Chesapeake Energy (CHK)

19. Subsequent Events

On February 2, 2009, we completed a public offering of $1 billion aggregate principal amount of senior notes due 2015, which have an interest rate of 9.5% per annum. The senior notes were priced at 95.071% of par to yield 10.625%. On February 17, 2009, we completed an offering of an additional $425 million aggregate principal amount of the 9.5% Senior Notes due 2015. The additional senior notes were priced at 97.75% of par plus accrued interest from February 2 to February 17, 2009 to yield 10.0% per annum. Net proceeds of $1.343 billion from these two offerings were used to repay outstanding indebtedness under our revolving bank credit facility, which we anticipate reborrowing from time to time to fund drilling and leasehold acquisition initiatives and for general corporate purposes.

On February 20, 2009, we amended our Haynesville Shale joint venture agreement with Plains Exploration & Production Company to provide Plains a one-time option in June 2010 to reduce its maximum drilling cost carry obligation by $800 million in exchange for assigning us, effective December 31, 2010, 50% of its interest in the Haynesville joint venture properties. Chesapeake believes Plains’ cost basis in the properties that would be assigned to us upon exercise of the option could approximate $1.5 billion to $1.6 billion by December 31, 2010. If Plains exercises this option and has funded more than $850 million of its drilling cost carry as of December 31, 2010, we will be required to pay to Plains an amount equal to such excess. We will not be required to refund to Plains any of the $1.65 billion in cash consideration paid in July 2008 or any portion of the first $850 million in drilling cost carries to be paid by Plains.

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19. Subsequent Events

On February 2, 2009, we completed a public offering of $1 billion aggregate principal amount of senior notes due 2015, which have
an interest rate of 9.5% per annum. The senior notes were priced at 95.071% of par to yield 10.625%. On February 17, 2009, we completed an offering of an additional $425 million aggregate principal amount of the 9.5% Senior Notes due 2015.
The additional senior notes were priced at 97.75% of par plus accrued interest from February 2 to February 17, 2009 to yield 10.0% per annum. Net proceeds of $1.343 billion from these two offerings were used to repay outstanding
indebtedness under our revolving bank credit facility, which we anticipate reborrowing from time to time to fund drilling and leasehold acquisition initiatives and for general corporate purposes.

11. Subsequent Events

On July 1, 2008, we entered into a joint venture with Plains Exploration & Production Company to develop our Haynesville Shale leasehold in Northwest Louisiana and East Texas. Under the terms of the joint venture, Plains acquired a 20% interest in our approximately 550,000 net acres of Haynesville Shale leasehold for $1.65 billion in cash, consisting of $1.375 billion paid on July 7, 2008 with the remainder to be paid by October 30, 2008, subject to normal post-closing adjustments. Plains has also agreed to fund 50% of our 80% share of the costs associated with drilling and completing future Haynesville Shale joint venture wells over a multi-year period, up to an additional $1.65 billion. In addition, Plains has the right to a 20% participation in any additional leasehold we acquire in the Haynesville Shale. We used approximately $1.1 billion of the proceeds from this transaction to temporarily repay outstanding indebtedness under our revolving bank credit facility and the balance to pay for leasehold acquisition and drilling costs in the Haynesville Shale play and for other general corporate purposes. Proceeds from the sale will be reflected as a reduction of natural gas and oil properties for accounting purposes, with no gain or loss recognized.

On July 7, 2008, we redeemed the outstanding principal amount of $300 million of our 7.75% Senior Notes due 2015 for $312 million. We will recognize a $31 million loss associated with this transaction in the third quarter of 2008.

On July 15, 2008, we completed a public offering of 28.75 million shares of common stock at $57.25 per share. Net proceeds of approximately $1.586 billion were used to repay outstanding borrowings under our revolving bank credit facility, which may be reborrowed to fund our drilling and leasehold acquisition initiatives and for other general corporate purposes.

On August 8, 2008, BP America Inc. acquired all of our interests in approximately 90,000 net acres of leasehold and producing natural gas properties in the Arkoma Basin Woodford Shale play for $1.75 billion in cash. The properties, which are located in Atoka, Coal, Hughes and Pittsburg counties, Oklahoma, are currently producing approximately 50 mmcfe per day.

Subsequent to June 30, 2008, a holder of our 4.5% cumulative convertible preferred stock exchanged 891,100 shares for 2,227,750 shares of common stock in a privately negotiated exchange. This will result in a $12 million loss on conversion of preferred stock in the third quarter of 2008.

Subsequent to June 30, 2008, holders of our 5.0% (Series 2005B) cumulative convertible preferred stock exchanged 935,885 shares for 2,662,940 shares of common stock in privately negotiated exchanges. This will result in a $13 million loss on conversion of preferred stock in the third quarter of 2008.

On August 1, 2008, we completed a volumetric production payment transaction with estimated proved reserves of approximately 93 bcfe and current net production (at the time of sale) of approximately 46 mmcfe per day from wells in the Anadarko Basin of Oklahoma. This transaction resulted in net proceeds to us of $600 million.

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11. Subsequent Events

On April 2, 2008, we completed a public offering of 23 million shares of common stock at $45.75 per share. Net proceeds of approximately $1.011 billion were used to repay outstanding borrowings under our revolving bank credit facility, which may be reborrowed to fund our recently announced drilling and land acquisition initiatives and for other general corporate purposes.

Subsequent to March 31, 2008, a holder of our 5.0% (Series 2005B) cumulative convertible preferred stock exchanged 1,689,300 shares for 4,845,266 shares of common stock in two privately negotiated exchanges.

On May 1, 2008, we sold certain Chesapeake-operated long-lived producing assets in Texas, Oklahoma and Kansas in a volumetric production payment transaction for proceeds of approximately $623 million. These assets had estimated proved reserves of approximately 94 bcfe and current net production of approximately 47 mmcfe

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

per day. Chesapeake retained drilling rights on the properties below currently producing intervals. For accounting purposes, the transaction will be treated as a sale and the company’s proved reserves will be reduced accordingly.

On May 1, 2008, we announced our intention to sell all of our Arkoma Basin Woodford Shale properties in Hughes, Pittsburg, Coal and Atoka counties in Oklahoma. The properties consist of approximately 85,000 net acres and 40 mmcfe per day of current production. We expect to receive proceeds of over $1.2 billion from the sale of the properties and anticipate completing a transaction in mid-2008.

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10. Subsequent Events

On October 23, 2007, we commenced offers to exchange common stock for any and all of the 4,600,000 outstanding shares of our 5% Cumulative Convertible Preferred Stock (Series 2005) and 2,300,000 outstanding shares of our 6.25% Mandatory Convertible Preferred Stock. The offers are scheduled to expire on November 20, 2007.

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10. Subsequent Events

On July 12, 2007, Chesapeake and Anadarko Petroleum Corporation jointly announced the completion of multiple agreements, including a joint venture involving Chesapeake and Anadarko assets in the Deep Haley area of the Delaware Basin in West Texas. Through the formation of a joint venture and other separate agreements, Chesapeake received various interests in Anadarko’s existing Deep Haley area production, leasehold and contractual rights as well as Oklahoma City real estate assets acquired by Anadarko in 2006 as part of its acquisition of Kerr-McGee Corporation. Through the formation of the joint venture and other separate agreements, Anadarko received approximately $310 million in cash and other consideration. Subsequently, Chesapeake and SandRidge Energy, Inc. jointly announced the execution of a transaction by which SandRidge acquired from Chesapeake certain downtown Oklahoma City real estate assets that Chesapeake acquired as a part of this transaction.

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10. Subsequent Events

On April 30, 2007, we announced that we entered into a letter of intent with Gastar Exploration Ltd. to acquire a portion of Gastar’s East Texas undeveloped leasehold for total consideration of approximately $92 million, including the purchase of 10 million newly issued Gastar common shares at a price of $2.00 per share. Following the transaction, Chesapeake would own a total of 42.2 million Gastar common shares, or approximately 20.5% of Gastar’s basic shares outstanding. This transaction is subject to another party’s right of first refusal.

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10. Subsequent Events

On July 11, 2006, we issued 3.75 million shares of common stock at $29.05 per share and 300,000 shares of our 6.25% mandatory convertible preferred stock upon the exercise of the underwriters’ options to purchase the additional shares pursuant to the June 2006 public offerings of our common stock and 6.25% preferred stock.

On July 27, 2006, we acquired a drilling contractor and affiliated trucking company in the Appalachian Basin for $70 million in cash.

On July 28, 2006, we acquired oil and natural gas properties and mid-stream natural gas systems from Four Sevens Oil Co., Ltd. and Sinclair Oil Corporation for $845 million in cash.

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9. Subsequent Events

On May 3, 2006, we announced offers to exchange common stock for any and all of our outstanding 86,310 shares of 4.125% Convertible Preferred Stock and 842,673 shares of 5.00% Convertible Preferred Stock (Series 2003). The offers are scheduled to expire on June 1, 2006.

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16. Subsequent Events

On January 17, 2006, we announced that we had entered into agreements with private companies to acquire oil and natural gas assets in the Barnett Shale, south Texas, Permian basin, Mid-Continent and East Texas regions for an aggregate purchase price of approximately $700 million in cash. We have recently closed transactions for approximately $640 million in cash and expect to close the remaining acquisition by March 31, 2006. The pending acquisition is subject to customary closing conditions and purchase price adjustments.

On January 5, 2006, we acquired a privately-held Oklahoma-based trucking company for $48 million.

On February 3, 2006, we amended and restated our revolving bank credit facility, increasing the commitments to $2 billion and extending the maturity date to February 2011.

In February 2006, through our wholly-owned subsidiary Nomac Drilling Corporation, we acquired 13 drilling rigs and related assets from Martex Drilling Company, L.L.P., a privately-held drilling contractor with operations in East Texas and North Louisiana, for $150 million.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On February 3, 2006, we issued an additional $500 million of our 6.5% Senior Notes due 2017, in a private placement. Net proceeds from the offering were approximately $486.6 and were used to repay outstanding borrowings under our revolving bank credit facility, incurred primarily to finance our recent acquisitions.

On February 10, 2006, we sold our investment in Pioneer Drilling Company (AMEX: PDC) common stock for proceeds of $159 million and a pre-tax gain of $116 million.

Our President and Chief Operating Officer, Tom L. Ward, resigned as a director, officer and employee of the company effective February 10, 2006. Mr. Ward has agreed to act as a consultant to Chesapeake for a period of six months from the effective date of his resignation, pursuant to a resignation agreement, to assist in the transition of his responsibilities. During the term of his consulting agreement, Mr. Ward will receive no cash compensation but will be provided support staff for personal administrative and accounting services together with access to the company’s fractional shares in aircraft in accordance with historical practices. The resignation agreement provides for the immediate vesting of all of Mr. Ward’s unvested stock options and restricted stock on February 10, 2006. As a result of such vesting, options to purchase 724,615 shares of Chesapeake’s common stock at an average exercise price of $8.01 per share and 1,291,875 shares of restricted common stock became immediately vested. As a result, the company expects to incur a non-cash after-tax charge of approximately $31.8 million in the first quarter 2006. Mr. Ward will have until May 10, 2006 to exercise the stock options granted to him by the company.

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9. Subsequent Events

On September 30, 2005, Chesapeake agreed to acquire Columbia Energy Resources, LLC and its subsidiaries, including Columbia Natural Resources, LLC, (CNR) for $2.2 billion in cash, subject to closing adjustments. Chesapeake will assume certain CNR liabilities, the final calculation of which is dependent upon natural gas prices on the day of the closing, among other things. CNR’s primary assets are Appalachian Basin proved natural gas reserves, unevaluated oil and gas leasehold interests and natural gas gathering systems. The closing is expected to occur by December 1, 2005. Chesapeake plans to finance the acquisition through proceeds from debt and equity offerings, borrowings under its revolving bank credit facility and, if needed, a bridge loan.

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8. Subsequent Events

On September 30, 2005, Chesapeake Energy Corporation and Triana Energy Holdings, LLC entered into a purchase agreement pursuant to which Chesapeake will acquire Columbia Energy Resources, LLC and its subsidiaries, including Columbia Natural Resources, LLC (CNR), for $2.2 billion in cash, the assumption of an estimated $75 million working capital deficit and liabilities related to CNR’s prepaid sales agreement and hedging positions.

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Columbia Energy Resources, LLC (a wholly owned

subsidiary of Triana Energy Holdings, LLC)

Notes to Consolidated Financial Statements (Unaudited)

The acquisition is conditioned upon, among other things, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. Either the buyer or the seller may terminate the purchase agreement if the closing has not occurred by December 31, 2005.

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