Chesapeake EnergyShale Operations Overview

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Chesapeake Energy Overview

Founded in 1989Headquartered in Oklahoma City, OK

Offices regionally located in Charleston, WV, Jane Lew, WV, Mt. Morris, PA, Canonsburg, PA, Harrisburg, PA, and Towanda, PA

Exclusive U.S. onshore focusOne of the nation’s largest natural gas producers

1Q ‘10 natural gas production of 2.328bcf/d

Nation’s most active explorer 1993-2010Nation’s most active horizontal driller 1993-2010Exceptional drilling success rate – 98%

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Chesapeake Energy Overview

Most active driller in U.S. 1993-2010133 operated rigs currently

―26 rigs currently drilling in the Marcellus Shale area

CHK responsible for 1 of 8 new gas wells being drilled in U.S.

Consistent production growth20th consecutive year of sequential production growth

Unparalleled inventory of U.S. onshore leasehold and 3-D seismic

Lower risk of suboptimal return on capitalHigher production rates

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Chesapeake Energy Overview

Only producer with #1 or #2 position in “Big-4” U.S. shale plays

#1 in Marcellus Shale; 1,550,000 net acres#1 in Haynesville Shale; 530,000 net acres#2 in Fayetteville Shale; 465,000 net acres#2 in Barnett Shale; 220,000 net acres

Advantageous joint venture arrangementsStatoilHydro, Total, BP, Plains Exploration and Production Company

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Chesapeake’s Key Operating Areas

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Characteristics of Shale Formations

Found in organic-rich sedimentary rocks (shales) that were originally deposited as muds within tidal flats and deep water basins

Shale formations can be found 1 mile or more underground

Dense rock with low permeability

Typically requires a combination of horizontal drilling and hydraulic fracturing for the natural resources to be recovered in economic quantities

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The Production Process

Five basic steps:

1. Site selection and well pad preparation2. Drilling the well3. Completing the well4. Marketing the resources5. Reclaiming the site

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Site Selection

A number of factors are considered in selecting a drilling site:

Favorable geologyTopographyAccess RoadsRoutes for pipelines and utilitiesProximity to schools or residential areasEnvironmental factors such as wetlands and sensitive wildlife habitatAvailable water source(s)

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Well Pad Preparation

Well pads can be located in rural or urban areasPad preparation requires approximately 4-6 weeksTypical horizontal well pad requires 3-5 acres to construct

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Advanced Drilling Technologies Reduce Surface Footprint

Vertical drilling patterns required:

Up to 16 well pads needed to recover the natural resources from 640 acresMultiple roads with pipelines and utilities required to access the wellsTotal surface disturbance was ~45 acres

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Extraordinary Technology Advances Extract Natural Gas More Effectively

Horizontal drilling substantially reduces surface footprint

6-8 horizontal wells anticipated drilled from each 3-5 acre padOnly one road with pipeline and utilities to well padApproximately 85% less surface disturbance than from with vertical wells

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Drilling the Well Using Today’s New Technology

Wells are drilled and constructed to recover the natural resources while protecting the environment and providing for the safety of workers and area residents

Drilling is a 24/7 operationReduces rig time on location

The drilling phase is a temporary operation, typically lasting 3-4 weeks per wellboreChesapeake Energy utilizes a “closed-loop” drilling system

All drilling materials are containedNo materials collected in earthen pits

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Drilling the Well-Groundwater Protection

4 or more layers of protection are installed in the well to isolate the well from the surrounding strata and protect groundwater supplies and the environment

Multiple layers of steel casing and cement are utilizedCasing set in place below freshwater aquifer zone

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Using Horizontal Wells

Computer-driven, state-of-the-art technology allows for horizontal drilling

Horizontal drilling allows for access to a greater volume of the shale resource reservoir

Access to a greater volume of the reservoir makes shale resource development economical

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Well Completion

After the drilling rig is removed, hydraulic fracturing (“fracing”) beginsFracing is a process to stimulate natural resource production from the hard shaleImpoundments, if necessary, hold freshwater onlyWater is mixed with proppant (such as sand) and pumped into the shalereservoir under pressure• 99.5% of fracturing fluid is made up of

water and sand

Generally takes several days per wellbore

For more information on hydraulic fracturing, please visit AskChesapeake.com

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Aqua Renew Program

ProcessCurrently recycling/reusing nearly 100% of water used during the production process

BenefitsReduces or eliminates need for water to be sent offsite for disposalReduces required water supplies Reduces truck traffic, lowers impact on roads, noise, and airReduces the cost of operations

For more information on the Aqua Renew program please visit AskChesapeake.com

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Marketing /Reclaiming the Site

Gas and liquids are separated by the “separator”

Pipeline carries natural resources to market

Produced water is retained on location

in tanks until removed via truck

Site is reclaimed and landscaped

Site is reduced to approximately 1 acre

Small access road will be retained

Company returns regularly

Maintain equipment/monitor production rate

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Who Shares In The Revenue?

Mineral OwnersBonuses and royalties

Local WorkersWages and benefits

Local BusinessSubcontractors and service companies

Counties, Cities, School DistrictsAd valorem and other taxes

Other StakeholdersCharitable organizationsChesapeake shareholders

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Why Lease With Chesapeake Energy?

Most experience shale operator in the U.S.21-year track record of production increasesBest management practices utilized throughout drilling and completion processFinancial strength through joint ventures in multiple operating areas

Total, StatoilHydro, BP, Plains Exploration and Production Company

Advanced technological capabilities translate into higher production rates and reserve recoveries

Unparalleled inventory of onshore U.S. 3-D seismic dataIn-house geology core lab

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Questions?

For more information:

Mike D. Mullermichael.muller@chk.com405.833.9115

Information provided is subject to change based on multiple factors.