Chesapeake Energy Corporation Posts Strong Results for 2002; Oil and Gas Production and Proved Reserves Set Records
Company Reports Fourth Quarter 2002 Net Income Available to Common Shareholders of $24 Million, Discretionary Cash Flow of $125 Million and Ebitda of $157 Million on Revenue of $255 Million and Production of 50 Bcfe
Company Reports Full-Year 2002 Net Income Available to Common Shareholders of $30 Million, Discretionary Cash Flow of $410 Million and Ebitda of $521 Million on Revenue of $738 Million and Production of 181 Bcfe
PRNewswire-FirstCall
OKLAHOMA CITY

Chesapeake Energy Corporation today reported its financial and operating results for the fourth quarter of 2002 and for the full-year 2002. For the fourth quarter, Chesapeake generated net income available to common shareholders of $23.7 million ($0.13 per fully diluted common share), discretionary cash flow (defined as cash flow from operating activities before changes in assets and liabilities and certain non-cash items) of $125.4 million and ebitda (defined as discretionary cash flow plus interest expense) of $156.7 million on revenue of $255.4 million.

The company's fourth quarter 2002 net income available to common shareholders of $23.7 million included a $0.6 million after-tax risk management loss (a non-cash item related to the application of SFAS 133 to certain of the company's hedging contracts), a $7.4 million after-tax loss from the impairment of the company's investment in the securities of Seven Seas Petroleum, Inc. and a $0.8 million after-tax loss from the early extinguishment of certain Chesapeake debt securities. Without these items, Chesapeake's net income to common shareholders in the fourth quarter of 2002 would have been $32.5 million ($0.18 per fully diluted common share).

Production for the fourth quarter of 2002 was 49.5 billion cubic feet of natural gas equivalent (bcfe), comprised of 43.9 billion cubic feet of natural gas (bcf) (89%) and 0.94 million barrels of oil (mmbo) (11%). Oil and natural gas production increased 20% from the fourth quarter of 2001 and 6% compared to the third quarter of 2002. Approximately 9% of the 2.8 bcfe production increase in the 2002 fourth quarter was attributable to acquisitions closed during the fourth quarter. The fourth quarter of 2002 marked Chesapeake's sixth consecutive quarter of production growth compared to six consecutive quarters of production declines in the industry.

Average prices realized during the fourth quarter of 2002 after hedging were $24.67 per barrel of oil (bo) and $4.00 per thousand cubic feet of natural gas (mcf), for a realized gas equivalent price of $4.01 per thousand cubic feet of natural gas equivalent (mcfe). Hedging activities (excluding the effects of Risk Management Income or Loss) decreased fourth quarter 2002 oil price realizations by $2.3 million ($2.41 per bo) and increased fourth quarter 2002 gas price realizations by $14.2 million ($0.32 per mcf), for a total fourth quarter 2002 revenue increase from hedging activities of $11.9 million ($0.24 per mcfe).

The table below summarizes Chesapeake's key statistics during the 2002 fourth quarter and compares them to the 2002 third quarter and the 2001 fourth quarter:

                                                   Three Months Ended:
                                              12/31/02    9/30/02   12/31/01
  Average daily production (in mmcfe)           538        507        450
  Gas as % of total production                   89         89         88
  Natural gas production (in bcf)              43.9       41.4       36.5
  Average realized gas price ($/mcf)           4.00       3.39       3.88
  Oil production (in mbbls)                     941        872        807
  Average realized oil price ($/bbl)          24.67      25.67      24.07
  Natural gas equivalent production (in bcfe)  49.5       46.7       41.4
  Gas equivalent realized price ($/mcfe)       4.01       3.49       3.90
  General and administrative costs ($/mcfe)     .11        .08        .10
  Production taxes ($/mcfe)                     .21        .15        .04
  Lease operating expenses ($/mcfe)             .54        .53        .47
  Interest expense ($/mcfe)                     .63        .61        .61
  DD&A of oil and gas properties ($/mcfe)      1.28       1.25       1.16
  Discretionary cash flow ($ in millions)     125.4      102.0      112.7
  Discretionary cash flow ($/mcfe)             2.53       2.19       2.72
  Ebitda ($ in millions)                      156.7      130.4      138.0
  Ebitda ($/mcfe)                              3.17       2.79       3.34
  Net income to common
   shareholders  ($ in millions)               23.7       14.1       41.3


                Chesapeake Reports Full-Year 2002 Results

For the full-year 2002, Chesapeake generated net income available to common shareholders of $30.2 million ($0.17 per fully diluted common share), discretionary cash flow of $410.2 million and ebitda of $521.5 million on revenue of $737.8 million.

The company's 2002 net income available to common shareholders of $30.2 million included a $52.8 million after-tax risk management loss (a non-cash item related to the application of SFAS 133 to certain of the company's hedging contracts), a $10.3 million after-tax loss from the impairment of the company's investment in the securities of Seven Seas Petroleum, Inc. and a $1.6 million after-tax loss from the early extinguishment of certain Chesapeake debt securities. Without these items, Chesapeake's net income to common shareholders in 2002 would have been $94.9 million ($0.55 per fully diluted common share).

Production for the full year 2002 was 181.5 bcfe, comprised of 160.7 bcf and 3.47 mmbo. Oil and natural gas production increased 12% from 2001, marking Chesapeake's 11th consecutive year of production growth. Average prices realized during 2002 after hedging were $25.22 per bo and $3.54 per mcf, for a realized gas equivalent price of $3.61 per mcfe. Hedging activities (excluding the effects of Risk Management Income or Loss) decreased 2002 oil price realizations by $1.1 million ($0.32 per bo) and increased 2002 gas price realizations by $97.1 million ($0.61 per mcf), for a total 2002 revenue increase from hedging activities of $96.0 million ($0.53 per mcfe).

The table below summarizes Chesapeake's key statistics during 2002 and compares them to the two prior years' results:

                                                        Year Ended:
                                              12/31/02   12/31/01   12/31/00
  Average daily production (in mmcfe)           497        442        367
  Gas as % of total production                   89         89         86
  Natural gas production (in bcf)             160.7      144.2      115.8
  Average realized gas price ($/mcf)           3.54       4.56       3.36
  Oil production (in mbbls)                   3,466      2,880      3,068
  Average realized oil price ($/bbl)          25.22      26.92      26.39
  Natural gas equivalent production (in bcfe) 181.5      161.5      134.2
  Gas equivalent realized price ($/mcfe)       3.61       4.56       3.50
  General and administrative costs ($/mcfe)     .10        .09        .10
  Production taxes ($/mcfe)                     .17        .20        .19
  Lease operating expenses ($/mcfe)             .54        .47        .37
  Interest expense ($/mcfe)                     .61        .61        .64
  DD&A of oil and gas properties ($/mcfe)      1.22       1.07        .75
  Discretionary cash flow ($ in millions)     410.2      521.6      304.9
  Discretionary cash flow ($/mcfe)             2.26       3.23       2.27
  Ebitda ($ in millions)                      521.5      619.9      391.2
  Ebitda ($/mcfe)                              2.87       3.84       2.92
  Net income to common
   shareholders  ($ in millions)               30.2      215.4      453.7*

   *Includes $265.0 million related to the reversal of a deferred tax
    valuation allowance recorded in the fourth quarter of 2000.

Chesapeake Reports Excellent 2002 Finding Costs and Reserve Replacement Ratio;

Reaches Record Level of Proved Oil and Natural Gas Reserves

Chesapeake began 2002 with estimated proved reserves of 1,780 bcfe and ended the year with 2,205 bcfe, an increase of 425 bcfe, or 24%. Reserve replacement during the year was 606 bcfe, or 335%, at an all-in finding cost of $1.31 per mcfe. Reserve additions through acquisitions totaled 275 bcfe at a cost of $1.38 per mcfe (including $0.23 per mcfe from non-cash tax basis step-ups). Reserve additions through drilling (including price and performance revisions) were 333 bcfe at a cost of $1.21 per mcfe, for a reserve replacement ratio of 183%. Excluding revisions related to higher oil and gas prices, Chesapeake's 2002 finding costs through the drillbit were $1.57 per mcfe. Pro forma for the ONEOK acquisition, which closed on January 31, 2003, the company's proved reserves at year-end 2002 were 2,401 bcfe.

Of the company's estimated proved reserves at year-end 2002, 74% were proved developed compared to 71% last year. In addition, 73% of this year's estimated proved reserves were prepared by outside engineers compared to 71% last year.

As of December 31, 2002, the company's estimated future net cash flows discounted at 10% before taxes (PV-10) were $3.72 billion using field differential adjusted prices of $30.18 per bo (from $31.25 NYMEX) and $4.28 per mcf (from $4.60 NYMEX). Last year's PV-10 was $1.65 billion using field differential adjusted prices of $18.82 per bo (from $19.84 NYMEX) and $2.51 per mcf (from $2.74 NYMEX).

Full Year 2003 Forecasts And Cap-Ex Budget

Chesapeake's revised forecasts and estimates will be released tomorrow morning in a new Outlook dated February 25, 2003.

Management Summary

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "Despite a 21% decrease in realized oil and gas prices in 2002 compared to 2001, Chesapeake posted very strong operational and financial results for the year. Our success in 2002 resulted from a series of key management decisions made during the past four years that have positioned the company to be a prime beneficiary of today's supply-constrained energy environment. These decisions involved product strategy (we favor gas over oil), geographic strategy (our focus on the Mid-Continent provides significant economies of scale and high returns on investment), business strategy (we are adept at both drilling for new reserves and acquiring existing reserves) and risk management strategy (our hedging results have been among the best in the industry).

The impact of these decisions is strongly reflected in our 2002 results and also in our four-year results from year-end 1998 through 2002. During this period, Chesapeake believes its track record of value-added growth has been one of the best in the independent exploration and production business:

  -- Production increased from 130 bcfe in 1998 to 181 bcfe in 2002,
     a compound annual growth rate (CAGR) of  9%;
  -- Proved reserves increased from 1,091 bcfe in 1998 to 2,205 bcfe in
     2002, a CAGR of  19%;
  -- Reserves were replaced at the average annual rate of 282% and finding
     costs averaged only $1.04 per mcfe while adding 1,936 bcfe through
     acquisitions and drilling;
  -- Ebitda increased from $183 million in 1998 to $521 million in 2002 and
     discretionary cash flow grew from $115 million in 1998 to $410 million
     in 2002, CAGRs of 30% and 37%, respectively;
  -- Net income available to common shareholders during the four-year period
     totaled $716 million and shareholders' equity increased by
     $1.2 billion; and
  -- Gains from hedging from 1998 to 2002 have exceeded $180 million and the
     company's 2003 hedges have also captured historically high oil and
     natural gas prices.

During these four years of exceptional achievement, Chesapeake has become the largest producer of natural gas in the Mid-Continent, among the eight largest independent gas producers in the U.S. and one of the most profitable producers of natural gas in the industry per unit of production. We believe the combination of our successful product and geographic strategies, our value-added risk management strategy, our balanced acquisition and drilling programs, our high quality assets and our low operating costs will enable Chesapeake to continue delivering one of the industry's best track records of value creation in the years to come."

Conference Call Information

Chesapeake's management invites your participation in a conference call tomorrow morning, February 25, at 9:00 a.m. EST to discuss the contents of this release. Please call 913-981-5533 between 8:50 and 9:00 a.m. EST on February 25 if you would like to participate in the call. For those unable to participate in the call, a replay will be available by calling 719-457-0820 between 12:00 p.m. EST on Tuesday, February 25 through midnight on Monday, March 10. The passcode for the replay is 720863. The conference call will also be simulcast live on the Internet and can be accessed by visiting Chesapeake's website at www.chkenergy.com and selecting "Conference Call" under the "Investor Relations" link.

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include estimates and give our current expectations or forecasts of future events. They are based on our historical operating trends, our existing commodity hedging position and our current estimate of proved reserves. Although we believe our forward-looking statements are reasonable, they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. For example, statements concerning the fair values of derivative contracts and their estimated contribution to our future results of operations are based upon market information as of a specific date. These market prices are subject to significant volatility. Factors that could cause actual operating and financial results to differ materially from expected results include the volatility of oil and gas prices, our substantial indebtedness, our commodity price risk management activities, the cost and availability of drilling and production services, our ability to replace reserves, the availability of capital, uncertainties inherent in evaluating our own reserves and the reserves we acquire, drilling and operating risks and other risk factors described in the company's 2002 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission.

Chesapeake Energy Corporation is one of 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 www.chkenergy.com .

                      CHESAPEAKE ENERGY CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                   ($ in 000's, except per share data)
                               (unaudited)

  THREE MONTHS ENDED:                        December 31,     December 31,
                                                2002             2001
                                             $      $/mcfe    $      $/mcfe
  REVENUES:
    Oil and gas sales                      198,462   4.01   161,339   3.90
    Risk management income (loss)           (1,023) (0.02)   (9,926) (0.24)
    Oil and gas marketing sales             57,981   1.17    25,662   0.62
      Total revenues                       255,420   5.16   177,075   4.28
  OPERATING COSTS:
    Production expenses                     26,939   0.55    19,441   0.47
    Production taxes                        10,167   0.21     1,661   0.04
    General and administrative               5,688   0.11     4,335   0.10
    Oil and gas marketing expenses          56,900   1.15    25,036   0.61
    Depreciation, depletion,
     and amortization of oil
     and gas properties                     63,458   1.28    47,998   1.16
    Depreciation and amortization
     of other assets                         3,520   0.07     2,709   0.06
      Total operating costs                166,672   3.37   101,180   2.44

  INCOME FROM OPERATIONS                    88,748   1.79    75,895   1.84

  OTHER INCOME (EXPENSE):
    Interest and other income                   (3) (0.00)    1,493   0.03
    Interest expense                       (31,314) (0.63)  (25,344) (0.61)
    Loss on investment in Seven Seas       (12,431) (0.25)      ---    ---
    Impairment of investment in securities     ---    ---   (10,079) (0.24)
    Gain on sale of Canadian subsidiary        ---    ---    27,000   0.65
    Loss on early extinguishment of debt    (1,273) (0.03)      ---    ---
      Total other income (expense)         (45,021) (0.91)   (6,930) (0.17)

  Income Before Income Taxes                43,727   0.88    68,965   1.67
  Income Tax Expense                        17,488   0.35    26,340   0.64

  NET INCOME                                26,239   0.53    42,625   1.03

  Preferred Stock Dividends                 (2,529) (0.05)   (1,322) (0.03)

  NET INCOME AVAILABLE
   TO COMMON SHAREHOLDERS                   23,710   0.48    41,303   1.00


  EARNINGS PER COMMON SHARE:

    Basic                                  $  0.14          $  0.25

    Assuming dilution                      $  0.13          $  0.23

  WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING:

    Basic                                  170,118          164,616

    Assuming dilution                      195,733          182,725


                      CHESAPEAKE ENERGY CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                   ($ in 000's, except per share data)
                               (unaudited)

  TWELVE MONTHS ENDED:                       December 31,     December 31,
                                                2002             2001
                                             $      $/mcfe    $      $/mcfe
  REVENUES:
    Oil and gas sales                      655,454   3.61   735,529   4.56
    Risk management income (loss)          (88,018) (0.48)   84,789   0.52
    Oil and gas marketing sales            170,315   0.94   148,733   0.92
      Total revenues                       737,751   4.07   969,051   6.00
  OPERATING COSTS:
    Production expenses                     98,191   0.54    75,374   0.47
    Production taxes                        30,101   0.17    33,010   0.20
    General and administrative              17,618   0.10    14,449   0.09
    Oil and gas marketing expenses         165,736   0.91   144,373   0.89
    Depreciation, depletion,
     and amortization of oil
     and gas properties                    221,189   1.22   172,902   1.07
    Depreciation and amortization
     of other assets                        14,009   0.08     8,663   0.06
      Total operating costs                546,844   3.02   448,771   2.78

  INCOME FROM OPERATIONS                   190,907   1.05   520,280   3.22

  OTHER INCOME (EXPENSE):
    Interest and other income                7,340   0.04     2,877   0.02
    Interest expense                      (111,280) (0.61)  (98,321) (0.61)
    Loss on investment in Seven Seas       (17,201) (0.10)      ---    ---
    Impairment of investment in securities     ---    ---   (10,079) (0.06)
    Gain on sale of Canadian subsidiary        ---    ---    27,000   0.17
    Loss on early extinguishment of debt    (2,626) (0.01)      ---    ---
    Gothic standby credit facility costs       ---    ---    (3,392) (0.02)
      Total other income (expense)        (123,767) (0.68)  (81,915) (0.50)

  Income Before Income Taxes
   and Extraordinary Item                   67,140   0.37   438,365   2.72
  Income Tax Expense                        26,854   0.15   174,959   1.09

  NET INCOME BEFORE EXTRAORDINARY ITEM      40,286   0.22   263,406   1.63

  EXTRAORDINARY ITEM:
    Loss on early extinguishment
     of debt, net of applicable income tax     ---    ---   (46,000) (0.28)

  NET INCOME                                40,286   0.22   217,406   1.35

  Preferred Stock Dividends                (10,117) (0.05)   (2,050) (0.02)

  NET INCOME AVAILABLE
   TO COMMON SHAREHOLDERS                   30,169   0.17   215,356   1.33

  EARNINGS PER COMMON SHARE:

    Basic                                  $  0.18          $  1.33

    Assuming dilution                      $  0.17          $  1.25

  WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING

    Basic                                  166,910          162,362

    Assuming dilution (A)                  172,714          173,981

   (A) Diluted shares outstanding for the twelve months ended December 31,
       2002 does not include the effect of the assumed conversion at the
       beginning of the period of the outstanding or converted preferred
       stock, as the effect was antidilutive.


                      CHESAPEAKE ENERGY CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in 000's)
                               (unaudited)

                                                 December 31,   December 31,
                                                      2002           2001

  Cash and cash equivalents                      $   247,719     $  124,960
  Other current assets                               187,598        236,423
    TOTAL CURRENT ASSETS                             435,317        361,383

  Property and equipment (net)                     2,389,884      1,785,581
  Deferred tax asset                                   2,071         67,781
  Other assets                                        48,336         72,023
    TOTAL ASSETS                                 $ 2,875,608     $2,286,768

  Current liabilities                            $   265,552     $  173,381
  Long term debt                                   1,651,198      1,329,453
  Revenue and royalties due others                    13,797         12,696
  Long term derivative instruments                    30,174            ---
  Other long term liabilities                          7,012          3,831
    TOTAL LIABILITIES                              1,967,733      1,519,361

  STOCKHOLDERS' EQUITY                               907,875        767,407

  TOTAL LIABILITIES & STOCKHOLDERS' EQUITY       $ 2,875,608     $2,286,768

  COMMON SHARES OUTSTANDING                          190,144        164,742


                      CHESAPEAKE ENERGY CORPORATION
               RECONCILIATION OF CERTAIN FINANCIAL MEASURES
                                (in 000's)
                               (unaudited)

  FOR THE TWELVE MONTHS ENDED DECEMBER 31,  2002        2001       2000

  CASH PROVIDED BY OPERATING ACTIVITIES  $ 432,531   $ 553,737   $ 314,640

  Adjustments:
    Changes in assets and liabilities      (20,014)    (35,174)     (8,836)
    Miscellaneous non-cash items            (2,334)      3,049        (870)

  DISCRETIONARY CASH FLOW                  410,183     521,612     304,934

  Interest Expense                         111,280      98,321      86,256

  EBITDA                                 $ 521,463   $ 619,933   $ 391,190


  FOR THE THREE MONTHS ENDED DECEMBER 31,   2002        2001       2000

  CASH PROVIDED BY OPERATING ACTIVITIES  $  78,873   $ 112,781   $ 139,926

  Adjustments:
    Changes in assets and liabilities       49,345      (1,402)    (25,075)
    Miscellaneous non-cash items            (2,786)      1,298        (459)

  DISCRETIONARY CASH FLOW                  125,432     112,677     114,392

  Interest Expense                          31,314      25,344      21,899

  EBITDA                                 $ 156,746   $ 138,021   $ 136,291

SOURCE: Chesapeake Energy Corporation

CONTACT: Marc Rowland, Executive Vice President and Chief Financial
Officer, +1-405-879-9232, or Tom Price, Jr., Senior Vice President Corporate
Development, +1-405-879-9257, both of Chesapeake Energy Corporation