Full Description

Chesapeake Energy Corporation (Chesapeake) is a producer of natural gas in the United States. The Company own interests in approximately 41,200 producing natural gas and oil wells that are producing approximately 2.3 billion cubic feet equivalent (bcfe) per day, 92% of which is natural gas. As of December 31, 2008,Chesapeake was focusing on discovering, developing and acquiring conventional and unconventional natural gas reserves onshore in the United States primarily in the Big 4 natural gas shale plays: the Barnett Shale in the Forth Worth Basin of north-central Texas, the Haynesville Shale in the Ark-La-Tex area of northwestern Louisiana and East Texas, the Fayetteville Shale in the Arkoma Basin of central Arkansas and the Marcellus Shale in the northern Appalachian Basin of West Virginia, Pennsylvania and New York. It also has operations in various other plays, both conventional and unconventional, in the Mid-Continent, Appalachian Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States. As of December 31, 2008, Chesapeake had 12.051 trillion cubic feet equivalent (tcfe), of proved reserves, of which 94% were natural gas, and all of which were onshore in the United States. During the year ended December 31, 2008, it produced an average of 2.303 bcfe per day.

In August 2008, Chesapeake announced that it has closed the sale of its Arkoma Basin Woodford Shale assets to BP America Inc. In June 2008, Goodrich Petroleum Corporation and Chesapeake announced that they have entered into a joint venture to develop Goodrich Petroleum Corporation’s Haynesville Shale acreage in the Bethany-Longstreet and Longwood fields of Caddo and DeSoto Parishes, Louisiana.

During 2008, the Company drilled 1,819 gross (1,491 net) operated wells and participated in another 1,857 gross (242 net) wells operated by other companies. During 2008, it entered into joint venture arrangements that monetized a portion of its investment in three of the Big 4 Shale plays and provide drilling cost carries for its retained interest. In the Haynesville Shale, it entered into a joint venture with Plains Exploration & Production Company in July 2008, in which it sold Plains a 20% interest in its Haynesville properties. In the Fayetteville Shale, Chesapeake entered into a joint venture with BP America Production Company (BP) in September 2008 in which it sold BP a 25% interest in its Fayetteville properties. It entered into a joint venture with StatoilHydro ASA in November 2008, in which it sold a 32.5% interest in its Marcellus properties. Moreover, Chesapeake retained an 80% interest in the Haynesville Shale properties, a 75% interest in the Fayetteville Shale properties and a 67.5% interest in the Marcellus Shale properties.

Chesapeake focuses its natural gas exploration, development and acquisition efforts in the six operating areas: Mid-Continent (including the Fayetteville Shale); Barnett Shale; Appalachian Basin (including the Marcellus Shale); Ark-La-Tex (including the Haynesville Shale); South Texas and Texas Gulf Coast, and Permian and Delaware Basins. Chesapeake’s Mid-Continent proved reserves of 4.456 tcfe represented 37% of its total proved reserves as of December 31, 2008, and this area produced 413 bcfe, or 49%, of its 2008 production. Chesapeake’s Barnett Shale proved reserves represented 2.935 tcfe, or 24%, of its total proved reserves as of December 31, 2008. Chesapeake’s Appalachian Basin proved reserves represented 1.569 tcfe, or 13%, of its total proved reserves as of December 31, 2008. Chesapeake’s Ark-La-Tex proved reserves represented 1.231 tcfe, or 10%, of its total proved reserves as of December 31, 2008. South Texas and Texas Gulf Coast proved reserves represented 943 bcfe, or 8%, of its total proved reserves as of December 31, 2008. Chesapeake’s Permian and Delaware Basin proved reserves represented 917 bcfe, or 8%, of its total proved reserves as of December 31, 2008.

At December 31, 2008, the Company had interests in approximately 41,200 (22,813 net) producing wells, including properties, in which it held an overriding royalty interest, of which 6,900 (3,840 net) were classified as primarily oil producing wells and 34,300 (18,973 net) were classified as primarily natural gas producing wells. Chesapeake operates approximately 23,800 of its 41,200 producing wells. During 2008, it drilled 1,819 (1,491 net) wells and participated in another 1,857 (242 net) wells operated by other companies. It operates approximately 86% of its daily production volumes.