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Brandon Honey Brandon Lee David Light Presented December 4, 2008

Watch List Items. Brandon Honey Brandon Lee David Light Presented December 4, 2008. Chesapeake Energy Corporation (NYSE: CHK). Overview. General Corporate Information Strategy Natural Gas Background Trends Thesis. General Corporate Information.

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Brandon Honey Brandon Lee David Light Presented December 4, 2008

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

  2. Chesapeake Energy Corporation(NYSE: CHK)

  3. Overview • General Corporate Information • Strategy • Natural Gas Background • Trends • Thesis

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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 5-Year Basic Chart

  12. Natural Gas

  13. 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

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

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