Chesapeake Advances in Debt Reduction Plan

Chesapeake announced substantial progress in achieving its long-term debt reduction goal set forth in its 30/25 Plan announced in January 2011. Chesapeake's long-term debt (net of cash) as of year-end 2011 was approximately $10.3 billion, a reduction of $1.4 billion from the September 30, 2011 level of $11.7 billion and a reduction of $2.2 billion from the year-end 2010 level of $12.5 billion. Chesapeake's 30/25 Plan calls for the company's long-term debt (net of cash) to be approximately $9.5 billion as of year-end 2012 and the company fully intends to achieve this level by year-end 2012, regardless of the price of natural gas during the year. In the first year of the plan, Chesapeake achieved more than 70 percent of its two-year goal and reduced its long-term debt (net of cash) per unit of proved reserves from $0.73 per thousand cubic feet of natural gas equivalent (mcfe) to approximately $0.55 per mcfe, a debt per mcfe reduction of 25 percent in just one year.

The 30/25 Plan also calls for the company to increase its production by 30 percent during the two-year period ending December 31, 2012, net of property divestitures. The Plan's original goal of 25 percent production growth was increased to 30 percent in July 2011. During 2011, Chesapeake increased its annual production by 15 percent to an average of approximately 3.27 billion cubic feet of natural gas equivalent per day. However, if natural gas prices remain at currently depressed levels, Chesapeake will further reduce its drilling capital expenditures on dry natural gas plays, which would likely decrease its projected natural gas production and could reduce its two-year production growth target below 30 percent.

Despite the divestiture of approximately 2.8 trillion cubic feet of natural gas equivalent (tcfe) of proved reserves, Chesapeake announced preliminary estimated year-end 2011 proved reserves of approximately 18.8 tcfe, an increase of 10 percent from year-end 2010 levels.

In addition, Chesapeake provided an update on its hedging position and disclosed it has downside protection in place on approximately 44 percent of its projected liquids production for the first half of 2012 at an average price of $101.72 per barrel (bbl) and approximately 25 percent of its projected liquids production for the second half of 2012 at an average price of $102.59 per bbl.

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