Chesapeake Energy Corporation Announces $220 Million of Mid-Continent Natural Gas Acquisitions, Increased 2003 Production Forecast, Initial 2004 Production Forecast and Additions to Hedging Positions
Transactions With Oxley Petroleum and Others Further Strengthen Chesapeake's Positions in the Anadarko and Arkoma Basins of the Mid-Continent Region
PRNewswire-FirstCall
OKLAHOMA CITY

Chesapeake Energy Corporation today announced the acquisition of $220 million of Mid-Continent gas assets through its recent acquisition of privately-owned Oxley Petroleum Company and several other recently completed and pending smaller acquisitions. In these transactions, Chesapeake has acquired or agreed to acquire an internally estimated 135 billion cubic feet of gas equivalent proved reserves (bcfe) for $220 million. After allocating $40 million of this purchase price to gas plants, gas gathering systems and unevaluated leasehold, Chesapeake's acquisition cost per mcfe of proved reserves is $1.33.

Current production from the acquired properties is approximately 35 million cubic feet of natural gas equivalent production (mmcfe) per day and the proved reserves have a reserves-to-production index of 10.6 years, are 99% natural gas and are 75% proved developed. Initial lease operating expenses on the acquired properties are expected to average $0.45 per thousand cubic feet of gas equivalent (mcfe), compared to $0.54 per mcfe for Chesapeake during 2002 and approximately $0.70 per mcfe for the company's peer group during 2002.

The Oxley acquisition closed on May 30, 2003 and the other transactions have closed in recent months or will close before July 31, 2003. The company intends to finance the acquisitions using cash on hand and short-term borrowings from its $350 million bank credit facility.

Background Information on Oxley Petroleum Company

Oxley Petroleum was founded in Tulsa in 1962 by John C. Oxley and has been managed in recent years by Stephen M. "Mike" Oxley. Over the past 41 years, the Oxley family built one of the premier privately-owned natural gas companies in Oklahoma. Oxley's primary focus was the Arkoma Basin, a prolific gas-producing region located in eastern Oklahoma and western Arkansas where Chesapeake already owns approximately 250 bcfe of estimated proved reserves and produces approximately 50 mmcfe per day. Of the properties being acquired, 82% are located in townships in which Chesapeake owns existing interests. Chesapeake believes its consolidation of assets in these townships will create numerous operational efficiencies and enhanced drilling opportunities.

The majority of the other acquired assets are located in the Greater Mayfield area of Beckham County in western Oklahoma, where Chesapeake is very active. In Greater Mayfield, Chesapeake is currently drilling seven deep Springer wells to an average depth of 20,000 feet. Greater Mayfield is Chesapeake's most important exploratory area and in 2003 the company expects to spend approximately 10% of its projected $600 million capital expenditure budget further exploring and developing this area.

Chesapeake Benefits from Increasing Mid-Continent Scale

Chesapeake remains focused on continuing to build an unprecedented scale of operations in the prolific natural gas fields of the Anadarko and Arkoma basins in the Mid-Continent. During the past five years, the company has actively consolidated ownership in key Mid-Continent gas fields through acquisitions of long-lived gas reserves owned by AnSon, Hugoton, DLB, Enervest, OXY, Barrett, Apache, Gothic, Staghorn, Questar, Sapient, Ram, Canaan, Focus, EnCana, Priam, Williams, OG&E, ONEOK, Vintage, El Paso and now Oxley. Through these and other acquisitions since 1998, Chesapeake has acquired 2.5 trillion cubic feet of gas equivalent proved reserves (tcfe) at an average cost of $1.14 per mcfe.

Through this consolidation effort, Chesapeake has emerged as Oklahoma's largest natural gas producer, with an estimated 2003 gas production market share of 16%. In addition, the company is the operator of or a participant in approximately 50% of the 125 wells currently being drilled in Oklahoma, providing the company with unequalled access to current geological information across the state. Chesapeake believes this knowledge provides it with unique competitive advantages in executing its business strategy.

   Chesapeake Increases 2003 Production Guidance, Provides Initial 2004
         Production Guidance and Announces Significant Increases
               in its Natural Gas and Oil Hedging Positions

Chesapeake is increasing its 2003 production forecast by 6% from a range of 240-245 bcfe to a range of 255-260 bcfe to reflect the transactions announced today and the success of the company's exploration drilling program. In April 2003, Chesapeake estimated that its daily production during the second quarter of 2003 would average 675 mmcfe per day. The company now estimates that its second quarter production will average more than 710 mmcfe per day. Of the 35 mmcfe per day estimated increase, 20% is attributable to the Oxley transaction (which contributed 20 mmcfe per day to the last month of the quarter, for an average for the quarter of 7 mmcfe per day) and 80% is attributable to better than forecasted drilling results.

Furthermore, Chesapeake now expects its second half of 2003 production to exceed 740 mmcfe per day, an increase of 65 mmcfe per day over April's forecast of 675 mmcfe per day. Of this increase, 50% is attributable to the transactions announced today and 50% is attributable to better than forecasted drilling results. In addition, Chesapeake's initial production forecast for 2004 is 275-280 bcfe, or 760 mmcfe per day at the mid-point of this range.

During the past six weeks, Chesapeake has added substantial natural gas and oil hedges to the hedging positions it had previously announced in April 2003. Currently, the company has hedged the following amounts of its estimated 2003 - 2007 oil and natural gas production:

                             Oil               Natural Gas
  Quarter or Year   % Hedged    $ NYMEX    % Hedged    $ NYMEX

  2Q 2003              71%       $28.12       40%       $5.10
  3Q 2003              83%       $28.07       53%       $5.49
  4Q 2003              83%       $28.07       49%       $5.73
  Remaining 2003       79%       $28.08       47%       $5.47

  2004                  9%       $27.30       12%       $5.87
  2005                ---           ---        3%       $4.99
  2006                ---           ---        3%       $4.84
  2007                ---           ---        3%       $4.84

Depending on changes in oil and natural gas futures markets and underlying supply and demand trends, the company may either increase or decrease its hedging positions in the future.

Management Comments

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "Today's announcements provide further evidence of our ongoing commitment to creating industry-leading shareholder value through a sharp strategic focus on further consolidation of high-quality Mid-Continent gas assets, timely hedging decisions and successful Mid-Continent deep gas exploration. Today's announced acquisitions fit perfectly with our existing Mid-Continent assets and with Chesapeake's business strategy of creating value by delivering profitable organic growth from our unique deep gas exploration program and by acquiring and developing low-cost, long-lived, under-exploited natural gas assets in the Mid-Continent region.

"Today's announced transactions and Chesapeake's highly successful drilling results during the second quarter should increase our company's estimated proved reserves at June 30, 2003 to approximately 3.0 tcfe. Based on the results achieved from our previous acquisitions in the Mid-Continent, we expect to substantially increase the value of these newly acquired properties through additional drilling and by reducing administrative and operating costs. We are especially excited about enhancing our Arkoma Basin position and increasing our already strong position in the Greater Mayfield area of the Anadarko Basin, where our recent drillbit performance has been exceptional.

"In addition, our increased oil and natural gas hedging positions should further strengthen the company's financial performance in the quarters ahead. For some time now, our company had been predicting that natural gas prices would sharply increase this summer. We have already successfully taken advantage of higher gas prices early this summer to lock-in very attractive financial returns for our shareholders on a significant portion of our production. We will be on the lookout for additional attractive hedging opportunities later this summer and fall."

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 eight 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 .

                               SCHEDULE "A"
                           CHESAPEAKE'S OUTLOOK
                           As of June 24, 2003

Quarter Ending June 30, 2003; Year Ending December 31, 2003; Year Ending December 31, 2004.

We have adopted a policy of periodically providing investors with guidance on certain factors that affect our future financial performance. As of June 24, 2003, we are using the following key operating assumptions in our projections for the second quarter of 2003, full year 2003, and full year 2004.

The primary changes from our April 28, 2003 guidance are explained as follows:

   1)  We have updated the projected effects from changes in our hedging
       positions.
   2)  We have included our expectations for future NYMEX oil and gas prices
       to illustrate hedging effects only, they are not a forecast of our
       expectations for 2003 oil and natural gas prices.
   3)  We have increased our projected oil and natural gas production for
       the second quarter 2003 and full year 2003.
   4)  We have included 2004 projections for the first time.

                          Quarter Ending   Year Ending     Year Ending
                             June 30,        Dec. 31,        Dec. 31,
                               2003            2003            2004

  Estimated Production
    Oil - Mbo                 1,150           4,500           4,500
    Gas - Bcf                57 - 58        228 - 233       248 - 253
    Gas Equivalent - Bcfe    64 - 65        255 - 260       275 - 280
    Daily gas equivalent
     midpoint - in Mmcfe        710             705             760
  NYMEX Prices (for
   calculation of
   hedging effects only)
    Oil - $/Bo               $27.40          $27.82          $24.00
    Gas - $/Mcf               $5.40           $5.81           $4.50
  Estimated Corporate
   Differentials to NYMEX
   Prices
    Oil - $/Bo               -$2.00          -$1.92          -$2.00
    Gas - $/Mcf          -$0.50 - $0.60  -$0.50 - $0.60  -$0.50 - $0.60
  Estimated Hedging
   Effects (based on
   expected NYMEX
   prices above)
    Oil - $/Bo               +$0.50          +$0.03          +$0.29
    Gas - $/Mcf              +$0.06          -$0.25          +$0.18
  Operating Costs
   per Mcfe
    Production expense    $0.53 - 0.57    $0.53 - 0.57    $0.57 - $0.60
    Production taxes
     (generally 7% of
      O&G revenues)       $0.31 - 0.33    $0.31 - 0.33    $0.27 - $0.30
    General and
     administrative       $0.09 - 0.10    $0.09 - 0.10    $0.09 - $0.10
    DD&A - oil and gas    $1.32 - 1.37    $1.32 - 1.37    $1.37 - $1.42
    Depreciation of
     other assets         $0.08 - 0.10    $0.08 - 0.10    $0.08 - $0.10
    Interest expense      $0.60 - 0.65    $0.60 - 0.65    $0.55 - $0.60
  Other Income and Expense
   per Mcfe (A)
    Marketing and Other
     income               $0.02 - 0.04    $0.02 - 0.04    $0.02 - $0.04

  Book Tax Rate -
   All Deferred                  38%             38%             38%
  Equivalent Shares
   Outstanding
    Basic                   215,000 m       212,000 m       216,000
    Diluted                 262,000 m       255,000 m       264,000

  Capital Expenditures:
    Drilling, Land
     and Seismic           $150 - $155 mm  $600 - $650 mm      $600 mm

  (A)  Does not include non-cash risk management income or loss (SFAS 133)
       or the cumulative effect of the adoption of SFAS 143.

  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 Chesapeake Energy Marketing, Inc.'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 natural gas hedging arrangements:

                                                          % Hedged
                           Avg.          Avg. NYMEX               Open Swap
                          NYMEX            Price                  Positions
                          Strike  Gain   Including   Assuming     as a % of
                  Open    Price   from   Open and      Gas        Estimated
                 Swaps   Of Open Closed   Closed   Production     Total Gas
                in Bcf's  Swaps  Swaps   Positions in Bcf's of:   Production
  2003:
  2nd Qtr         23.0    $4.92  $0.18     $5.10      57.5            40%

  3rd Qtr         32.2    $5.46  $0.03     $5.49      61.0            53%

  4th Qtr         30.1    $5.67  $0.06     $5.73      61.6            49%

  Remaining 2003  85.3    $5.39  $0.08     $5.47     180.1            47%


                                                          % Hedged
                           Avg.          Avg. NYMEX               Open Swap
                          NYMEX            Price                  Positions
                          Strike  Gain   Including   Assuming     as a % of
                  Open    Price   from   Open and      Gas        Estimated
                 Swaps   Of Open Closed   Closed   Production     Total Gas
                in Bcf's  Swaps  Swaps   Positions in Bcf's of:   Production

  2004:

  1st Qtr         16.4    $6.34  $0.05     $6.39      62.0            26%

  2nd Qtr          7.6    $5.22  $0.00     $5.22      62.3            12%

  3rd Qtr          2.8    $5.11  $0.00     $5.11      62.7             4%

  4th Qtr          2.8    $5.29  $0.00     $5.29      63.0             4%

  Total 2004      29.6    $5.84  $0.03     $5.87     250.0            12%

  Total 2005       7.3    $4.99  $0.00     $4.99     260.0             3%

  Total 2006       7.3    $4.84  $0.00     $4.84     270.0             3%

  Total 2007       7.3    $4.84  $0.00     $4.84     280.0             3%


Chesapeake has also entered into the following natural gas basis hedging arrangements:

                                                    Assuming Gas
                        Annual                       Production
                   Volume in Bcf's    NYMEX less:   in Bcf's of:   % Hedged
  2003 Remaining        120.0           $0.188         180.1          67%
  2004                  157.4            0.173         250.0          63%
  2005                  109.5            0.156         260.0          42%
  2006                   47.5            0.155         270.0          18%
  2007                   63.9            0.166         280.0          23%
  2008                   64.0            0.166         290.0          22%
  2009                   37.0            0.160         300.0          12%
                        599.3           $0.169*      1,830.1          33%
  * weighted average


  The Company has entered into the following crude oil hedging arrangements:

                                                          % Hedged
                                                                   Open Swap
                                                                   Positions
                                        Avg.      Assuming          as % of
                              Open     NYMEX        Oil              Total
                            Swaps in   Strike    Production        Estimated
                             Mmbo's    Price    in Mmbo's of:     Production
  Q2 - 2003*                  819      $28.12      1,150              71%

  Q3 - 2003*                  948      $28.07      1,145              83%

  Q4 - 2003*                  948      $28.07      1,145              83%

  Remaining 2003            2,715      $28.08      3,440              79%

  Q1 - 2004*                  240      $27.30      1,125              21%

  Q2 - 2004*                  160      $27.30      1,125              14%

  Q3 - 2004*                    0       $0.00      1,125               0%

  Q4 - 2004*                    0       $0.00      1,125               0%

  Total 2004                  400      $27.30      4,500               9%

*Swaps with a knockout provision for days in which NYMEX closes below $21.00.

                               SCHEDULE "B"

                           CHESAPEAKE'S OUTLOOK

                           As of April 28, 2003

  Quarter Ending June 30, 2003; Year Ending December 31, 2003.

We have adopted a policy of periodically providing investors with guidance on certain factors that affect our future financial performance. As of April 28, 2003, we are using the following key operating assumptions in our projections for the second quarter of 2003 and full year 2003.

The primary changes from our April 9, 2003 guidance are explained as follows:

  (1) We have updated the projected effects from changes in our hedging
      positions.
  (2) We have included our expectations for future NYMEX oil and gas prices
      to illustrate hedging effects only, they are not a forecast of our
      expectations for 2003 oil and natural gas prices.
  (3) We have increased our projected production for the remainder of 2003.

                                        Quarter Ending     Year Ending
                                        June 30, 2003    December 31, 2003

  Estimated Production
    Oil - Mbo                             950 - 1,000      3,600 - 3,700
    Gas - Bcf                              55 - 56           218 - 223
    Gas Equivalent - Bcfe                  61 - 62           240 - 245
  NYMEX Prices (for calculation of
   hedging effects only)
    Oil - $/Bo                              $25.33             $26.80
    Gas - $/Mcf                              $5.05              $5.41
  Estimated Corporate Differentials
   to NYMEX Prices
    Oil - $/Bo                              -$2.00             -$1.92
    Gas - $/Mcf                         -$0.50 - $0.60     -$0.50 - $0.60
  Estimated Hedging Effects (based
   on expected NYMEX prices above)
    Oil - $/Bo                              +$2.39             +$0.70
    Gas - $/Mcf                             +$0.21             -$0.23
  Operating Costs per Mcfe
    Production expense                   $0.53 - 0.57       $0.53 - 0.57
    Production taxes (generally 7%
     of O&G revenues)                    $0.31 - 0.33       $0.31 - 0.33
    General and administrative           $0.09 - 0.10       $0.09 - 0.10
    DD&A - oil and gas                   $1.32 - 1.37       $1.32 - 1.37
    Depreciation of other assets         $0.08 - 0.10       $0.08 - 0.10
    Interest expense                     $0.65 - 0.70       $0.65 - 0.70
  Other Income and Expense per Mcfe (A)
    Marketing and Other income           $0.02 - 0.04       $0.02 - 0.04

  Book Tax Rate - All Deferred                38%                38%
  Equivalent Shares Outstanding
    Basic                                   215,000 m          212,000 m
    Diluted                                 262,000 m          255,000 m

  Capital Expenditures:
    Drilling, Land and Seismic            $150 - $155 mm     $575 - $600 mm

  (B) Does not include non-cash risk management income or loss (SFAS 133) or
      the cumulative effect of the adoption of SFAS 143.

  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,
  (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, and

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 Chesapeake Energy Marketing, Inc.'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 natural gas hedging arrangements:

                                                         % Hedged
                        Avg.            Avg. NYMEX               Open Swap
                       NYMEX               Price                Positions as
                       Strike            Including   Assuming       a % of
               Open    Price  Gain from  Open and      Gas          Total
               Swaps  Of Open  Closed     Closed    Production       Gas
             in Bcf's  Swaps    Swaps    Positions  in Bcf's of:  Production

  2003:

  2nd Qtr      21.6    $4.81    $0.20      $5.01       55.0           39%

  3rd Qtr      16.6    $4.68    $0.11      $4.79       57.0           29%

  4th Qtr      14.4    $4.85    $0.17      $5.02       58.0           25%

  Remaining
   2003        52.5    $4.78    $0.16      $4.94      170.0           31%

  2004:

  1st Qtr       0.6    $5.68    $1.33      $7.01       59.0            1%


The Company has entered into the following natural gas basis hedging arrangements:

                   Annual                         Assuming Gas
                Volume (mmcf)      NYMEX less:   Production of:    % Hedged
  2003 Remaining    107.8            0.188
  2003 Total        143.3            0.182           220.0            65%
  2004              157.4            0.173           223.0            71%
  2005              109.5            0.156           223.0            49%
  2006               47.5            0.155           223.0            21%
  2007               63.9            0.166           223.0            29%
  2008               64.1            0.166           223.0            29%
  2009               35.5            0.160           223.0            16%
                    622.0            0.169*
   * weighted average


  The Company has entered into the following crude oil hedging arrangements:

                                                      % Hedged
                                                                 Open
                                                                 Swap
                                               Assuming       Positions
                                   Avg.          Oil             as %
                     Open         NYMEX       Production       of Total
                   Swaps in       Strike      in Mmbo's       Estimated
                     Mbo's        Price          of:          Production

  Q2 - 2003*          819         28.12          860              95%

  Q3 - 2003*          828         28.12          865              96%

  Q4 - 2003*          828         28.12          865              96%

  Remaining 2003    2,475         28.12        2,590              96%

  * Swaps with a knockout provision for days in which NYMEX closes below
    $21.00.

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 Investor
Relations, +1-405-879-9257, both of Chesapeake Energy Corporation