market rental value of the rigs as determined at the time of renewal. As of September 30, 2008, Chesapeake’s drilling subsidiaries had contracted to acquire 24 rigs to be constructed during 2008 and 2009. The total remaining cost of the rigs is estimated to be approximately $295 million. Our intent is to sell and lease back those rigs as they are delivered. Commitments related to rig lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of September 30, 2008, the minimum aggregate future rig lease payments were approximately $619 million.

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 81 drilling rigs and related equipment for $660 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for lease payments of approximately $90 million annually. The lease obligations are guaranteed by Chesapeake and its other material restricted subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we can exercise an early purchase option after six or seven years or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic lease equal to the fair market rental value of the rigs as determined at the time of renewal. As of September 30, 2008, Chesapeake’s drilling subsidiaries had contracted to acquire 24 rigs to be constructed during 2008 and 2009. The total remaining cost of the rigs is estimated to be approximately $295 million. Our intent is to sell and lease back those rigs as they are delivered. Commitments related to rig lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of September 30, 2008, the minimum aggregate future rig lease payments were approximately $619 million.

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 80 drilling rigs and related equipment for $647 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for rental payments of approximately $90 million annually. The lease obligations are guaranteed by Chesapeake and its other material subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we have the option to purchase the rigs in 2013 or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic rental equal to the fair market rental value of the rigs as determined at the time of renewal. As of June 30, 2008, Chesapeake’s drilling subsidiaries had contracted to acquire 26 rigs to be constructed during 2008. The total remaining cost of the rigs is estimated to be approximately $335 million. Our intent is to sell and lease back those rigs as they are delivered. Commitments related to rig lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of June 30, 2008, the minimum aggregate future rig lease payments were approximately $628 million.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Rig Leases

In a series of transactions in 2006, 2007 and 2008, our drilling subsidiaries sold 80 drilling rigs and related equipment for $647 million and entered into a master lease agreement under which we agreed to lease the rigs from the buyer for initial terms of seven to ten years for rental payments of approximately $90 million annually. The lease obligations are guaranteed by Chesapeake and its other material subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we have the option to purchase the rigs in 2013 or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic rental equal to the fair market rental value of the rigs as determined at the time of renewal. Commitments related to rig lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of March 31, 2008, the minimum aggregate future rig lease payments were approximately $650 million.

Rig Leases

In a series of transactions in 2006 and 2007, our drilling subsidiaries have sold 70 drilling rigs and related equipment for $565 million and entered into a master lease agreement under which they agreed to lease the rigs from the buyer for initial terms of seven to ten years for rental payments of approximately $80 million annually. The lease obligations are guaranteed by Chesapeake and its other material subsidiaries. These transactions were recorded as sales and operating leasebacks and any related gain or loss will be amortized to service operations expense over the lease term. Under the rig leases, we have the option to purchase the rigs in 2013 or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic rental equal to the fair market rental value of the rigs as determined at the time of renewal. Commitments related to these lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of September 30, 2007, the minimum aggregate future rig lease payments were approximately $591 million.

Rig Leases

In a series of transactions in 2006 and 2007, our wholly-owned subsidiary, Nomac Drilling Corporation, has sold 33 of its drilling rigs and related equipment for $331 million and entered into a master lease agreement under which it agreed to lease the rigs from the buyer for initial terms of eight to ten years for rental payments of approximately $44 million annually. Nomac’s lease obligations are guaranteed by Chesapeake and its other material domestic subsidiaries. These transactions were recorded as sales and operating leasebacks, with an aggregate deferred gain of $32 million on the sales which will be amortized to service operations expense over the lease term. Under the rig leases, we have the option to purchase the rigs in 2013 or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic rental equal to the fair market rental value of the rigs as determined at the time of renewal. Commitments related to these lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of June 30, 2007, the minimum aggregate future rig lease payments were approximately $344 million.

Rig Leases

In a series of transactions in 2006 and 2007, our wholly owned subsidiary, Nomac Drilling Corporation, has sold 27 of its drilling rigs and related equipment for $274 million and entered into a master lease agreement under which it agreed to lease the rigs from the buyer for initial terms of eight to ten years for rental payments of approximately $36 million annually. Nomac’s lease obligations are guaranteed by Chesapeake and its other material domestic subsidiaries. These transactions were recorded as sales and operating leasebacks, with an aggregate deferred gain of $28 million on the sales which will be amortized to service operations expense over the lease term. Under the rig leases, we have the option to purchase the rigs in 2013 or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic rental equal to the fair market rental value of the rigs as determined at the time of renewal. Commitments related to these lease payments are not recorded in the accompanying condensed consolidated balance sheets. As of March 31, 2007, the minimum aggregate future rig lease payments were approximately $290 million.

Rig Leases

In September 2006, our wholly owned subsidiary, Nomac Drilling Corporation, sold 18 of its drilling rigs and related equipment for $187.5 million and entered into a master lease agreement under which it agreed to lease the rigs from the buyer for an initial term of eight years from October 1, 2006 for rental payments of $26.0 million annually. Nomac’s lease obligations are guaranteed by Chesapeake and its other material domestic subsidiaries. This transaction was recorded as a sale and operating leaseback, with an aggregate deferred gain of $14.8 million on the sale which will be amortized to service operations expense over the lease term. Under the rig lease, we have the option to purchase the rigs on September 30, 2013 or on the expiration of the lease term for a purchase price equal to the then fair market value of the rigs. Additionally, we have the option to renew the rig lease for a negotiated renewal term at a periodic rental equal to the fair market rental value of the rigs as determined at the time of renewal.

Commitments related to these lease payments are not recorded in the accompanying consolidated balance sheets. As of September 30, 2006, minimum future rig lease payments were as follows (in thousands):