Chesapeake Energy Corporation Announces Updated 2001-2002 Forecasts And Revised 2001-2002 Gas Hedging Program
PRNewswire
OKLAHOMA CITY

The following was released today by Chesapeake Energy Corporation:

Chesapeake Energy Corporation today announced that as a result of pricing an $800 million offering of 8.125% senior notes due 2011 and entering into additional natural gas hedges for 2001 and 2002, the company has updated its forecasts and estimates for both years. The attached three-page exhibit has been filed on Form 8-K with the SEC and has been posted on our website at www.chkenergy.com.

Chesapeake's forecasts and estimates are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to the risks and uncertainties identified at the end of this release. Furthermore, these projections do not reflect the potential impact of unforeseen events that may occur subsequent to the issuance of this release.

Chesapeake's 2001 guidance is based on currently projected capital expenditures of $310 million for drilling, leasehold, and seismic expenditures and $140 million for acquisitions and investments. The company is using mid- point projections for 2001 production estimates of 175 bcfe (90% gas) and per mcfe lease operating expenses of $0.40, production taxes of $0.35, interest costs of $0.58, general and administrative costs of $0.10 and DD&A of oil and gas properties of $1.03. In addition, Chesapeake expects its tax rate to average 40%, of which at least 95% should be deferred.

If the forecasted targets described above are achieved and if NYMEX oil and gas prices average $25.43 per bo and $5.61 per mcf in 2001 (for a realized per mcfe price of $4.94 per mcfe), Chesapeake expects to generate ebitda of $725 million, operating cash flow of $625 million and recurring net income of $275 million in 2001. The company's net income estimate does not include the effect of an estimated $44 million after-tax charge expected in the second quarter for the early extinguishment of debt.

The company's 2001 gas price projection of $5.61 per mcf is based on actual NYMEX index prices of $9.91 for January, $6.22 for February, $5.03 for March, and $5.35 for April, and an average of $5.09 for the remaining 8 months of 2001. For the next 8 months, Chesapeake has hedged approximately 57% of its projected gas production via swaps at an average price of $5.20 per mcf and collars at prices ranging from $4.00 to $6.26. Chesapeake has also hedged approximately 63% of its expected oil production for the next 8 months at an average NYMEX price of $29.66. In addition, the company has also protected approximately 39% of its estimated annual 2002 natural gas production via swaps at an average of $5.09 per mcf and collars at prices ranging from $4.00 to $5.75 per mcf.

Management Summary

Aubrey K. McClendon, Chesapeake's Chairman and Chief Executive Officer, stated, "Last week's $800 million debt offering was a momentous event for our company. Our shareholders will greatly benefit from the offering because resulting interest expense should decline by $15 million per year and average debt maturities have been extended to almost 10 years. Our proactive and conservative management of our balance sheet and income statement through the debt offering and hedging activities should create substantial shareholder value in the years to come."

The information in this release includes certain forward-looking statements that are based on assumptions that in the future may prove not to have been accurate. Those statements, and Chesapeake Energy Corporation's business and prospects, are subject to a number of risks, including production variances from expectations, uncertainties about estimates of reserves, volatility of oil and gas prices, the need to develop and replace reserves, the substantial capital expenditures required to fund operations, environmental risks, drilling and operating risks, risks related to exploratory and developmental drilling, competition, government regulation, and the ability of the company to implement its business strategy. These and other risks are described in the company's documents and reports that are available from the United States Securities and Exchange Commission, including those discussed under Risk Factors in the report filed on Form 10-K for the year ended December 31, 2000.

Chesapeake Energy Corporation is among the 10 largest independent natural gas producers in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent region of the United States. The company's Internet address is http://www.chkenergy.com/.

                      CHESAPEAKE ENERGY CORPORATION

                                 OUTLOOK

                              April 2, 2001

Quarters Ending March 31 and June 30, 2001; Years Ending December 31, 2001 and 2002.

We have adopted a policy of providing investors with guidance on certain factors that affect our future financial performance. As of April 2, 2001, we are using the following key operating assumptions in our projections for the first two quarters of 2001 and full years 2001 and 2002. The key operating assumptions for 2001 include the completion of the merger with Gothic Energy Corporation which occurred on January 16, 2001.

                    Quarter      Quarter         Year              Year
                    Ending        Ending        Ending            Ending
                   March 31,     June 30,      Dec. 31,          Dec. 31,
                     2001          2001          2001              2002

  Estimated
   Production
    Oil - Mbo       600-675      700-750     2,750-3,250       3,000-3,500
    Gas - Bcf        35-36        37-39        154-160           162-168
    Gas
     Equivalent-
     Bcfe           38.5-40       41-43        170-180           183-187
  Estimated NYMEX
   Prices
    Oil - $/Bo      $28.73        $25.00        $25.43            $23.00
    Gas - $/Mcf      $7.05        $5.12         $5.61             $4.19
  Estimated
   Differentials
   to NYMEX Prices
    Oil - $/Bo      -$0.80        -$0.80        -$0.80            -$0.75
    Gas - $/Mcf     -$0.31        -$0.34        -$0.32            -$0.29
  Estimated Hedging
   Effects
   (based on expected
   NYMEX prices above)
    Oil - $/Bo      +$0.90        +$3.24        +$2.81            +$0.00
    Gas - $/Mcf     -$0.80        -$0.23        -$0.25            +$0.28
  Estimated Realized
   Prices (includes
   hedging)
    Oil - $/Bo      $28.91        $27.44        $27.29            $22.25
    Gas - $/Mcf      $5.87        $4.54         $4.98             $4.18
    Gas Equivalent
     - $/Mcfe        $5.77        $4.55         $4.94             $4.13
  Operating Costs
   per Mcfe
    Production
     expense      $0.38-0.42    $0.36-0.40    $0.36-0.40        $0.40-0.45
    Production
     taxes (6.5%
     of O&G
     revenues)    $0.38-0.42    $0.28-0.32    $0.32-0.35        $0.23-0.27
    General and
     admin.       $0.09-0.11    $0.09-0.11    $0.10-0.11        $0.09-0.11
    DD&A - oil
     and gas      $0.90-0.93    $0.96-0.99    $1.00-1.06        $1.08-1.12
    Depreciation of
     other assets $0.05-0.06    $0.05-0.06    $0.05-0.06        $0.05-0.06
    Interest
     expense      $0.66-0.70    $0.68-0.72    $0.56-0.60        $0.45-0.49
  Other Income and
   expense per
   mcfe(B)(C)
    Marketing gross
     profit       $0.02-0.04    $0.02-0.04    $0.02-0.04        $0.02-0.04
    Other income  $0.01-0.03    $0.01-0.03    $0.01-0.05        $0.01-0.05
  Book Tax Rate
   - primarily
   deferred         35-40%        35-40%        35-40%            35-40%
  Equivalent shares
   outstanding
    Basic          155,000 m    159,000 m     159,000 m         163,000 m
    Diluted        168,000 m    169,000 m     169,000 m         171,000 m
  Capital
   Expenditures:
    Drilling       $79,000 m    $84,000 m     $300,000 -        $315,000 -
                                              $325,000 m        $345,000 m
  Sensitivity to
   price change
   - for each
   $1.00/bbl
    PV 10%         $15 mm(A)    $15 mm(A)     $15 mm(A)         $15 mm(A)
    Cash flow from
     operations   $0.7 mm(A)    $0.7 mm(A) $2.5-$3.0 mm(A)  $2.5-$3.0 mm(A)
  Sensitivity to
   price change
   - for each
   $0.10/mcf
    PV 10%          $72 mm        $72 mm        $72 mm            $72 mm
    Cash flow from
     operations     $4.0 mm      $4.0 mm      $15-$16 mm        $15-$16 mm

  A)  Current reserves inclusive of Gothic reserves.
  B)  Does not include non-recurring charges of an estimated $3.4 million
      (pre-tax) related to the Gothic acquisition in quarter ended 3/31/01.
  C)  Does not include an anticipated extraordinary charge of $44 mm (after-
      tax) related to early debt extinguishment in quarter ended 6/30/01.

  Commodity Hedging Activities

Periodically the Company utilizes hedging strategies to hedge the price of a portion of its future oil and gas production. These strategies include:

   (i)   swap arrangements that establish an index-related price above
         which the Company pays the counterparty and below which the
         Company is paid by the counterparty,
   (ii)  the purchase of index-related puts that provide for a "floor"
         price below which the counterparty pays the Company the amount by
         which the price of the commodity is below the contracted floor,
   (iii) the sale of index-related calls that provide for a "ceiling" price
         above which the Company pays the counterparty the amount by which
         the price of the commodity is above the contracted ceiling,
   (iv)  basis protection swaps, which are arrangements that guarantee the
         price differential of oil or gas from a specified delivery point
         or points, and
   (v)   collar arrangements that establish an index-related price below
         which the counterparty pays the Company and a separate index-
         related price above which the Company pays the counterparty.

Commodity markets are volatile, and as a result, Chesapeake's hedging activity is dynamic. As market conditions warrant, the Company may elect to settle a hedging transaction prior to its scheduled maturity date and, as a result, realize a gain or loss on the transaction.

Results from commodity hedging transactions are reflected in oil and gas sales to the extent related to the Company's oil and gas production. The Company only enters into commodity hedging transactions related to the Company's oil and gas production volumes or CEMI's physical purchase or sale commitments. Gains or losses on crude oil and natural gas hedging transactions are recognized as price adjustments in the months of related production.

The Company has entered into the following "no-cost" natural gas collar transactions:

                                    Estimated   NYMEX-Index   NYMEX-Index
                       Monthly        % of      Floor Price  Ceiling Price
                    Volume (mmbtu) Production   (per mmbtu)   (per mmbtu)
  2001
  April               1,800,000        14%        $4.00         $6.08
  May                 1,860,000        14%         4.00          6.08
  June                2,400,000        19%         4.25          6.26
  July                2,480,000        19%         4.25          6.26
  August              2,480,000        19%         4.25          6.26
  September           2,400,000        18%         4.25          6.26
  October             1,860,000        13%         4.00          6.08
  November            1,800,000        13%         4.00          6.08
  December            1,860,000        13%         4.00          6.08
  Totals/Averages    18,940,000        16%        $4.13         $6.17

  2002
  January               620,000         5%        $4.00         $5.75
  February              560,000         5%         4.00          5.75
  March                 620,000         4%         4.00          5.75
  April               1,200,000         9%         4.00          5.38
  May                 1,240,000         9%         4.00          5.38
  June                1,200,000         9%         4.00          5.38
  July                1,240,000         9%         4.00          5.38
  August              1,240,000         9%         4.00          5.38
  September           1,200,000         9%         4.00          5.38
  October             1,240,000         9%         4.00          5.38
  November              600,000         5%         4.00          5.75
  December              620,000         4%         4.00          5.75
  Totals/Averages    11,580,000         7%        $4.00         $5.47


   The Company has entered into the following natural gas swap arrangements:

                                                                NYMEX-
                                Monthly         Estimated       Index
                       Months    Volume            % of      Strike Price
                                (MMBtu)         Production   (per MMBtu)

  January 2001                  4,960,000          40%          $6.03
  February 2001                 5,320,000          49%           6.12
  March 2001                    4,650,000          36%           5.11
  April 2001                    5,400,000          43%           4.84
  May 2001                      8,060,000          61%           4.97
  June 2001                     6,600,000          52%           5.04
  July 2001                     6,820,000          51%           5.05
  August 2001                   6,820,000          51%           5.05
  September 2001                6,600,000          50%           5.02
  October 2001                  3,720,000          26%           4.76
  November 2001                 2,400,000          17%           6.00
  December 2001                 2,480,000          17%           6.10
  January 2002 (A)              2,790,000          20%           6.03
  February 2002 (A)             2,520,000          20%           5.82
  March 2002 (A)                2,790,000          20%           5.48
  April 2002 (A)                5,700,000          42%           4.85
  May 2002 (A)                  5,890,000          42%           4.81
  June 2002 (A)                 5,700,000          42%           4.80
  July 2002 (A)                 5,890,000          42%           4.81
  August 2002 (A)               5,890,000          42%           4.81
  September 2002 (A)            5,700,000          42%           4.81
  October 2002 (A)              5,890,000          42%           4.80
  November 2002 (A)             2,100,000          16%           4.97
  December 2002 (A)             2,170,000          15%           5.06
  Totals/Averages
   (2001 & 2002 combined)     116,860,000          36%           5.21

  (A)  Cap swap - limits payment by counter party to $1.00-$1.50/mmbtu.

The Company has entered into crude oil swap arrangements designed to hedge 5,000 barrels per day at a NYMEX Index strike price of $29.76 per barrel in January through December 2001, and 10,000 barrels per month at an average price of $29.12 per barrel.

SOURCE: Chesapeake Energy Corporation

Contact: Marc Rowland, Executive Vice President and Chief Financial
Officer, 405-879-9232, or Tom Price, Jr., Senior Vice President, Corporate
Development, 405-879-9257, both of Chesapeake Energy Corporation

Company News On-Call: http://www.prnewswire.com/comp/138877.html or fax,
800-758-5804, ext. 138877