Analyst: Jeremy Leach and JohnPaul Bennett Thursday, November 5 th , 2009

1. Analyst: Jeremy Leach and JohnPaul Bennett Thursday, November 5th, 2009

2. Overview • An oil and natural gas exploration and production company, engages in the acquisition, exploration, and development of properties for the production of crude oil and natural gas from underground reservoirs • Provides marketing and midstream services for natural gas and oil for other working interest owners in properties it operate • Only located in the United States, no global presence

3. Strengths Weaknesses • Low operating costs • More development-focused with many core plays • Contracting more acreage deals • No global presence • Selling of ownership instead of relying on debt or equity to fund its growth Opportunities Threats • Recent discovery of shale fields and drilling fields • Returns will increase as firm increases its production • Subject to volatile commodity prices and an ever-changing regulatory environment (tax regulation) • Profits fluctuate with oil and gas prices • Spend too much for leasing acreage, unconventional strategy Sources: Yahoo Finance, Morningstar

4. Basic Info Ticker: CHK Sector: Energy Current Price: $24.35 52-Week Range: $9.84– $30 Market Cap: $15.5B Beta: 1.36 *Reuters & Morningstar

5. Time-Series Analysis *Morningstar

6. Cross-Sectional Analysis *Morningstar

7. 1-Year VS S&P 500 w/ RSI *Yahoo Finance

8. 1-Year Chart w/ 100 and 200 – Day Moving Averages *Yahoo Finance

9. Intrinsic Value • Morningstar Fair Value Estimate: $46 • Three-Stage DDM Calculated Fair Value: $6.22 • Three-Stage FCFE Calculated Fair Value: $120.16 • Average of Three-Stage Models: $63.19 • With 15% Margin of Safety: $53.65 – $72.73 • $24.35 < $53.65 = Suggests Undervalued

10. Earnings and revenue comparisons with the year-earlier period were quite weak, severely hampered by the slump in commodity prices – Zacks.com Earnings and revenue comparisons with the year-earlier period were quite weak, severely hampered by the slump in commodity prices – Zacks.com Changing tax legislation in the U.S. could have a negative effect on future cash flows Headlines Earnings and revenue comparisons with the year-earlier period were quite weak, severely hampered by the slump in commodity prices – Zacks.com Since 1999, Chesapeake has grown by leaps and bounds, however, it will become increasingly difficult for the firm to expand at its historical rate as commodity prices are a large determinant of sales and profit growth as profits fluctuate with oil and gas prices – Morningstar Changing tax legislation in the U.S. could have a negative effect on future cash flows – Morningstar Moved from being an acquisitive company with many emerging plays to a company that is more development-focused with many core plays – Morningstar CEO Aubrey McClendon faced heat for his 2008 $112.5 million compensation package… making him the highest-paid CEO in the U.S., even though the stock fell 59% Chesapeake has been criticized for spending too heavily to lease acres – Reuters

11. Discussion