Brandon Honey Brandon Lee David Light Presented December 4, 2008 Watch List Items

Chesapeake Energy Corporation (NYSE: CHK)

Overview General Corporate Information Strategy Natural Gas Background Trends Thesis

General Corporate Information Largest independent producer of natural gas in the US –Third largest overall in US Headquartered in Oklahoma City, OK

Strategy Build one of the largest onshore natural gas resource bases in the US Focuses on: –Exploratory and Developmental Drilling –Corporate and Property Acquisitions De-emphasized to focus on drilling Medium/Small companies

Strategy Growth from drilling Control substantial land and drilling location inventories –“Land grab” leasehold program Develop proprietary technological advantages –Largest inventory of 3-D seismic information

Strategy Focus on low costs –Minimize lease operating costs –Minimize SG&A Mitigate commodity price risk –Hedging Improve balance sheet –Debt as a percentage of total capitalization was 47% in 2007 compared to 137% in 1998 Financing –Convertible preferred used to be primary method –Now gets capital by selling stakes in producing properties

Natural Gas Clean, Abundant, Affordable, American Fastest growing energy source since the 1970’s –120 year supply in US Cleanest Hydrocarbon in the world –Less CO2 emissions than coal –No mercury or particulate emissions

Natural Gas Cost of building a plant is 25% of building a capital intensive coal-fired power plant Affordability depends on –Abundance, reliability, efficiency, cost of alternative sources of energy –Market forces Most drilling activity in 25 years 98% of the natural gas used domestically is from the US or Canada –60% of oil is imported

Trends Provides an alternative to imported oil –Less subject to supply disruptions 22% of municipal bus systems in US rely on compressed natural gas Growing interest for compressed natural gas use in taxis and refuse trucks Auto manufacturers pressured to produce green energy efficient cars Utilities are choosing natural gas over coal more often for electricity Possible Carbon Tax Tax credits for those cities and individuals using natural gas vehicles

5-Year Basic Chart

Natural Gas

Thesis Pros Natural Gas usage will increase –Continued stable demand from power plants –Huge upside if nat gas cars are adopted –White House support Well positioned in the right regions Concerns Liquidity Natural Gas prices

Please Watch Current Price (12/1/2008): $15.00 Model Valuation: