Chesapeake Energy Corporation Announces Acquisition of Barnett Shale Natural Gas Property From Hallwood Energy Corporation for $277 Million
Company to Acquire 18,000 Acre North Block Property in Johnson County, Texas, Located Just North of Chesapeake's Existing 44%-Owned 30,000 Acre South Block Joint Venture With Hallwood
Transaction Includes Production of 25 Mmcfe Per Day and 280 Bcfe of Internally Estimated Reserves, Consisting of 135 Bcfe of Proved Reserves and 145 Bcfe of Probable and Possible Reserves
Acquisition Boosts Chesapeake's Production Forecast By 3.6% for 2005 and 5.8% for 2006 as Estimated Production on Acquired Property Increases to 40 Mmcfe per Day in 2005 and 70 Mmcfe per Day in 2006
PRNewswire-FirstCall
OKLAHOMA CITY

Chesapeake today announced that it has entered into an agreement with Hallwood Energy Corporation to acquire Hallwood's 18,000 acre North Block property in Johnson County, Texas for $277 million in cash. This property is located immediately north of Hallwood's 30,000 acre South Block property, in which Chesapeake acquired a 44% working interest through its June 2002 acquisition of Canaan Energy Corporation.

In this transaction, Chesapeake anticipates acquiring an internally estimated 135 billion cubic feet of natural gas equivalent proved reserves (bcfe), 145 bcfe of probable and possible reserves and net production of approximately 25 million cubic feet of natural gas equivalent production (mmcfe) per day from 31 vertical wells and 11 horizontal wells. Chesapeake has identified approximately 70 proved undeveloped and 90 probable and possible horizontal drilling locations on the 18,000 acre North Block that it believes can be drilled at an average cost of approximately $2.2 million per well to develop estimated ultimate reserves (EUR) of 2.5 bcfe per well. Pro forma for this acquisition, Chesapeake's proved oil and natural gas reserves will increase to an internally estimated 4.6 trillion cubic feet of natural gas equivalent (tcfe) as of September 30, 2004.

After allocating $98 million of the $277 million purchase price to undeveloped leasehold, Chesapeake's acquisition cost for the 135 bcfe of internally estimated proved reserves will be $1.33 per thousand cubic feet of natural gas equivalent (mcfe). Including $303 million of anticipated future drilling costs to fully develop the proved, probable and possible (3P) reserves, the company estimates that its all-in acquisition cost for the 280 bcfe of 3P reserves will be $2.07 per mcfe. In addition, Chesapeake has agreed to purchase Hallwood's North Block gas gathering, compression and water disposal assets for $15 million.

The North Block proved reserves have a reserves-to-production index of 14.8 years, are 100% gas, are 15% proved developed, have current lease operating expenses of $0.22 per mcfe, have severance taxes of 1.3% of the wellhead revenue value and will be 100% Chesapeake-operated. The property's very low lease operating expenses (approximately $0.53 per mcfe below the industry average) and unusually low severance taxes (approximately $0.37 below the standard 7.5% Texas severance tax rate at $6.00 per mcf because of severance tax reductions applicable to certain types of newly drilled wells in Texas) create an approximate $0.90 per mcfe economic advantage over typical Mid-Continent natural gas properties.

Through the use of a three-rig drilling program, the company believes it can increase gas production on the acquired property from 25 mmcfe per day in December 2004 to at least 55 mmcfe per day by December 2005 and to at least 85 mmcfe per day by December 2006. If these production increases are achieved, Chesapeake estimates that its average daily production in 2005 and 2006 will increase by 40 and 70 mmcfe per day, respectively (see Chesapeake's updated Outlook as of November 30, 2004 attached as Exhibit "A"). The company has hedged the current 25 mmcfe per day of acquired production at NYMEX gas prices of $7.15 per mmbtu and $6.63 per mmbtu for 2005 and 2006, respectively, well above the gas prices used to evaluate the property.

The acquisition is expected to close on December 15, 2004 and is subject to customary closing conditions. The company intends to finance the acquisition using a portion of the proceeds from a new $600 million private issue of senior notes.

Hallwood is a private company and was advised in the sale by Albrecht & Associates, Inc. of Houston, Texas.

Management Comment

Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are pleased to announce today's acquisition of the Hallwood North Block acreage for several reasons. First, we are building our Barnett Shale ownership and creating economies of scale by leveraging off our acquisition of Canaan Energy Corporation in June 2002. In that $120 million transaction we inherited an initial Barnett Shale leasehold position in Johnson County, Texas, to which we initially gave no value. Today it appears that Chesapeake's South Block Barnett Shale position may be worth more than what we paid for the entire Canaan transaction.

"Second, Chesapeake is well positioned to continue Hallwood's successful production ramp-up currently underway, having worked closely with Hallwood for two years in the South Block and because of our extensive experience with horizontal drilling (more than 285 horizontal wells drilled in Texas since 1990) and 3-D seismic (more than 9.0 million acres owned). Hallwood's use of horizontal drilling, innovative completion techniques and 3-D seismic information during the past few years has been very effective on both the 18,000 North Block property and the 30,000 acre South Block property.

"Finally, we believe we have been conservative in our reserve estimates for the acquired property, both with regard to our estimated EUR's of 2.5 bcfe per horizontal well and to our planned PUD drilling pattern of 140 acres and 2,000' standoffs for horizontal wellbores. Over time, we are hopeful that our reserve estimates can increase and that our well spacing can decrease, leading to significantly higher recoverable proved reserves than currently projected. We look forward to adding further value to this prolific gas-producing area of the Mid-Continent region in the years to come."

Conference Call Information

A conference call has been scheduled for Wednesday morning, December 1, 2004 at 9:00 a.m. EST to discuss this release. The telephone number to access the conference call is 913.981.5592. For those unable to participate in the conference call, a replay will be available from 12:00 p.m. EST, December 1, 2004 through midnight EST on December 14, 2004. The number to access the conference call replay is 719.457.0820 and the passcode is 915998. The conference call will also be simulcast live on the Internet and can be accessed at http://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.

Factors that could cause actual results to differ materially from expected results are described under "Risk Factors" in our prospectus dated September 10, 2004 filed with the Securities and Exchange Commission on September 10, 2004. They include the volatility of oil and gas prices; adverse effects our substantial indebtedness and preferred stock obligations could have on our operations and future growth; our ability to compete effectively against strong independent oil and gas companies and majors; possible financial losses and significant collateral requirements 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 and companies; our ability to replace reserves; the availability of capital; writedowns of oil and gas carrying values if commodity prices decline; environmental and other claims in excess of insured amounts resulting from drilling and production operations; and the loss of key personnel. 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.

Our production forecasts are dependent upon many assumptions, including estimates of production decline rates from existing wells and the outcome of future drilling activity. Also, our internal estimates of reserves, particularly those in the property proposed to be acquired where we may have limited review of data or experience with the reserves, may be subject to revision and may be different from estimates by our external reservoir engineers at year-end. Although we believe the expectations, estimates 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 and data or by known or unknown risks and uncertainties.

The SEC has generally permitted oil and gas companies, in filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use the terms "probable" and "possible" reserves or other descriptions of volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC's guidelines may prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the company.

The announcement of a proposed debt financing in this press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities. The debt securities will likely not be registered under the Securities Act of 1933 or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and state laws.

Chesapeake Energy Corporation is the sixth largest independent producer of natural gas 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, Permian Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States. The company's Internet address is http://www.chkenergy.com/ .

                               SCHEDULE "A"

               CHESAPEAKE'S OUTLOOK AS OF NOVEMBER 30, 2004

Quarter Ending December 31, 2004; Year Ending December 31, 2004; Year Ending December 31, 2005; Year Ending December 31, 2006.

We have adopted a policy of periodically providing investors with guidance on certain factors that affect our future financial performance. As of November 30, 2004, we are using the following key assumptions in our projections for the fourth quarter of 2004, the full-year 2004, the full-year 2005 and the full-year 2006.

The primary changes from our November 1, 2004 Outlook are explained as follows:

   1)  We have updated our previous production forecasts for 2005 and 2006
       to reflect increases in production of 40 mmcfe per day in 2005 and
       70 mmcfe per day in 2006 as a result of the announced acquisition of
       Hallwood Energy Corporation.  This increases our full-year 2005
       production forecast by 3.6% to a mid-point of 1,155 mmcfe per day and
       our 2006 production forecast by 5.8% to a mid-point of 1,270 mmcfe
       per day.
   2)  We have increased capital expenditures by $50 million in each of 2005
       and 2006 to reflect increased drilling activity planned on the
       Hallwood North Block property.
   3)  We have updated the projected effects from changes in our hedging
       positions since our November 1, 2004 Outlook.
   4)  We have included our expectations for future NYMEX oil and gas prices
       to illustrate hedging effects only.
   5)  We have adjusted equivalent shares outstanding to reflect i) the
       conversion of our 6.75% preferred stock into common shares on
       November 22, 2004, ii) a recent private exchange of 600,000 shares of
       our 6.0% preferred stock for 3.225 million of our common shares, and
       iii) our pending tender offer to exchange our remaining 6.0%
       preferred stock for an estimated 21.2 million common shares.


                    Quarter Ending  Year Ending   Year Ending   Year Ending
                      December 31,  December 31,  December 31,  December 31,
                           2004          2004          2005          2006

  Estimated
   Production:

    Oil - Mbo               1,588         6,560         6,600         6,600
    Gas - Bcf           88.5 - 89.5   317 - 319     379 - 387     418 - 428
    Gas Equivalent
     - Bcfe               98 - 99     356 - 358     418 - 426     458 - 468

    Daily gas
     equivalent
     midpoint - in
     Mmcfe                  1,069           975         1,155         1,270

  NYMEX Prices (for
   calculation of
   realized hedging
   effects only):
    Oil - $/Bo             $46.67        $41.00        $40.00        $36.00
    Gas - $/Mcf             $6.60         $6.01         $6.00         $6.00

  Estimated
   Differentials to
   NYMEX Prices:
    Oil - $/Bo             -$2.75        -$2.65        -$2.75        -$2.75
    Gas - $/Mcf            -$0.75        -$0.70        -$0.70        -$0.70


  Estimated
   Realized Hedging
   Effects (based
   on expected NYMEX
   prices above):

    Oil - $/Bo            -$15.85       -$10.19         $0.06         $0.00

    Gas - $/Mcf            -$0.53        -$0.23         $0.05        -$0.01

  Operating Costs
   per Mcfe of
   Projected
   Production:
    Production
     expense         $0.57 - 0.62  $0.57 - 0.62  $0.62 - 0.67  $0.68 - 0.72
    Production taxes
     (generally
      7% of O&G
      revenues)      $0.40 - 0.44  $0.28 - 0.33  $0.38 - 0.40  $0.38 - 0.40
    General and
     administrative  $0.10 - 0.11  $0.10 - 0.11  $0.10 - 0.11  $0.11 - 0.12
    Stock based
     compensation
     (non-cash)      $0.02 - 0.04  $0.02 - 0.04  $0.04 - 0.06  $0.09 - 0.10
    DD&A - oil
     and gas         $1.65 - 1.70  $1.60 - 1.65  $1.65 - 1.75  $1.75 - 1.85
    Depreciation of
     other assets    $0.08 - 0.10  $0.08 - 0.10  $0.09 - 0.11  $0.10 - 0.12
    Interest
     expense(a)      $0.45 - 0.49  $0.45 - 0.49  $0.43 - 0.47  $0.43 - 0.47
  Other Income and
   Expense per Mcfe:
    Marketing and
     other income    $0.02 - 0.04  $0.02 - 0.04  $0.02 - 0.04  $0.02 - 0.04

  Book Tax Rate           36%           36%           36%           36%

  Equivalent Shares
   Outstanding:

    Basic               279 mm        254 mm        313 mm        316 mm
    Diluted             347 mm        327 mm        351 mm        354 mm

  Capital
   Expenditures:
    Drilling,
     leasehold and
     seismic          $300 - $325    $1,100 -      $1,250 -      $1,350 -
                          mm        $1,150 mm     $1,350 mm     $1,450 mm

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


  Commodity Hedging Activities

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

  2004:
  1st Qtr          69.5    $5.94    $0.03     $5.97       70.1        99%
  2nd Qtr          62.2    $5.15    $0.00     $5.15       76.5        81%
  3rd Qtr(1)       70.7    $5.49   -$0.09     $5.40       83.2        85%
  4th Qtr(1)       76.5    $5.88   -$0.11     $5.77       89.0        86%
  Total 2004      278.9    $5.63   -$0.05     $5.58      318.8        88%

  2005:
  1st Qtr          60.6    $6.89   -$0.11     $6.78       91.5        66%
  2nd Qtr          34.9    $5.97   -$0.30     $5.67       94.5        37%
  3rd Qtr          30.8    $5.96   -$0.35     $5.61       97.5        32%
  4th Qtr          21.6    $6.10   -$0.50     $5.60       99.5        22%
  Total 2005(1)   147.9    $6.36   -$0.26     $6.10      383.0        39%

  Total 2006(1)(2) 32.0    $6.62   -$0.76     $5.86      423.0         8%

  Total 2007(2)     ---      ---      ---       ---      450.0        ---

  TOTALS
  2005-2007       179.9    $6.41   -$0.35     $6.06    1,256.0        14%

   (1)  Certain hedging arrangements include swaps with knockout prices
        ranging from $3.50 to $5.25 covering 25.4 bcf in 2004, $3.75 to
        $5.00 covering 52.9 bcf in 2005 and $3.75 to $5.25 covering 21.1 bcf
        in 2006.

   (2)  Swaps covering 25.6 bcf have been locked for 2007.  This will result
        in the recognition of $11.6 million of losses in 2007 when the
        hedging arrangements settle.

   (3)  Not shown above are collars covering 1.1 bcf and 4.4 bcf of
        production in Q4 2004 and in 2005, respectively, at a weighted
        average floor and ceiling of $3.10 and $4.44.  In addition, call
        options covering 10.2 bcf and 7.3 bcf of production in Q4 2004 and
        in 2005 at a weighted average price of $6.31 and $6.00 are not
        included in the table above.

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

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

  2004                     157.4         0.17        318.8          49%
  2005                     186.1         0.26        383.0          49%
  2006                     124.1         0.31        423.0          29%
  2007                     118.7         0.27        450.0          26%
  2008                     108.0         0.25        475.0          23%
  2009                      80.3         0.28        500.0          16%

  Totals                   774.6        $0.25      2,549.8          30%

   * 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 mbo's      Strike Price  in mbo's of:  Production

  Q1 - 2004            1,270           $28.58        1,465          87%
  Q2 - 2004            1,540           $30.00        1,673          92%
  Q3 - 2004(1)         1,519           $30.32        1,834          83%
  Q4 - 2004(1)         1,518           $30.10        1,588          96%
  Total 2004(1)        5,847           $29.80        6,560          89%
  Q1 - 2005              855           $41.76        1,650          52%
  Q2 - 2005              865           $41.63        1,650          52%
  Q3 - 2005              138           $31.16        1,650           8%
  Q4 - 2005              138           $30.62        1,650           8%
  Total 2005(1)        1,996           $40.20        6,600          30%

   (1)  Certain hedging arrangements include swaps with knockout prices
        ranging from $21.00 to $26.00 covering 2,240 mbo in 2004 and
        knockout prices ranging from $26.00 to $34.00 covering 1,996 mbo in
        2005.


                               SCHEDULE "B"

           CHESAPEAKE'S PREVIOUS OUTLOOK AS OF NOVEMBER 1, 2004
                      (PROVIDED FOR REFERENCE ONLY)

            NOW SUPERSEDED BY OUTLOOK AS OF NOVEMBER 30, 2004

Quarter Ending December 31, 2004; Year Ending December 31, 2004; Year Ending December 31, 2005; Year Ending December 31, 2006.

We have adopted a policy of periodically providing investors with guidance on certain factors that affect our future financial performance. As of November 1, 2004, we are using the following key assumptions in our projections for the fourth quarter of 2004, the full-year 2004, the full-year 2005 and the full-year 2006.

The primary changes from our July 26, 2004 Outlook are explained as follows:

   1)  We have deleted our 2004 third quarter forecast and have updated our
       forecasts for the 2004 fourth quarter, the full-year 2004 and full-
       year 2005 forecasts and have provided our initial 2006 forecast.
   2)  We have updated our previous production forecast for the full-year
       2004 to reflect actual third quarter 2004 production, which exceeded
       the mid-point of our guidance by 24 mmcfe per day, or 2.4%.  In
       addition, we have revised upward our fourth quarter 2004 production
       forecast by 20 mmcfe per day, or 2.0%, from the mid-point of our
       previous guidance, ii) our full-year 2004 production forecast by
       8 mmcfe per day, or 0.8%, from the mid-point of our previous
       guidance, iii) our full-year 2005 forecast by 33 mmcfe per day, or
       3.0%, from the mid-point of our previous guidance, all to account for
       better than expected 2004 drilling results.  The mid-point of our
       initial 2006 production forecast is 438 bcfe, or 1,200 mmcfe per day,
       a projected increase of 7.6% over the midpoint of our revised 2005
       forecast and 23.1% above the mid-point of our revised 2004 production
       forecast.
   3)  We have updated the projected effects from changes in our hedging
       positions since our July 26, 2004 Outlook.
   4)  We have included our expectations for future NYMEX oil and gas prices
       to illustrate hedging effects only.
   5)  For ease of reconciliation, please note that our first quarter 2004
       production was 78.9 bcfe, our second quarter 2004 production was
       86.5 bcfe, our third quarter production was 94.2 bcfe and our first
       nine months 2004 production was 259.7 bcfe.  Our July 26, 2004
       Outlook forecasted a third quarter 2004 production range of 91.5 to
       92.5 bcfe and a full-year 2004 production range of 353 to 355 bcfe.
       The differences are attributable to better than expected 2004
       drilling results.


                    Quarter Ending  Year Ending   Year Ending   Year Ending
                      December 31,  December 31,  December 31,  December 31,
                           2004          2004          2005          2006

  Estimated
   Production:
    Oil - Mbo             1,588          6,560         6,600         6,600
    Gas - Bcf          88.5 - 89.5     317 - 319     364 - 372     393 - 403
    Gas Equivalent
     - Bcfe              98 - 99       356 - 358     403 - 411     433 - 443

    Daily gas
     equivalent
     midpoint -
     in Mmcfe               1,069           975         1,115         1,200

  NYMEX Prices
   (for calculation
    of realized
    hedging effects
    only):
    Oil - $/Bo             $46.67        $41.00        $40.00        $36.00
    Gas - $/Mcf             $6.60         $6.01         $6.00         $6.00

  Estimated
   Differentials to
   NYMEX Prices:
    Oil - $/Bo             -$2.75        -$2.65        -$2.75        -$2.75

    Gas - $/Mcf            -$0.75        -$0.70        -$0.70        -$0.70

  Estimated Realized
   Hedging Effects
   (based on expected
   NYMEX prices
   above):

    Oil - $/Bo            -$15.85       -$10.19         $0.06         $0.00

    Gas - $/Mcf            -$0.53        -$0.23         $0.00        -$0.04

  Operating Costs
   per Mcfe of
   Projected
   Production:
    Production
     expense          $0.57 - 0.62  $0.57 - 0.62  $0.62 - 0.67  $0.68 - 0.72
    Production
     taxes
     (generally
      7% of O&G
      revenues)       $0.40 - 0.44  $0.28 - 0.33  $0.38 - 0.40  $0.38 - 0.40
    General and
     administrative   $0.10 - 0.11  $0.10 - 0.11  $0.10 - 0.11  $0.11 - 0.12
    Stock based
     compensation
     (non-cash)       $0.02 - 0.04  $0.02 - 0.04  $0.04 - 0.0   $0.09 - 0.10
    DD&A - oil
     and gas          $1.65 - 1.70  $1.60 - 1.65  $1.65 - 1.75  $1.75 - 1.85
    Depreciation of
     other assets     $0.08 - 0.10  $0.08 - 0.10  $0.09 - 0.11  $0.10 - 0.12
    Interest
     expense(a)       $0.45 - 0.49  $0.45 - 0.49  $0.43 - 0.47  $0.43 - 0.47
  Other Income and
   Expense per Mcfe:
    Marketing and
     other income     $0.02 - 0.04  $0.02 - 0.04  $0.02 - 0.04  $0.02 - 0.04

  Book Tax Rate            36%           36%           36%           36%

  Equivalent Shares
   Outstanding:
    Basic                279 mm        254 mm        288 mm        290 mm
    Diluted              347 mm        317 mm        349 mm        352 mm

  Capital Expenditures:
    Drilling,
     leasehold and
     seismic           $300 - $325    $1,100 -      $1,200 -     $1,300 -
                           mm         $1,150 mm     $1,300 mm    $1,400 mm

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


  Commodity Hedging Activities

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

  2004:
  1st Qtr          69.5      $5.94    $0.03     $5.97      70.1        99%
  2nd Qtr          62.2      $5.15    $0.00     $5.15      76.5        81%
  3rd Qtr(1)       70.7      $5.49   -$0.09     $5.40      83.2        85%
  4th Qtr(1)       76.5      $5.88   -$0.11     $5.77      89.0        86%
  Total 2004      278.9      $5.63   -$0.05     $5.58     318.8        88%

  2005:
  1st Qtr          56.1      $6.82   -$0.17     $6.65      92.0        61%
  2nd Qtr          30.4      $5.86   -$0.35     $5.51      92.0        33%
  3rd Qtr          26.2      $5.77   -$0.41     $5.36      92.0        28%
  4th Qtr          17.0      $5.85   -$0.63     $5.22      92.0        18%
  Total 2005(1)   129.7      $6.26   -$0.30     $5.96     368.0        35%

  Total 2006(1)(2) 13.8      $6.64   -$1.77     $4.87     398.0         3%

  Total 2007(2)     ---        ---      ---       ---     430.0        ---

  TOTALS
  2005-2007       143.5      $6.30   -$0.44     $5.86   1,196.0        12%

   (1)  Certain hedging arrangements include swaps with knockout prices
        ranging from $3.50 to $5.25 covering 25.4 bcf in 2004, $3.75 to
        $5.00 covering 52.9 bcf in 2005 and $3.75 to $5.25 covering 21.1 bcf
        in 2006.

   (2)  Swaps covering 25.6 bcf have been locked for 2007.  This will result
        in the recognition of $11.6 million of losses in 2007 when the
        hedging arrangements settle.

   (3)  Not shown above are collars covering 1.1 bcf and 4.4 bcf of
        production in Q4 2004 and in 2005, respectively, at a weighted
        average floor and ceiling of $3.10 and $4.44.  In addition, call
        options covering 10.2 bcf and 7.3 bcf of production in Q4 2004 and
        in 2005 at a weighted average price of $6.31 and $6.00 are not
        included in the table above.

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

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

  2004                     157.4         0.17        318.8          49%
  2005                     175.2         0.25        368.0          48%
  2006                     113.1         0.30        398.0          28%
  2007                     107.7         0.26        430.0          25%
  2008                     108.0         0.25        460.0          23%
  2009                      80.3         0.28        490.0          16%

  Totals                   741.7        $0.26      2,464.8          30%

   * 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 mbo's      Strike Price  in mbo's of:  Production

  Q1 - 2004            1,270           $28.58        1,465          87%
  Q2 - 2004            1,540           $30.00        1,673          92%
  Q3 - 2004(1)         1,519           $30.32        1,834          83%
  Q4 - 2004(1)         1,518           $30.10        1,588          96%

  Total 2004(1)        5,847           $29.80        6,560          89%

  Q1 - 2005              855           $41.76        1,650          52%
  Q2 - 2005              865           $41.63        1,650          52%
  Q3 - 2005              138           $31.16        1,650           8%
  Q4 - 2005              138           $30.62        1,650           8%

  Total 2005(1)        1,996           $40.20        6,600          30%

   (1)  Certain hedging arrangements include swaps with knockout prices
        ranging from $21.00 to $26.00 covering 2,240 mbo in 2004 and
        knockout prices ranging from $26.00 to $34.00 covering 1,996 mbo in
        2005.

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