Chesapeake Energy Corporation Posts Strong Results for Second Quarter 2003; Natural Gas Production Sets Record for Eighth Consecutive Quarter
Second Quarter 2003 Net Income Available to Common Shareholders Reaches $76 Million on Revenue of $430 Million and Production of 67 Bcfe
PRNewswire-FirstCall
OKLAHOMA CITY

Chesapeake Energy Corporation today reported its financial and operating results for the 2003 second quarter. For the quarter, Chesapeake generated net income available to common shareholders of $76.3 million ($0.31 per fully diluted common share), operating cash flow of $226.1 million (defined as cash flow from operating activities before changes in assets and liabilities) and ebitda of $266.1 million (defined as income before income taxes, interest expense, and depreciation, depletion and amortization expense) on revenue of $429.6 million. The company's 2003 second quarter net income available to common shareholders included a $1.9 million after-tax non-cash risk-management gain resulting from the application of SFAS 133 to the company's derivative contracts that do not qualify for hedge accounting.

During the second quarter, Chesapeake produced 67.3 billion cubic feet of natural gas equivalent (bcfe), compared to the company's most recent forecast of 64-65 bcfe. This 67.3 bcfe of production was comprised of 60.0 billion cubic feet of natural gas (bcf) (89% on an mcf equivalent basis) and 1.2 million barrels of oil (mmbo) (11% on an mcf equivalent basis).

The 2003 second quarter oil and natural gas production increased 55% year- over-year from the 2002 second quarter and 19% sequentially from the 2003 first quarter. Of the 10.5 bcfe in sequential production growth during the second quarter, only 9.5% came from acquisitions closed during the quarter. The 2003 second quarter was Chesapeake's eighth consecutive quarter of sequential production increase. During these eight quarters, Chesapeake's production has increased 72%, for an average sequential quarterly growth rate of 7%.

Reserve growth during the 2003 second quarter was also significant as production of 67 bcfe was replaced by 201 bcfe of new proved reserves (a 300% reserve replacement rate). This growth was comprised of 112 bcfe from drilling and revisions and 96 bcfe from acquisitions, partially offset by 7 bcfe of divestitures that were sold for proceeds of $19 million. Chesapeake's internally estimated proved reserves now total approximately 2.95 trillion cubic feet of natural gas equivalent, of which 90% are natural gas and 74% are proved developed. This marks the company's seventh consecutive quarter of growth in estimated proved reserves.

Average prices realized during the 2003 second quarter (including hedging) were $26.24 per barrel of oil (bo) and $4.73 per thousand cubic feet of natural gas (mcf), for a realized gas equivalent price of $4.70 per thousand cubic feet of natural gas equivalent (mcfe). Chesapeake's realized pricing differentials to NYMEX during the quarter averaged a negative $2.15 per bo and a negative $0.70 per mcf and hedging activities generated a $0.52 loss per bo and a $0.03 gain per mcf.

Key Operational and Financial Statistics for the 2003 Second Quarter

The table below summarizes Chesapeake's key statistics during the 2003 second quarter and compares them to the 2003 first quarter and the 2002 second quarter:

  Key Operational and Financial Statistics:         Three Months Ended:
                                                6/30/03   3/31/03   6/30/02
  Average daily production (in mmcfe)             740       631       477
  Gas as % of total production                     89        89        89
  Natural gas production (in bcf)                60.0      50.4      38.5
  Average realized gas price ($/mcf) (A)         4.73      4.51      3.38
  Oil production (in mbbls)                     1,224     1,060       823
  Average realized oil price ($/bbl) (A)        26.24     27.27     26.55
  Natural gas equivalent production (in bcfe)    67.3      56.8      43.4
  Gas equivalent realized price ($/mcfe) (A)     4.70      4.52      3.50
  General and administrative costs ($/mcfe)      0.09      0.10      0.09
  Production taxes ($/mcfe)                      0.25      0.33      0.18
  Lease operating expenses ($/mcfe)              0.51      0.55      0.56
  Interest expense ($/mcfe)                      0.56      0.62      0.57
  DD&A of oil and gas properties ($/mcfe)        1.36      1.35      1.17
  Operating cash flow ($ in millions) (B)       226.1     167.7      96.6
  Operating cash flow ($/mcfe)                   3.36      2.96      2.23
  Ebitda ($ in millions) (C)                    266.1     230.0     120.8
  Ebitda ($/mcfe)                                3.95      4.05      2.78
  Net income available to common
   shareholders ($ in millions)                  76.3      70.0      22.5

   (A) includes the effects of hedging
   (B) cash flow provided by operating activities before changes in assets
       and liabilities
   (C) defined as income before income taxes, interest expense, and
       depreciation, depletion and amortization expense

           Chesapeake Updates Forecasts and Hedging Information

Chesapeake's initial 2003 third quarter and updated full-year 2003 and 2004 forecasts are attached to this release in a revised Outlook dated July 28, 2003 and labeled as Schedule "A". The company's previous guidance of June 24, 2003 is provided for comparative reference only and is labeled as Schedule "B". The new Outlook reflects an increase in projected 2003 full- year production volumes to 258-262 bcfe, up from 255-260 bcfe included in the company's June 24, 2003 Outlook. This increased production forecast is attributable to Chesapeake's drilling programs generating better than previously forecasted production volumes. The company has now increased its full-year 2003 production estimate by 35% since the beginning of the year.

In addition, Chesapeake has added to its hedging positions since the June 24, 2003 update. Currently, the company has hedged the following percentages of its projected 2003-2007 oil and natural gas production:

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

  3Q 2003              79%      $  28.07       62%      $  5.50
  4Q 2003              79%      $  28.07       63%      $  5.72

  Remaining 2003       79%      $  28.07       62%      $  5.61
  2004                 63%      $  27.85       26%      $  5.51
  2005                ---            ---       15%      $  4.79
  2006                ---            ---        9%      $  4.74
  2007                ---            ---        9%      $  4.76


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

Standard & Poor's Raises Chesapeake's Credit Ratings

On July 10, 2003, Standard & Poor's Rating Services raised Chesapeake's corporate credit rating to BB-. At the same time, S & P assigned its BBB- rating to the company's recently amended $350 million secured revolving credit facility due 2007. This is the first time Chesapeake has received an investment grade rating on any of its outstanding debt and evidences Chesapeake's continuing commitment to strengthening its balance sheet.

Management Comments

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are pleased to announce Chesapeake's very strong second quarter earnings report, which features exceptional growth in production and proved reserves, low operating and administrative costs, high operating margins and increased production forecasts for the remainder of 2003 and for 2004. Chesapeake's value-creating financial and operating results are being driven by its distinctive Mid-Continent focus on successful deep-gas exploration and on finding, completing and quickly integrating small and medium-sized acquisitions. Because of the company's unique scale in the Mid-Continent, its technological advantages in deep gas exploration and its unrivaled Mid- Continent 3-D seismic and leasehold inventory, we believe Chesapeake's production and reserve growth trends should be sustainable and should enable the company to continue generating significant increases in shareholder value in the years ahead."

Conference Call Information

A conference call has been scheduled for Tuesday morning, July 29, 2003 at 9:00 a.m. EDT to discuss the earnings release. The telephone number to access the conference call is 913.981.5533. For those unable to participate in the conference call, a replay will be available from 12:00 p.m. EDT on Tuesday, July 29, 2003 through midnight EDT on Friday, August 15, 2003. The number to access the conference call replay is 719.457.0820 and the passcode is 448860. The conference call will also be simulcast live on the Internet and can be accessed at www.chkenergy.com by selecting "Conference Calls" under the "Investor Relations" section. The webcast of the conference call will be available on the website for one year.

This press release and the accompanying Outlooks include "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 give our current expectations or forecasts of future events. They include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, and statements concerning anticipated cash flow and liquidity, business strategy and other plans and objectives for future operations. Disclosures concerning 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. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under "Risk Factors" in Item 1 of our 2002 Form 10-K and subsequent filings with the Securities and Exchange Commission. They include the volatility of oil and gas prices; adverse effects our substantial indebtedness could have on our operations and future growth; our ability to compete effectively against strong oil and gas companies and majors; the cost and availability of drilling and production services; possible financial losses as a result of our commodity price risk management activities; uncertainties inherent in estimating quantities of oil and gas reserves, including reserves we acquire, projecting future rates of production and the timing of development expenditures; exposure to potential liabilities of acquired properties; our ability to replace reserves; the availability of capital; changes in interest rates; and drilling and operating risks. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release, and we undertake no obligation to update this information.

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 .

                        CHESAPEAKE ENERGY CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                     ($ in 000's, except per share data)
                                 (unaudited)
  THREE MONTHS ENDED:                     June 30, 2003       June 30, 2002
                                            $      $/mcfe      $      $/mcfe
  REVENUES:
    Oil and gas sales                    316,172    4.69    152,009    3.50
    Risk management income (loss)          3,084    0.05       (481)  (0.01)
    Oil and gas marketing sales          110,296    1.64     42,785    0.99
      Total revenues                     429,552    6.38    194,313    4.48
  OPERATING COSTS:
    Production expenses                   34,263    0.51     24,242    0.56
    Production taxes                      17,101    0.25      7,911    0.18
    General and administrative             6,000    0.09      3,859    0.09
    Oil and gas marketing expenses       106,857    1.59     41,181    0.95
    Depreciation, depletion, and
     amortization of oil and
     gas properties                       91,570    1.36     50,778    1.17
    Depreciation and amortization
     of other assets                       4,122    0.06      3,652    0.08
      Total operating costs              259,913    3.86    131,623    3.03

  INCOME FROM OPERATIONS                 169,639    2.52     62,690    1.45

  OTHER INCOME (EXPENSE):
    Interest and other income                781    0.01      3,992    0.09
    Interest expense                     (37,773)  (0.56)   (24,690)  (0.57)
    Loss on repurchases of debt              ---     ---       (273)  (0.01)
      Total other income (expense)       (36,992)  (0.55)   (20,971)  (0.49)

  Income Before Income Taxes             132,647    1.97     41,719    0.96

  Income Tax Expense
    Current                                  ---     ---        ---     ---
    Deferred                              50,407    0.75     16,686    0.38
      Total income tax expense            50,407    0.75     16,686    0.38

  NET INCOME                              82,240    1.22     25,033    0.58

  Preferred Stock Dividends               (5,979)  (0.09)    (2,530)  (0.06)

  NET INCOME AVAILABLE TO COMMON
   SHAREHOLDERS                           76,261    1.13     22,503    0.52

  EARNINGS PER COMMON SHARE:

    Basic                                  $0.36              $0.14

    Assuming dilution                      $0.31              $0.13

  WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING
   (in 000's):

    Basic                                214,341            165,963

    Assuming dilution                    263,919            191,947


                        CHESAPEAKE ENERGY CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                     ($ in 000's, except per share data)
                                 (unaudited)
  SIX MONTHS ENDED:                       June 30, 2003      June 30, 2002
                                            $      $/mcfe      $      $/mcfe
  REVENUES:
    Oil and gas sales                    572,504    4.61    293,980    3.45
    Risk management income (loss)         30,794    0.25    (79,949)  (0.94)
    Oil and gas marketing sales          200,604    1.62     70,118    0.82
      Total revenues                     803,902    6.48    284,149    3.33
  OPERATING COSTS:
    Production expenses                   65,720    0.53     46,302    0.54
    Production taxes                      35,698    0.29     13,127    0.15
    General and administrative            11,665    0.09      8,153    0.10
    Oil and gas marketing expenses       196,215    1.58     67,688    0.79
    Depreciation, depletion, and
     amortization of oil and
     gas properties                      168,184    1.36     99,397    1.17
    Depreciation and amortization
     of other assets                       7,806    0.06      6,762    0.08
      Total operating costs              485,288    3.91    241,429    2.83

  INCOME FROM OPERATIONS                 318,614    2.57     42,720    0.50

  OTHER INCOME (EXPENSE):
    Interest and other income              1,544    0.01      5,537    0.07
    Interest expense                     (72,800)  (0.58)   (51,650)  (0.61)
    Loss on repurchases of debt              ---     ---       (864)  (0.01)
      Total other income (expense)       (71,256)  (0.57)   (46,977)  (0.55)

  Income (Loss) Before Income Taxes
   and Cumulative Effect of
   Accounting Change                     247,358    2.00     (4,257)  (0.05)

  Income Tax Expense (Benefit)
    Current                                  ---     ---        ---     ---
    Deferred                              93,998    0.76     (1,704)  (0.02)
      Total income tax expense (benefit)  93,998    0.76     (1,704)  (0.02)

  NET INCOME (LOSS) BEFORE CUMULATIVE
   EFFECT OF ACCOUNTING CHANGE           153,360    1.24     (2,553)  (0.03)

  Cumulative Effect of Accounting
   Change, Net of Tax                      2,389    0.02        ---     ---

  NET INCOME (LOSS)                      155,749    1.26     (2,553)  (0.03)

  Preferred Stock Dividends               (9,505)  (0.08)    (5,062)  (0.06)

  NET INCOME (LOSS) AVAILABLE
   TO COMMON SHAREHOLDERS                146,244    1.18     (7,615)  (0.09)


  EARNINGS PER COMMON SHARE:

    Basic
      Income (Loss) Before Cumulative
       Effect of Accounting Change         $0.70             $(0.05)
      Cumulative Effect of Accounting
       Change                               0.01                ---
      Net Income (Loss)                    $0.71             $(0.05)

    Assuming dilution
      Income (Loss) Before Cumulative
       Effect of Accounting Change         $0.62             $(0.05)
      Cumulative Effect of Accounting
       Change                               0.01                ---
      Net Income (Loss)                    $0.63             $(0.05)

  WEIGHTED AVERAGE COMMON AND COMMON
    EQUIVALENT SHARES OUTSTANDING
    (in 000's):

    Basic                                205,995            165,669

    Assuming dilution                    247,391            165,669


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

                                           June 30,      December 31,
                                             2003           2002

  Cash                                   $   35,909     $  247,637
  Other current assets                      297,558        187,680
       TOTAL CURRENT ASSETS                 333,467        435,317

  Property and equipment (net)            3,595,166      2,389,884
  Deferred tax asset                            ---          2,071
  Other assets                               84,727         48,336
       TOTAL ASSETS                      $4,013,360     $2,875,608

  Current liabilities                    $  415,871     $  265,552
  Long term debt                          1,968,447      1,651,198
  Long term liabilities                      73,502         50,983
  Deferred tax liability                     92,068            ---
       TOTAL LIABILITIES                  2,549,888      1,967,733

  STOCKHOLDERS' EQUITY                    1,463,472        907,875

  TOTAL LIABILITIES &
   STOCKHOLDERS' EQUITY                  $4,013,360     $2,875,608

  COMMON SHARES OUTSTANDING                 215,862        190,144


                        CHESAPEAKE ENERGY CORPORATION
                    CONDENSED CONSOLIDATED CASH FLOW DATA
                                  (in 000's)
                                 (unaudited)

  THREE MONTHS ENDED:                  June 30,      March 31,     June 30,
                                        2003           2003         2002

  Cash provided by operating
   activities                        $ 277,581    $    99,052    $  97,528

  Cash (used in) investing
   activities                        $(313,485)   $(1,002,289)   $(234,613)

  Cash provided by financing
   activities                        $  33,809    $   693,604    $  21,429


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

  THREE MONTHS ENDED:                 June 30,      March 31,       June 30,
                                        2003          2003            2002

  CASH PROVIDED BY OPERATING
   ACTIVITIES                        $ 277,581    $    99,052    $   97,528

  Adjustments:
    Changes in assets and
     liabilities                       (51,512)        68,661          (910)

  OPERATING CASH FLOW*               $ 226,069    $   167,713    $   96,618


  *  Operating cash flow represents net cash provided by operating
     activities before changes in assets and liabilities.  Operating cash
     flow is presented because management believes it is a useful adjunct to
     net cash provided by operating activities under accounting principles
     generally accepted in the United States (GAAP).  Operating cash flow is
     widely accepted as a financial indicator of an oil and gas company's
     ability to generate cash which is used to internally fund exploration
     and development activities and to service debt.  This measure is widely
     used by investors and rating agencies in the valuation, comparison,
     rating and investment recommendations of companies within the oil and
     gas exploration and production industry.  Operating cash flow is not a
     measure of financial performance under GAAP and should not be
     considered as an alternative to cash flows from operating, investing,
     or financing activities as an indicator of cash flows, or as a measure
     of liquidity.


  THREE MONTHS ENDED:                 June 30,       March 31,      June 30,
                                        2003           2003           2002

  Net income                          $ 82,240      $  71,120      $  25,033

  Deferred income tax expense           50,407         43,591         16,686
  Interest expense                      37,773         35,027         24,690
  Depreciation and amortization
   of other assets                       4,122          3,684          3,652
  Depreciation, depletion and
   amortization of oil and
   gas properties                       91,570         76,614         50,778

  EBITDA**                            $266,112       $230,036       $120,839


  **Ebitda represents net income (loss) before cumulative effect of
    accounting change, income tax expense (benefit), interest expense, and
    depreciation, depletion and amortization expense.  Ebitda is presented
    as a supplemental financial measurement in the evaluation of our
    business.  We believe that it provides additional information regarding
    our ability to meet our future debt service, capital expenditures and
    working capital requirements.  This measure is widely used by investors
    and rating agencies in the valuation, comparison, rating and investment
    recommendations of companies.  Ebitda is also a financial measurement
    that, with certain negotiated adjustments, is reported to our banks
    under our bank credit facilities and is used in our financial covenants
    under our bank credit facilities and our indentures governing our senior
    notes.  Ebitda is not a measure of financial performance under GAAP.
    Accordingly, it should not be considered as a substitute for net income,
    income from operations, or cash flow provided by operating activities
    prepared in accordance with GAAP.  Ebitda is reconciled to cash provided
    by operating activities as follows:


  THREE MONTHS ENDED:                  June 30,      March 31,     June 30,
                                         2003          2003          2002

  CASH PROVIDED BY OPERATING
   ACTIVITIES                          $277,581      $ 99,052      $ 97,528

  Changes in assets and liabilities     (51,512)       68,661          (910)
  Interest expense                       37,773        35,027        24,690
  Risk management income (loss)           3,084        27,710          (481)
  Other non-cash items                     (814)         (414)           12

  EBITDA                               $266,112      $230,036      $120,839


                               SCHEDULE "A"

                           CHESAPEAKE'S OUTLOOK

                           As of July 28, 2003

Quarter Ending September 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 July 28, 2003, we are using the following key operating assumptions in our projections for the third quarter of 2003, full year 2003, and full year 2004.

The primary changes from our June 24, 2003 guidance are in italicized bold and 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
      full year 2003 and 2004.
  4)  We have included third quarter 2003 projections for the first time.

                              Quarter Ending   Year Ending      Year Ending
                               September 30,   December 31,     December 31,
                                   2003            2003            2004
  Estimated Production
    Oil - Mbo                     1,200           4,700           4,700
    Gas - Bcf                  60.5 - 61.0      230 - 234       249 - 253
    Gas Equivalent - Bcfe      67.5 - 68.0      258 - 262       277 - 281
    Daily gas equivalent
     midpoint - in Mmcfe            735             710             765
  NYMEX Prices (for calculation
   of hedging effects only)
    Oil - $/Bo                   $25.00          $28.19          $24.00
    Gas - $/Mcf                   $5.43           $5.79           $4.50
  Estimated Differentials to
   NYMEX Prices
    Oil - $/Bo                   -$2.50          -$2.23          -$2.00
    Gas - $/Mcf                  -$0.50          -$0.50          -$0.50
  Estimated Hedging Effects
   (based on expected NYMEX
    prices above)
    Oil - $/Bo                   +$2.64          -$0.24          +$2.43
    Gas - $/Mcf                  +$0.24          -$0.25          +$0.29
  Operating Costs per Mcfe
    Production expense        $0.53 - 0.57    $0.53 - 0.57    $0.57 - $0.60
    Production taxes (generally
     6% 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        $1.35 - 1.40    $1.35 - 1.40    $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                        216,000 m       214,000 m       218,000
    Diluted                      266,000 m       258,000 m       268,000

  Capital Expenditures:
    Drilling, Land and
     Seismic                  $150 - $155 mm  $600 - $650 mm  $600 - $650 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 currently has in place the following natural gas hedging arrangements:

                                                            % Hedged
                                         Avg. NYMEX
                          Avg.             Price                   Open Swap
                         NYMEX           Including                 Positions
                         Strike            Open       Assuming     as a % of
                Open     Price  Gain from  and          Gas        Estimated
               Swaps    Of Open   Locked  Locked     Production    Total Gas
              in Bcf's   Swaps    Swaps  Positions  in Bcf's of:  Production
  2003:

  3rd Qtr      37.7      $5.45    $0.05    $5.50        60.8          62%

  4th Qtr      38.3      $5.65    $0.07    $5.72        60.9          63%

  Remaining
   2003        76.0      $5.55    $0.06    $5.61       121.7          62%


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

  2004:

  1st Qtr      26.4      $6.12    $0.08    $6.20        61.4          43%

  2nd Qtr      17.0      $5.06    $0.00    $5.06        62.3          27%

  3rd Qtr      11.0      $4.92    $0.00    $4.92        63.5          17%

  4th Qtr      11.0      $5.13    $0.00    $5.13        63.8          17%

  Total 2004   65.4      $5.48    $0.03    $5.51       251.0          26%

  Total 2005   40.2      $4.79    $0.00    $4.79       260.0          15%

  Total 2006   25.6      $4.74    $0.00    $4.74       270.0           9%

  Total 2007   25.6      $4.76    $0.00    $4.76       280.0           9%


Chesapeake has also entered into the following natural gas basis protection swaps:

                                                    Assuming Gas
                           Annual                  Production in
                      Volume in Bcf's   NYMEX less:   Bcf's of:     % Hedged
  2003 Remaining            82.8          $0.188       121.7           68%
  2004                     157.4           0.173       251.0           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%
                           562.1          $0.169*    1,772.7           32%
      *  weighted average


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

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

  Q3 - 2003*          948        $28.07          1,200            79%

  Q4 - 2003*          948        $28.07          1,200            79%

  Remaining 2003    1,896        $28.07          2,400            79%


  Q1 - 2004*          877        $27.76          1,175            75%

  Q2 - 2004*          797        $27.81          1,175            68%

  Q3 - 2004*          644        $27.94          1,175            55%

  Q4 - 2004*          644        $27.94          1,175            55%

  Total 2004        2,962        $27.85          4,700            63%


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

                               SCHEDULE "B"

            CHESAPEAKE'S PREVIOUS OUTLOOK AS OF JUNE 24, 2003
                      (PROVIDED FOR REFERENCE ONLY)

              NOW SUPERSEDED BY OUTLOOK AS OF JULY 28, 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 in italicized bold and 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 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. NYMEX
                          Avg.             Price                   Open Swap
                         NYMEX           Including                 Positions
                         Strike            Open       Assuming     as a % of
                Open     Price  Gain from  and          Gas        Estimated
               Swaps    Of Open   Locked  Locked     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. NYMEX
                          Avg.             Price                   Open Swap
                         NYMEX           Including                 Positions
                         Strike            Open       Assuming     as a % of
                Open     Price  Gain from  and          Gas        Estimated
               Swaps    Of Open   Locked  Locked     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 protection swaps:

                                                      Assuming Gas
                         Annual                       Production in
                    Volume in Bcf's      NYMEX less:    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 in       Estimated
                      Mmbo's       Price       Mmbo's of:       Production
  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.

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