Chesapeake Energy Corporation Posts Record Results for the 2004 First Quarter
Company Reports 2004 First Quarter Net Income Available to Common Shareholders of $104 Million on Revenue of $563 Million and Production of 79 Bcfe
PRNewswire-FirstCall
OKLAHOMA CITY

Chesapeake Energy Corporation today reported its financial and operating results for the 2004 first quarter. For the quarter, Chesapeake generated net income available to common shareholders of $104.4 million ($0.38 per fully diluted common share), operating cash flow of $327.5 million (defined as cash flow from operating activities before changes in assets and liabilities) and ebitda of $348.1 million (defined as income before income taxes, interest expense, and depreciation, depletion and amortization expense) on revenue of $563.1 million.

The company's 2004 first quarter net income available to common shareholders and ebitda include an unrealized after-tax mark-to-market loss of $14.6 million resulting from the company's oil and natural gas and interest rate hedging programs and an after-tax $4.4 million loss from the exchange or repurchase of certain Chesapeake debt securities. These are items typically excluded from analysts' estimates.

Excluding these items, Chesapeake's net income to common shareholders in the 2004 first quarter would have been $123.4 million ($0.44 per fully diluted common share) and ebitda would have been $369.0 million. These items did not affect the calculation of operating cash flow.

Oil and Natural Gas Production and Proved Reserves Set Records

Production for the 2004 first quarter was 78.9 billion cubic feet of natural gas equivalent (bcfe), an increase of 22.1 bcfe, or 39%, over the 56.8 bcfe produced in the 2003 first quarter and an increase of 5.6 bcfe, or 7.6%, over the 73.3 bcfe produced in the 2003 fourth quarter. The 22.1 bcfe increase in this year's first quarter production over the first quarter of 2003's production consisted of 11.1 bcfe from organic drillbit growth and 11.0 bcfe generated from acquisitions. The company's organic growth rate during the past 12 months was 20%, well above the company's forecasted organic growth rate of 5% and among the very best organic growth performances reported by public mid- and large-cap E&P companies for the past 12 months. In addition, the 50/50 split between the company's growth through the drillbit and growth through acquisitions reflects the company's balanced growth strategy.

The 2004 first quarter's 78.9 bcfe of production was comprised of 70.1 billion cubic feet of natural gas (bcf) (89% on a natural gas equivalent basis) and 1.47 million barrels of oil and natural gas liquids (mmbo) (11% on a natural gas equivalent basis). Chesapeake's average daily production rate for the quarter was 867 million cubic feet of natural gas equivalent production (mmcfe), consisting of 770 mmcf of gas and 16,099 barrels of oil and natural gas liquids. The 2004 first quarter was Chesapeake's eleventh consecutive quarter of sequential production growth. During these eleven quarters, Chesapeake's production has increased 102%, for an average sequential quarterly growth rate of 6.6% and an average annualized growth rate of 29%.

Average prices realized during the 2004 first quarter (including realized gains or losses from oil and gas derivatives, but excluding unrealized gains or losses on such derivatives) were $27.10 per barrel of oil (bo) and $5.62 per thousand cubic feet of natural gas (mcf), for a realized gas equivalent price of $5.50 per thousand cubic feet of natural gas equivalent (mcfe). Chesapeake's average realized pricing differentials to NYMEX during the quarter were a negative $2.56 per bo and a negative $0.73 per mcf. Realized gains or losses from hedging activities generated a $5.69 loss per bo and a $0.48 gain per mcf, for a 2004 first quarter realized hedging gain of $25.7 million, or $0.33 per mcfe.

The company drilled 118 gross (88 net) operated wells and participated in another 137 gross wells (21 net) operated by other companies during the 2004 first quarter. Chesapeake invested $129 million in the operated wells and $47 million in the non-operated wells. The company's drilling success rate was 92% for operated wells and 99% for non-operated wells.

During the 2004 first quarter, the company replaced its 78.9 bcfe of production by 473%, or 372.8 bcfe at a drilling and acquisition cost of $1.66 per mcfe. Drillbit replacement was 146% and acquisition replacement was 327%. At the end of the first quarter, Chesapeake's estimated proved reserves were 3.5 tcfe.

Key Operational and Financial Statistics for the 2004 First Quarter

The table below summarizes Chesapeake's key statistics during the 2004 first quarter and compares them to the 2003 fourth quarter and the 2003 first quarter:

                                             Three Months Ended:
                                   3/31/04        12/31/03       3/31/03

  Average daily production (in
   mmcfe)                             867             797           631
  Gas as % of total production         89              90            89
  Natural gas production (in bcf)    70.1            66.3          50.4
  Average realized gas price
   ($/mcf) (A)                       5.62            5.15          4.51
  Oil production (in mbbls)         1,465           1,165         1,060
  Average realized oil price
   ($/bo) (A)                       27.10           23.76         27.27
  Natural gas equivalent
   production (in bcfe)              78.9            73.3          56.8
  Gas equivalent realized price
   ($/mcfe) (A)                      5.50            5.03          4.52
  General and administrative
   costs ($/mcfe)                     .10             .10           .09
  Production taxes ($/mcfe)           .19 (D)         .28           .33
  Lease operating expenses ($/mcfe)   .57             .49           .55
  Interest expense ($/mcfe) (A)       .48             .51           .62
  DD&A of oil and gas properties
   ($/mcfe)                          1.52            1.41          1.35
  Operating cash flow ($ in
   millions) (B)                    327.5           262.4         167.7
  Operating cash flow ($/mcfe)       4.15            3.58          2.95
  Ebitda ($ in millions) (C)        348.1           257.8         232.0
  Ebitda ($/mcfe)                    4.41            3.52          4.09
  Net income to common shareholders
   ($ in millions)                  104.4            62.4          70.0

   (A)  includes the effects of realized gains or (losses) from hedging, but
        does not include the effects of unrealized gains or (losses) from
        hedging
   (B)  defined as 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
   (D)  includes pre-tax benefit of $6.8 million, or $0.09 per mcfe, from
        prior period severance tax credits

 Significant Balance Sheet Improvement Achieved during 2004 First Quarter

Since the beginning of 2004, Chesapeake has closed acquisitions totaling $570 million. In conjunction with these acquisitions, the company raised $298 million of common equity and $305 million of 4.125% convertible preferred equity. Chesapeake's debt-to-total capitalization ratio is now 46%, the lowest in its 11 years as a public company.

Additionally, through a series of debt exchanges completed during recent months, Chesapeake has extended the average maturity of its long-term debt to over nine years and has reduced its average fixed interest rate to 7.7%. The company's secured credit facility is currently rated as investment grade and the company believes its business strategy and operational performance will lead to an investment grade credit rating for its unsecured debt in the future.

Chesapeake Updates 2004 Production Forecasts and Hedging Information

Chesapeake's updated 2004 second quarter and full-year 2004 forecasts are attached to this release in an Outlook dated April 26, 2004 labeled Schedule "A". This Outlook has been changed from the Outlook dated March 23, 2004 (attached as Schedule "B" for investors' convenience) to reflect an initial forecast for the 2004 second quarter and a revised forecast for the full-year 2004.

Chesapeake's average daily production in 2004 is expected to exceed 2003's production by approximately 175 mmcfe, or 24%, while average daily production in the 2004 second quarter is expected to exceed 2003's second quarter production by approximately 167 mmcfe, or 23%. In addition, average daily production in the 2004 second quarter is expected to exceed 2004's first quarter production by approximately 40 mmcfe, or 4.6%.

The following table details Chesapeake's hedged oil and natural gas positions:

                  Hedged Positions as of April 26, 2004

                                 Oil                    Natural Gas
  Quarter or Year        % Hedged     $ NYMEX      % Hedged     $ NYMEX
  2004 1Q                    87%       $28.58          99%        $5.97
  2004 2Q                   100%       $30.00          75%        $5.00
  2004 3Q                    96%       $30.32          58%        $4.94
  2004 4Q                    95%       $30.10          47%        $5.13
  2004 Total                 95%       $29.80          69%        $5.35
  2005                        9%       $31.56          27%        $5.03
  2006                       ---          ---          10%        $4.88
  2007                       ---          ---           8%        $4.76

Depending on changes in oil and natural gas futures markets and management's view of underlying oil and natural gas supply and demand trends, Chesapeake may either increase or decrease its hedged positions at any time in the future without notice.

Management Summary

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "Chesapeake generated record results for its shareholders again this quarter, following an especially strong 2003 performance. With the filing of our peer companies' Form 10-K reports for 2003, we have now been able to compare our company's 2003 performance with our peer group's 2003 performance. We hope that you will agree that Chesapeake's performance in 2003 was exceptional:

   --  #1 in stock price appreciation, up 75%;
   --  #1 in proved reserves growth, up 44%;
   --  #1 in production growth, up 48%;
   --  #1 in % of gas production, up 90%;
   --  #1 in shareholders' equity % increase, up 91%;
   --  #1 (tied) for lowest amount of goodwill booked, zero;
   --  #1 in oil and natural gas revenue per mcfe, $4.79;
   --  #1 in lowest G&A per mcfe, $0.09;
   --  #1 in ebitda per mcfe, $3.88;
   --  #2 (tied) for lowest LOE per mcfe, $0.51;
   --  #4 in cash flow per mcfe, $3.37.
   --  CHK's peer companies are:  Apache, Anadarko, Burlington, Cabot,
       Devon, EnCana, EOG, Forest, Kerr-McGee, Noble, Newfield, Pogo,
       Pioneer, Vintage, and XTO.

"Although we obviously can not guarantee a repeat of these rankings in 2004 or in future years, we do believe the combination of Chesapeake's focused product and geographic strategies, value-added risk management strategy, balanced acquisition and drilling programs, high quality assets and low operating costs will enable our company to continue delivering one of the industry's best track records of value creation for years to come."

Conference Call Information

A conference call has been scheduled for Tuesday morning, April 27, 2004 at 9:00 a.m. EDT to discuss this earnings release. The telephone number to access the conference call is 913.981.5572. For those unable to participate in the conference call, a replay will be available from 12:00 p.m. EDT, April 27, 2004 through midnight EDT on Friday, May 14, 2004. The number to access the conference call replay is 719.457.0820 and the passcode is 149305. 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 2003 10-K. 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 independent 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 and interest rate 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 six largest independent U.S. natural gas producers. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent, Permian Basin, South Texas and onshore Texas Gulf Coast regions 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:           March 31, 2004           March 31, 2003
                                $         $/mcfe          $         $/mcfe
  REVENUES:
    Oil and gas sales       419,793         5.32      286,019         5.04
    Oil and gas marketing
     sales                  143,336         1.82       90,308         1.59
      Total Revenues        563,129         7.14      376,327         6.63

  OPERATING COSTS:
    Production expenses      44,803         0.57       31,457         0.55
    Production taxes         14,936         0.19       18,597         0.33
    General and
     administrative           8,166         0.10        5,379         0.09
    Stock based
     compensation             1,869         0.02          ---          ---
    Provision for legal
     settlements                ---          ---          286         0.01
    Oil and gas marketing
     expenses               139,664         1.77       89,358         1.58
    Oil and gas
     depreciation,
     depletion, and
     amortization           119,908         1.52       76,614         1.35
    Depreciation and
     amortization of
     other assets             5,739         0.08        3,684         0.06
      Total Operating
       Costs                335,085         4.25      225,375         3.97

  INCOME FROM OPERATIONS    228,044         2.89      150,952         2.66

  OTHER INCOME (EXPENSE):
    Interest and other
     income                   1,343         0.02          763         0.01
    Interest expense        (46,545)       (0.59)     (37,004)       (0.65)
    Loss on repurchases or
     exchanges of Chesapeake
     debt                    (6,925)       (0.09)         ---          ---
      Total Other Income
       (Expense)            (52,127)       (0.66)     (36,241)       (0.64)

  Income Before Income
   Taxes and Cumulative
   Effect of Accounting
   Change                   175,917         2.23      114,711         2.02

  Income Tax Expense:
    Current                     ---          ---          ---          ---
    Deferred                 63,327         0.80       43,591         0.77
      Total Income Tax
       Expense               63,327         0.80       43,591         0.77


  NET INCOME BEFORE
   CUMULATIVE EFFECT OF
   ACCOUNTING CHANGE,
   NET OF TAX               112,590         1.43       71,120         1.25

  Cumulative Effect of
   Accounting Change,
   Net of Income Tax of
   $1,464,000                   ---          ---        2,389         0.04

  NET INCOME                112,590         1.43       73,509         1.29

  Preferred Stock
   Dividends                 (8,168)       (0.11)      (3,526)       (0.06)

  NET INCOME AVAILABLE
   TO COMMON SHAREHOLDERS   104,422         1.32       69,983         1.23

  EARNINGS PER COMMON SHARE:

    Basic
      Income Before
       Cumulative Effect of
       Accounting Change      $0.44                     $0.34
      Cumulative Effect of
       Accounting Change        ---                      0.01
      Net Income              $0.44                     $0.35

    Assuming dilution
      Income Before
       Cumulative Effect of
       Accounting Change      $0.38                     $0.31
      Cumulative Effect of
       Accounting Change        ---                      0.01
      Net Income              $0.38                     $0.32

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

    Basic                   236,884                   197,608

    Assuming dilution       299,241                   230,672


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

                                                March 31,     December 31,
                                                   2004           2003

  Cash                                            $189,425        $40,581
  Other current assets                             382,043        301,823
    TOTAL CURRENT ASSETS                           571,468        342,404

  Property and equipment (net)                   4,888,923      4,133,117
  Other assets                                      97,071         96,770
    TOTAL ASSETS                                $5,557,462     $4,572,291

  Current liabilities                             $742,572       $513,156
  Long term debt                                 2,012,147      2,057,713
  Asset retirement obligation                       57,476         48,812
  Long term liabilities                             46,280         28,774
  Deferred tax liability                           368,808        191,026
    TOTAL LIABILITIES                            3,227,283      2,839,481

  STOCKHOLDERS' EQUITY                           2,330,179      1,732,810

  TOTAL LIABILITIES & STOCKHOLDERS' EQUITY      $5,557,462     $4,572,291

  COMMON SHARES OUTSTANDING                        240,788        216,784


                      CHESAPEAKE ENERGY CORPORATION
         SUPPLEMENTAL DATA - OIL & GAS SALES AND INTEREST EXPENSE

                                                   Three Months Ended
                                                         March 31,
                                                    2004           2003

  Oil and Gas Sales ($ in thousands):
    Oil sales                                      $48,031        $35,140
    Oil derivatives - realized gains (losses)       (8,330)        (6,238)
    Oil derivatives - unrealized gains (losses)     (6,019)           (77)
      Total oil sales                              $33,682        $28,825

    Gas sales                                     $360,101       $314,050
    Gas derivatives - realized gains (losses)       33,991        (86,620)
    Gas derivatives - unrealized gains (losses)     (7,981)        29,764
      Total gas sales                             $386,111       $257,194

      Total oil and gas sales                     $419,793       $286,019

  Average Sales Price (excluding gains (losses)
   on derivatives):
    Oil ($ per bbl)                                 $32.79         $33.15
    Gas ($ per mcf)                                  $5.14          $6.23
    Gas equivalent ($ per mcfe)                      $5.17          $6.15

  Average Sales Price (excluding unrealized
   gains (losses) on derivatives):
    Oil ($ per bbl)                                 $27.10         $27.27
    Gas ($ per mcf)                                  $5.62          $4.51
    Gas equivalent ($ per mcfe)                      $5.50          $4.52

  Interest Expense ($ in thousands):
    Interest                                       $38,564        $35,704
    Derivatives - realized (gains) losses             (758)          (674)
    Derivatives - unrealized (gains) losses          8,739          1,974
      Total Interest Expense                       $46,545        $37,004


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


  THREE MONTHS ENDED:                           March 31,      March 31,
                                                   2004           2003

  Cash provided by operating activities           $335,733        $99,052

  Cash (used in) investing activities            $(735,434)   $(1,002,289)

  Cash provided by financing activities           $548,545       $693,604


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

                                                 March 31,      March 31,
  THREE MONTHS ENDED:                               2004           2003

  CASH PROVIDED BY OPERATING ACTIVITIES           $335,733        $99,052

  Adjustments:
    Changes in assets and liabilities               (8,216)        68,661

  OPERATING CASH FLOW*                            $327,517       $167,713

   * 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.

                                                  March 31,      March 31,
  THREE MONTHS ENDED:                               2004           2003

  Net income before cumulative effect of
   accounting change                              $112,590        $71,120

  Deferred income tax expense                       63,327         43,591
  Interest expense                                  46,545         37,004
  Depreciation and amortization of other assets      5,739          3,684
  Oil and gas depreciation, depletion and
   amortization                                    119,908         76,614

  EBITDA**                                        $348,109       $232,013

   **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:

                                                  March 31,      March 31,
  THREE MONTHS ENDED:                               2004           2003

  CASH PROVIDED BY OPERATING ACTIVITIES           $335,733        $99,052

  Changes in assets and liabilities                 (8,216)        68,661
  Interest expense, realized                        37,806         35,030
  Unrealized gains (losses) on oil and gas
   derivatives                                     (14,000)        29,687
  Other non-cash items                              (3,214)          (417)

  EBITDA                                          $348,109       $232,013


                      CHESAPEAKE ENERGY CORPORATION
          RECONCILIATION OF ADJUSTED EARNINGS & ADJUSTED EBITDA
                  ($ In 000'S, except per share amounts)

                                                     Three Months Ended
                                                        March 31, 2004

  Net income to common shareholders                        $104,422

  Adjustments, net of tax:
    Unrealized (gains) losses from hedging                   14,553
    Loss on repurchases or exchanges of debt                  4,432

  Adjusted earnings*                                       $123,407

  Adjusted earnings per share assuming dilution               $0.44

  EBITDA                                                   $348,109

  Adjustments, before tax:
    Unrealized (gains) losses from oil and gas hedging       14,000
    Loss on repurchases or exchanges of debt                  6,925

  Adjusted EBITDA*                                         $369,034

   *Adjusted earnings and adjusted EBITDA, both non-GAAP financial measures,
    exclude certain items that management believes affect the comparability
    of operating results.  The Company discloses these non-GAAP financial
    measures as a useful adjunct to GAAP earnings and EBITDA because:
    a.  Management uses adjusted earnings and adjusted EBITDA to evaluate
        the Company's operational trends and performance relative to other
        oil and gas producing companies.
    b.  Adjusted earnings and adjusted EBITDA are more comparable to
        earnings and EBITDA estimates provided by securities analysts.
    c.  Items excluded generally are one-time items, or items whose timing
        or amount cannot be reasonably estimated.  Accordingly, any guidance
        provided by the Company generally excludes information regarding
        these types of items.


                               SCHEDULE "A"

                CHESAPEAKE'S OUTLOOK AS OF APRIL 26, 2004

  Quarter Ending June 30, 2004; 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 April 26, 2004, we are using the following key assumptions in our projections for the second quarter of 2004 and the full-year 2004.

The primary changes from our March 23, 2004 guidance are explained as follows:

    1)  We have replaced our 2004 first quarter forecast with our initial
        forecast for the 2004 second quarter.
    2)  We have updated the projected effects from changes in our hedging
        positions.
    3)  We have included estimates of non-cash expense associated with the
        issuance of restricted stock under stock-based compensation plans.
    4)  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 2004 oil and natural gas prices.

                                         Quarter Ending     Year Ending
                                         June 30, 2004   December 31, 2004

  Estimated Production:
    Oil - Mbo                                 1,540             6,185
    Gas - Bcf                                73 - 74          293 - 299
    Gas Equivalent - Bcfe                    82 - 83          330 - 336
    Daily gas equivalent midpoint - in Mmcfe   907               910
  NYMEX Prices (for calculation of realized
   hedging effects only):
    Oil - $/Bo                                $28.67            $29.45
    Gas - $/Mcf                                $4.96             $5.04
  Estimated Differentials to NYMEX Prices:
    Oil - $/Bo                                -$2.75            -$2.72
    Gas - $/Mcf                               -$0.70            -$0.71
  Estimated Realized Hedging Effects (based
   on expected NYMEX prices above):
    Oil - $/Bo                                 $1.34             $0.57
    Gas - $/Mcf                                $0.13             $0.28
  Operating Costs per Mcfe of Projected
   Production:
    Production expense                     $0.55 - 0.60      $0.55 - 0.60
    Production taxes (generally 7% of O&G
     revenues)                             $0.28 - 0.30      $0.28 - 0.32
    General and administrative             $0.10 - 0.11      $0.10 - 0.11
    Stock based compensation (non-cash)    $0.02 - 0.03      $0.02 - 0.03
    DD&A - oil and gas                     $1.52 - 1.56      $1.52 - 1.60
    Depreciation of other assets           $0.07 - 0.09      $0.07 - 0.09
    Interest expense (A)                   $0.49 - 0.53      $0.45 - 0.50
  Other Income and Expense per Mcfe:
    Marketing and other income             $0.02 - 0.04      $0.02 - 0.04

  Book Tax Rate                                 36%               36%
  Equivalent Shares Outstanding:
    Basic                                      241 mm           247 mm
    Diluted                                    304 mm           305 mm

  Capital Expenditures:
    Drilling, leasehold and seismic         $200 - $225 mm    $850 - $900 mm

   (A)  Does not include gains or losses on interest rate derivatives
        (SFAS 133).

  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)   For swap instruments, we receive a fixed price for the hedged
         commodity and pay a floating market price, as defined in each
         instrument, to the counterparty.  The fixed-price payment and the
         floating-price payment are netted, resulting in a net amount due to
         or from the counterparty.
   (ii)  For cap-swaps, Chesapeake receives a fixed price and pays a
         floating market price.  The fixed price received by Chesapeake
         includes a premium in exchange for a "cap" limiting the
         counterparty's exposure.  In other words, there is no limit to
         Chesapeake's exposure but there is a limit to the downside exposure
         of the counterparty.
   (iii) Basis protection swaps are arrangements that guarantee a price
         differential of oil or gas from a specified delivery point.
         Chesapeake receives a payment from the counterparty if the price
         differential is greater than the stated terms of the contract and
         pays the counterparty if the price differential is less than the
         stated terms of the contract.

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, lock in the gain or loss on the transaction.

Chesapeake enters into oil and natural gas derivative transactions in order to mitigate a portion of its exposure to adverse market changes in oil and natural gas prices. Accordingly, associated gains or loses from the derivative transactions are reflected as adjustments to oil and gas sales. All realized gains and losses from oil and natural gas derivatives are included in oil and gas sales in the month of related production. Pursuant to SFAS 133, certain derivatives do not qualify for designation as cash flow hedges. Changes in the fair value of these non-qualifying derivatives that occur prior to their maturity (i.e. because of temporary fluctuations in value) are reported currently in the consolidated statement of operations as unrealized gains (losses) within oil and gas sales.

Following provisions of SFAS 133, changes in the fair value of derivative instruments designated as cash flow hedges, to the extent effective in offsetting cash flows attributable to hedged risk, are recorded in other comprehensive income until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized currently in oil and natural gas sales.

  The company currently has in place the following natural gas swaps:

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

  2004:
  1st Qtr    69.5   $5.94      $0.03        $5.97       70.1           99%
  2nd Qtr    55.0   $5.00      $0.00        $5.00       73.5           75%
  3rd Qtr    43.7   $4.94      $0.00        $4.94       75.0           58%
  4th Qtr    35.4   $5.13      $0.00        $5.13       76.0           47%
  Total
   2004     203.6   $5.34      $0.01        $5.35      294.6           69%

  Total
   2005      81.2   $5.03      $0.00        $5.03      305.0           27%

  Total
   2006      32.9   $4.88      $0.00        $4.88      315.0           10%

  Total
   2007      25.6   $4.76      $0.00        $4.76      325.0            8%

  TOTALS
  2004-2007 343.3   $5.18      $0.01        $5.19    1,239.6           28%

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

                                               Assuming Gas
                     Annual                     Production
                Volume in Bcf's  NYMEX less:   in Bcf's of:   % Hedged

  2004                157.4          0.173        294.6          53%
  2005                109.5          0.156        305.0          36%
  2006                 47.5          0.155        315.0          15%
  2007                 63.9          0.166        325.0          20%
  2008                 64.0          0.166        335.0          19%
  2009                 37.0          0.160        345.0          11%
  Totals              479.3        $0.164*      1,919.6          25%

   * weighted average

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

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

  Q1 - 2004*          1,270         $28.58          1,465          87%

  Q2 - 2004*          1,540         $30.00          1,540         100%

  Q3 - 2004*          1,519         $30.32          1,590          96%

  Q4 - 2004*          1,518         $30.10          1,590          95%

  Total 2004*         5,847         $29.80          6,185          95%

  Total 2005*           548         $31.56          6,360           9%

   *Swaps with a knockout price of $21.00, with the exception of 2,000 bopd
    in 2004 with a knockout price of $24.00, with an additional 1,000 bopd
    in Q2 2004 at $24.00, 1,000 bopd in Q3 and Q4 2004 with a knockout price
    of $23.00, 2,000 bopd for 1/04 and 3-8/04 at a knockout price of $22.00,
    3,000 bopd in 2/04 at a knockout price of $22.00 and 1,500 bopd from
    4/04 through 12/05 at a knockout price of $26.00.


                               SCHEDULE "B"

            CHESAPEAKE'S PREVIOUS OUTLOOK AS OF MARCH 23, 2004
                      (PROVIDED FOR REFERENCE ONLY)

              NOW SUPERSEDED BY OUTLOOK AS OF APRIL 26, 2004

  Quarter Ending March 31, 2004; 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 March 23, 2004, we are using the following key assumptions in our projections for the first quarter of 2004 and the full-year 2004.

The primary changes from our February 23, 2004 guidance are explained as follows:

   1)  We have increased our full-year 2004 production forecast to reflect
       the four acquisitions announced today and better than expected recent
       drilling results.
   2)  We have updated the projected effects from changes in our hedging
       positions.
   3)  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 2004 oil and natural gas prices.
   4)  The equivalent shares outstanding numbers did not change as a result
       of today's announced preferred stock offering because the conversion
       structure of the preferred stock is not expected to cause an
       immediate increase in fully diluted shares.


                                        Quarter Ending        Year Ending
                                        March 31, 2004     December 31, 2004
  Estimated Production:
    Oil - Mbo                                 1,450               6,100
    Gas - Bcf                                69 - 70            293 - 299
    Gas Equivalent - Bcfe                    78 - 79            330 - 336
    Daily gas equivalent midpoint - in Mmcfe   863                 910
  NYMEX Prices (for calculation of
   realized hedging effects only):
    Oil - $/Bo                                $33.58              $28.06
    Gas - $/Mcf                                $5.69               $4.99
  Estimated Differentials to NYMEX Prices:
    Oil - $/Bo                                -$2.69              -$2.55
    Gas - $/Mcf                               -$0.66              -$0.61
  Estimated Realized Hedging Effects (based
   on expected NYMEX prices above):
    Oil - $/Bo                                -$4.56              +$0.86
    Gas - $/Mcf                               +$0.43              +$0.27
  Operating Costs per Mcfe of Projected
   Production:
    Production expense                     $0.55 - 0.60        $0.55 - 0.60
    Production taxes (generally 7% of
     O&G revenues)                         $0.32 - 0.34        $0.28 - 0.32
    General and administrative (A)         $0.10 - 0.11        $0.10 - 0.11
    DD&A - oil and gas                     $1.48 - 1.52        $1.50 - 1.55
    Depreciation of other assets           $0.07 - 0.09        $0.07 - 0.09
    Interest expense (B)                   $0.49 - 0.53        $0.45 - 0.50
  Other Income and Expense per Mcfe:
    Marketing and other income             $0.02 - 0.04        $0.02 - 0.04

  Book Tax Rate                                 38%                 38%
  Equivalent Shares Outstanding:
    Basic                                     240,000 m          247,000 m
    Diluted                                   302,000 m          304,000 m

  Capital Expenditures:
    Drilling, leasehold and seismic         $175 - $200 mm    $750 - $800 mm

   (A)  Does not include non-cash expense associated with the issuance of
        restricted stock.
   (B)  Does not include gains or losses on interest rate derivatives
        (SFAS 133).

  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)   For swap instruments, we receive a fixed price for the hedged
         commodity and pay a floating market price, as defined in each
         instrument, to the counterparty.  The fixed-price payment and the
         floating-price payment are netted, resulting in a net amount due to
         or from the counterparty.
   (ii)  For cap-swaps, Chesapeake receives a fixed price and pays a
         floating market price.  The fixed price received by Chesapeake
         includes a premium in exchange for a "cap" limiting the
         counterparty's exposure.  In other words, there is no limit to
         Chesapeake's exposure but there is a limit to the downside exposure
         of the counterparty.
   (iii) Basis protection swaps are arrangements that guarantee a price
         differential of oil or gas from a specified delivery point.
         Chesapeake receives a payment from the counterparty if the price
         differential is greater than the stated terms of the contract and
         pays the counterparty if the price differential is less than the
         stated terms of the contract.

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, lock in the gain or loss on the transaction.

Chesapeake enters into oil and natural gas derivative transactions in order to mitigate a portion of its exposure to adverse market changes in oil and natural gas prices. Accordingly, associated gains or loses from the derivative transactions are reflected as adjustments to oil and gas sales. All realized gains and losses from oil and natural gas derivatives are included in oil and gas sales in the month of related production. Pursuant to SFAS 133, certain derivatives do not qualify for designation as cash flow hedges. Changes in the fair value of these non-qualifying derivatives that occur prior to their maturity (i.e. because of temporary fluctuations in value) are reported currently in the consolidated statement of operations as unrealized gains (losses) within oil and gas sales.

Following provisions of SFAS 133, changes in the fair value of derivative instruments designated as cash flow hedges, to the extent effective in offsetting cash flows attributable to hedged risk, are recorded in other comprehensive income until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized currently in oil and natural gas sales.

  The company currently has in place the following natural gas swaps:

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

  2004:
  1st Qtr    69.5   $5.94      $0.03       $5.97        69.5         98%
  2nd Qtr    53.2   $4.97      $0.00       $4.97        74.0         72%
  3rd Qtr    40.9   $4.87      $0.00       $4.87        75.0         54%
  4th Qtr    32.7   $5.05      $0.00       $5.05        76.0         43%
  Total
   2004     196.3   $5.31      $0.01       $5.32       294.5         66%

  Total
   2005      81.2   $5.03      $0.00       $5.03       305.0         27%

  Total
   2006      32.9   $4.88      $0.00       $4.88       315.0         10%

  Total
   2007      25.6   $4.76      $0.00       $4.76       325.0          8%

  TOTALS
  2004-2007 336.0   $5.15      $0.01       $5.16     1,239.5         27%

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

                                                   Assuming
                     Annual                     Gas Production
                Volume in Bcf's   NYMEX less:    in Bcf's of:    % Hedged

  2004                157.4           0.173          290.5          54%
  2005                109.5           0.156          305.0          36%
  2006                 47.5           0.155          315.0          15%
  2007                 63.9           0.166          325.0          20%
  2008                 64.0           0.166          335.0          19%
  2009                 37.0           0.160          345.0          11%
  Totals              479.3          $0.164*       1,915.5          25%

   * weighted average

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

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

  Q1 - 2004*        1,270          $28.58           1,390            91%

  Q2 - 2004*        1,419          $29.63           1,575            90%

  Q3 - 2004*        1,182          $29.47           1,590            74%

  Q4 - 2004*        1,058          $29.15           1,590            67%

  Total 2004*       4,929          $29.22           6,145            80%

  Total 2005*         548          $31.56           6,360             9%

   *Swaps with a knockout price of $21.00, with the exception of 2,000 bopd
    in 2004 with a knockout price of $24.00, with an additional 1,000 bopd
    in Q2 2004 at $24.00, 1,000 bopd in Q3 and Q4 2004 with a knockout price
    of $23.00, 2,000 bopd for 1/04 and 3-8/04 at a knockout price of $22.00,
    3,000 bopd in 2/04 at a knockout price of $22.00 and 1,500 bopd from
    4/04 through 12/05 at a knockout price of $26.00.

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