10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2005

¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 1-13726

Chesapeake Energy Corporation

(Exact Name of Registrant as Specified in Its Charter)

Oklahoma	73-1395733
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6100 North Western Avenue Oklahoma City, Oklahoma	73118
(Address of principal executive offices)	(Zip Code)

(405) 848-8000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $.01	New York Stock Exchange
7.5% Senior Notes due 2013	New York Stock Exchange
7.0% Senior Notes due 2014	New York Stock Exchange
7.5% Senior Notes due 2014	New York Stock Exchange
6.375% Senior Notes due 2015	New York Stock Exchange
7.75% Senior Notes due 2015	New York Stock Exchange
6.625% Senior Notes due 2016	New York Stock Exchange
6.875% Senior Notes due 2016	New York Stock Exchange
6.25% Senior Notes due 2018	New York Stock Exchange
6.0% Cumulative Convertible Preferred Stock	New York Stock Exchange
5.0% Cumulative Convertible Preferred Stock (Series 2003)	New York Stock Exchange
4.5% Cumulative Convertible Preferred Stock	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  x    NO  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    YES  ¨    NO  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x            Accelerated filer  ¨            Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The aggregate market value of our common stock held by non-affiliates on June 30, 2005 was $6,327,096,262. At March 10, 2006, there were 373,622,333 shares of our $0.01 par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the 2006 Annual Meeting of Shareholders are incorporated by reference in Part III.

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

2005 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Business	3
ITEM 1A.	Risk Factors	21
ITEM 1B.	Unresolved Staff Comments	27
ITEM 2.	Properties	27
ITEM 3.	Legal Proceedings	27
ITEM 4.	Submission of Matters to a Vote of Security Holders	27
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
ITEM 6.	Selected Financial Data	30
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	54
ITEM 8.	Financial Statements and Supplementary Data	62
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	116
ITEM 9A.	Controls and Procedures	116
ITEM 9B.	Other Information	116
PART III
ITEM 10.	Directors and Executive Officers of the Registrant	117
ITEM 11.	Executive Compensation	117
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	117
ITEM 13.	Certain Relationships and Related Transactions	117
ITEM 14.	Principal Accountant Fees and Services	117
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	118

PART I

ITEM 1. Business

General

We are the second largest independent producer of natural gas in the United States, owning interests in approximately 30,600 producing oil and gas wells that are currently producing approximately 1.5 bcfe per day, 92% of which is natural gas. Our strategy is focused on discovering, developing and acquiring onshore natural gas reserves primarily in the southwestern U.S. and secondarily in the Appalachian Basin of the eastern U.S. Our most important operating area has historically been the Mid-Continent region of the U.S., which includes Oklahoma, Arkansas, Kansas and the Texas Panhandle, and is where 51% of our proved oil and natural gas reserves are located. During the past four years, we have also built significant positions in the South Texas and Texas Gulf Coast regions, the Permian Basin of West Texas and eastern New Mexico, the Barnett Shale area of north-central Texas, the Ark-La-Tex area of East Texas and northern Louisiana and most recently, the emerging Fayetteville Shale play located in Arkansas. As a result of our recent acquisition of the holding company of Columbia Natural Resources, LLC and certain affiliated entities (“CNR”), we now have a significant presence in the Appalachian Basin, principally in West Virginia, eastern Kentucky, eastern Ohio and southern New York.

As of December 31, 2005, we had 7.5 tcfe of proved reserves, of which 92% are natural gas and all of which are onshore. During 2005, we replaced our 469 bcfe of production with an internally estimated 3.088 tcfe of new proved reserves, for a reserve replacement rate of 659%. Reserve replacement through the drillbit was 1.047 tcfe, or 223% of production (including a positive 17 bcfe from performance revisions and a positive 24 bcfe from oil and natural gas price increases), and reserve replacement through acquisitions was 2.041 tcfe, or 436% of production. Our proved reserves grew by 53% during 2005, from 4.9 tcfe to 7.5 tcfe.

During 2005, we led the nation in drilling activity with an average utilization of 73 operated rigs and 66 non-operated rigs. Through this drilling activity, we drilled 902 (686 net) operated wells and participated in another 1,066 (130 net) wells operated by other companies. We added approximately 1.047 tcfe of proved oil and natural gas reserves through our drilling efforts. Our success rate was 98% for operated wells and 95% for non-operated wells. As of December 31, 2005, our proved developed reserves were 65% of our total proved reserves. In 2005, we added approximately 1,200 new employees and invested $362 million in leasehold (exclusive of leases acquired through acquisitions) and 3-D seismic data, all of which we consider the building blocks of future value creation.

From January 1, 1998 through December 31, 2005, we have been one of the most active consolidators of onshore U.S. natural gas assets, having purchased approximately 5.9 tcfe of proved reserves, at a total cost of approximately $10.3 billion (including $2.2 billion for unproved leasehold, but excluding $809 million of deferred taxes established in connection with certain corporate acquisitions) for a per proved mcfe acquisition cost of $1.37.

During 2005, we were especially active in the acquisitions market. Acquisition expenditures totaled $4.9 billion through December 31, 2005 (including $1.4 billion for unproved leasehold, but excluding $252 million of deferred taxes established in connection with certain corporate acquisitions). Through these acquisitions, we have acquired an internally estimated 2.0 tcfe of proved oil and natural gas reserves at a per proved mcfe acquisition cost of $1.74.

On November 14, 2005, we acquired CNR and its significant natural gas reserves, acreage and mid-stream assets for approximately $3.02 billion, of which $2.2 billion was in cash and $0.82 billion was in assumed liabilities related to CNR’s prepaid sales agreement, hedging positions and other liabilities. The CNR assets consist of 125 mmcfe per day of natural gas production, 1.3 tcfe of proved reserves and approximately 3.2 million net acres of U.S. oil and gas leasehold, which we estimate have over 9,000 additional undrilled locations with reserve potential. CNR also owns extensive mid-stream natural gas assets, including over 6,500 miles of natural gas gathering lines.

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Our principal executive offices are located at 6100 North Western Avenue, Oklahoma City, Oklahoma 73118 and our main telephone number at that location is (405) 848-8000. We make available free of charge on our website at www.chkenergy.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. References to “us”, “we” and “our” in this report refer to Chesapeake Energy Corporation together with its subsidiaries.

Recent Developments

In the first quarter of 2006, we have continued to execute our acquisition and financing strategy through the following transactions, in which we:

• acquired oil and natural gas assets from private companies located in the Barnett Shale, South Texas, Permian Basin, Mid-Continent and Ark-La-Tex regions for an aggregate purchase price of approximately $640 million in cash and expect to close another acquisition for a cash purchase price of approximately $60 million by March 31, 2006;

• acquired a privately-held Oklahoma-based trucking company for $48 million;

• issued an additional $500 million of our 6.5% Senior Notes due 2017 in a private placement and used the proceeds of approximately $487 million to repay outstanding borrowings under our revolving bank credit facility incurred primarily to finance our recent acquisitions;

• amended and restated our revolving bank credit facility, increasing the commitments to $2.0 billion and extending the maturity date to February 2011;

• sold our investment in Pioneer Drilling Company (AMEX:PDC) common stock for cash proceeds of $159 million and a pre-tax gain of $116 million; and

• acquired 13 drilling rigs and related assets through our wholly-owned subsidiary, Nomac Drilling Corporation, from Martex Drilling Company, L.L.P., a privately-held drilling contractor with operations in East Texas and North Louisiana, for $150 million.

Our President and Chief Operating Officer, Tom L. Ward, resigned as a director, officer and employee of the company effective February 10, 2006. Mr. Ward has agreed to act as a consultant to Chesapeake for a period of six months from the effective date of his resignation, pursuant to a resignation agreement, to assist in the transition of his responsibilities. During the term of his consulting agreement, Mr. Ward will receive no cash compensation but will be provided support staff for personal administrative and accounting services together with access to the company’s fractional shares in aircraft in accordance with historical practices. The resignation agreement provides for the immediate vesting of all of Mr. Ward’s unvested stock options and restricted stock on February 10, 2006. As a result of such vesting, options to purchase 724,615 shares of Chesapeake’s common stock at an average exercise price of $8.01 per share and 1,291,875 shares of restricted common stock became immediately vested. As a result, the company expects to incur a non-cash after-tax charge of approximately $31.8 million in the first quarter 2006. Mr. Ward will have until May 10, 2006 to exercise the stock options granted to him by the company.

Business Strategy

Since our inception in 1989, our goal has been to create value for investors by building one of the largest onshore natural gas resource bases in the United States. For much of the past eight years, our strategy to accomplish this goal has been to build the dominant operating position in the Mid-Continent region, the third largest gas supply region in the U.S. In building our industry-leading position in the Mid-Continent, we have integrated an aggressive and technologically advanced drilling program with an active property consolidation program focused on small to medium-sized corporate and property acquisitions. In 2002, we began expanding our focus from the Mid-Continent to other regions where we believed we could extend our successful strategy. To date, those areas have included the South Texas and Texas Gulf Coast regions, the Permian Basin of West

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Texas and eastern New Mexico, the Barnett Shale area of north-central Texas, the Ark-La-Tex area of East Texas and northern Louisiana, and, through our recent CNR acquisition, the Appalachian Basin, principally in West Virginia, eastern Kentucky, eastern Ohio and southern New York. We believe significant elements of our successful Mid-Continent strategy of acquisition, exploitation, extension and exploration have been or will be successfully transferred to these areas.

Key elements of this business strategy are further explained below:

• Make High-Quality Acquisitions.    Our acquisition program is focused on acquisitions of natural gas properties that offer high-quality, long-lived production and significant development and higher potential deep drilling opportunities. From January 1, 1998 through December 31, 2005, we have acquired $10.3 billion of oil and gas properties at an estimated average cost of $1.37 per mcfe of proved reserves. Included in this amount is $2.2 billion for unproved leasehold, but excluded from this amount is $809 million, or $0.14 per mcfe of proved reserves, of deferred taxes established in connection with certain corporate acquisitions. The vast majority of these acquisitions either increased our ownership in existing wells or fields or added additional drilling locations in our focused operating areas. Because these operating areas contain many smaller companies seeking liquidity opportunities and larger companies seeking to divest non-core assets, we expect to continue to find additional attractive acquisition opportunities in the future.

• Grow through the Drillbit.    One of our most distinctive characteristics is our ability to increase reserves and production through the drillbit. We are currently utilizing 78 operated drilling rigs and 82 non-operated drilling rigs to conduct the most active drilling program in the United States. We focus both on finding significant new natural gas reserves and developing existing proved reserves, principally at deeper depths than the industry average. For the past seven years, we have been aggressively investing in leasehold, 3-D seismic information and human capital to be able to take advantage of the favorable drilling economics that exist today. While we believe U.S. natural gas production has been generally declining during the past five years, we are one of the few large-cap companies that have been able to increase production, which we have successfully achieved for the past 16 consecutive years and 18 consecutive quarters. We believe key elements of the success and scale of our drilling programs have been our early recognition that gas prices were likely to move higher in the U.S. in the post-1999 period accompanied by our willingness to aggressively hire new employees and to build the nation’s largest onshore leasehold and 3-D seismic inventories, all of which are the building blocks of value creation in a successful large-scale drilling program.

• Build Regional Scale.    We believe one of the keys to success in the natural gas exploration industry is to build significant operating scale in a limited number of operating areas that share many similar geological and operational characteristics. Achieving such scale provides many benefits, the most important of which are higher per unit revenues, lower per unit operating costs, greater rates of drilling success, higher returns from more easily integrated acquisitions and higher returns on drilling investments. We first began pursuing this focused strategy in the Mid-Continent in late 1997 and we are now the largest natural gas producer, the most active driller and the most active acquirer of leasehold and producing properties in the Mid-Continent. We believe this region, which trails only the Gulf Coast and Rocky Mountain basins in current U.S. gas production, has many attractive characteristics. These characteristics include long-lived natural gas properties with predictable decline curves; multi-pay geological targets that decrease drilling risk and have resulted in a drilling success rate of 93% over the past sixteen years; generally lower service costs than in more competitive or more remote basins; and a favorable regulatory environment with virtually no federal land ownership. We believe our other operating areas possess many of these same favorable characteristics and our goal is to become or remain a top five producer in each of our operating areas.

• Focus on Low Costs.    By minimizing lease operating costs and general and administrative expense through focused activities and increased scale, we have been able to deliver attractive financial returns through all phases of the commodity price cycle. We believe our low cost structure is the result of

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management’s effective cost-control programs, a high-quality asset base and the extensive and competitive services, gas processing and transportation infrastructures that exist in our key operating areas. As of December 31, 2005, we operated approximately 18,200 wells, or approximately 80% of our daily production.

• Improve our Balance Sheet.    We have made significant progress in improving our balance sheet over the past seven years. From December 31, 1998 through December 31, 2005, we have increased our shareholders’ equity by $6.4 billion through a combination of earnings and common and preferred equity issuances. As of December 31, 2005, our debt as a percentage of total capitalization (total capitalization is the sum of debt and stockholders’ equity) was 47%, compared to 49% as of December 31, 2004 and 137% as of December 31, 1998. We plan to continue improving our balance sheet in the years ahead.

Based on our view that natural gas will be in a tight supply/demand relationship in the U.S. during at least the next few years because of the significant structural challenges to growing gas supply and the growing demand for this clean-burning, domestically-produced fuel, we believe our focused natural gas acquisition, exploitation and exploration strategy should provide substantial value-creating growth opportunities in the years ahead. Our goal is to increase our overall production by 10% to 20% per year, with growth at an annual rate of 5% to 10% generated organically through the drillbit and the remaining growth generated through acquisitions. We have reached or exceeded this overall production goal in 11 of our 13 years as a public company.

Company Strengths

We believe the following six characteristics distinguish our past performance and differentiate our future growth potential from other independent natural gas producers:

• High-Quality Asset Base.    Our producing properties are characterized by long-lived reserves, established production profiles and an emphasis on onshore natural gas. Based upon current production and proved reserve estimates, our proved reserves-to-production ratio, or reserve life, is approximately 14 years. In addition, we believe we are the sixth largest producer of natural gas in the U.S. (second among independents) and among the largest owners of proved U.S. natural gas reserves. In each of our operating areas, our properties are concentrated in locations that enable us to establish substantial economies of scale in drilling and production operations and facilitate the application of more effective reservoir management practices. We intend to continue building our asset base in each of our operating areas through a balance of acquisitions, exploitation and exploration. As of December 31, 2005, we operated properties accounting for approximately 80% of our daily production volumes. This large percentage of operated properties provides us with a high degree of operating flexibility and cost control.

• Low-Cost Producer.    Our high-quality asset base, the work ethic of our employees, our hands-on management style and our headquarters location in Oklahoma City have enabled us to achieve a low operating and administrative cost structure. During 2005, our operating costs per unit of production were $1.26 per mcfe, which consisted of general and administrative expenses of $0.14 per mcfe (including non-cash stock-based compensation of $0.03 per mcfe), production expenses of $0.68 per mcfe and production taxes of $0.44 per mcfe. We believe this is one of the lowest cost structures among publicly-traded, large-cap independent oil and natural gas producers.

• Successful Acquisition Program.    Our experienced acquisition team focuses on enhancing and expanding our existing assets in each of our operating areas. These areas are characterized by long-lived natural gas reserves, low lifting costs, multiple geological targets, favorable basis differentials to benchmark commodity prices, well-developed oil and gas transportation infrastructures and considerable potential for further consolidation of assets. Since 1998, we have completed $10.3 billion in acquisitions at an estimated average cost of $1.37 per mcfe of proved reserves. Included in this amount is $2.2 billion for unproved leasehold, but excluded from this amount is $809 million, or $0.14

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per mcfe of proved reserves, of deferred taxes established in connection with certain corporate acquisitions. We are well-positioned to continue making attractive acquisitions as a result of our extensive track record of identifying, completing and integrating multiple successful acquisitions, our large operating scale and our knowledge and experience in the regions in which we operate.

• Large Inventory of Drilling Projects.    During the 16 years since our inception, we have been among the five most active drillers of new wells in the United States. Presently, we are the most active driller in the U.S. (with 78 operated and 82 non-operated rigs drilling). Through this high level of activity over the years, we have developed an industry-leading expertise in drilling deep vertical and horizontal wells in search of large natural gas accumulations in challenging reservoir conditions. In addition, we believe that our large 11.6 million acre 3-D seismic inventory, much of which is proprietary to us, provides significant informational advantages over our competitors. As a result of our aggressive leasehold acquisition and seismic acquisition strategies, we have been able to accumulate a U.S. onshore leasehold position of approximately 8.5 million net acres and have acquired rights to 11.6 million acres of onshore 3-D seismic data to help evaluate our expansive acreage inventory. On this very large acreage position, our technical teams have identified approximately 28,000 exploratory and developmental drill sites, representing a backlog of more than ten years of future drilling opportunities at current drilling rates.

• Hedging Program.    We have used and intend to continue using hedging programs to reduce the risks inherent in acquiring and producing oil and natural gas reserves, commodities that are frequently characterized by significant price volatility. We believe this price volatility is likely to continue in the years ahead and that we can use this volatility to our benefit by taking advantage of prices when they reach levels that management believes are either unsustainable for the long-term or provide unusually high rates of return on our invested capital. Excluding hedges assumed in the acquisition of CNR, we currently have gas hedges in place covering 71% of our anticipated gas production for 2006, 36% of our anticipated gas production for 2007 and 22% of our anticipated gas production for 2008 at average NYMEX prices of $9.43, $9.85 and $9.10 per mcf, respectively (excluding collars and options). In addition, we have 63% of our anticipated oil production hedged for 2006, 22% of our anticipated oil production hedged for 2007 and 14% of our anticipated oil production hedged for 2008 at average NYMEX prices of $61.02, $62.42 and $65.48 per barrel of oil, respectively.

• Entrepreneurial Management.    Chesapeake was formed in 1989 with an initial capitalization of $50,000 and fewer than ten employees. Since then, management has guided the company through various operational and industry challenges and extremes of oil and gas prices to create the second largest independent U.S. producer of natural gas with approximately 2,900 employees and an enterprise value of approximately $20 billion. Our CEO and co-founder, Aubrey K. McClendon, has been in the oil and gas industry for 23 years and beneficially owns, as of March 10, 2006, approximately 22.4 million shares of our common stock.

Properties

Chesapeake focuses its natural gas exploration, development and acquisition efforts in one primary operating area and in four secondary operating areas: (i) the Mid-Continent (consisting of Oklahoma, Arkansas, southwestern Kansas and the Texas Panhandle), representing 51% of our proved reserves, (ii) the South Texas and Texas Gulf Coast region, representing 8% of our proved reserves, (iii) the Barnett Shale area of north-central Texas and the Ark-La-Tex area of central and East Texas and northern Louisiana, representing 14% of our proved reserves, (iv) the Permian Basin of western Texas and eastern New Mexico, representing 9% of our proved reserves, and (v) the Appalachian basin, principally in West Virginia, eastern Kentucky, eastern Ohio and southern New York, representing 17% of our proved reserves.

Chesapeake’s strategy for 2006 is to continue developing our natural gas assets through exploratory and developmental drilling and by selectively acquiring strategic properties in the Mid-Continent and in our secondary areas. We project that our 2006 production will be between 576 bcfe and 586 bcfe. We have budgeted

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$3.0 to $3.2 billion for drilling, acreage acquisition, seismic and related capitalized internal costs, all of which is expected to be funded with operating cash flow based on our current assumptions. Our budget is frequently adjusted based on changes in oil and gas prices, drilling results, drilling costs and other factors. We expect to fund future acquisitions through a combination of operating cash flow, our revolving bank credit facility and, if needed, new debt and equity issuances.

Operating Areas

Mid-Continent.    Chesapeake’s Mid-Continent proved reserves of 3.798 tcfe represented 51% of our total proved reserves as of December 31, 2005, and this area produced 298 bcfe, or 64%, of our 2005 production. During 2005, we invested approximately $1.102 billion to drill 1,442 (498 net) wells in the Mid-Continent. We anticipate spending approximately 35% of our total budget for exploration and development activities in the Mid-Continent region during 2006.

South Texas and Texas Gulf Coast.    Chesapeake’s South Texas and Texas Gulf Coast proved reserves represented 622 bcfe, or 8%, of our total proved reserves as of December 31, 2005. During 2005, the South Texas and Texas Gulf Coast assets produced 64 bcfe, or 14%, of our total production. During 2005, we invested approximately $239.1 million to drill 115 (80 net) wells in the South Texas and Texas Gulf Coast region. We anticipate spending approximately 10% of our total budget for exploration and development activities in the South Texas and Texas Gulf Coast region during 2006.

Ark-La-Tex and Barnett Shale.    Chesapeake’s Ark-La-Tex and Barnett Shale proved reserves represented 1.069 tcfe, or 14%, of our total proved reserves as of December 31, 2005. During 2005, the Ark-La-Tex and Barnett Shale assets produced 58 bcfe, or 12%, of our total production. During 2005, we invested approximately $326.9 million to drill 257 (171 net) wells in the Ark-La-Tex and Barnett Shale regions. For 2006, we anticipate spending approximately 33% of our total budget for exploration and development activities in the Ark-La-Tex and Barnett Shale regions.

Permian Basin.    Chesapeake’s Permian Basin proved reserves represented 693 bcfe, or 9%, of our total proved reserves as of December 31, 2005. During 2005, the Permian assets produced 40 bcfe, or 9%, of our total production. During 2005, we invested approximately $265.9 million to drill 139 (56 net) wells in the Permian Basin. For 2006, we anticipate spending approximately 15% of our total budget for exploration and development activities in the Permian Basin.

Appalachian Basin.    Chesapeake’s Appalachian Basin proved reserves represented 1.296 tcfe, or 17%, of our total proved reserves as of December 31, 2005. During 2005, the Appalachian assets produced 6 bcfe, or 1%, of our total production, which was not acquired until November 14, 2005. During 2005, we invested approximately $8 million to drill 15 (11 net) wells in the Appalachian Basin. For 2006, we anticipate spending approximately 7% of our total budget for exploration and development activities in the Appalachian Basin.

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Drilling Activity

The following table sets forth the wells we drilled during the periods indicated. In the table, “gross” refers to the total wells in which we had a working interest and “net” refers to gross wells multiplied by our working interest.

	2005						2004						2003
	Gross	Percent		Net	Percent		Gross	Percent		Net	Percent		Gross	Percent		Net	Percent
Development:
Productive	1,736	97	%	735	97	%	1,239	97	%	463	98	%	958	96	%	401	97	%
Non-productive	51	3		21	3		34	3		9	2		37	4		11	3
Total	1,787	100	%	756	100	%	1,273	100	%	472	100	%	995	100	%	412	100	%
Exploratory:
Productive	177	98	%	57	95	%	164	92	%	67	91	%	76	86	%	36	83	%
Non-productive	4	2		3	5		14	8		7	9		12	14		8	17
Total	181	100	%	60	100	%	178	100	%	74	100	%	88	100	%	44	100	%

The following table shows the wells we drilled by area:

	2005		2004		2003
	Gross Wells	Net Wells	Gross Wells	Net Wells	Gross Wells	Net Wells
Mid-Continent	1,442	498	1,195	417	984	403
South Texas and Texas Gulf Coast	115	80	67	38	55	25
Ark-La-Tex and Barnett Shale	257	171	82	36	—	—
Permian	139	56	107	55	44	28
Appalachia	15	11	—	—	—	—
Total	1,968	816	1,451	546	1083	456

At December 31, 2005, we had 154 (67 net) wells in process. As of December 31, 2005, we owned 18 drilling rigs dedicated to drilling wells operated by Chesapeake. An additional 26 drilling rigs are under construction or on order, and we purchased 13 drilling rigs in February 2006. Our drilling business is conducted through our wholly owned subsidiary, Nomac Drilling Corporation.

Well Data

At December 31, 2005, we had interests in approximately 30,600 (16,985 net) producing wells, including properties in which we held an overriding royalty interest, of which 3,100 (1,360 net) were classified as primarily oil producing wells and 27,500 (15,625 net) were classified as primarily gas producing wells. Chesapeake operated approximately 18,200 of its 30,600 producing wells. During 2005, we drilled 902 (686 net) wells and participated in another 1,066 (130 net) wells operated by other companies. We operate approximately 80% of our current daily production volumes.

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Production, Sales, Prices and Expenses

The following table sets forth information regarding the production volumes, oil and gas sales, average sales prices received and expenses for the periods indicated:

	2005			2004			2003
Net Production:
Oil (mbbl)		7,698			6,764			4,665
Gas (mmcf)		422,389			322,009			240,366
Gas equivalent (mmcfe)		468,577			362,593			268,356
Oil and Gas Sales ($ in thousands):
Oil sales	$	401,845		$	260,915		$	132,630
Oil derivatives – realized gains (losses)		(34,132	)		(69,267	)		(12,058	)
Oil derivatives – unrealized gains (losses)		4,374			3,454			(9,440	)
Total oil sales	$	372,087		$	195,102		$	111,132
Gas sales	$	3,231,286		$	1,789,275		$	1,171,050
Gas derivatives – realized gains (losses)		(367,551	)		(85,634	)		(5,331	)
Gas derivatives – unrealized gains (losses)		36,763			37,433			19,971
Total gas sales	$	2,900,498		$	1,741,074		$	1,185,690
Total oil and gas sales	$	3,272,585		$	1,936,176		$	1,296,822
Average Sales Price (excluding gains (losses) on derivatives):
Oil ($ per bbl)	$	52.20		$	38.57		$	28.43
Gas ($ per mcf)	$	7.65		$	5.56		$	4.87
Gas equivalent ($ per mcfe)	$	7.75		$	5.65		$	4.86
Average Sales Price (excluding unrealized gains (losses) on derivatives):
Oil ($ per bbl)	$	47.77		$	28.33		$	25.85
Gas ($ per mcf)	$	6.78		$	5.29		$	4.85
Gas equivalent ($ per mcfe)	$	6.90		$	5.23		$	4.79
Expenses ($ per mcfe):
Production expenses	$	0.68		$	0.56		$	0.51
Production taxes	$	0.44		$	0.29		$	0.29
General and administrative expenses	$	0.14		$	0.10		$	0.09
Oil and gas depreciation, depletion and amortization	$	1.91		$	1.61		$	1.38
Depreciation and amortization of other assets	$	0.11		$	0.08		$	0.06
Interest expense (a)	$	0.47		$	0.45		$	0.55

(a) Includes realized gains or (losses) from interest rate derivatives, but does not include unrealized gains or (losses) and is net of amounts capitalized.

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Oil and Gas Reserves

The tables below set forth information as of December 31, 2005 with respect to our estimated proved reserves, the associated estimated future net revenue and present value (discounted at 10%) of estimated future net revenue before and after income tax (standardized measure) at such date. Neither the pre-tax present value of estimated future net revenue nor the after-tax standardized measure is intended to represent the current market value of the estimated oil and gas reserves we own.

	December 31, 2005
	Oil (mbbl)		Gas (mmcf)		Total (mmcfe)
Proved developed		76,238		4,442,270		4,899,694
Proved undeveloped		27,085		2,458,484		2,620,996
Total proved		103,323		6,900,754		7,520,690
	Proved Developed		Proved Undeveloped		Total Proved
	($ in thousands)
Estimated future net revenue (a)	$	32,435,228	$	14,376,458	$	46,811,686
Present value of future net revenue (a)	$	16,271,138	$	6,662,456	$	22,933,594
Standardized measure (a) (b)					$	15,967,911

	Oil (mbbl)	Gas (mmcf)	Gas Equivalent (mmcfe)	Percent of Proved Reserves		Present Value ($ in thousands)
Mid-Continent	48,915	3,504,653	3,798,216	51	%	$	11,308,766
South Texas and Texas Gulf Coast	3,308	602,551	622,399	8			2,459,379
Ark-La-Tex and Barnett Shale	6,379	1,030,962	1,069,236	14			3,551,565
Permian	39,126	457,811	692,570	9			2,040,175
Appalachia	1,094	1,289,919	1,296,482	17			3,462,744
Other	4,501	14,858	41,787	1			110,965
Total	103,323	6,900,754	7,520,690	100	%	$	22,933,594	(a)

(a) Estimated future net revenue represents the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices and costs in effect at December 31, 2005. The prices used in the external and internal reports yield weighted average wellhead prices of $56.41 per barrel of oil and $8.76 per mcf of gas. These prices should not be interpreted as a prediction of future prices. The amounts shown do not give effect to non-property related expenses, such as corporate general and administrative expenses and debt service, or to depreciation, depletion and amortization. Estimated future net revenue and the present value thereof differ from future net cash flows and the standardized measure thereof only because the former do not include the effects of future income tax expenses ($6.97 billion as of December 31, 2005).

Management uses future net revenue, which is calculated without deducting estimated future income tax expenses, and the present value thereof as one measure of the value of the company’s current proved reserves and to compare relative values among peer companies without regard to income taxes. We also understand that securities analysts and rating agencies use this measure in similar ways. While future net revenue and present value are based on prices, costs and discount factors which are consistent from company to company, the standardized measure of discounted future net cash flows is dependent on the unique tax situation of each individual company.

(b) The standardized measure of discounted future net cash flows is calculated in accordance with SFAS 69. Additional information on the standardized measure is presented in note 11 of the notes to our consolidated financial statements included in Item 8 of this report.

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As of December 31, 2005, our reserve estimates included 2.621 tcfe of reserves classified as proved undeveloped (PUD). Of this amount, approximately 56% (by volume) were initially classified as PUDs in 2005, 29% were initially classified as PUDs in 2004, 5% were initially classified as PUDs in 2003, and the remaining 10% were initially classified as PUDs prior to 2003. Of our proved developed reserves, 555 bcfe are non-producing, which are primarily “behind pipe” zones in producing wells.

The future net revenue attributable to our estimated proved undeveloped reserves of $14.4 billion at December 31, 2005, and the $6.7 billion present value thereof, has been calculated assuming that we will expend approximately $4.3 billion to develop these reserves. The amount and timing of these expenditures will depend on a number of factors, including actual drilling results, product prices and the availability of capital, but we have projected to incur $1.8 billion in 2006, $1.1 billion in 2007, $0.7 billion in 2008 and $0.7 billion in 2009 and beyond. We do not believe any of these proved undeveloped reserves are contingent upon installation of additional infrastructure and we are not subject to regulatory approval other than routine permits to drill, which we expect to obtain in the normal course of business.

Chesapeake employed third-party engineers to prepare independent reserve forecasts for approximately 78% of our proved reserves (by volume) at year-end 2005. These are not audits or reviews of internally prepared reserve reports. The estimates of the proved reserves evaluated by third-party engineers were within 99% of the company’s own estimates and were used instead of our estimates for booking purposes. Netherland, Sewell & Associates, Inc. evaluated 25%, Data and Consulting Services, Division of Schlumberger Technology Corporation evaluated 16%, Lee Keeling and Associates, Inc. evaluated 15%, Ryder Scott Company L.P. evaluated 12%, LaRoche Petroleum Consultants, Ltd. evaluated 8%, and H. J. Gruy and Associates, Inc. evaluated 2% of our estimated proved reserves by volume at December 31, 2005. Of the 41,880 properties included in the 2005 reserve reports, the estimates prepared by the independent firms covered approximately 16,400 properties, or 39% of the total well count. Because, in management’s opinion, it is cost prohibitive for third-party engineers to evaluate all of our wells, we have prepared reserve forecasts for approximately 22% of our proved reserves. All estimates were prepared based upon a review of production histories and other geologic, economic, ownership and engineering data we developed. The estimates are not based on any single significant assumption due to the diverse nature of the reserves and there is no significant concentration of proved reserves volume or value in any one well.

No estimates of proved reserves comparable to those included herein have been included in reports to any federal agency other than the Securities and Exchange Commission.

Chesapeake’s ownership interest used in calculating proved reserves and the associated estimated future net revenue was determined after giving effect to the assumed maximum participation by other parties to our farmout and participation agreements. The prices used in calculating the estimated future net revenue attributable to proved reserves do not reflect market prices for oil and gas production sold subsequent to December 31, 2005. There can be no assurance that all of the estimated proved reserves will be produced and sold at the assumed prices.

There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond Chesapeake’s control. The reserve data represent only estimates. Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates made by different engineers often vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of such estimates, and such revisions may be material. Accordingly, reserve estimates are often different from the actual quantities of oil and gas that are ultimately recovered. Furthermore, the estimated future net revenue from proved reserves and the associated present value are based upon certain assumptions, including prices, future production levels and costs that may not prove correct. Future prices and costs may be materially higher or lower than the prices and costs as of the date of any estimate. A change in price of $0.10 per mcf for natural gas and $1.00 per barrel for oil would result

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in a change in the December 31, 2005 present value of estimated future net revenue of our proved reserves of approximately $315 million and $50 million, respectively. The estimated future net revenue used in this analysis does not include the effects of future income taxes or hedging. The foregoing uncertainties are particularly true as to proved undeveloped reserves, which are inherently less certain than proved developed reserves and which comprise a significant portion of our proved reserves.

The company’s estimated proved reserves and the standardized measure of discounted future net cash flows of the proved reserves at December 31, 2005, 2004 and 2003, and the changes in quantities and standardized measure of such reserves for each of the three years then ended, are shown in Note 11 of the notes to the consolidated financial statements included in Item 8 of this report.

Development, Exploration, Acquisition and Divestiture Activities

The following table sets forth historical cost information regarding our development, exploration, acquisition and divestiture activities during the periods indicated:

	December 31,
	2005			2004			2003
	($ in thousands)
Acquisition of properties:
Proved properties	$	3,554,651		$	1,541,920		$	1,110,077
Unproved properties		1,375,675			570,495			198,394
Deferred income taxes		251,722			463,949			(4,903	)
Total		5,182,048			2,576,364			1,303,568
Development costs:
Development drilling (a)		1,566,730			863,268			474,355
Leasehold acquisition costs		290,946			110,530			84,984
Asset retirement obligation and other (b)		52,619			41,924			54,657
Total		1,910,295			1,015,722			613,996
Exploration costs:
Exploratory drilling		253,341			128,635			103,424
Geological and geophysical costs (c)		70,901			55,618			42,736
Total		324,242			184,253			146,160
Sales of oil and gas properties		(9,769	)		(12,048	)		(22,156	)
Total	$	7,406,816		$	3,764,291		$	2,041,568

(a) Includes capitalized internal cost of $94.1 million, $45.4 million and $30.9 million, respectively.

(b) The 2003 amount includes $24.1 million of asset retirement costs recorded as a result of implementation of SFAS 143 effective January 1, 2003.

(c) Includes capitalized internal cost of $8.1 million, $6.3 million and $4.6 million, respectively.

Our development costs included $671 million, $333 million and $229 million in 2005, 2004 and 2003, respectively, related to properties carried as proved undeveloped locations in the prior year’s reserve reports. Included in our reserve report as of December 31, 2005 are estimated future development costs of $4.3 billion related to the development of proved undeveloped reserves ($1.8 billion in 2006, $1.1 billion in 2007, $0.7 billion in 2008 and $0.7 billion in 2009 and beyond). Chesapeake’s developmental drilling schedules are subject to revision and reprioritization throughout the year, resulting from unknowable factors such as the relative success in an individual developmental drilling prospect leading to an additional drilling opportunity, rig availability, title issues or delays, and the effect that acquisitions may have on prioritizing development drilling plans.

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A summary of our development, exploration, acquisition and divestiture activities in 2005 by operating area is as follows:

	Gross Wells Drilled	Net Wells Drilled	Exploration and Development		Leasehold			Acquisition of Unproved Properties		Acquisition of Proved Properties (a)			Sales of Properties			Total
	($ in thousands)
Mid-Continent	1,442	498	$	1,102,099	$	166,281		$	178,169	$	217,238		$	(214	)	$	1,663,573
South Texas and Texas Gulf Coast	115	80		239,107		87,418			224,947		215,166			—			766,638
Ark-La-Tex and Barnett Shale	257	171		359,206		7,816			350,416		666,309			—			1,383,747
Permian	139	56		233,597		29,452			114,874		339,838			(9,555	)		708,206
Appalachia	15	11		7,673		—			506,881		2,367,835			—			2,882,389
Other	—	—		1,909		(21	)		388		(13	)		—			2,263
Total	1,968	816	$	1,943,591	$	290,946		$	1,375,675	$	3,806,373		$	(9,769	)	$	7,406,816

(a) Includes $252 million of deferred tax adjustments.

Acreage

The following table sets forth as of December 31, 2005 the gross and net acres of both developed and undeveloped oil and gas leases which we hold. “Gross” acres are the total number of acres in which we own a working interest. “Net” acres refer to gross acres multiplied by our fractional working interest. Acreage numbers do not include our options to acquire additional leasehold which have not been exercised.

	Developed		Undeveloped		Total
	Gross	Net	Gross	Net	Gross	Net
Mid-Continent	3,636,949	1,723,203	3,497,527	1,609,322	7,134,476	3,332,525
South Texas and Texas Gulf Coast	304,027	172,915	352,121	229,615	656,148	402,530
Ark-La-Tex and Barnett Shale	164,589	116,239	317,082	220,316	481,671	336,555
Permian	175,204	110,571	726,714	459,224	901,918	569,795
Appalachia	506,828	478,791	2,907,116	2,681,685	3,413,944	3,160,476
Canada	—	—	673,689	614,616	673,689	614,616
Other	43,424	18,607	95,240	76,084	138,664	94,691
Total	4,831,021	2,620,326	8,569,489	5,890,862	13,400,510	8,511,188

Marketing

Chesapeake’s oil production is generally sold under market sensitive or spot price contracts. Our natural gas production is sold to purchasers under percentage-of-proceeds contracts, percentage-of-index contracts or spot price contracts. By the terms of the percentage-of-proceeds contracts, we receive a percentage of the resale price received by the purchaser for sales of residue gas and natural gas liquids recovered after transportation and processing of our gas. These purchasers sell the residue gas and natural gas liquids based primarily on spot market prices. The revenue we receive from the sale of natural gas liquids is included in oil sales. Under percentage-of-index contracts, the price per mmbtu we receive for our gas is tied to indexes published in Inside FERC or Gas Daily. Although exact percentages vary daily, as of February 2006, approximately 70% of our natural gas production was sold under short-term contracts at market-sensitive or spot prices.

During 2005, sales to Eagle Energy Partners I, L.P. (Eagle) of $851 million accounted for 18% of our total revenues. Chesapeake owns approximately 33% of Eagle. Management believes that the loss of this customer would not have a material adverse effect on our results of operations or our financial position. No other customer accounted for more than 10% of total revenues in 2005.

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Chesapeake Energy Marketing, Inc., which is our marketing subsidiary, provides marketing services, including commodity price structuring, contract administration and nomination services for Chesapeake and its partners. This subsidiary is a reportable segment under SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information. See Note 8 of the notes to our consolidated financial statements in Item 8.

Drilling

In 2001, Chesapeake formed its 100% owned drilling rig subsidiary, Nomac Drilling Corporation (“Nomac”), with an investment of $26 million to build and refurbish five drilling rigs. As of December 31, 2005, Nomac owned 18 drilling rigs dedicated to drilling wells operated by Chesapeake and had an additional 26 rigs under construction or on order. The 18 drilling rigs which are currently drilling company-operated wells have depth ratings between 7,500 and 23,000 feet and range in drilling horsepower from 650 to 2,000. These drilling rigs are currently operating in the Mid-Continent region of Oklahoma and Texas. In February 2006, Nomac acquired 13 drilling rigs from privately-held Martex Drilling Corporation for $150 million. The acquisition of Martex will bring Nomac’s rig fleet to 57 drilling rigs when all rigs on order are delivered. As the Martex drilling rigs currently under contract become available, they will be used for drilling company-operated wells.

Gas Gathering

Chesapeake owns and operates gathering systems in 13 states throughout the Mid-Continent and Appalachian regions. These systems are designed primarily to gather company production and are comprised of approximately 7,600 miles of gathering lines, treating facilities and processing facilities which provide service to approximately 8,775 wells.

Hedging Activities

We utilize hedging strategies to hedge the price of a portion of our future oil and natural gas production and to manage interest rate exposure. See Item 7A—Quantitative and Qualitative Disclosures About Market Risk.

Regulation

General.    All of our operations are conducted onshore in the United States. The U.S. oil and gas industry is subject to regulation at the federal, state and local level, and some of the laws, rules and regulations that govern our operations carry substantial penalties for noncompliance. This regulatory burden increases our cost of doing business and, consequently, affects our profitability.

Regulation of Oil and Gas Operations.    Our exploration and production operations are subject to various types of regulation at the U.S. federal, state and local levels, although very few of our oil and gas leases are located on federal lands. Such regulation includes requirements for permits to drill and to conduct other operations and for provision of financial assurances (such as bonds) covering drilling and well operations. Other activities subject to regulation are:

• the location of wells,

• the method of drilling and completing wells,

• the surface use and restoration of properties upon which wells are drilled,

• the plugging and abandoning of wells,

• the disposal of fluids used or other wastes obtained in connection with operations,

• the marketing, transportation and reporting of production, and

• the valuation and payment of royalties.

Our operations are also subject to various conservation regulations. These include the regulation of the size of drilling and spacing units (regarding the density of wells which may be drilled in a particular area) and the

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unitization or pooling of oil and gas properties. In this regard, some states, such as Oklahoma and Arkansas, allow the forced pooling or integration of tracts to facilitate exploration, while other states, such as Texas and New Mexico, rely on voluntary pooling of lands and leases. In areas where pooling is voluntary, it may be more difficult to form units and, therefore, more difficult to fully develop a project if the operator owns less than 100% of the leasehold. In addition, state conservation laws establish maximum rates of production from oil and gas wells, generally prohibit the venting or flaring of gas and impose certain requirements regarding the ratability of production. The effect of these regulations is to limit the amount of oil and gas we can produce and to limit the number of wells or the locations at which we can drill.

Chesapeake operates a number of natural gas gathering systems. The U.S. Department of Transportation and certain state agencies regulate the safety and operating aspects of the transportation and storage activities of these facilities. All of the company’s sales of oil, natural gas liquids and natural gas are currently deregulated, although governmental agencies may elect in the future to regulate certain sales.

We do not anticipate that compliance with existing laws and regulations governing exploration, production and gas gathering will have a significantly adverse effect upon our capital expenditures, earnings or competitive position.

Environmental Regulation.    Various federal, state and local laws and regulations concerning the discharge of contaminants into the environment, the generation, storage, transportation and disposal of contaminants, and the protection of public health, natural resources, wildlife and the environment affect our exploration, development and production operations, including processing facilities. We must take into account the cost of complying with environmental regulations in planning, designing, drilling, operating and abandoning wells. In most instances, the regulatory requirements relate to the handling and disposal of drilling and production waste products, water and air pollution control procedures, and the remediation of petroleum-product contamination. In addition, our operations may require us to obtain permits for, among other things,

• air emissions,

• discharges into surface waters, and

• the construction and operation of underground injection wells or surface pits to dispose of produced saltwater and other nonhazardous oilfield wastes.

Under state and federal laws, we could be required to remove or remediate previously disposed wastes, including wastes disposed of or released by us or prior owners or operators in accordance with current laws or otherwise, to suspend or cease operations in contaminated areas, or to perform remedial well plugging operations or cleanups to prevent future contamination. The Environmental Protection Agency and various state agencies have limited the disposal options for hazardous and nonhazardous wastes. The owner and operator of a site, and persons that treated, disposed of or arranged for the disposal of hazardous substances found at a site, may be liable, without regard to fault or the legality of the original conduct, for the release of a hazardous substance into the environment. The Environmental Protection Agency, state environmental agencies and, in some cases, third parties are authorized to take actions in response to threats to human health or the environment and to seek to recover from responsible classes of persons the costs of such action. Furthermore, certain wastes generated by our oil and natural gas operations that are currently exempt from treatment as hazardous wastes may in the future be designated as hazardous wastes and, therefore, be subject to considerably more rigorous and costly operating and disposal requirements.

Federal and state occupational safety and health laws require us to organize information about hazardous materials used, released or produced in our operations. Certain portions of this information must be provided to employees, state and local governmental authorities and local citizens. We are also subject to the requirements and reporting set forth in federal workplace standards.

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We have made and will continue to make expenditures to comply with environmental regulations and requirements. These are necessary business costs in the oil and gas industry. Although we are not fully insured against all environmental risks, we maintain insurance coverage which we believe is customary in the industry. Moreover, it is possible that other developments, such as stricter and more comprehensive environmental laws and regulations, as well as claims for damages to property or persons resulting from company operations, could result in substantial costs and liabilities, including civil and criminal penalties, to Chesapeake. We believe we are in compliance with existing environmental regulations, and that, absent the occurrence of an extraordinary event the effect of which cannot be predicted, any noncompliance will not have a material adverse effect on our operations or earnings.

Income Taxes

Chesapeake recorded income tax expense of $545.1 million in 2005 compared to income tax expense of $289.8 million in 2004 and $191.8 million in 2003. Our effective income tax rate was 36.5% in 2005 compared to 36% in 2004 and 38% in 2003. The increase in 2005 reflected the impact state income taxes and permanent differences had on our overall effective rate. We expect our effective income tax rate will increase to 38% in 2006 to reflect our current assessment of expected increases in state income taxes and permanent differences.

At December 31, 2005, Chesapeake had federal income tax net operating loss (NOL) carryforwards of approximately $564.5 million. We also had approximately $169.6 million of alternative minimum tax (AMT) NOL carryforwards available as a deduction against future AMT income and approximately $12.3 million of percentage depletion carryforwards. The NOL carryforwards expire from 2012 through 2025. The value of the remaining carryforwards depends on the ability of Chesapeake to generate taxable income. In addition, for AMT purposes, only 90% of AMT income in any given year may be offset by AMT NOLs.

The ability of Chesapeake to utilize NOL carryforwards to reduce future federal taxable income and federal income tax is subject to various limitations under the Internal Revenue Code of 1986, as amended. The utilization of such carryforwards may be limited upon the occurrence of certain ownership changes, including the issuance or exercise of rights to acquire stock, the purchase or sale of stock by 5% stockholders, as defined in the Treasury regulations, and the offering of stock by us during any three-year period resulting in an aggregate change of more than 50% in the beneficial ownership of Chesapeake.

In the event of an ownership change (as defined for income tax purposes), Section 382 of the Code imposes an annual limitation on the amount of a corporation’s taxable income that can be offset by these carryforwards. The limitation is generally equal to the product of (i) the fair market value of the equity of the company multiplied by (ii) a percentage approximately equivalent to the yield on long-term tax exempt bonds during the month in which an ownership change occurs. In addition, the limitation is increased if there are recognized built-in gains during any post-change year, but only to the extent of any net unrealized built-in gains (as defined in the Code) inherent in the assets sold. Certain NOLs acquired through various acquisitions are also subject to limitations. The following table summarizes our net operating losses as of December 31, 2005 and any related limitations:

	Net Operating Losses
	Total		Limited		Annual Limitation
	($ in thousands)
Net operating loss	$	564,451	$	49,284	$	27,754
AMT net operating loss	$	169,635	$	11,220	$	6,652

Although no assurances can be made, we do not believe that an ownership change has occurred as of December 31, 2005. Future equity transactions by Chesapeake or by 5% stockholders (including relatively small transactions and transactions beyond our control) could cause an ownership change and therefore a limitation on the annual utilization of NOLs. Following an ownership change, the amount of Chesapeake’s NOLs available for use each year will depend upon future events that cannot currently be predicted and upon interpretation of complex

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rules under Treasury regulations. If less than the full amount of the annual limitation is utilized in any given year, the unused portion may be carried forward and may be used in addition to successive years’ annual limitation.

We expect to utilize our NOL carryforwards and other tax deductions and credits to offset taxable income in the future. However, there is no assurance that the Internal Revenue Service will not challenge these carryforwards or their utilization.

Title to Properties

Our title to properties is subject to royalty, overriding royalty, carried, net profits, working and other similar interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due and to other encumbrances. As is customary in the industry in the case of undeveloped properties, only cursory investigation of record title is made at the time of acquisition. Drilling title opinions are usually prepared before commencement of drilling operations. We believe we have satisfactory title to substantially all of our active properties in accordance with standards generally accepted in the oil and gas industry. Nevertheless, we are involved in title disputes from time to time which result in litigation.

Operating Hazards and Insurance

The oil and gas business involves a variety of operating risks, including the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as oil spills, gas leaks, ruptures or discharges of toxic gases. If any of these should occur, Chesapeake could suffer substantial losses due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties, and suspension of operations. Our horizontal and deep drilling activities involve greater risk of mechanical problems than vertical and shallow drilling operations.

Chesapeake maintains a $50 million oil and gas lease operator policy that insures against certain sudden and accidental risks associated with drilling, completing and operating our wells. There is no assurance that this insurance will be adequate to cover all losses or exposure to liability. Chesapeake also carries a $175 million comprehensive general liability umbrella policy and a $100 million pollution liability policy. We provide workers’ compensation insurance coverage to employees in all states in which we operate and we maintain a $1 million employment practice liability policy. While we believe these policies are customary in the industry, they do not provide complete coverage against all operating risks.

Facilities

Chesapeake owns an office complex in Oklahoma City and also owns or leases various field offices in the following locations:

• Illinois: Chicago;

• Kansas: Garden City;

• Kentucky: Gray, Elkhorn City, Hueysville, Inez and Prestonburg;

• Louisiana: Cheneyville and Shreveport;

• New Mexico: Eunice and Hobbs;

• New York: Hammondsport;

• Oklahoma: Arkoma, Billings, El Reno, Kingfisher, Lindsay, Waynoka, Weatherford, Wilburton, Forgan and Sayre;

• Tennessee: Egan;

• Texas: Borger, Dumas, College Station, Midland, Cleburne, Goliad, Ozona, Tyler, Victoria and Zapata; and

• West Virginia: Branchland, Buckhannon, Cedar Grove, Charleston, Clendenin, Kermit and Tad.

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Employees

Chesapeake had 2,885 employees as of December 31, 2005, which includes 429 employed by our drilling subsidiary, Nomac Drilling Corporation. As a result of the CNR acquisition, approximately 140 of our employees are covered by a collective bargaining agreement. We believe our employee relations are good.

Glossary of Oil and Gas Terms

The terms defined in this section are used throughout this Form 10-K.

Bcf.    Billion cubic feet.

Bcfe.    Billion cubic feet of gas equivalent.

Bbl.    One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.

Btu.    British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

Commercial Well; Commercially Productive Well.    An oil and gas well which produces oil and gas in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Developed Acreage.    The number of acres which are allocated or assignable to producing wells or wells capable of production.

Development Well.    A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.

Dry Hole; Dry Well.    A well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.

Exploratory Well.    A well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir or to extend a known reservoir.

Farmout.    An assignment of an interest in a drilling location and related acreage conditional upon the drilling of a well on that location.

Formation.    A succession of sedimentary beds that were deposited under the same general geologic conditions.

Full Cost Pool.    The full cost pool consists of all costs associated with property acquisition, exploration, and development activities for a company using the full cost method of accounting. Additionally, any internal costs that can be directly identified with acquisition, exploration and development activities are included. Any costs related to production, general corporate overhead or similar activities are not included.

Gross Acres or Gross Wells.    The total acres or wells, as the case may be, in which a working interest is owned.

Horizontal Wells.    Wells which are drilled at angles greater than 70 degrees from vertical.

Mbbl.    One thousand barrels of crude oil or other liquid hydrocarbons.

Mbtu.    One thousand btus.

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Mcf.    One thousand cubic feet.

Mcfe.    One thousand cubic feet of gas equivalent.

Mmbbl.    One million barrels of crude oil or other liquid hydrocarbons.

Mmbtu.    One million btus.

Mmcf.    One million cubic feet.

Mmcfe.    One million cubic feet of gas equivalent.

Net Acres or Net Wells.    The sum of the fractional working interests owned in gross acres or gross wells.

NYMEX.    New York Mercantile Exchange.

Present Value or PV-10.    When used with respect to oil and gas reserves, present value or PV-10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices and costs in effect at the determination date, without giving effect to non-property related expenses such as general and administrative expenses, debt service and future income tax expense or to depreciation, depletion and amortization, discounted using an annual discount rate of 10%.

Productive Well.    A well that is producing oil or gas or that is capable of production.

Proved Developed Reserves.    Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery should be included as “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved.

Reserve Replacement.    Calculated by dividing the sum of reserve additions from all sources (revisions, extensions, discoveries and other additions and acquisitions) by the actual production for the corresponding period. The values for these reserve additions are derived directly from the proved reserves table on page 107. In calculating reserve replacement, we do not use unproved reserve quantities or proved reserve additions attributable to less than wholly-owned consolidated entities or investments accounted for using the equity method. Management uses the reserve replacement ratio as an indicator of the company’s ability to replenish annual production volumes and grow its reserves, thereby providing some information on the sources of future production. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. As an annual measure, the ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not imbed the cost or timing of future production of new reserves, it cannot be used as a measure of value creation.

Proved Reserves.    The estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes (a) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any, and (b) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available

20

geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir. Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the “proved” classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based.

Proved Undeveloped Location.    A site on which a development well can be drilled consistent with spacing rules for purposes of recovering proved undeveloped reserves.

Proved Undeveloped Reserves.    Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Proved undeveloped reserves may not include estimates attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.

Royalty Interest.    An interest in an oil and gas property entitling the owner to a share of oil or gas production free of costs of production.

Standardized Measure of Discounted Future Net Cash Flows.    The discounted future net cash flows relating to proved reserves based on year-end prices, costs and statutory tax rates (adjusted for permanent differences) and a 10-percent annual discount rate.

Tcf.    One trillion cubic feet.

Tcfe.    One trillion cubic feet of gas equivalent.

Undeveloped Acreage.    Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether such acreage contains proved reserves.

Working Interest.    The operating interest which gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.

ITEM 1A.    Risk Factors

Our business has many risks. Any of the following factors could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our common stock, preferred stock or senior notes could decline. This information should be considered carefully, together with other information in this report and other reports and materials we file with the Securities and Exchange Commission.

Oil and gas prices are volatile. A decline in prices could adversely affect our financial position, financial results, cash flows, access to capital and ability to grow.

Our revenues, operating results, profitability and future rate of growth depend primarily upon the prices we receive for the oil and gas we sell. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The amount we can borrow from banks is subject to periodic redeterminations based on prices specified by our bank group at the time of redetermination. In addition, we may have ceiling test write-downs in the future if prices fall significantly.

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Historically, the markets for oil and gas have been volatile and they are likely to continue to be volatile. Wide fluctuations in oil and gas prices may result from relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and other factors that are beyond our control, including:

• worldwide and domestic supplies of oil and gas;

• weather conditions;

• the level of consumer demand;

• the price and availability of alternative fuels;

• the proximity and capacity of natural gas pipelines and other transportation facilities;

• the price and level of foreign imports;

• domestic and foreign governmental regulations and taxes;

• the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

• political instability or armed conflict in oil-producing regions; and

• overall domestic and global economic conditions.

These factors and the volatility of the energy markets make it extremely difficult to predict future oil and gas price movements with any certainty. Declines in oil and gas prices would not only reduce revenue, but could reduce the amount of oil and gas that we can produce economically and, as a result, could have a material adverse effect on our financial condition, results of operations and reserves. Further, oil and gas prices do not necessarily move in tandem. Because approximately 92% of our reserves at December 31, 2005 are natural gas reserves, we are more affected by movements in natural gas prices.

Our level of indebtedness may limit our financial flexibility.

As of December 31, 2005, we had long-term indebtedness of approximately $5.5 billion, with $72.0 million drawn under our revolving bank credit facility. Our long-term indebtedness represented 47% of our total book capitalization at December 31, 2005. As of March 10, 2006, we had approximately $402 million outstanding under our revolving bank credit facility.

Our level of indebtedness and preferred stock affects our operations in several ways, including the following:

• a portion of our cash flows from operating activities must be used to service our indebtedness and pay dividends on our preferred stock and is not available for other purposes;

• we may be at a competitive disadvantage as compared to peer companies that have less debt;

• the covenants contained in the agreements governing our outstanding indebtedness and future indebtedness may limit our ability to borrow additional funds, pay dividends and make certain investments and may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;

• additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes may have higher costs and more restrictive covenants;

• changes in the credit ratings of our debt may negatively affect the cost, terms, conditions and availability of future financing, and lower ratings will increase the interest rate and fees we pay on our revolving bank credit facility; and

• we may be more vulnerable to general adverse economic and industry conditions.

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We may incur additional debt, including significant secured indebtedness, or issue additional series of preferred stock in order to make future acquisitions or to develop our properties. A higher level of indebtedness and/or additional preferred stock increases the risk that we may default on our obligations. Our ability to meet our debt obligations and to reduce our level of indebtedness depends on our future performance. General economic conditions, oil and gas prices and financial, business and other factors affect our operations and our future performance. Many of these factors are beyond our control. We may not be able to generate sufficient cash flow to pay the interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt. Factors that will affect our ability to raise cash through an offering of our capital stock or a refinancing of our debt include financial market conditions, the value of our assets and our performance at the time we need capital.

In addition, our bank borrowing base is subject to periodic redetermination. A lowering of our borrowing base could require us to repay indebtedness in excess of the borrowing base, or we might need to further secure the lenders with additional collateral.

Competition in the oil and natural gas industry is intense, and many of our competitors have greater financial and other resources than we do.

We operate in the highly competitive areas of oil and natural gas acquisition, development, exploitation, exploration and production. We face intense competition from both major and other independent oil and natural gas companies in each of the following areas:

• seeking to acquire desirable producing properties or new leases for future exploration, and

• seeking to acquire the equipment and expertise necessary to develop and operate our properties.

Many of our competitors have financial and other resources substantially greater than ours, and some of them are fully integrated oil companies. These companies may be able to pay more for development prospects and productive oil and natural gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. Our ability to develop and exploit our oil and natural gas properties and to acquire additional properties in the future will depend upon our ability to successfully conduct operations, evaluate and select suitable properties and consummate transactions in this highly competitive environment.

Significant capital expenditures are required to replace our reserves.

Our exploration, development and acquisition activities require substantial capital expenditures. Historically, we have funded our capital expenditures through a combination of cash flows from operations, our revolving bank credit facility and debt and equity issuances. Future cash flows are subject to a number of variables, such as the level of production from existing wells, prices of oil and gas, and our success in developing, acquiring and producing new reserves. If revenue were to decrease as a result of lower oil and gas prices or decreased production, and our access to capital were limited, we would have a reduced ability to replace our reserves. If our cash flow from operations is not sufficient to fund our capital expenditure budget, we may not be able to access additional bank debt, debt or equity or other methods of financing on an economic basis to meet these requirements.

If we are not able to replace reserves, we may not be able to sustain production.

Our future success depends largely upon our ability to find, develop or acquire additional oil and gas reserves that are economically recoverable. Unless we replace the reserves we produce through successful development, exploration or acquisition activities, our proved reserves and production will decline over time. In addition, approximately 35% of our total estimated proved reserves (by volume) at December 31, 2005 were undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will

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require significant capital expenditures and successful drilling operations. Our reserve estimates reflect that our production rate on producing properties will decline approximately 24% from 2006 to 2007. Thus, our future oil and natural gas reserves and production and, therefore, our cash flow and income are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves.

The actual quantities and present value of our proved reserves may prove to be lower than we have estimated.

This report contains estimates of our proved reserves and the estimated future net revenues from our proved reserves. These estimates are based upon various assumptions, including assumptions required by the SEC relating to oil and gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The process of estimating oil and gas reserves is complex. The process involves significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, these estimates are inherently imprecise.

Actual future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and gas reserves most likely will vary from these estimates. Such variations may be significant and could materially affect the estimated quantities and present value of our proved reserves. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development drilling, prevailing oil and gas prices and other factors, many of which are beyond our control. Our properties may also be susceptible to hydrocarbon drainage from production by operators on adjacent properties.

At December 31, 2005, approximately 35% of our estimated proved reserves (by volume) were undeveloped. Recovery of undeveloped reserves requires significant capital expenditures and successful drilling operations. These reserve estimates include the assumption that we will make significant capital expenditures to develop the reserves, including $1.8 billion in 2006. You should be aware that the estimated costs may not be accurate, development may not occur as scheduled and results may not be as estimated.

You should not assume that the present values referred to in this report represent the current market value of our estimated oil and natural gas reserves. In accordance with SEC requirements, the estimates of our present values are based on prices and costs as of the date of the estimates. The December 31, 2005 present value is based on weighted average oil and natural gas wellhead prices of $56.41 per barrel of oil and $8.76 per mcf of natural gas. Actual future prices and costs may be materially higher or lower than the prices and costs as of the date of an estimate.

Any changes in consumption by oil and natural gas purchasers or in governmental regulations or taxation will also affect actual future net cash flows.

The timing of both the production and the expenses from the development and production of oil and natural gas properties will affect both the timing of actual future net cash flows from our proved reserves and their present value. In addition, the 10% discount factor, which is required by the SEC to be used in calculating discounted future net cash flows for reporting purposes, is not necessarily the most accurate discount factor. The effective interest rate at various times and the risks associated with our business or the oil and gas industry in general will affect the accuracy of the 10% discount factor.

Acquisitions may prove to be worth less than we paid because of uncertainties in evaluating recoverable reserves and potential liabilities.

Our recent growth is due in part to acquisitions of exploration and production companies, producing properties and undeveloped leasehold. We expect acquisitions will also contribute to our future growth. Successful acquisitions require an assessment of a number of factors, including estimates of recoverable reserves,

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exploration potential, future oil and gas prices, operating costs and potential environmental and other liabilities. Such assessments are inexact and their accuracy is inherently uncertain. In connection with our assessments, we perform a review of the acquired properties which we believe is generally consistent with industry practices. However, such a review will not reveal all existing or potential problems. In addition, our review may not permit us to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. We do not inspect every well. Even when we inspect a well, we do not always discover structural, subsurface and environmental problems that may exist or arise. We are generally not entitled to contractual indemnification for pre-closing liabilities, including environmental liabilities. Normally, we acquire interests in properties on an “as is” basis with limited remedies for breaches of representations and warranties. As a result of these factors, we may not be able to acquire oil and gas properties that contain economically recoverable reserves or be able to complete such acquisitions on acceptable terms.

We were not entitled to contractual indemnification for the majority of pre-closing liabilities, including environmental liabilities, in our recent acquisition of CNR. We acquired CNR on an “as is” basis with very limited remedies for breaches of representations and warranties. We might incur significant liabilities relating to CNR in the future which we have not yet identified or cannot quantify at this time.

As new owners, we may not effectively consolidate and integrate acquired operations, particularly when we make significant acquisitions outside our historical operating areas.

Significant acquisitions present operational and administrative challenges that may prove more difficult than anticipated. The failure to consolidate functions and integrate procedures, personnel and operations in an effective and timely manner may adversely affect our business and results of operations, at least temporarily. Significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties, which may have substantially different operating and geological characteristics or be in different geographic locations than our existing properties. To the extent that we acquire properties substantially different from the properties in our primary operating areas or acquire properties that require different technical expertise, we may not be able to realize the economic benefits of these acquisitions as efficiently as in our prior acquisitions. As a result of our recent acquisition of CNR, we now have a significant presence in the Appalachian Basin, principally in West Virginia, eastern Kentucky, eastern Ohio and southern New York. We have not previously developed or explored for oil and natural gas in this part of the U.S.

Exploration and development drilling may not result in commercially productive reserves.

We do not always encounter commercially productive reservoirs through our drilling operations. The new wells we drill or participate in may not be productive and we may not recover all or any portion of our investment in wells we drill or participate in. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well that oil or gas is present or may be produced economically. The cost of drilling, completing and operating a well is often uncertain, and cost factors can adversely affect the economics of a project. Our efforts will be unprofitable if we drill dry wells or wells that are productive but do not produce enough reserves to return a profit after drilling, operating and other costs. Further, our drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including:

• increases in the cost of, or shortages or delays in the availability of, drilling rigs and equipment;

• unexpected drilling conditions;

• title problems;

• pressure or irregularities in formations;

• equipment failures or accidents;

• adverse weather conditions; and

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• compliance with environmental and other governmental requirements.

Future price declines may result in a write-down of our asset carrying values.

We utilize the full cost method of accounting for costs related to our oil and gas properties. Under this method, all such costs (for both productive and nonproductive properties) are capitalized and amortized on an aggregate basis over the estimated lives of the properties using the unit-of-production method. However, these capitalized costs are subject to a ceiling test which limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved oil and gas reserves discounted at 10% plus the lower of cost or market value of unproved properties. The full cost ceiling is evaluated at the end of each quarter using the prices for oil and gas at that date, adjusted for the impact of derivatives accounted for as cash flow hedges. A significant decline in oil and gas prices from current levels, or other factors, without other mitigating circumstances, could cause a future write-down of capitalized costs and a non-cash charge against future earnings.

Our hedging activities may reduce the realized prices received for our oil and gas sales and require us to provide collateral for hedging liabilities.

In order to manage our exposure to price volatility in marketing our oil and gas, we enter into oil and gas price risk management arrangements for a portion of our expected production. Commodity price hedging may limit the prices we actually realize and therefore reduce oil and gas revenues in the future. The fair value of our oil and gas derivative instruments outstanding as of December 31, 2005 was a liability of approximately $945.8 million. In addition, our commodity price risk management transactions may expose us to the risk of financial loss in certain circumstances, including instances in which:

• our production is less than expected;

• there is a widening of price differentials between delivery points for our production and the delivery point assumed in the hedge arrangement; or

• the counterparties to our contracts fail to perform under the contracts.

Some of our commodity price and interest rate risk management arrangements require us to deliver cash collateral or other assurances of performance to the counterparties in the event that our payment obligations exceed certain levels. As of December 31, 2005, we were required to post a total of $50 million of collateral with our counterparties through letters of credit issued under our bank credit facility with respect to commodity price and financial risk management transactions. As of March 10, 2006, we were required to post $50 million of collateral with our counterparties through letters of credit. Future collateral requirements are uncertain and will depend on arrangements with our counterparties and highly volatile natural gas and oil prices.

Lower oil and gas prices could negatively impact our ability to borrow.

Our amended and restated revolving bank credit facility limits our borrowings to the lesser of the borrowing base (currently $2.5 billion) and the commitment (currently $2.0 billion). The borrowing base is determined periodically at the discretion of the banks and is based in part on oil and gas prices. Additionally, some of our indentures contain covenants limiting our ability to incur indebtedness in addition to that incurred under our bank credit facility. These indentures limit our ability to incur additional indebtedness unless we meet one of two alternative tests. The first alternative is based on our adjusted consolidated net tangible assets (as defined in all of our indentures), which is determined using discounted future net revenues from proved oil and gas reserves as of the end of each year. The second alternative is based on the ratio of our adjusted consolidated EBITDA (as defined in the relevant indentures) to our adjusted consolidated interest expense over a trailing twelve-month period. As of the date of this report, we are permitted to incur significant additional indebtedness under both of these debt incurrence tests. Lower oil and gas prices in the future could reduce our adjusted consolidated EBITDA, as well as our adjusted consolidated net tangible assets, and thus could reduce our ability to incur additional indebtedness.

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Oil and gas drilling and producing operations can be hazardous and may expose us to environmental liabilities.

Oil and gas operations are subject to many risks, including well blowouts, cratering and explosions, pipe failure, fires, formations with abnormal pressures, uncontrollable flows of oil, natural gas, brine or well fluids, and other environmental hazards and risks. Our drilling operations involve risks from high pressures and from mechanical difficulties such as stuck pipes, collapsed casings and separated cables. If any of these risks occur, we could sustain substantial losses as a result of:

• injury or loss of life;

• severe damage to or destruction of property, natural resources and equipment;

• pollution or other environmental damage;

• clean-up responsibilities;

• regulatory investigations and penalties; and

• suspension of operations.

Our liability for environmental hazards includes those created either by the previous owners of properties that we purchase or lease or by acquired companies prior to the date we acquire them. We maintain insurance against some, but not all, of the risks described above. Our insurance may not be adequate to cover casualty losses or liabilities. Also, in the future we may not be able to obtain insurance at premium levels that justify its purchase.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Information regarding our properties is included in Item 1 and in Note 11 of the notes to our consolidated financial statements included in Item 8 of this report.

ITEM 3. Legal Proceedings

We are currently involved in various disputes incidental to our business operations. We believe that the final resolution of currently pending or threatened litigation is not likely to have a material adverse effect on our financial position or results of operations or cash flows.

ITEM 4. Submission of Matters to a Vote of Security Holders

Not applicable.

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PART II

ITEM 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

Our common stock trades on the New York Stock Exchange under the symbol “CHK”. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported by the New York Stock Exchange:

	Common Stock
	High		Low
Year ended December 31, 2005:
First Quarter	$	23.65	$	15.06
Second Quarter		24.00		17.74
Third Quarter		38.98		22.90
Fourth Quarter		40.20		26.59
Year ended December 31, 2004:
First Quarter	$	13.98	$	11.70
Second Quarter		15.05		12.68
Third Quarter		16.24		13.69
Fourth Quarter		18.31		15.17

At March 10, 2006, there were 1,473 holders of record of our common stock and approximately 322,000 beneficial owners.

Dividends

The following table sets forth the amount of dividends per share declared on Chesapeake common stock during 2005 and 2004:

	2005		2004
First Quarter	$	0.045	$	0.035
Second Quarter		0.050		0.045
Third Quarter		0.050		0.045
Fourth Quarter		0.050		0.045

While we expect to continue to pay dividends on our common stock, the payment of future cash dividends will depend upon, among other things, our financial condition, funds from operations, the level of our capital and development expenditures, our future business prospects, contractual restrictions and any other factors considered relevant by the board of directors.

Several of the indentures governing our outstanding senior notes contain restrictions on our ability to declare and pay cash dividends. Under these indentures, we may not pay any cash dividends on our common or preferred stock if an event of default has occurred, if we have not met one of the two debt incurrence tests described in the indentures, or if immediately after giving effect to the dividend payment, we have paid total dividends and made other restricted payments in excess of the permitted amounts. As of December 31, 2005, our coverage ratio for purposes of the debt incurrence test under the relevant indentures was 5.45 to 1, compared to 2.25 to 1 required in our indentures. Our adjusted consolidated net tangible assets under the relevant indentures exceeded 200% of our total indebtedness, as required in our indentures, by more than $5.2 billion.

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The following table presents information about repurchases of our common stock during the three months ended December 31, 2005:

Period	Total Number of Shares Purchased (a)	Average Price Paid Per Share (a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (b)
October 1, 2005 through October 31, 2005	28,227	$	32.461	—	—
November 1, 2005 through November 30, 2005	26,596	$	29.890	—	—
December 1, 2005 through December 31, 2005	22,952	$	31.965	—	—
Total	77,775	$	31.435	—	—

(a) Includes 75,224 shares purchased in the open market for the matching contributions we make to our 401(k) plans and the surrender to the company of 2,551 shares of common stock to pay withholding taxes in connection with the vesting of employee restricted stock.

(b) We make matching contributions to our 401(k) plans and 401(k) make-up plan using Chesapeake common stock which is held in treasury or is purchased by the respective plan trustees in the open market. The plans contain no limitation on the number of shares that may be purchased for purposes of company contributions. There are no other repurchase plans or programs currently authorized by the board of directors.

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ITEM 6.    Selected Financial Data

The following table sets forth selected consolidated financial data of Chesapeake for the years ended December 31, 2005, 2004, 2003, 2002 and 2001. The data are derived from our audited consolidated financial statements revised to reflect the reclassification of certain items. In addition to changes in the annual average prices for oil and gas and increased production from drilling activity, significant acquisitions in recent years also impacted comparability between years. See Notes 11 and 13 of the notes to our consolidated financial statements. The table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes, appearing in Items 7 and 8 of this report.

	Years Ended December 31,
	2005			2004			2003			2002			2001
	($ in thousands, except per share data)
Statement of Operations Data:
Revenues:
Oil and gas sales	$	3,272,585		$	1,936,176		$	1,296,822		$	568,187		$	820,318
Oil and gas marketing sales		1,392,705			773,092			420,610			170,315			148,733
Total revenues		4,665,290			2,709,268			1,717,432			738,502			969,051
Operating costs:
Production expenses		316,956			204,821			137,583			98,191			75,374
Production taxes		207,898			103,931			77,893			30,101			33,010
General and administrative expenses		64,272			37,045			23,753			17,618			14,449
Oil and gas marketing expenses		1,358,003			755,314			410,288			165,736			144,373
Oil and gas depreciation, depletion and amortization		894,035			582,137			369,465			221,189			172,902
Depreciation and amortization of other assets		50,966			29,185			16,793			14,009			8,663
Provision for legal settlements		—			4,500			6,402			—			—
Total operating costs		2,892,130			1,716,933			1,042,177			546,844			448,771
Income from operations		1,773,160			992,335			675,255			191,658			520,280
Other income (expense):
Interest and other income		10,452			4,476			2,827			7,340			2,877
Interest expense		(219,800	)		(167,328	)		(154,356	)		(112,031	)		(98,321	)
Loss on repurchases or exchanges of Chesapeake debt		(70,419	)		(24,557	)		(20,759	)		(2,626	)		(76,667	)
Loss on investment in Seven Seas Petroleum, Inc.		—			—			(2,015	)		(17,201	)		—
Impairments of investments in securities		—			—			—			—			(10,079	)
Gain on sale of Canadian subsidiary		—			—			—			—			27,000
Gothic standby credit facility costs		—			—			—			—			(3,392	)
Total other income (expense)		(279,767	)		(187,409	)		(174,303	)		(124,518	)		(158,582	)
Income before income taxes and cumulative effect of accounting change		1,493,393			804,926			500,952			67,140			361,698
Income tax expense (benefit):
Current		—			—			5,000			(1,822	)		3,565
Deferred		545,091			289,771			185,360			28,676			140,727
Total income tax expense		545,091			289,771			190,360			26,854			144,292
Net income before cumulative effect of accounting change, net of tax		948,302			515,155			310,592			40,286			217,406
Cumulative effect of accounting change, net of income taxes of $1,464,000		—			—			2,389			—			—
Net Income		948,302			515,155			312,981			40,286			217,406
Preferred stock dividends		(41,813	)		(39,506	)		(22,469	)		(10,117	)		(2,050	)
Loss on conversion/exchange of preferred stock		(26,874	)		(36,678	)		—			—			—
Net income available to common shareholders	$	879,615		$	438,971		$	290,512		$	30,169		$	215,356
Earnings per common share—basic:
Income before cumulative effect of accounting change	$	2.73		$	1.73		$	1.36		$	0.18		$	1.33
Cumulative effect of accounting change		—			—			0.02			—			—
	$	2.73		$	1.73		$	1.38		$	0.18		$	1.33
Earnings per common share—assuming dilution:
Income before cumulative effect of accounting change	$	2.51		$	1.53		$	1.20		$	0.17		$	1.25
Cumulative effect of accounting change		—			—			0.01			—			—
	$	2.51		$	1.53		$	1.21		$	0.17		$	1.25
Cash dividends declared per common share	$	0.195		$	0.170		$	0.135		$	0.060		$	—

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	Years Ended December 31,
	2005		2004		2003		2002		2001
	($ in thousands, except per share data)
Cash Flow Data:
Cash provided by operating activities	$	2,406,888	$	1,432,274	$	938,907	$	428,797	$	478,098
Cash used in investing activities		7,017,494		3,381,204		2,077,217		779,745		670,105
Cash provided by financing activities		4,663,737		1,915,245		931,254		480,991		310,146
Effect of exchange rate changes on cash		—		—		—		—		(545	)
Balance Sheet Data (at end of period):
Total assets	$	16,118,462	$	8,244,509	$	4,572,291	$	2,875,608	$	2,286,768
Long-term debt, net of current maturities		5,489,742		3,075,109		2,057,713		1,651,198		1,329,453
Stockholders’ equity		6,174,323		3,162,883		1,732,810		907,875		767,407

ITEM 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Data

The following table sets forth certain information regarding the production volumes, oil and gas sales, average sales prices received and expenses for the periods indicated:

	December 31,
	2005			2004			2003
Net Production:
Oil (mbbl)		7,698			6,764			4,665
Gas (mmcf)		422,389			322,009			240,366
Gas equivalent (mmcfe)		468,577			362,593			268,356
Oil and Gas Sales ($ in thousands):
Oil sales	$	401,845		$	260,915		$	132,630
Oil derivatives – realized gains (losses)		(34,132	)		(69,267	)		(12,058	)
Oil derivatives – unrealized gains (losses)		4,374			3,454			(9,440	)
Total oil sales		372,087			195,102			111,132
Gas sales		3,231,286			1,789,275			1,171,050
Gas derivatives – realized gains (losses)		(367,551	)		(85,634	)		(5,331	)
Gas derivatives – unrealized gains (losses)		36,763			37,433			19,971
Total gas sales		2,900,498			1,741,074			1,185,690
Total oil and gas sales	$	3,272,585		$	1,936,176		$	1,296,822
Average Sales Price (excluding gains (losses) on derivatives):
Oil ($ per bbl)	$	52.20		$	38.57		$	28.43
Gas ($ per mcf)	$	7.65		$	5.56		$	4.87
Gas equivalent ($ per mcfe)	$	7.75		$	5.65		$	4.86
Average Sales Price (excluding unrealized gains (losses) on derivatives):
Oil ($ per bbl)	$	47.77		$	28.33		$	25.85
Gas ($ per mcf)	$	6.78		$	5.29		$	4.85
Gas equivalent ($ per mcfe)	$	6.90		$	5.23		$	4.79
Expenses ($ per mcfe):
Production expenses	$	0.68		$	0.56		$	0.51
Production taxes (a)	$	0.44		$	0.29		$	0.29
General and administrative expenses	$	0.14		$	0.10		$	0.09
Oil and gas depreciation, depletion and amortization	$	1.91		$	1.61		$	1.38
Depreciation and amortization of other assets	$	0.11		$	0.08		$	0.06
Interest expense (b)	$	0.47		$	0.45		$	0.55
Interest Expense ($ in thousands):
Interest expense	$	226,330		$	162,781		$	151,676
Interest rate derivatives – realized (gains) losses		(4,945	)		(791	)		(3,859	)
Interest rate derivatives – unrealized (gains) losses		(1,585	)		5,338			6,539
Total interest expense	$	219,800		$	167,328		$	154,356
Net Wells Drilled		816			546			456
Net Producing Wells as of the End of Period		16,985			8,058			5,873

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(a) Production taxes in 2004 include a benefit of $6.8 million, or $0.02 per mcfe, from 2003 severance tax credits.

(b) Includes realized gains or (losses) from interest rate derivatives, but does not include unrealized gains or (losses) and is net of amounts capitalized.

We manage our business as three separate segments, an exploration and production segment, a marketing segment and a service operations segment which is comprised of our wholly owned drilling subsidiary. We refer you to Note 8 of the notes to our consolidated financial statements appearing in Item 8 of this report, which summarizes by segment our net income and capital expenditures for 2005, 2004 and 2003 and our assets as of December 31, 2005, 2004 and 2003.

Executive Summary

Chesapeake is the second largest independent producer of natural gas in the United States and we own interests in approximately 30,600 producing oil and gas wells. Our strategy is focused on discovering, developing and acquiring onshore natural gas reserves primarily in the southwestern U.S. and secondarily in the Appalachian Basin in the eastern U.S. Our most important operating area has historically been the Mid-Continent region, which includes Oklahoma, Arkansas, Kansas and the Texas Panhandle. At December 31, 2005, 51% of our proved reserves were located in the Mid-Continent. During the past four years, we have also built significant positions in the South Texas and Texas Gulf Coast regions, the Permian Basin of West Texas and eastern New Mexico, the Barnett Shale area of north-central Texas, the Ark-La-Tex area of East Texas and northern Louisiana and the emerging Fayetteville Shale play in Arkansas. As a result of our recent acquisition of Columbia Energy Resources, LLC and its subsidiaries, including Columbia Natural Resources, LLC (“CNR”) as described below, we now have a significant presence in the Appalachian Basin, principally in West Virginia, eastern Kentucky, eastern Ohio and southern New York.

Chesapeake attributes its strong organic growth rates during 2005 and in the past five years to management’s early recognition that oil and gas prices were undergoing structural change and its subsequent decision to invest aggressively in the building blocks of value creation in the E&P industry—people, land and seismic. During the past five years, Chesapeake has invested more than $3.0 billion in new leasehold and 3-D seismic acquisitions and now owns what it believes to be the largest inventories of onshore leasehold (8.5 million net acres) and 3-D seismic (11.6 million acres) in the U.S. On this leasehold, the company has identified more than a 10-year drilling inventory of approximately 28,000 drilling locations.

In addition, Chesapeake has significantly strengthened its technical capabilities during the past five years by increasing its land, geoscience and engineering staff by 400% to over 600 employees. Today, the company has more than 3,300 employees, of which approximately 70% work in the company’s E&P operations and 30% work in the company’s oilfield service operations.

Oil and natural gas production for 2005 was 468.6 bcfe, an increase of 106.0 bcfe, or 29% over the 362.6 bcfe produced in 2004. We have increased our production for 16 consecutive years and 18 consecutive quarters. During these 18 quarters, Chesapeake’s U.S. production has increased 262% for an average compound quarterly growth rate of 7% and an average compound annual growth rate of 33%.

In addition to increased oil and natural gas production, the prices we received were higher in 2005 than in 2004. On a natural gas equivalent basis, weighted average prices (excluding the effect of unrealized gains or losses on derivatives) were $6.90 per mcfe in 2005 compared to $5.23 per mcfe in 2004. The increase in prices resulted in an increase in revenue of $782.2 million, and increased production resulted in an increase in revenue of $554.0 million, for a total increase in revenue of $1.336 billion (excluding the effect of unrealized gains or losses on derivatives). In each of the operating areas where Chesapeake sells its oil and natural gas, established marketing and transportation infrastructures exist thereby contributing to relatively high wellhead price realizations for our production.

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During 2005, Chesapeake drilled 902 (686 net) operated wells and participated in another 1,066 (130 net) wells operated by other companies. The company’s drilling success rate was 98% for company-operated wells and 95% for non-operated wells. During 2005, Chesapeake invested $1.511 billion in operated wells (using an average of 73 operated rigs), $309 million in non-operated wells (using an average of approximately 66 non-operated rigs) and $362 million in acquiring new 3-D seismic data and new leasehold (excluding leasehold acquired through acquisitions). Our acquisition expenditures totaled $4.9 billion during 2005 (including amounts paid for unproved leasehold and excluding $252 million of deferred taxes in connection with certain corporate acquisitions). We expect to continue replacing reserves through the drillbit and acquisitions, although the timing and magnitude of future additions are uncertain.

Chesapeake began 2005 with estimated proved reserves of 4.902 tcfe and ended the year with 7.521 tcfe, an increase of 2.619 tcfe, or 53%. During 2005, we replaced 468.6 bcfe of production with an estimated 3.088 tcfe of new proved reserves, for a reserve replacement rate of 659%. This compares to reserve replacement of 578% and 459% for 2004 and 2003, respectively. Reserve replacement through the drillbit was 1.047 tcfe, or 223% of production (including a positive 17 bcfe from performance revisions and a positive 24 bcfe from oil and natural gas price increases), or 34% of the total increase. Reserve replacement through acquisitions was 2.041 tcfe, or 436% of production, or 66% of the total increase. Our annual decline rate on producing properties is projected to be 24% from 2006 to 2007, 16% from 2007 to 2008, 13% from 2008 to 2009, 11% from 2009 to 2010 and 10% from 2010 to 2011. Our percentage of proved undeveloped reserve additions to total proved reserve additions was approximately 36% in 2005, 56% in 2004 and 35% in 2003. Based on our current drilling schedule and budget, we expect that virtually all of the proved undeveloped reserves added in 2005 will begin producing within the next five years. Generally, proved developed reserves are producing at the time they are added or will begin producing within a year.

On November 14, 2005, we acquired CNR and its significant natural gas reserves, acreage and mid-stream assets for approximately $3.02 billion, of which $2.2 billion was in cash and $0.82 billion was in assumed liabilities related to CNR’s working capital deficit and its prepaid sales agreement and hedging positions. The CNR assets consist of 125 mmcfe per day of natural gas production, 1.3 tcfe of proved reserves and approximately 3.2 million net acres of U.S. oil and gas leasehold, which we estimate have over 9,000 additional undrilled locations with reserve potential. CNR also owns extensive mid-stream natural gas assets, including over 6,500 miles of natural gas gathering lines.

In anticipation of today’s tight drilling rig market, Chesapeake began making a series of investments in drilling rigs in 2001. In that year, Chesapeake formed its 100% owned drilling rig subsidiary, Nomac Drilling Corporation, with an investment of $26 million to build and refurbish five drilling rigs. Chesapeake has invested a total of $123 million in Nomac’s 19 operating rigs, invested another $26 million in 25 rigs that Nomac is currently building, and budgeted an additional $191 million for completion of these rigs.

In addition to Nomac, Chesapeake has also made four other major drilling rig investments. The first of these was its ownership of approximately 17% of the common stock of Pioneer Drilling Company (“Pioneer”), which we began acquiring in 2003. The company recently sold its Pioneer stock, realizing proceeds of $159 million and a pre-tax gain of $116 million that it will recognize in the 2006 first quarter. Chesapeake re-invested the Pioneer proceeds to acquire 13 rigs from privately held Martex Drilling Company, L.L.P. for $150 million.

Chesapeake has invested $43 million in two private drilling rig contractors, DHS Drilling Company and Mountain Drilling Company, in which Chesapeake owns 45% and 49%, respectively. DHS owns ten drilling rigs and has three more rigs on order. Mountain owns one drilling rig and has ordered another nine rigs for delivery in 2006 and 2007. Chesapeake’s drilling rig investments have served as a partial hedge to rising service costs and have also provided competitive advantages in making acquisitions and in developing its own leasehold on a more timely basis.

As of December 31, 2005, the company’s debt as a percentage of total capitalization (total capitalization is the sum of debt and stockholders’ equity) was 47% compared to 49% as of December 31, 2004. During 2005, we

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received net proceeds of $5.252 billion through issuances of $1.380 billion of preferred equity, $1.025 billion of common equity, and $2.990 billion principal amount of senior notes. We issued 18.7 million shares of common stock in exchange for outstanding shares of our 4.125% and 5.0% (Series 2003) preferred stock and upon conversions of our 6.0% preferred stock. Additionally, we purchased and retired $564.4 million principal amount of outstanding senior notes during 2005. As a result of our debt transactions during 2005, we have extended the average maturity of our long-term debt to over 10 years and have lowered our average interest rate to approximately 6.3%.

We intend to continue to focus on improving the strength of our balance sheet. We believe our business strategy and operational performance will lead to an investment grade credit rating for our unsecured debt in the future.

Our President and Chief Operating Officer, Tom L. Ward, resigned as a director, officer and employee of the company effective February 10, 2006. The Resignation Agreement provides for the immediate vesting of all of Mr. Ward’s unvested stock options and restricted stock on February 10, 2006. As a result of such vesting, options to purchase 724,615 shares of Chesapeake’s common stock at an average exercise price of $8.01 per share and 1,291,875 shares of restricted common stock became immediately vested. As a result, the company expects to incur a non-cash after-tax charge of approximately $31.8 million in the first quarter 2006.

Liquidity and Capital Resources

Sources of Liquidity and Uses of Funds

Our primary source of liquidity to meet operating expenses and fund capital expenditures (other than for certain acquisitions) is cash flow from operations. Based on our current production, price and expense assumptions, we expect cash flow from operations will exceed our drilling capital expenditures in 2006. Our budget for drilling, land and seismic activities during 2006 is currently between $3.0 billion and $3.2 billion. We believe this level of exploration and development will be sufficient to increase our reserves in 2006 and achieve our goal of a 10% to 20% increase in production over 2005 production (inclusive of acquisitions completed or scheduled to close in 2006 through the filing date of this report but without regard to any additional acquisitions that may be completed in 2006). However, higher drilling and field operating costs, drilling results that alter planned development schedules, acquisitions or other factors could cause us to revise our drilling program, which is largely discretionary. Any cash flow from operations not needed to fund our drilling program will be available for acquisitions, dividends, debt repayment or other general corporate purposes in 2006.

Cash provided by operating activities was $2.407 billion in 2005, compared to $1.432 billion in 2004 and $938.9 million in 2003. The $975 million increase from 2004 to 2005 and the $493.1 million increase from 2003 to 2004 were primarily due to higher realized prices and higher volumes of oil and gas production. We expect that 2006 production volumes will be higher than in 2005 and that cash provided by operating activities in 2006 will exceed 2005 levels. While a precipitous decline in gas prices in 2006 would affect the amount of cash flow that would be generated from operations, we have 63% of our expected oil production in 2006 hedged at an average NYMEX price of $61.02 per barrel of oil and 71% (excluding the hedges assumed in the CNR acquisition and certain collars and options) of our expected natural gas production in 2006 hedged at an average NYMEX price of $9.43 per mcf. This level of hedging provides certainty of the cash flow we will receive for a substantial portion of our 2006 production. Depending on changes in oil and gas futures markets and management’s view of underlying oil and natural gas supply and demand trends, however, we may increase or decrease our current hedging positions.

Based on fluctuations in natural gas and oil prices, our hedging counterparties may require us to deliver cash collateral or other assurances of performance from time to time. At December 31, 2005 and March 10, 2006, we had $50 million of letters of credit securing our performance of hedging contracts. To mitigate the liquidity impact of those collateral requirements, we have negotiated caps on the amount of collateral that we might be required to post with seven of our counterparties. All of our existing commodity hedges that are not under our

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secured hedge facilities (described below under Contractual Obligations) are with these counterparties and the maximum amount of collateral that we would be required to post with them is no more than $230 million in the aggregate.

A significant source of liquidity is our $2.0 billion syndicated revolving bank credit facility which matures in February 2011. At March 10, 2006, there was $1.5 billion of borrowing capacity available under the revolving bank credit facility. We use the facility to fund daily operating activities and acquisitions as needed. We borrowed $5.682 billion and repaid $5.669 billion in 2005, we borrowed $2.160 billion and repaid $2.101 billion in 2004 and we borrowed and repaid $738 million in 2003 under our bank credit facility. We incurred $4.7 million, $2.2 million and $2.5 million of financing costs related to our revolving bank credit facility in 2005, 2004 and 2003, respectively, as a result of amendments to the credit facility agreement. Also during 2005, we repaid the remaining credit facility balance of $96.1 million assumed in the CNR acquisition.

We believe that our available cash, cash provided by operating activities and funds available under our revolving bank credit facility will be sufficient to fund our operating, interest and general and administrative expenses, our capital expenditure budget, our short-term contractual obligations and dividend payments at current levels for the foreseeable future.

The public and institutional markets have been our principal source of long-term financing for acquisitions. We have sold debt and equity in both public and private offerings in the past, and we expect that these sources of capital will continue to be available to us in the future for acquisitions. Nevertheless, we caution that ready access to capital on reasonable terms and the availability of desirable acquisition targets at attractive prices are subject to many uncertainties, as explained under “Risk Factors” in Item 1A.

The following table reflects the proceeds from sales of securities we issued in 2005, 2004 and 2003 ($ in millions):

	2005				2004				2003
	Total Proceeds		Net Proceeds		Total Proceeds		Net Proceeds		Total Proceeds		Net Proceeds
Unsecured senior notes guaranteed by subsidiaries	$	2,300.0	$	2,251.3	$	1,200.0	$	1,166.0	$	500.0	$	485.4
Contingent convertible unsecured senior notes		690.0		673.3		—		—		—		—
Convertible preferred stock		1,380.0		1,341.5		313.3		304.9		402.5		390.4
Common stock		1,024.6		985.8		650.0		624.2		186.3		177.4
Total	$	5,394.6	$	5,251.9	$	2,163.3	$	2,095.1	$	1,088.8	$	1,053.2

We qualify as a well-known seasoned issuer (WKSI), as defined in Rule 405 of the Securities Act of 1933, and therefore we may utilize automatic shelf registration to register future debt and equity issuances with the Securities and Exchange Commission. A prospectus supplement will be prepared at the time of an offering and will contain a description of the security issued, the plan of distribution and other information.

We paid dividends on our common stock of $60.5 million, $38.9 million and $27.3 million in 2005, 2004 and 2003, respectively, and we paid dividends on our preferred stock of $31.5 million, $40.9 million and $20.9 million in 2005, 2004 and 2003, respectively. We received $21.6 million, $12.0 million and $9.3 million from the exercise of employee and director stock options and warrants in 2005, 2004 and 2003, respectively. We paid $4.0 million and $2.1 million to purchase treasury stock in 2005 and 2003 to fund our matching contributions to our 401(k) make-up plan. There were no treasury stock purchases made in 2004.

In 2005, we paid $11.6 million to settle derivative liabilities assumed from CNR.

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Outstanding payments from certain disbursement accounts in excess of funded cash balances where no legal right of set-off exists increased by $61.2 million, $88.3 million and $28.3 million in 2005, 2004 and 2003, respectively. All disbursements are funded on the day they are presented to our bank using available cash on hand or draws on our revolving bank credit facility.

Historically, we have used significant funds to redeem or purchase and retire outstanding senior notes issued by Chesapeake. The following table shows our redemption, purchases and exchanges of senior notes for 2005, 2004 and 2003 ($ in millions):

	Senior Notes Activity
For the Year Ended December 31, 2005:	Retired		Premium		Other (a)		Issued			Cash Paid
8.375% Senior Notes due 2008	$	19.0	$	1.2	$	—	$	—		$	20.2
8.125% Senior Notes due 2011		245.4		17.3		0.7		—			263.4
9.0% Senior Notes due 2012		300.0		41.4		0.8		—			342.2
	$	564.4	$	59.9	$	1.5	$	—		$	625.8
For the Year Ended December 31, 2004:
8.375% Senior Notes due 2008	$	190.8	$	16.1	$	0.5	$	—		$	207.4
7.875% Senior Notes due 2004		42.1		—		—		—			42.1
8.5% Senior Notes due 2012		4.3		0.2		—		—			4.5
8.125% Senior Notes due 2011 (b)		482.8		—		62.1		(534.2	)		10.7
	$	720.0	$	16.3	$	62.6	$	(534.2	)	$	264.7
For the Year Ended December 31, 2003:
8.5% Senior Notes due 2012	$	106.4	$	6.7	$	—	$	—		$	113.1
8.5% Senior Notes due 2012 (c)		32.0		—		1.5		(33.5	)		—
8.375% Senior Notes due 2008 (d)		27.9		—		1.6		(29.5	)		—
8.375 Senior Notes due 2008 and 8.125% Senior Notes due 2011 (e)		22.9		—		0.8		(23.7	)		—
8.375% Senior Notes due 2008 and 8.125% Senior Notes due 2011 (f)		61.2		—		2.6		(63.8	)		—
	$	250.4	$	6.7	$	6.5	$	(150.5	)	$	113.1

(a) Includes adjustments to accrued interest and discount associated with notes retired and new notes issued, cash in lieu of fractional notes, transaction costs and fair value hedging adjustments.

(b) We issued $63.7 million of our 7.75% Senior Notes and $470.5 million of our 6.875% Senior Notes.

(c) We issued $33.5 million of our 7.75% Senior Notes.

(d) We issued $29.5 million of our 7.75% Senior Notes.

(e) We issued $23.7 million of our 7.75% Senior Notes for $6.0 million 8.375% Senior Notes and $16.8 million 8.125% Senior Notes.

(f) We issued $63.8 million of our 7.5% Senior Notes for $6.3 million 8.375% Senior Notes and $54.9 million 8.125% Senior Notes.

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Cash used in investing activities increased to $6.921 billion in 2005, compared to $3.381 billion in 2004 and $2.077 billion in 2003. The following table shows our capital expenditures during these years ($ in millions):

	2005		2004		2003
Acquisitions of oil and gas companies, proved and unproved properties, net of cash acquired	$	3,925.5	$	1,914.7	$	1,261.3
Exploration and development of oil and gas properties		2,371.9		1,276.3		727.2
Additions to buildings and other fixed assets		417.5		126.7		71.5
Additions to investments		135.0		37.0		30.8
Additions to drilling equipment		66.8		23.1		1.2
Deposits for acquisitions		35.0		16.3		13.3
Total	$	6,951.7	$	3,394.1	$	2,105.3

Through divestitures of oil and gas properties, we received $9.8 million in 2005, $12.0 million in 2004 and $22.2 million, in 2003. Sales of other assets and investments in securities of other companies provided $20.4 million, $0.9 million and $5.8 million of cash in 2005, 2004 and 2003, respectively.

Our accounts receivable are primarily from purchasers of oil and natural gas ($615.4 million at December 31, 2005) and exploration and production companies which own interests in properties we operate ($84.8 million at December 31, 2005). This industry concentration has the potential to impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, industry or other conditions. We generally require letters of credit for receivables from customers which are judged to have sub-standard credit, unless the credit risk can otherwise be mitigated.

Our liquidity is not dependent on the use of off-balance sheet financing arrangements, such as the securitization of receivables or obtaining access to assets through special purpose entities. We have not relied on off-balance sheet financing arrangements in the past and we do not intend to rely on such arrangements in the future as a source of liquidity. We are not a commercial paper issuer.

Investing and Financing Transactions

The following table describes investing transactions that we completed in 2005 ($ in millions):

Acquisition	Location	Amount
Columbia Natural Resources, LLC	Appalachian Basin	$	2,200	(a)
BRG Petroleum Corporation	Mid-Continent and Ark-La-Tex		325	(b)
Hallwood Energy, III L.P.	Barnett Shale		250	(c)
Laredo Energy II, L.L.C.	South Texas		228
Houston-based oil and gas company	Texas Gulf Coast/South Texas		202
Pecos Production Company	Permian		198
Laredo II Partners	Texas Gulf Coast/South Texas		139
Corpus Christi-based oil and gas company	Ark-La-Tex		95
Dallas-based oil and gas company	Ark-La-Tex		85
Midland-based oil and gas company	Permian		38
Other	Various		372	(d)
		$	4,132

(a) Includes $175 million related to gathering systems which was allocated to other property and equipment.

(b) We paid $16.3 million of the purchase amount in 2004.

(c) Includes $15 million related to gathering systems which was allocated to other property and equipment.

(d) In 2005, we paid the remaining $57 million of the purchase price related to an acquisition transaction with Hallwood Energy Corporation in the fourth quarter of 2004.

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During 2004 and continuing in 2005, we have taken several steps to improve our capital structure. These transactions enabled us to extend our average maturity of long-term debt to over ten years with an average interest rate of approximately 6.3%. Maintaining a debt-to-total-capitalization ratio below 50% and reducing debt per mcfe of proved reserves remain key goals of our business strategy.

We completed the following significant financing transactions in 2005:

First Quarter 2005

• Amended our revolving bank credit facility to increase the committed borrowing base to $1.25 billion and extended the maturity of the facility to January 2010.

• Completed a private purchase of $11.0 million of our 8.375% Senior Notes due 2008 for $12.0 million (including a premium of $0.8 million).

Second Quarter 2005

• Completed private offerings of $600 million principal amount of 6.625% Senior Notes due 2016 and 4,600,000 shares of 5.0% cumulative convertible preferred stock having a liquidation preference of $100 per share. Net proceeds of approximately $1.032 billion from these transactions were used to finance acquisitions totaling $459 million that closed in the second quarter of 2005 and to repay debt incurred under our revolving bank credit facility to temporarily finance the BRG and the Laredo acquisitions completed in the first quarter.

• Completed a private placement of $600 million of 6.25% Senior Notes due 2018. Net proceeds of approximately $596.4 million were used to fund our purchases in June 2005 of $237.8 million of our 8.125% Senior Notes due 2011 for $255.3 million (including a premium of $16.8 million and transaction costs of $0.7 million) and $298.9 million of our 9.0% Senior Notes due 2012 for $341.0 million (including a premium of $41.3 million and transaction costs of $0.8 million) pursuant to tender offers for the 8.125% and 9.0% Senior Notes.

• Completed a private exchange of 45,000 shares of our outstanding 4.125% cumulative convertible preferred stock for 2,911,250 shares of common stock. No cash was received or paid in connection with this transaction.

Third Quarter 2005

• Completed cash tender offers for our 8.125% Senior Notes due 2011 and 9.0% Senior Notes due 2012. Approximately $0.3 million was used to purchase $0.1 million of 8.125% Senior Notes due 2011 and $0.2 million of 9.0% Senior Notes due 2012. Together with the amounts acquired in June 2005, we acquired a total of $237.9 million principal amount of 8.125% Senior Notes due 2011 and $299.1 million principal amount of 9.0% Senior Notes due 2012, representing 96.9% and 99.7%, respectively, of the amounts outstanding, in the tender offers, which expired on July 6, 2005. We redeemed the remaining $7.5 million of 8.125% and $0.9 million of 9.0% Senior Notes for $9.1 million (including a premium of $0.6 million) on August 17, 2005 based on the make-whole redemption provisions in the indentures.

• Completed a number of transactions whereby we exchanged 133,675 shares of our 4.125% cumulative convertible preferred stock for 8,529,758 shares of our common stock. No cash was received or paid in connection with these transactions.

• Completed a number of transactions whereby we exchanged 697,724 shares of our 5.0% (Series 2003) cumulative convertible preferred stock for 4,354,439 shares of our common stock. No cash was received or paid in connection with these transactions.

• Completed a private placement of $600 million of 6.5% Senior Notes due 2017. Net proceeds of approximately $584.6 million were used to repay amounts outstanding under our revolving bank credit facility which resulted from acquisitions completed in the third quarter.

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• Completed public offerings of 3,450,000 shares of 4.5% cumulative convertible preferred stock having a liquidation preference of $100 per share and 9,200,000 shares of common stock at $32.72 per share. Net proceeds from both offerings of approximately $624.6 million were used to repay amounts outstanding under our revolving bank credit facility which resulted from acquisitions completed in the third quarter.

Fourth Quarter 2005

• Completed private offerings of $500 million of 6.875% Senior Notes due 2020, $690 million of 2.75% Contingent Convertible Senior Notes due 2035 and 5,750,000 shares of 5.00% cumulative convertible preferred stock having a liquidation preference of $100 per share. Net proceeds of approximately $1.718 billion along with cash on hand and borrowings under our credit facility were used to fund the CNR acquisition.

• Completed a public offering of 23 million shares of common stock at $31.46 per share. Net proceeds of approximately $696.4 million were used to repay outstanding borrowings under our revolving bank credit facility which were incurred to temporarily finance the CNR acquisition.

• Completed a number of transactions whereby we exchanged 45,515 shares of our 4.125% cumulative convertible preferred stock for 2,880,873 shares of our common stock. No cash was received or paid in connection with these transactions.

• Completed an exchange of 1,330 shares of 5.0% (Series 2003) cumulative convertible preferred stock for 8,281 shares of common stock. No cash was received or paid in connection with these transactions.

Contractual Obligations

We currently have a $2.0 billion syndicated revolving bank credit facility which matures in February 2011. The credit facility was increased from $1.25 billion to $2.0 billion in February 2006. As of December 31, 2005, we had $72.0 million of outstanding borrowings under this facility and had utilized $53.0 million of the facility for various letters of credit. Borrowings under the facility are collateralized by certain producing oil and natural gas properties and bear interest at either (i) the greater of the reference rate of Union Bank of California, N.A., or the federal funds effective rate plus 0.50% or (ii) London Interbank Offered Rate (LIBOR), at our option, plus a margin that varies from 0.875% to 1.50% according to our senior unsecured long-term debt ratings. The collateral value and borrowing base are redetermined periodically. The unused portion of the facility is subject to an annual commitment fee that also varies from 0.125% to 0.30% according to our senior unsecured long-term debt ratings. Currently the annual commitment fee is 0.25%. Interest is payable quarterly or, if LIBOR applies, it may be payable at more frequent intervals.

The credit facility agreement contains various covenants and restrictive provisions which limit our ability to incur additional indebtedness, purchase or redeem our capital stock, make investments or loans, and create liens. The credit facility agreement requires us to maintain an indebtedness to total capitalization ratio (as defined) not to exceed 0.65 to 1 and an indebtedness to EBITDA ratio (as defined) not to exceed 3.5 to 1. At December 31, 2005, our indebtedness to total capitalization ratio was 0.48 to 1 and our indebtedness to EBITDA ratio was 2.34 to 1. If we should fail to perform our obligations under these and other covenants, the revolving credit commitment could be terminated and any outstanding borrowings under the facility could be declared immediately due and payable. Such acceleration, if involving a principal amount of $10 million ($50 million in the case of our senior notes issued after 2004), would constitute an event of default under our senior note indentures which could in turn result in the acceleration of a significant portion of our senior note indebtedness. The credit facility agreement also has cross default provisions that apply to other indebtedness we may have with an outstanding principal amount in excess of $75 million.

Some of our commodity price and financial risk management arrangements require us to deliver cash collateral or other assurances of performance to the counterparties in the event that our payment obligations exceed certain levels. As of December 31, 2005, we were required to post $50 million of collateral in the form of

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letters of credit with respect to such derivative transactions. These collateral requirements were $50 million as of March 10, 2005. Future collateral requirements are uncertain and will depend on arrangements with our counterparties and fluctuations in natural gas and oil prices and interest rates. We currently have arrangements with five of our counterparties, with which we have outstanding transactions, that limit the amount of collateral that we would be required to post with them to no more than $230 million in the aggregate.

We have two secured hedging facilities, each of which permits us to enter into cash-settled natural gas and oil commodity transactions, valued by the counterparty, for up to $500 million. The scheduled maturity date for these facilities is May 2010. Outstanding transactions under each facility are collateralized by certain of our oil and natural gas properties that do not secure any of our other obligations. One of the hedging facilities is subject to an annual fee of 0.30% of the maximum total capacity and each of them has a 1.0% exposure fee, which is assessed quarterly on the average of the daily negative fair market value amounts, if any, during the quarter. As of December 31, 2005, the fair market value of the natural gas and oil hedging transactions was a liability of $92.9 million under one of the facilities and a liability of $10.9 million under the other facility. As of March 10, 2006, the fair market value of the same transactions was an asset of approximately $100 million and $400 million, respectively. The hedging facilities contain the standard representations and default provisions that are typical of such agreements. The agreements also contain various restrictive provisions which govern the aggregate gas and oil production volumes that we are permitted to hedge under all of our agreements at any one time.

Two of our subsidiaries, Chesapeake Exploration Limited Partnership and Chesapeake Appalachia, L.L.C., are the borrowers under our revolving bank credit facility and Chesapeake Exploration Limited Partnership is the named party to our hedging facilities. The facilities are guaranteed by Chesapeake and all its other wholly-owned domestic subsidiaries. Our revolving bank credit facility and secured hedge facilities do not contain material adverse change or adequate assurance covenants. Although the applicable interest rates and commitment fees in our bank credit facility fluctuate slightly based on our long-term senior unsecured credit ratings, the bank facility and the secured hedge facilities do not contain provisions which would trigger an acceleration of amounts due under the facilities or a requirement to post additional collateral in the event of a downgrade of our credit ratings.

In addition to outstanding revolving bank credit facility borrowings discussed above, as of December 31, 2005, senior notes represented approximately $5.4 billion of our long-term debt and consisted of the following ($ in thousands):

7.5% Senior Notes due 2013	$	363,823
7.0% Senior Notes due 2014		300,000
7.5% Senior Notes due 2014		300,000
7.75% Senior Notes due 2015		300,408
6.375% Senior Notes due 2015		600,000
6.625% Senior Notes due 2016		600,000
6.875% Senior Notes due 2016		670,437
6.5% Senior Notes due 2017		600,000
6.25% Senior Notes due 2018		600,000
6.875% Senior Notes due 2020		500,000
2.75% Contingent Convertible Senior Notes due 2035		690,000
Discount on senior notes		(95,577	)
Discount for interest rate derivatives		(11,349	)
	$	5,417,742

No scheduled principal payments are required on any of the senior notes until 2013, when $363.8 million is due. The holders of the 2.75% Contingent Convertible Senior Notes due 2035 may require us to repurchase all or a portion of these notes on November 15, 2015, 2020, 2025 and 2030 at 100% of the principal amount of the notes.

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As of December 31, 2005 and currently, debt ratings for the senior notes are Ba2 by Moody’s Investor Service (stable outlook), BB by Standard & Poor’s Ratings Services (stable outlook) and BB by Fitch Ratings (stable outlook).

Our senior notes are unsecured senior obligations of Chesapeake and rank equally with all of our other unsecured indebtedness. All of our wholly-owned domestic subsidiaries guarantee the notes. The indentures (other than the indentures issued after June 2005) contain covenants limiting our ability and our restricted subsidiaries’ ability to incur additional indebtedness; pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness; make investments and other restricted payments; incur liens; engage in transactions with affiliates; sell assets; and consolidate, merge or transfer assets. The debt incurrence covenants do not presently restrict our ability to borrow under or expand our secured credit facility. As of December 31, 2005, we estimate that secured commercial bank indebtedness of approximately $3.6 billion could have been incurred under the most restrictive indenture covenant.

The table below summarizes our contractual obligations as of December 31, 2005 ($ in thousands)

	Payments Due By Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 years
Long-term debt obligations	$	5,596,668	$	—	$	—	$	—	$	5,596,668
Capital lease obligations		8,979		3,370		4,219		1,390		—
Operating lease obligations		13,759		4,124		6,310		2,623		702
Purchase obligations (a)		662,551		387,290		167,375		12,419		95,467
Standby letters of credit		57,609		57,609		—		—		—
Other long-term obligations		—		—		—		—		—
Total contractual cash obligations	$	6,339,566	$	452,393	$	177,904	$	16,432	$	5,692,837

(a) See Note 4 of the notes to our consolidated financial statements for discussion regarding transportation and drilling contract commitments.

Hedging Activities

Oil and Gas Hedging Activities

Our results of operations and operating cash flows are impacted by changes in market prices for oil and gas. To mitigate a portion of the exposure to adverse market changes, we have entered into various derivative instruments. Executive management is involved in all risk management activities and the Board of Directors reviews the company’s hedging program at every Board meeting. We believe we have sufficient internal controls to prevent unauthorized hedging. As of December 31, 2005, our oil and gas derivative instruments were comprised of swaps, cap-swaps, basis protection swaps, call options and collars. Item 7A—Quantitative and Qualitative Disclosures About Market Risk contains a description of each of these instruments. Although derivatives often fail to achieve 100% effectiveness for accounting purposes, we believe our derivative instruments continue to be highly effective in achieving the risk management objectives for which they were intended.

Hedging allows us to predict with greater certainty the effective prices we will receive for our hedged oil and gas production. We closely monitor the fair value of our hedging contracts and may elect to settle a contract prior to its scheduled maturity date in order to lock in a gain or loss. Commodity markets are volatile, and Chesapeake’s hedging activity is dynamic.

Mark-to-market positions under oil and gas hedging contracts fluctuate with commodity prices. As described above under Contractual Obligations, we may be required to deliver cash collateral or other assurances of performance if our payment obligations to our hedging counterparties exceed levels stated in our contracts.

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Realized gains and losses from our oil and gas derivatives resulted in a net decrease in oil and gas sales of $401.7 million, or $0.86, per mcfe in 2005, a net decrease of $154.9 million, or $0.43, per mcfe in 2004 and a net decrease of $17.4 million, or $0.06, per mcfe in 2003. Oil and gas sales also include changes in the fair value of oil and gas derivatives that do not qualify as cash flow hedges under SFAS 133, as well as gains (losses) on ineffectiveness of instruments designated as cash flow hedges. Unrealized gains (losses) included in oil and gas sales in 2005, 2004 and 2003 were $41.1 million, $40.9 million and $10.5 million, respectively. Included in these unrealized gains (losses) are gains (losses) on ineffectiveness of cash flow hedges of ($76.3) million in 2005, ($8.2) million in 2004 and ($9.2) million in 2003.

Changes in the fair value of oil and gas derivative instruments designated as cash flow hedges, to the extent effective in offsetting cash flows attributable to the hedged commodities, and locked-in gains and losses of derivative contracts are recorded in accumulated other comprehensive income until being transferred to earnings in the month of related production. These unrealized losses, net of related tax effects, totaled $270.7 million, $4.4 million and $20.3 million as of December 31, 2005, 2004, and 2003, respectively. Based upon the market prices at December 31, 2005, we expect to transfer to earnings approximately $153.8 million of the loss included in the balance of accumulated other comprehensive income during the next 12 months when the transactions actually occur. A detailed explanation of accounting for oil and gas derivatives under SFAS 133 appears under “Application of Critical Accounting Policies—Hedging” elsewhere in this Item 7.

The fair values of our oil and gas derivative instruments are recorded on our consolidated balance sheet as assets or liabilities. The estimated fair values of our oil and gas derivative instruments (including derivatives acquired from CNR) as of December 31, 2005 and 2004 are provided below:

	December 31,
	2005			2004
	($ in thousands)
Derivative assets (liabilities):
Fixed-price gas swaps	$	(1,047,094	)	$	57,073
Gas basis protection swaps		307,308			122,287
Fixed-price gas cap-swaps		(161,056	)		(48,761	)
Fixed-price gas counter-swaps		37,785			4,654
Gas call options (a)		(21,461	)		(5,793	)
Fixed-price gas collars		(9,374	)		(5,573	)
Fixed-price gas locked swaps		(34,229	)		(77,299	)
Floating-price gas swaps		2,607			—
Fixed-price oil swaps		(16,936	)		—
Fixed-price oil cap-swaps		(3,364	)		(8,238	)
Estimated fair value	$	(945,814	)	$	38,350

(a) After adjusting for the remaining $23.0 million and $3.2 million premium paid to Chesapeake by the counterparty, the cumulative unrealized loss related to these call options as of December 31, 2005 and 2004 was $1.6 million and $2.6 million, respectively.

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Additional information concerning changes in the fair value of our oil and gas derivative instruments is as follows:

	December 31,
	2005			2004			2003
	($ in thousands)
Fair value of contracts outstanding, as of January 1	$	38,350		$	(44,988	)	$	(14,533	)
Change in fair value of contracts during the period		(771,076	)		(69,927	)		(31,078	)
Contracts realized or otherwise settled during the period		401,684			154,901			17,389
Fair value of new contracts when entered into during the period		(614,772	)		(5,369	)		(16,766	)
Fair value of contracts when closed during the period		—			3,733			—
Fair value of contracts outstanding, as of December 31	$	(945,814	)	$	38,350		$	(44,988	)

Interest Rate Derivatives

We use interest rate derivatives to mitigate our exposure to the volatility in interest rates. For interest rate derivative instruments designated as fair value hedges (in accordance with SFAS 133), changes in fair value of interest rate derivatives are recorded on the consolidated balance sheets as assets (liabilities) and the debt’s carrying value amount is adjusted by the change in the fair value of the debt subsequent to the initiation of the derivative. Any resulting differences are recorded currently as ineffectiveness in the consolidated statements of operations as an adjustment to interest expense. Changes in the fair value of derivative instruments not qualifying as fair value hedges are recorded currently as adjustments to interest expense.

As of December 31, 2005, the following interest rate swaps were used to convert a portion of our long-term fixed-rate debt to floating-rate debt were outstanding:

Term	Notional Amount		Fixed Rate		Floating Rate	Fair Value Gain (Loss)
						($ in thousands)
September 2004 – August 2012	$	75,000,000	9.000	%	6 month LIBOR plus 452 basis points	$	(2,734	)
July 2005 – January 2015	$	150,000,000	7.750	%	6 month LIBOR plus 289 basis points	$	(5,133	)
July 2005 – June 2014	$	150,000,000	7.500	%	6 month LIBOR plus 282 basis points	$	(5,327	)
September 2005 – August 2014	$	250,000,000	7.000	%	6 month LIBOR plus 205.5 basis points	$	(5,004	)
October 2005 – June 2015	$	200,000,000	6.375	%	6 month LIBOR plus 112 basis points	$	(1,344	)
October 2005 – January 2018	$	250,000,000	6.250	%	6 month LIBOR plus 99 basis points	$	(3,240	)
October 2005 – January 2016	$	200,000,000	6.625	%	6 month LIBOR plus 129 basis points	$	282

In January 2006, we closed the interest rate swap on our 6.625% Senior Notes for $1.0 million. Subsequent to December 31, 2005, we entered into the following interest rate swaps (which qualify as fair value hedges) to convert a portion of our long-term fixed-rate debt to floating-rate debt:

Term	Notional Amount		Fixed Rate		Floating Rate
January 2006 – January 2016	$	250,000,000	6.625	%	6 month LIBOR plus 129 basis points
March 2006 – January 2016	$	250,000,000	6.875	%	6 month LIBOR plus 120 basis points
March 2006 – August 2017	$	250,000,000	6.500	%	6 month LIBOR plus 125.5 basis points

In 2005, we closed various interest rate swaps for gains totaling $7.1 million. These interest rate swaps were designated as fair value hedges, and the settlement amounts received will be amortized as a reduction to realized interest expense over the remaining terms of the related senior notes.

In March 2004, Chesapeake entered into an interest rate swap which required Chesapeake to pay a fixed rate of 8.68% while the counterparty paid Chesapeake a floating rate of six month LIBOR plus 0.75% on a notional amount of $142.7 million. On March 15, 2005, we elected to terminate the interest rate swap and paid $31.8 million to the counterparty.

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Results of Operations

General.    For the year ended December 31, 2005, Chesapeake had net income of $948.3 million, or $2.51 per diluted common share, on total revenues of $4.665 billion. This compares to net income of $515.2 million, or $1.53 per diluted common share, on total revenues of $2.709 billion during the year ended December 31, 2004, and net income of $313.0 million, or $1.21 per diluted common share, on total revenues of $1.717 billion during the year ended December 31, 2003. The 2005 net income includes, on a pre-tax basis, a $70.4 million loss on repurchased debt and $42.7 million in net unrealized gains on oil and gas and interest rate derivatives. The 2004 net income includes, on a pre-tax basis, a $24.6 million loss on repurchased debt, a $4.5 million provision for legal settlements and $35.5 million in net unrealized gains on oil and gas and interest rate derivatives. The 2003 net income includes, on a pre-tax basis, a $20.8 million loss on repurchased debt, a $6.4 million provision for legal settlements, $4.0 million in net unrealized losses on oil and gas and interest rate derivatives, and a $2.0 million impairment of our investment in Seven Seas Petroleum Inc.

Oil and Gas Sales.    During 2005, oil and gas sales were $3.273 billion compared to $1.936 billion in 2004 and $1.297 billion in 2003. In 2005, Chesapeake produced and sold 468.6 bcfe at a weighted average price of $6.90 per mcfe, compared to 362.6 bcfe in 2004 at a weighted average price of $5.23 per mcfe, and 268.4 bcfe in 2003 at a weighted average price of $4.79 per mcfe (weighted average prices for all years discussed exclude the effect of unrealized gains or (losses) on derivatives of $41.1 million, $40.9 million and $10.5 million in 2005, 2004 and 2003, respectively). The increase in prices in 2005 resulted in an increase in revenue of $782 million and increased production resulted in a $554 million increase, for a total increase in revenues of $1.336 billion (excluding unrealized gains or losses on oil and gas derivatives). The increase in production from period to period was due to the combination of production growth from drilling as well as acquisitions completed during those periods.

For 2005, we realized an average price per barrel of oil of $47.77, compared to $28.33 in 2004 and $25.85 in 2003 (weighted average prices for all years discussed exclude the effect of unrealized gains or losses on derivatives). Natural gas prices realized per mcf (excluding unrealized gains or losses on derivatives) were $6.78, $5.29 and $4.85 in 2005, 2004 and 2003, respectively. Realized gains or losses from our oil and gas derivatives resulted in a net decrease in oil and gas revenues of $401.7 million or $0.86 per mcfe in 2005, a net decrease of $154.9 million or $0.43 per mcfe in 2004 and a net decrease of $17.4 million or $0.06 per mcfe in 2003.

A change in oil and gas prices has a significant impact on our oil and gas revenues and cash flows. Assuming 2005 production levels, a change of $0.10 per mcf of gas sold would result in an increase or decrease in revenues and cash flow of approximately $42.2 million and $39.5 million, respectively, and a change of $1.00 per barrel of oil sold would result in an increase or decrease in revenues and cash flow of approximately $7.7 million and $7.2 million, respectively, without considering the effect of hedging activities.

The following table shows our production by region for 2005, 2004 and 2003:

	Years Ended December 31,
	2005			2004			2003
	Mmcfe	Percent		Mmcfe	Percent		Mmcfe	Percent
Mid-Continent	297,773	64	%	268,459	74	%	233,559	87	%
South Texas and Texas Gulf Coast	63,852	13		42,427	12		15,546	6
Ark-La-Tex and Barnett Shale	58,116	12		19,640	5		7,776	3
Permian	40,207	9		29,468	8		8,496	3
Appalachia	5,878	1		—	—		—	—
Other	2,751	1		2,599	1		2,979	1
Total Production	468,577	100	%	362,593	100	%	268,356	100	%

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Natural gas production represented approximately 90% of our total production volume on an equivalent basis in 2005, compared to 89% in 2004 and 90% in 2003.

Oil and Gas Marketing Sales.    Chesapeake realized $1.393 billion in oil and gas marketing sales to third parties in 2005, with corresponding oil and gas marketing expenses of $1.358 billion, for a net margin of $35 million. Marketing activities are substantially for third parties who are owners in Chesapeake operated wells. This compares to sales of $773 million and $421 million, expenses of $755 million and $410 million, and margins of $18 million and $11 million in 2004 and 2003, respectively. In 2005 and 2004, Chesapeake realized an increase in volumes and prices related to oil and gas marketing sales as compared to the previous year.

Production Expenses.    Production expenses, which include lifting costs and ad valorem taxes, were $317.0 million in 2005, compared to $204.8 million and $137.6 million in 2004 and 2003, respectively. On a unit-of-production basis, production expenses were $0.68 per mcfe in 2005 compared to $0.56 and $0.51 per mcfe in 2004 and 2003, respectively. The increase in 2005 was primarily due to higher third-party field service costs, energy costs and personnel costs. We expect that production expenses per mcfe produced for 2006 will range from $0.77 to $0.82.

Production Taxes.    Production taxes were $207.9 million in 2005 compared to $103.9 million in 2004 and $77.9 million in 2003. On a unit-of-production basis, production taxes were $0.44 per mcfe in 2005 compared to $0.29 per mcfe in both 2004 and 2003. The $104.0 million increase in production taxes in 2005 is due primarily to approximately 106.0 bcfe of increased production and the increase of $2.10 per mcfe in sales price (excluding gains or losses on derivatives). Included in 2004 is a credit of $6.8 million, or $0.02 per mcfe, related to certain Oklahoma severance tax abatements for the period July 2003 through December 2003. In April 2004, the Oklahoma Tax Commission concluded that a pre-determined oil and gas price cap for 2003 sales had not been exceeded (on a statewide basis) and notified the company that it was eligible to receive certain severance tax abatements for the period from July 1, 2003 through June 30, 2004. The company had previously estimated that the average oil and gas sales prices in Oklahoma (on a statewide basis) could exceed the price cap, and did not reflect the benefit from these potential severance tax abatements until the first quarter of 2004. In general, production taxes are calculated using value-based formulas that produce higher per unit costs when oil and gas prices are higher. We expect production taxes per mcfe to range from $0.41 to $0.46 during 2006 based on NYMEX prices of $54.00 per barrel of oil and natural gas wellhead prices ranging from $7.50 to $8.50 per mcfe produced.

General and Administrative Expense.    General and administrative expenses, which are net of internal payroll and non-payroll costs capitalized in our oil and gas properties (see Note 11 of notes to consolidated financial statements), were $64.3 million in 2005, $37.0 million in 2004 and $23.8 million in 2003. General and administrative expenses were $0.14, $0.10 and $0.09 per mcfe for 2005, 2004 and 2003, respectively. The increase in 2005 and 2004 was the result of the company’s overall growth. This growth has resulted in a substantial increase in employees and related costs. Included in general and administrative expenses is stock-based compensation of $15.3 million in 2005, $4.8 million in 2004 and $0.9 million in 2003. During 2005, 3.9 million shares of restricted stock, net of forfeitures, were granted to employees. The cost of all outstanding restricted shares is amortized over a four-year period which resulted in the recognition of $23.3 million of stock-based compensation costs during 2005. Of this amount, $12.6 million was reflected in general and administrative expense, and the remaining $10.7 million was capitalized to oil and gas properties. Chesapeake did not issue restricted stock awards prior to 2004. Additionally, we recognized $3.9 million, $0.6 million and $0.9 million in stock-based compensation expense in 2005, 2004 and 2003, respectively, as a result of modifications made to previously issued stock options. Of the $3.9 million recognized in 2005, $1.2 million was capitalized to oil and gas properties. Stock-based compensation was $0.03 per mcfe for 2005 and $0.01 per mcfe for 2004. We anticipate that general and administrative expenses for 2006 will be between $0.22 and $0.26 per mcfe produced including stock based compensation ranging from $0.08 and $0.10 per mcfe produced.

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Chesapeake follows the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities. We capitalized $102.2 million, $51.7 million and $35.5 million of internal costs (excluding stock-based compensation) in 2005, 2004 and 2003, respectively, directly related to our oil and gas property acquisition, exploration and development efforts.

Provision for Legal Settlements.    In 2004, we recorded a provision for legal settlement of $4.5 million related to various litigation incidental to our business operations. In 2003, we recorded a $6.4 million provision related to the settlement of a class-action lawsuit with certain Oklahoma royalty owners.

Oil and Gas Depreciation, Depletion and Amortization.    Depreciation, depletion and amortization of oil and gas properties was $894.0 million, $582.1 million and $369.5 million during 2005, 2004 and 2003, respectively. The average DD&A rate per mcfe, which is a function of capitalized costs, future development costs, and the related underlying reserves in the periods presented, was $1.91, $1.61 and $1.38 in 2005, 2004 and 2003, respectively. The increase in the average rate from $1.61 in 2004 to $1.91 in 2005 is primarily the result of higher drilling costs, higher costs associated with acquisitions and the recognition of the tax effect of acquisition costs in excess of tax basis acquired in certain corporate acquisitions. We expect the 2006 DD&A rate to be between $2.15 and $2.20 per mcfe produced.

Depreciation and Amortization of Other Assets.    Depreciation and amortization of other assets was $51.0 million in 2005, compared to $29.2 million in 2004 and $16.8 million in 2003. The increase in 2005 and 2004 was primarily the result of higher depreciation costs resulting from the acquisition of various gathering facilities, compression equipment, construction of new buildings at our corporate headquarters complex and at various field office locations and the purchase of additional information technology equipment and software in 2005 and 2004. Property and equipment costs are depreciated on a straight-line basis. Buildings are depreciated over 15 to 39 years, gathering facilities are depreciated over seven to 20 years, drilling rigs are depreciated over 15 years and all other property and equipment are depreciated over the estimated useful lives of the assets, which range from two to seven years. To the extent drilling rigs are used to drill our wells, a substantial portion of the depreciation is capitalized in oil and gas properties as exploration or development costs. We expect 2006 depreciation and amortization of other assets to be between $0.14 and $0.16 per mcfe produced.

Interest and Other Income.    Interest and other income was $10.5 million, $4.5 million and $2.8 million in 2005, 2004 and 2003, respectively. The 2005 income consisted of $3.0 million of interest income, $1.8 million of income related to equity investments, and $5.7 million of miscellaneous income. The 2004 income consisted of $2.1 million of interest income, $0.8 million of income related to earnings on investments, and $1.6 million of miscellaneous income. The 2003 income consisted of $1.0 million of interest income, a $0.4 million loss related to an equity investment, a $0.6 million gain on the final settlement of the sale of our Canadian subsidiary and $1.6 million of miscellaneous income.

Interest Expense.    Interest expense increased to $219.8 million in 2005 compared to $167.3 million in 2004 and $154.4 million in 2003 as follows:

	Years Ended December 31,
	2005			2004			2003
	($ in millions)
Interest expense on senior notes and revolving bank credit facility	$	299.6		$	194.5		$	163.2
Capitalized interest		(79.0	)		(36.2	)		(13.0	)
Amortization of loan discount		5.7			4.5			1.6
Unrealized (gain) loss on interest rate derivatives		(1.6	)		5.3			6.5
Realized gain on interest rate derivatives		(4.9	)		(0.8	)		(3.9	)
Total interest expense	$	219.8		$	167.3		$	154.4
Average long-term borrowings	$	3,948		$	2,428		$	1,932

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We use interest rate derivatives to mitigate our exposure to the volatility in interest rates. For interest rate derivative instruments designated as fair value hedges (in accordance with SFAS 133), changes in fair value of interest rate derivatives are recorded on the consolidated balance sheets as assets (liabilities) and the debt’s carrying value amount is adjusted by the change in the fair value of the debt subsequent to the initiation of the derivative. Any resulting differences are recorded currently as ineffectiveness in the consolidated statements of operations as an adjustment to interest expense. Changes in the fair value of derivative instruments not qualifying as fair value hedges are recorded currently as adjustments to interest expense. A detailed explanation of our interest rate derivative activity appears below in Item 7A—Quantitative and Qualitative Disclosures About Market Risk.

Interest expense, excluding unrealized (gains) losses on derivatives and net of amounts capitalized, was $0.47 per mcfe in 2005 compared to $0.45 per mcfe in 2004 and $0.55 per mcfe in 2003. We expect interest expense for 2006 to be between $0.52 and $0.57 per mcfe produced (before considering the effect of interest rate derivatives).

Loss on Investment in Seven Seas.    In 2003, we reduced the carrying value of our 2001 investment in securities of Seven Seas Petroleum Inc. to zero by recording an impairment of $2.0 million. We recovered approximately $5.5 million on this investment in 2003 and recorded an impairment of $17.2 million in 2002.

Loss on Repurchases or Exchanges of Debt.    During the past three years we have repurchased or exchanged Chesapeake debt and incurred losses in connection with these transactions. We entered into these transactions in order to re-finance a portion of our long-term debt at a lower rate of interest. The following table shows the losses related to these transactions for 2005, 2004 and 2003, respectively ($ in millions):

	Notes Retired		Loss on Repurchases/Exchanges
For the Year Ended December 31, 2005:			Premium		Other (a)			Total
8.375% Senior Notes due 2008	$	19.0	$	1.2	$	0.1		$	1.3
8.125% Senior Notes due 2011		245.4		17.3		4.4			21.7
9.0% Senior Notes due 2012		300.0		41.4		6.0			47.4
	$	564.4	$	59.9	$	10.5		$	70.4
For the Year Ended December 31, 2004:
8.375% Senior Notes due 2008	$	190.8	$	16.1	$	1.5		$	17.6
8.5% Senior Notes due 2012		4.3		0.2		0.7			0.9
8.125% Senior Notes due 2011		482.8		—		6.0			6.0
	$	677.9	$	16.3	$	8.2		$	24.5
For the Year Ended December 31, 2003:
8.5% Senior Notes due 2012	$	106.4	$	6.7	$	14.1	(b)	$	20.8

(a) Includes write-offs of discounts, deferred charges and interest rate derivatives associated with notes retired and transaction costs.

(b) Includes a $12.0 million loss that was recognized based on the hedging relationship between the notes and an associated interest rate derivative.

Income Tax Expense.    Chesapeake recorded income tax expense of $545.1 million in 2005 compared to income tax expense of $289.8 million in 2004 and $191.8 million in 2003. Our effective income tax rate was 36.5% in 2005 compared to 36% in 2004 and 38% in 2003. The increase in 2005 reflected the impact state income taxes and permanent differences had on our overall effective rate. Our effective income tax rate will increase to 38% in 2006 to reflect our current assessment of expected increases in state income taxes and permanent differences. During 2003 and 2001, we determined that it was more likely than not that $4.4 million and $2.4 million, respectively, of the deferred tax assets related to Louisiana net operating losses would not be realized and we recorded a valuation allowance equal to such amounts during those years. In 2004, we acquired Louisiana oil and gas properties which resulted in us determining that it was more likely than not that the

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$6.8 million of deferred tax assets related to Louisiana net operating losses would be realized. Therefore, the $6.8 million valuation allowance was reversed at December 31, 2004 as part of the recording of the purchase of these assets. All 2005 income tax expense was deferred, and we expect most, if not all, of our 2006 income tax expense to be deferred.

Cumulative Effect of Accounting Change.    Effective January 1, 2003, Chesapeake adopted SFAS No. 143, Accounting For Asset Retirement Obligation. Upon adoption of SFAS 143 in 2003, we recorded the discounted fair value of our expected future obligations of $30.5 million, a cumulative effect of the change in accounting principle, as an increase to earnings of $2.4 million (net of income taxes) and an increase in net oil and gas properties of $34.3 million.

Loss on Conversion/Exchange of Preferred Stock.    Loss on conversion/exchange of preferred stock was $26.9 million in 2005 compared to $36.7 million in 2004. The 2005 loss was the result of private exchanges of $224.2 million of our 4.125% cumulative convertible preferred stock for 14.3 million shares of common stock and private exchanges of $69.9 million of our 5.0% (Series 2003) cumulative convertible preferred stock for 4.4 million shares of common stock. The 2004 loss was the result of a private exchange of $30.0 million of our 6.0% cumulative convertible preferred stock for 3.2 million shares of common stock and a public exchange of $194.8 million of our 6.0% cumulative convertible preferred stock for 20.8 million shares of common stock. The loss on the exchanges represented the excess of the fair value of the common stock issued over the fair value of the securities issuable pursuant to the original conversion terms. We also incurred $1.2 million in transaction costs related to the public exchange.

Application of Critical Accounting Policies

Readers of this report and users of the information contained in it should be aware of how certain events may impact our financial results based on the accounting policies in place. The four policies we consider to be the most significant are discussed below. The company’s management has discussed each critical accounting policy with the audit committee of the company’s board of directors.

The selection and application of accounting policies is an important process that changes as our business changes and as accounting rules are developed. Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing rules and the use of judgment to the specific set of circumstances existing in our business.

Hedging.    Chesapeake uses commodity price and financial risk management instruments to mitigate our exposure to price fluctuations in oil and natural gas and interest rates. Recognized gains and losses on derivative contracts are reported as a component of the related transaction. Results of oil and gas derivative transactions are reflected in oil and gas sales, and results of interest rate hedging transactions are reflected in interest expense. The changes in the fair value of derivative instruments not qualifying for designation as either cash flow or fair value hedges that occur prior to maturity are reported currently in the consolidated statement of operations as unrealized gains (losses) within oil and gas sales or interest expense. Cash flows from derivative instruments are classified in the same category within the statement of cash flows as the items being hedged, or on a basis consistent with the nature of the instruments.

Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded at fair value and included in the consolidated balance sheet as assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception of a derivative. For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Any change in the fair value resulting from ineffectiveness, as defined by SFAS 133, is recognized immediately in oil and gas sales. For derivative instruments designated as fair value hedges (in accordance with SFAS 133),

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changes in fair value, as well as the offsetting changes in the estimated fair value of the hedged item attributable to the hedged risk, are recognized currently in earnings. Differences between the changes in the fair values of the hedged item and the derivative instrument, if any, represent gains or losses on ineffectiveness and are reflected currently in interest expense. Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time. Changes in fair value of contracts that do not qualify as hedges or are not designated as hedges are also recognized currently in earnings. See “Hedging Activities” above and Item 7A—Quantitative and Qualitative Disclosures About Market Risk for additional information regarding our hedging activities.

One of the primary factors that can have an impact on our results of operations is the method used to value our derivatives. We have established the fair value of all derivative instruments using estimates determined by our counterparties and subsequently confirmed the fair values internally using established index prices and other sources. These values are based upon, among other things, futures prices, volatility, time to maturity and credit risk. The values we report in our financial statements change as these estimates are revised to reflect actual results, changes in market conditions or other factors, many of which are beyond our control.

Another factor that can impact our results of operations each period is our ability to estimate the level of correlation between future changes in the fair value of the hedge instruments and the transactions being hedged, both at the inception and on an ongoing basis. This correlation is complicated since energy commodity prices, the primary risk we hedge, have quality and location differences that can be difficult to hedge effectively. The factors underlying our estimates of fair value and our assessment of correlation of our hedging derivatives are impacted by actual results and changes in conditions that affect these factors, many of which are beyond our control.

Due to the volatility of oil and natural gas prices and, to a lesser extent, interest rates, the company’s financial condition and results of operations can be significantly impacted by changes in the market value of our derivative instruments. As of December 31, 2005, 2004 and 2003, the net market value of our derivatives was a liability of $968.3 million, an asset of $2.5 million and a liability of $75.4 million, respectively. The derivatives that we acquired in our CNR acquisition represented $661.4 million of the liability at December 31, 2005. With respect to our derivatives held as of December 31, 2005, an increase or decrease in natural gas prices of $0.10 per mmbtu would decrease or increase the estimated fair value of our derivatives by approximately $136 million. An increase or decrease in crude oil prices of $1.00 per barrel would decrease or increase the estimated fair value of our derivatives by approximately $8 million.

Oil and Gas Properties.    The accounting for our business is subject to special accounting rules that are unique to the oil and gas industry. There are two allowable methods of accounting for oil and gas business activities: the successful efforts method and the full-cost method. Chesapeake follows the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities. Under the successful efforts method, geological and geophysical costs and costs of carrying and retaining undeveloped properties are charged to expense as incurred. Costs of drilling exploratory wells that do not result in proved reserves are charged to expense. Depreciation, depletion, amortization and impairment of oil and gas properties are generally calculated on a well by well or lease or field basis versus the aggregated “full cost” pool basis. Additionally, gain or loss is generally recognized on all sales of oil and gas properties under the successful efforts method. As a result, our financial statements will differ from companies that apply the successful efforts method since we will generally reflect a higher level of capitalized costs as well as a higher oil and gas depreciation, depletion and amortization rate, and we will not have exploration expenses that successful efforts companies frequently have.

Capitalized costs are amortized on a composite unit-of-production method based on proved oil and gas reserves. Depreciation, depletion and amortization expense is also based on the amount of estimated reserves. If

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we maintain the same level of production year over year, the depreciation, depletion and amortization expense may be significantly different if our estimate of remaining reserves changes significantly.

Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized.

The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties, and otherwise if impairment has occurred. Unevaluated properties are grouped by major producing area where individual property costs are not significant and are assessed individually when individual costs are significant.

We review the carrying value of our oil and gas properties under the full-cost accounting rules of the Securities and Exchange Commission on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. The two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues. Revisions to estimates of natural gas and oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues.

The process of estimating natural gas and oil reserves is very complex, requiring significant decisions in the evaluation of available geological, geophysical, engineering and economic data. The data for a given property may also change substantially over time as a result of numerous factors, including additional development activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions. As a result, material revisions to existing reserve estimates occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various properties increase the likelihood of significant changes in these estimates.

As of December 31, 2005, approximately 78% of our proved reserves were evaluated by independent petroleum engineers, with the balance evaluated by our internal reservoir engineers. In addition, our internal engineers review and update our reserves on a quarterly basis. All reserve estimates are prepared based upon a review of production histories and other geologic, economic, ownership and engineering data we developed. Additional information about our 2005 year-end reserve evaluation is included under “Oil and Gas Reserves” in Item 1—Business.

In addition, the prices of natural gas and oil are volatile and change from period to period. Price changes directly impact the estimated revenues from our properties and the associated present value of future net revenues. Such changes also impact the economic life of our properties and thereby affect the quantity of reserves that can be assigned to a property.

The volatility of oil and natural gas prices and the impact of revisions to reserve estimates can have a significant impact on the company’s financial condition and results of operations. Our oil and gas depreciation, depletion and amortization rates have increased from $1.38 per mcfe in 2003 to $1.91 per mcfe in 2005 reflecting the impact of increases in prices and finding costs during these periods. As of December 31, 2005, a decrease in natural gas prices of $0.10 per mcf and a decrease in oil prices of $1.00 per barrel would reduce the company’s estimated proved reserves by 3.5 bcfe and by 1.1 bcfe, respectively, as a result of economic truncation of the expected producing lives of some properties.

Income Taxes.    As part of the process of preparing the consolidated financial statements, we are required to estimate the federal and state income taxes in each of the jurisdictions in which Chesapeake operates. This

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process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as derivative instruments, depreciation, depletion and amortization, and certain accrued liabilities for tax and accounting purposes. These differences and our net operating loss carryforwards result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess, using all available positive and negative evidence, the likelihood that the deferred tax assets will be recovered from future taxable income. If we believe that recovery is not likely, we must establish a valuation allowance. Generally, to the extent Chesapeake establishes a valuation allowance or increases or decreases this allowance in a period, we must include an expense or reduction of expense within the tax provisions in the consolidated statement of operations.

Under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, an enterprise must use judgment in considering the relative impact of negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists (a) the more positive evidence is necessary and (b) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion or all of the deferred tax asset. Among the more significant types of evidence that we consider are:

• taxable income projections in future years,

• whether the carryforward period is so brief that it would limit realization of tax benefits,

• future sales and operating cost projections that will produce more than enough taxable income to realize the deferred tax asset based on existing sales prices and cost structures, and

• our earnings history exclusive of the loss that created the future deductible amount coupled with evidence indicating that the loss is an aberration rather than a continuing condition.

If (a) natural gas and oil prices were to decrease significantly below present levels (and if such decreases were considered other than temporary), (b) exploration, drilling and operating costs were to increase significantly beyond current levels, or (c) we were confronted with any other significantly negative evidence pertaining to our ability to realize our NOL carryforwards prior to their expiration, we may be required to provide a valuation allowance against our deferred tax assets. As of December 31, 2005, we had deferred tax assets of $726.5 million.

Accounting for Business Combinations.    Our business has grown substantially through acquisitions and our business strategy is to continue to pursue acquisitions as opportunities arise. We have accounted for all of our business combinations using the purchase method, which is the only method permitted under SFAS 141, Accounting for Business Combinations. The accounting for business combinations is complicated and involves the use of significant judgment.

Under the purchase method of accounting, a business combination is accounted for at a purchase price based upon the fair value of the consideration given, whether in the form of cash, assets, stock or the assumption of liabilities. The assets and liabilities acquired are measured at their fair values, and the purchase price is allocated to the assets and liabilities based upon these fair values. The excess of the cost of an acquired entity, if any, over the net of the amounts assigned to assets acquired and liabilities assumed is recognized as goodwill. The excess of the fair value of assets acquired and liabilities assumed over the cost of an acquired entity, if any, is allocated as a pro rata reduction of the amounts that otherwise would have been assigned to certain acquired assets.

Determining the fair values of the assets and liabilities acquired involves the use of judgment, since some of the assets and liabilities acquired do not have fair values that are readily determinable. Different techniques may be used to determine fair values, including market prices, where available, appraisals, comparisons to transactions for similar assets and liabilities and present value of estimated future cash flows, among others. Since these estimates involve the use of significant judgment, they can change as new information becomes available.

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We believe that the consideration we have paid for our acquisitions has represented the fair value of the assets and liabilities acquired at the time of purchase. Consequently, we have not recognized any goodwill from any of our business combinations, nor do we expect to recognize goodwill from similar business combinations that we may complete in the future.

Disclosures About Effects of Transactions with Related Parties

As of December 31, 2005, we had accrued accounts receivable from our two co-founders, CEO Aubrey K. McClendon and former COO, Tom L. Ward, of $6.4 million and $6.4 million, respectively, representing joint interest billings from December 2005 which were invoiced and paid in January 2006. Since Chesapeake was founded in 1989, Messrs. McClendon and Ward have acquired small working interests in certain of our oil and gas properties by participating in our drilling activities. Joint interest billings to them are settled in cash immediately upon delivery of a monthly joint interest billing.

Under the Founder Well Participation Program, approved by our shareholders in June 2005, Messrs. McClendon and Ward may elect to participate in all or none of the wells drilled by or on behalf of Chesapeake, but they are not allowed to participate only in selected wells. A participation election is required to be received by the Compensation Committee of Chesapeake’s Board of Directors 30 days prior to the start of each calendar year. Their participation is permitted only under the terms outlined in the Founder Well Participation Program, which, among other things, limits their individual participation to a maximum working interest of 2.5% in a well and prohibits participation in situations where Chesapeake’s working interest would be reduced below 12.5% as a result of their participation. In addition, the company is reimbursed for the cost of its leasehold acquired by Messrs. McClendon and Ward as a result of their well participation. As a result of the resignation of Mr. Ward on February 10, 2006, his participation in the Founder Well Participation Program will expire on August 10, 2006, which is also the expiration date of non-competition covenants applicable to Mr. Ward.

As disclosed in Note 8 of the notes to our consolidated financial statements in Item 8, in 2005, Chesapeake had revenues of $851.4 million from oil and gas sales to Eagle Energy Partners I, L.P., an affiliated entity.

During 2005, 2004 and 2003, we paid legal fees of $1.2 million, $1.1 million and $2.1 million, respectively, for legal services provided by a law firm of which a former director is a member.

Recently Issued Accounting Standards

The Financial Accounting Standards Board recently issued the following standards which were reviewed by Chesapeake to determine the potential impact on our financial statements upon adoption.

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment, a revision of SFAS 123, accounting for stock-based compensation. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services by requiring a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This statement is effective as of the beginning of the annual reporting period that begins after June 15, 2005. Since the issuance of SFAS 123(R), three FASB Staff Positions (FSPs) have been issued regarding SFAS 123(R). These FSPs, FSP FAS 123(R)-1—Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R), FSP FAS 123(R)-2—Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R), and FSP FAS 123(R)-3—Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards will be applicable upon the initial adoption of SFAS 123(R).

Chesapeake will implement SFAS 123(R) in the first quarter of 2006 and the Black-Scholes option pricing model will be used to value the stock options as of the grant date. Based on the stock options outstanding and unvested at December 31, 2005 and our current intention to limit future awards of stock options, we do not believe the new accounting requirement will have a significant impact on future results of operations.

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In March 2005, the FASB issued FASB Interpretation No. (FIN) 47, Accounting for Conditional Asset Retirement Obligations. FIN 47 specifies the accounting treatment for conditional asset retirement obligations under the provisions of SFAS No. 143. FIN 47 is effective no later than the end of the fiscal year ending after December 15, 2005. We adopted this statement effective December 31, 2005. Implementation of FIN 47 did not have a material effect on our financial statements.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 requires retrospective application to prior period financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. The impact of SFAS 154 will depend on the nature and extent of any voluntary accounting changes and correction of errors after the effective date, but we do not currently expect SFAS 154 to have a material impact on our financial statements.

In June 2005, the EITF reached a consensus on Issue No. 04-10, Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds. EITF Issue 04-10 confirmed that operating segments that do not meet the quantitative thresholds can be aggregated only if aggregation is consistent with the objective and basic principles of SFAS 131, Disclosure about Segments of an Enterprise and Related Information. The consensus in this issue should be applied for fiscal years ending after September 30, 2005, and the corresponding information for earlier periods, including interim periods, should be restated unless it is impractical to do so. The adoption of EITF Issue 04-10 is not expected to have a material impact on our disclosures.

In September 2005, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty. EITF Issue 04-13 requires that purchases and sales of inventory with the same counterparty in the same line of business should be accounted for as a single non-monetary exchange, if entered into in contemplation of one another. The consensus is effective for inventory arrangements entered into, modified or renewed in interim or annual reporting periods beginning after March 15, 2006. The adoption of EITF Issue 04-13 is not expected to have a material impact on our financial statements.

Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our current expectations or forecasts of future events. They include statements regarding oil and gas reserve estimates, planned capital expenditures, the drilling of oil and gas wells and future acquisitions, expected oil and gas production, cash flow and anticipated liquidity, business strategy and other plans and objectives for future operations and expected future expenses. Statements concerning the fair values of derivative contracts and their estimated contribution to our future results of operations are based upon market information as of a specific date. These market prices are subject to significant volatility.

Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under “Risk Factors” in Items 1. and 2. of this report and include:

• the volatility of oil and gas prices,

• our level of indebtedness,

• the strength and financial resources of our competitors,

• the availability of capital on an economic basis to fund reserve replacement costs,

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• our ability to replace reserves and sustain production,

• uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the timing of development expenditures,

• uncertainties in evaluating oil and gas reserves of acquired properties and associated potential liabilities,

• inability to effectively integrate and operate acquired companies and properties,

• unsuccessful exploration and development drilling,

• declines in the value of our oil and gas properties resulting in ceiling test write-downs,

• lower prices realized on oil and gas sales and collateral required to secure hedging liabilities resulting from our commodity price risk management activities,

• lower oil and gas prices could negatively affect our ability to borrow, and

• drilling and operating risks.

We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, and we undertake no obligation to update this information. We urge you to carefully review and consider the disclosures made in this report and our other filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.

ITEM 7A.     Quantitative and Qualitative Disclosures About Market Risk

Oil and Gas Hedging Activities

Our results of operations and operating cash flows are impacted by changes in market prices for oil and gas. To mitigate a portion of the exposure to adverse market changes, we have entered into various derivative instruments. As of December 31, 2005, our oil and gas derivative instruments were comprised of swaps, cap-swaps, basis protection swaps, call options and collars. These instruments allow us to predict with greater certainty the effective oil and gas prices to be received for our hedged production. Although derivatives often fail to achieve 100% effectiveness for accounting purposes, we believe our derivative instruments continue to be highly effective in achieving the risk management objectives for which they were intended.

• For swap instruments, Chesapeake receives a fixed price for the hedged commodity and pays a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

• For cap-swaps, Chesapeake receives a fixed price and pays a floating market price. The fixed price received by Chesapeake includes a premium in exchange for a “cap” limiting the counterparty’s exposure. In other words, there is no limit to Chesapeake’s exposure but there is a limit to the downside exposure of the counterparty.

• Basis protection swaps are arrangements that guarantee a price differential for oil or gas from a specified delivery point. Chesapeake receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract.

• For call options, Chesapeake receives a cash premium from the counterparty in exchange for the sale of a call option. If the market price exceeds the fixed price of the call option, then Chesapeake pays the counterparty such excess. If the market price settles below the fixed price of the call option, no payment is due from Chesapeake.

• Collars contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, Chesapeake receives the fixed price and pays the market price. If the market price is between the call and the put strike price, no payments are due from either party.

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Chesapeake enters into counter-swaps from time to time for the purpose of locking-in the value of a swap. Under the counter-swap, Chesapeake receives a floating price for the hedged commodity and pays a fixed price to the counterparty. The counter-swap is 100% effective in locking-in the value of a swap since subsequent changes in the market value of the swap are entirely offset by subsequent changes in the market value of the counter-swap. We refer to this locked-in value as a locked swap. At the time Chesapeake enters into a counter-swap, Chesapeake removes the original swap’s designation as a cash flow hedge and classifies the original swap as a non-qualifying hedge under SFAS 133. The reason for this new designation is that collectively the swap and the counter-swap no longer hedge the exposure to variability in expected future cash flows. Instead, the swap and counter-swap effectively lock-in a specific gain (or loss) that will be unaffected by subsequent variability in oil and gas prices. Any locked-in gain or loss is recorded in accumulated other comprehensive income and reclassified to oil and gas sales in the month of related production.

With respect to counter-swaps that are designed to lock-in the value of cap-swaps, the counter-swap is effective in locking-in the value of the cap-swap until the floating price reaches the cap (or floor) stipulated in the cap-swap agreement. The value of the counter-swap will increase (or decrease), but in the opposite direction, as the value of the cap-swap decreases (or increases) until the floating price reaches the pre-determined cap (or floor) stipulated in the cap-swap agreement. However, because of the written put option embedded in the cap-swap, the changes in value of the cap-swap are not completely effective in offsetting changes in value of the corresponding counter-swap. Changes in the value of cap-swaps and the counter-swaps are recorded as adjustments to oil and gas sales.

Chesapeake enters into derivatives from time to time for the purpose of converting a fixed price gas sales contract to a floating price. We refer to these contracts as floating price swaps. For a floating price swap, Chesapeake receives a floating market price from the counterparty and pays a fixed price.

In accordance with FASB Interpretation No. 39, to the extent that a legal right of setoff exists, Chesapeake nets the value of its derivative arrangements with the same counterparty in the accompanying consolidated balance sheets.

Chesapeake enters into basis protection swaps for the purpose of locking-in a price differential for oil or gas from a specified delivery point. We currently have basis protection swaps covering four different delivery points which correspond to the actual prices we receive for much of our gas production. By entering into these basis protection swaps, we have effectively reduced our exposure to market changes in future gas price differentials. As of December 31, 2005, the fair value of our basis protection swaps was $307.3 million. Currently, our basis protection swaps cover approximately 24% of our anticipated gas production remaining in 2006, 24% in 2007, 20% in 2008, and 14% in 2009.

Gains or losses from derivative transactions are reflected as adjustments to oil and gas sales on the consolidated statements of operations. Realized gains (losses) included in oil and gas sales were ($401.7) million, ($154.9) million and ($17.4) million in 2005, 2004 and 2003, respectively. Pursuant to SFAS 133, certain derivatives do not qualify for designation as cash flow hedges. Changes in the fair value of these non-qualifying derivatives that occur prior to their maturity (i.e., temporary fluctuations in value) are reported currently in the consolidated statements of operations as unrealized gains (losses) within oil and gas sales. Unrealized gains (losses) included in oil and gas sales were $41.1 million, $40.9 million and $10.5 million, in 2005, 2004 and 2003, respectively.

Following provisions of SFAS 133, changes in the fair value of derivative instruments designated as cash flow hedges, to the extent they are effective in offsetting cash flows attributable to the hedged risk, are recorded in other comprehensive income until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized currently in oil and gas sales as unrealized gains (losses). We recorded a gain (loss) on ineffectiveness of ($76.3) million, ($8.2) million and ($9.2) million in 2005, 2004 and 2003, respectively.

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As of December 31, 2005, we had the following open oil and gas derivative instruments designed to hedge a portion of our oil and gas production for periods after December 2005 (excluding derivatives acquired from CNR):

	Volume		Weighted- Average Fixed Price to be Received (Paid)		Weighted Average Put Fixed Price	Weighted- Average Call Fixed Price	Weighted- Average Differential		SFAS 133 Hedge	Net Premiums Received ($ in thousands)	Fair Value at December 31, 2005 ($ in thousands)
Natural Gas (mmbtu):
Swaps:
1Q 2006	93,030,000		10.60		—	—	—		Yes	—	(34,043	)
2Q 2006	61,880,000		9.03		—	—	—		Yes	—	(80,285	)
3Q 2006	62,560,000		9.02		—	—	—		Yes	—	(87,205	)
4Q 2006	52,155,000		9.42		—	—	—		Yes	—	(80,961	)
1Q 2007	37,800,000		10.72		—	—	—		Yes	—	(40,253	)
2Q 2007	20,020,000		9.04		—	—	—		Yes	—	(9,700	)
3Q 2007	20,240,000		9.04		—	—	—		Yes	—	(10,526	)
4Q 2007	20,240,000		9.56		—	—	—		Yes	—	(11,900	)
1Q 2008	14,105,000		10.28		—	—	—		Yes	—	(9,199	)
2Q 2008	14,105,000		7.94		—	—	—		Yes	—	(10,122	)
3Q 2008	14,260,000		7.96		—	—	—		Yes	—	(10,140	)
4Q 2008	14,260,000		8.48		—	—	—		Yes	—	(10,492	)
Basis Protection Swaps:
1Q 2006	34,200,000		—		—	—	(0.33	)	No	—	66,338
2Q 2006	30,940,000		—		—	—	(0.31	)	No	—	21,892
3Q 2006	31,280,000		—		—	—	(0.31	)	No	—	17,380
4Q 2006	33,720,000		—		—	—	(0.32	)	No	—	22,268
1Q 2007	32,850,000		—		—	—	(0.29	)	No	—	24,990
2Q 2007	34,125,000		—		—	—	(0.35	)	No	—	23,208
3Q 2007	34,500,000		—		—	—	(0.35	)	No	—	18,471
4Q 2007	35,720,000		—		—	—	(0.32	)	No	—	20,078
1Q 2008	33,215,000		—		—	—	(0.29	)	No	—	19,800
2Q 2008	26,845,000		—		—	—	(0.25	)	No	—	17,689
3Q 2008	27,140,000		—		—	—	(0.25	)	No	—	14,136
4Q 2008	31,410,000		—		—	—	(0.28	)	No	—	12,716
1Q 2009	26,100,000		—		—	—	(0.32	)	No	—	9,076
2Q 2009	20,020,000		—		—	—	(0.28	)	No	—	8,026
3Q 2009	20,240,000		—		—	—	(0.28	)	No	—	5,505
4Q 2009	20,240,000		—		—	—	(0.28	)	No	—	5,735
Cap-Swaps:
1Q 2006	7,200,000		7.11		5.06	—	—		No	—	(28,331	)
2Q 2006	11,830,000		6.84		5.13	—	—		No	—	(40,761	)
3Q 2006	11,960,000		6.85		5.13	—	—		No	—	(42,622	)
4Q 2006	11,960,000		6.89		5.13	—	—		No	—	(49,342	)
Counter Swaps:
1Q 2006	(1,800,000	)	(6.19	)	—	—	—		No	—	9,267
2Q 2006	(1,820,000	)	(5.35	)	—	—	—		No	—	9,062
3Q 2006	(1,840,000	)	(5.33	)	—	—	—		No	—	9,353
4Q 2006	(1,840,000	)	(5.50	)	—	—	—		No	—	10,103
Call Options:
1Q 2006	1,800,000		—		—	12.50	—		No	1,890	(821	)
2Q 2006	1,820,000		—		—	12.50	—		No	1,911	(781	)
3Q 2006	1,840,000		—		—	12.50	—		No	1,932	(1,348	)
4Q 2006	1,840,000		—		—	12.50	—		No	1,932	(2,408	)
1Q 2007	1,800,000		—		—	12.50	—		No	1,890	(3,559	)
2Q 2007	1,820,000		—		—	12.50	—		No	1,911	(1,285	)
3Q 2007	1,840,000		—		—	12.50	—		No	1,932	(1,423	)
4Q 2007	1,840,000		—		—	12.50	—		No	1,932	(2,371	)
1Q 2008	1,820,000		—		—	12.50	—		No	1,911	(3,754	)
2Q 2008	1,820,000		—		—	12.50	—		No	1,911	(893	)
3Q 2008	1,840,000		—		—	12.50	—		No	1,932	(1,043	)
4Q 2008	1,840,000		—		—	12.50	—		No	1,932	(1,775	)

56

	Volume		Weighted- Average Fixed Price to be Received (Paid)		Weighted Average Put Fixed Price	Weighted- Average Call Fixed Price	Weighted- Average Differential	SFAS 133 Hedge	Net Premiums Received ($ in thousands)		Fair Value at December 31, 2005 ($ in thousands)
Collars:
1Q 2006	180,000		—		6.00	9.70	—	Yes		—		(270	)
Locked Swaps:
1Q 2006	6,300,000		—		—	—	—	No		—		(7,598	)
2Q 2006	6,370,000		—		—	—	—	No		—		(5,199	)
3Q 2006	6,440,000		—		—	—	—	No		—		(5,099	)
4Q 2006	6,440,000		—		—	—	—	No		—		(4,706	)
1Q 2007	6,300,000		—		—	—	—	No		—		(4,789	)
2Q 2007	6,370,000		—		—	—	—	No		—		(2,517	)
3Q 2007	6,440,000		—		—	—	—	No		—		(2,049	)
4Q 2007	6,440,000		—		—	—	—	No		—		(2,272	)
Floating-Price Swaps:
1Q 2006	(2,700,000	)	(7.96	)	—	—	—	No		—		2,607
Total Natural Gas										23,016		(264,142	)
Oil (bbls):
Swaps:
1Q 2006	900,000		60.00		—	—	—	Yes		—		(1,739	)
2Q 2006	880,000		59.88		—	—	—	Yes		—		(2,760	)
3Q 2006	828,000		60.16		—	—	—	Yes		—		(2,858	)
4Q 2006	828,000		59.78		—	—	—	Yes		—		(3,415	)
1Q 2007	360,000		57.13		—	—	—	Yes		—		(2,495	)
2Q 2007	91,000		51.04		—	—	—	Yes		—		(1,200	)
3Q 2007	92,000		50.56		—	—	—	Yes		—		(1,233	)
4Q 2007	92,000		50.11		—	—	—	Yes		—		(1,236	)
Cap-Swaps:
1Q 2006	135,000		57.82		40.67	—	—	No		—		(565	)
2Q 2006	136,500		57.82		40.67	—	—	No		—		(825	)
3Q 2006	138,000		57.82		40.67	—	—	No		—		(1,057	)
4Q 2006	92,000		56.53		40.00	—	—	No		—		(917	)
Total Oil										—		(20,300	)
Total Natural Gas and Oil									$	23,016	$	(284,442	)

We have established the fair value of all derivative instruments using estimates of fair value reported by our counterparties and subsequently evaluated internally using established index prices and other sources. The actual contribution to our future results of operations will be based on the market prices at the time of settlement and may be more or less than the fair value estimates used at December 31, 2005.

Based upon the market prices at December 31, 2005, we expect to transfer approximately $153.8 million (net of income taxes) of the loss included in the balance in accumulated other comprehensive income to earnings during the next 12 months when the transactions actually occur. All transactions hedged as of December 31, 2005 are expected to mature by December 31, 2009.

57

Additional information concerning changes in the fair value of our oil and gas derivative instruments is as follows:

	December 31,
	2005			2004			2003
	($ in thousands)
Fair value of contracts outstanding, as of January 1	$	38,350		$	(44,988	)	$	(14,533	)
Change in fair value of contracts during the period		(771,076	)		(69,927	)		(31,078	)
Contracts realized or otherwise settled during the period		401,684			154,901			17,389
Fair value of new contracts when entered into during the period		(614,772	)		(5,369	)		(16,766	)
Fair value of contracts when closed during the period		—			3,733			—
Fair value of contracts outstanding, as of December 31	$	(945,814	)	$	38,350		$	(44,988	)

The change in the fair value of our derivative instruments since January 1, 2005 resulted mainly from an increase in oil and natural gas prices. Derivative instruments reflected as current in the consolidated balance sheet represent the estimated fair value of derivative instrument settlements scheduled to occur over the subsequent twelve-month period based on market prices for oil and gas as of the consolidated balance sheet date. The derivative settlement amounts are not due and payable until the month in which the related underlying hedged transaction occurs.

We assumed certain liabilities related to open derivative positions in connection with the CNR acquisition. In accordance with SFAS 141, these derivative positions were recorded at fair value in the purchase price allocation as a liability of $592 million. The recognition of the derivative liability and other assumed liabilities resulted in an increase in the total purchase price which is allocated to the assets acquired. Because of this accounting treatment, only cash settlements for changes in fair value subsequent to the acquisition date for the derivative positions assumed will result in adjustments to our oil and gas revenues upon settlement. For example, if the fair value of the derivative positions assumed do not change then upon the sale of the underlying production and corresponding settlement of the derivative positions, cash would be paid to the counterparties and there would be no adjustment to oil and gas revenues related to the derivative positions. If, however, the actual sales price is different from the price assumed in the original fair value calculation, the difference would be reflected as either a decrease or increase in oil and gas revenues, depending upon whether the sales price was higher or lower, respectively, than the prices assumed in the original fair value calculation. For accounting purposes, the net effect of these acquired hedges is that we have hedged the production volumes listed below market prices on the date of our acquisition of CNR.

Pursuant to Statement of Financial Accounting Standards No. 149, Amendment of SFAS 133 on Derivative Instruments and Hedging Activities, the derivative instruments assumed in connection with the CNR acquisition are deemed to contain a significant financing element and all cash flows associated with these positions will be reported as financing activity in the statement of cash flows for the periods in which settlement occurs.

58

The following details the CNR derivatives we have assumed:

	Volume	Weighted- Average Fixed Price to be Received (Paid)	Weighted Average Put Fixed Price	Weighted- Average Call Fixed Price	SFAS 133 Hedge	Fair Value at December 31, 2005 ($ in thousands)
Natural Gas (mmbtu):
Swaps:
1Q 2006	7,872,500	4.91	—	—	Yes		(50,693	)
2Q 2006	10,510,500	4.86	—	—	Yes		(56,501	)
3Q 2006	10,626,000	4.86	—	—	Yes		(57,355	)
4Q 2006	10,626,000	4.86	—	—	Yes		(62,483	)
1Q 2007	10,350,000	4.82	—	—	Yes		(68,401	)
2Q 2007	10,465,000	4.82	—	—	Yes		(46,158	)
3Q 2007	10,580,000	4.82	—	—	Yes		(46,442	)
4Q 2007	10,580,000	4.82	—	—	Yes		(51,557	)
1Q 2008	9,555,000	4.68	—	—	Yes		(53,954	)
2Q 2008	9,555,000	4.68	—	—	Yes		(33,892	)
3Q 2008	9,660,000	4.68	—	—	Yes		(33,999	)
4Q 2008	9,660,000	4.66	—	—	Yes		(38,487	)
1Q 2009	4,500,000	5.18	—	—	Yes		(18,772	)
2Q 2009	4,550,000	5.18	—	—	Yes		(10,450	)
3Q 2009	4,600,000	5.18	—	—	Yes		(10,508	)
4Q 2009	4,600,000	5.18	—	—	Yes		(12,616	)
Total							(652,268	)
Collars:
1Q 2009	900,000	—	4.50	6.00	Yes		(3,380	)
2Q 2009	910,000	—	4.50	6.00	Yes		(1,754	)
3Q 2009	920,000	—	4.50	6.00	Yes		(1,773	)
4Q 2009	920,000	—	4.50	6.00	Yes		(2,197	)
Total							(9,104	)
Total Natural Gas						$	(661,372	)

In connection with the November 14, 2005 acquisition of Columbia Natural Resources, LLC (“CNR”), Chesapeake assumed obligations under forward gas sales agreements with Mahonia II Limited (Mahonia) to deliver a total of 8.9 bcf of natural gas to Mahonia through February 2006. As of December 31, 2005, the remaining 4.25 bcf of gas scheduled to be delivered under this contract has been recorded as a $60.9 million current accrued liability, based on the fair value of the delivery commitment at the date of acquisition.

59

Interest Rate Risk

The table below presents principal cash flows and related weighted average interest rates by expected maturity dates. As of December 31, 2005, the fair value of the fixed-rate long-term debt has been estimated based on quoted market prices.

	Years of Maturity
	2006		2007		2008		2009		2010		Thereafter			Total			Fair Value
	($ in millions)
Liabilities:
Long-term debt—fixed-rate (a)	$	—	$	—	$	—	$	—	$	—	$	5,524.7		$	5,524.7		$	5,582.4
Average interest rate		—		—		—		—		—		6.3	%		6.3	%		6.3	%
Long-term debt—variable rate	$	—	$	—	$	—	$	—	$	—	$	72.0		$	72.0		$	72.0
Average interest rate		—		—		—		—		—		7.3	%		7.3	%		7.3	%

(a) This amount does not include the discount included in long-term debt of ($95.6) million and the discount for interest rate swaps of ($11.3) million.

Changes in interest rates affect the amount of interest we earn on our cash, cash equivalents and short-term investments and the interest rate we pay on borrowings under our revolving bank credit facility. All of our other long-term indebtedness is fixed rate and therefore does not expose us to the risk of earnings or cash flow loss due to changes in market interest rates. However, changes in interest rates do affect the fair value of our debt.

Interest Rate Derivatives

We use interest rate derivatives to mitigate our exposure to the volatility in interest rates. For interest rate derivative instruments designated as fair value hedges (in accordance with SFAS 133), changes in fair value of interest rate derivatives are recorded on the consolidated balance sheets as assets (liabilities) and the debt’s carrying value amount is adjusted by the change in the fair value of the debt subsequent to the initiation of the derivative. Any resulting differences are recorded currently as ineffectiveness in the consolidated statements of operations as an adjustment to interest expense. Changes in the fair value of derivative instruments not qualifying as fair value hedges are recorded currently as adjustments to interest expense.

As of December 31, 2005, the following interest rate swaps were used to convert a portion of our long-term fixed-rate debt to floating-rate debt were outstanding:

Term	Notional Amount		Fixed Rate		Floating Rate	Fair Value Gain (Loss)
						($ in thousands)
September 2004 – August 2012	$	75,000,000	9.000	%	6 month LIBOR plus 452 basis points	$	(2,734	)
July 2005 – January 2015	$	150,000,000	7.750	%	6 month LIBOR plus 289 basis points	$	(5,133	)
July 2005 – June 2014	$	150,000,000	7.500	%	6 month LIBOR plus 282 basis points	$	(5,327	)
September 2005 – August 2014	$	250,000,000	7.000	%	6 month LIBOR plus 205.5 basis points	$	(5,004	)
October 2005 – June 2015	$	200,000,000	6.375	%	6 month LIBOR plus 112 basis points	$	(1,344	)
October 2005 – January 2018	$	250,000,000	6.250	%	6 month LIBOR plus 99 basis points	$	(3,240	)
October 2005 – January 2016	$	200,000,000	6.625	%	6 month LIBOR plus 129 basis points	$	282

In January 2006, we closed the interest rate swap on our 6.625% Senior Notes for $1.0 million. Subsequent to December 31, 2005, we entered into the following interest rate swaps (which qualify as fair value hedges) to convert a portion of our long-term fixed-rate debt to floating-rate debt:

Term	Notional Amount		Floating Rate
January 2006 – January 2016	$	250,000,000	6 month LIBOR plus 129 basis points
March 2006 – January 2016	$	250,000,000	6 month LIBOR plus 120 basis points
March 2006 – August 2017	$	250,000,000	6 month LIBOR plus 125.5 basis points

60

In 2005, we closed various interest rate swaps for gains totaling $7.1 million. These interest rate swaps were designated as fair value hedges, and the settlement amounts received will be amortized as a reduction to realized interest expense over the remaining terms of the related senior notes.

In March 2004, Chesapeake entered into an interest rate swap which required Chesapeake to pay a fixed rate of 8.68% while the counterparty paid Chesapeake a floating rate of six month LIBOR plus 0.75% on a notional amount of $142.7 million. On March 15, 2005, we elected to terminate the interest rate swap and paid $31.8 million to the counterparty.

61

ITEM 8.    Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

CHESAPEAKE ENERGY CORPORATION

	Page
Management’s Report on Internal Control Over Financial Reporting	63
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	64
Consolidated Balance Sheets at December 31, 2005 and 2004	66
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003	68
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003	69
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003	71
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2005, 2004 and 2003	72
Notes to Consolidated Financial Statements	73
Financial Statement Schedule:
Schedule II—Valuation and Qualifying Accounts	115

62

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

It is the responsibility of the management of Chesapeake Energy Corporation to establish and maintain adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management utilized the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control—Integrated Framework (COSO framework) in conducting the required assessment of effectiveness of the Company’s internal control over financial reporting.

Our evaluation of and conclusion on the effectiveness of internal control over financial reporting excludes Columbia Energy Resources, LLC, which we acquired in a purchase business combination on November 14, 2005. The acquisition of Columbia Energy Resources, LLC accounted for approximately twenty percent of our total assets at December 31, 2005, and contributed approximately two percent of our total revenue in fiscal 2005. See Note 13 for additional information regarding the acquisition.

Management has performed an assessment of the effectiveness of the Company’s internal control over financial reporting and has determined the Company’s internal control over financial reporting was effective as of December 31, 2005.

Our management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein.

Aubrey K. McClendon

Chairman and Chief Executive Officer

Marcus C. Rowland

Executive Vice President and Chief Financial Officer

63

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

of Chesapeake Energy Corporation:

We have completed integrated audits of Chesapeake Energy Corporation’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Chesapeake Energy Corporation and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 12 to the consolidated financial statements, effective January 1, 2003, the Company changed the manner in which it accounts for asset retirement obligations.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 8, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

64

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Columbia Energy Resources, LLC from its assessment of internal control over financial reporting as of December 31, 2005 because it was acquired by the Company in a purchase business combination in November 2005. We have also excluded Columbia Energy Resources, LLC from our audit of internal control over financial reporting. Columbia Energy Resources, LLC is a wholly-owned subsidiary whose total assets and total revenues represent twenty percent and two percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2005.

PricewaterhouseCoopers LLP

Oklahoma City, Oklahoma

March 13, 2006

65

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2005			2004
	($ in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	60,027		$	6,896
Accounts receivable:
Oil and gas sales		615,382			347,081
Joint interest, net of allowances of $4,904,000 and $4,648,000, respectively		84,765			68,220
Related parties		12,839			8,286
Other		78,208			35,781
Deferred income tax asset		234,592			18,068
Short-term derivative instruments		10,503			51,061
Inventory and other		87,081			32,147
Total Current Assets		1,183,397			567,540
PROPERTY AND EQUIPMENT:
Oil and gas properties, at cost based on full-cost accounting:
Evaluated oil and gas properties		15,880,919			9,451,413
Unevaluated properties		1,739,095			761,785
Less: accumulated depreciation, depletion and amortization of oil and gas properties		(3,945,703	)		(3,057,742	)
Total oil and gas properties, at cost based on full-cost accounting		13,674,311			7,155,456
Other property and equipment		750,083			324,495
Drilling rigs		116,133			49,375
Less: accumulated depreciation and amortization of other property, equipment and drilling rigs		(128,640	)		(84,942	)
Total Property and Equipment		14,411,887			7,444,384
OTHER ASSETS:
Investment in Pioneer Drilling Company		138,095			65,950
Other investments		159,348			26,793
Long-term derivative instruments		78,860			44,169
Other assets		146,875			95,673
Total Other Assets		523,178			232,585
TOTAL ASSETS	$	16,118,462		$	8,244,509

66

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS—(Continued)

	December 31,
	2005			2004
	($ in thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	516,792		$	367,176
Short-term derivative instruments		577,681			91,414
Other accrued liabilities		364,501			222,029
Revenues and royalties due others		394,693			216,820
Accrued interest		110,421			66,514
Total Current Liabilities		1,964,088			963,953
LONG-TERM LIABILITIES:
Long-term debt, net		5,489,742			3,075,109
Deferred income tax liability		1,804,978			933,873
Asset retirement obligation		156,593			73,718
Long-term derivative instruments		479,996			1,296
Revenues and royalties due others		22,585			17,007
Other liabilities		26,157			16,670
Total Long-Term Liabilities		7,980,051			4,117,673
CONTINGENCIES AND COMMITMENTS (Note 4)
STOCKHOLDERS’ EQUITY:
Preferred Stock, $.01 par value, 20,000,000 shares authorized:
6.00% cumulative convertible preferred stock, 99,310 and 103,110 shares issued and outstanding as of December 31, 2005 and 2004, respectively, entitled in liquidation to $4,965,500 and $5,155,500		4,966			5,156
5.00% cumulative convertible preferred stock (Series 2003), 1,025,946 and 1,725,000 shares issued and outstanding as of December 31, 2005 and 2004, respectively, entitled in liquidation to $102,594,600 and $172,500,000		102,595			172,500
4.125% cumulative convertible preferred stock, 89,060 and 313,250 shares issued and outstanding as of December 31, 2005 and 2004, respectively, entitled in liquidation to $89,060,000 and $313,250,000		89,060			313,250
5.00% cumulative convertible preferred stock (Series 2005), 4,600,000 and 0 shares issued and outstanding as of December 31, 2005 and 2004, respectively, entitled in liquidation to $460,000,000		460,000			—
4.50% cumulative convertible preferred stock, 3,450,000 and 0 shares issued and outstanding as of December 31, 2005 and 2004, respectively, entitled in liquidation to $345,000,000		345,000			—
5.00% cumulative convertible preferred stock (Series 2005B), 5,750,000 and 0 shares issued and outstanding as of December 31, 2005 and 2004, respectively, entitled in liquidation to $575,000,000		575,000			—
Common Stock, $.01 par value, 500,000,000 shares authorized, 375,510,521 and 316,940,784 shares issued December 31, 2005 and 2004, respectively		3,755			3,169
Paid-in capital		3,803,312			2,440,105
Retained earnings		1,100,841			262,987
Accumulated other comprehensive income (loss), net of tax of $112,071,000 and ($11,489,000), respectively		(194,972	)		20,425
Unearned compensation		(89,242	)		(32,618	)
Less: treasury stock, at cost; 5,320,816 and 5,072,121 common shares as of December 31, 2005 and 2004, respectively		(25,992	)		(22,091	)
Total Stockholders’ Equity		6,174,323			3,162,883
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	16,118,462		$	8,244,509

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2005			2004			2003
	($ in thousands, except per share data)
REVENUES:
Oil and gas sales	$	3,272,585		$	1,936,176		$	1,296,822
Oil and gas marketing sales		1,392,705			773,092			420,610
Total Revenues		4,665,290			2,709,268			1,717,432
OPERATING COSTS:
Production expenses		316,956			204,821			137,583
Production taxes		207,898			103,931			77,893
General and administrative expenses		64,272			37,045			23,753
Oil and gas marketing expenses		1,358,003			755,314			410,288
Oil and gas depreciation, depletion and amortization		894,035			582,137			369,465
Depreciation and amortization of other assets		50,966			29,185			16,793
Provision for legal settlements		—			4,500			6,402
Total Operating Costs		2,892,130			1,716,933			1,042,177
INCOME FROM OPERATIONS		1,773,160			992,335			675,255
OTHER INCOME (EXPENSE):
Interest and other income		10,452			4,476			2,827
Interest expense		(219,800	)		(167,328	)		(154,356	)
Loss on repurchases or exchanges of Chesapeake debt		(70,419	)		(24,557	)		(20,759	)
Loss on investment in Seven Seas Petroleum, Inc.		—			—			(2,015	)
Total Other Income (Expense)		(279,767	)		(187,409	)		(174,303	)
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE		1,493,393			804,926			500,952
INCOME TAX EXPENSE:
Current		—			—			5,000
Deferred		545,091			289,771			185,360
Total Income Tax Expense		545,091			289,771			190,360
NET INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE		948,302			515,155			310,592
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF INCOME TAXES OF $1,464,000		—			—			2,389
NET INCOME		948,302			515,155			312,981
PREFERRED STOCK DIVIDENDS		(41,813	)		(39,506	)		(22,469	)
LOSS ON CONVERSION/EXCHANGE OF PREFERRED STOCK		(26,874	)		(36,678	)		—
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	879,615		$	438,971		$	290,512
EARNINGS PER COMMON SHARE – BASIC:
Income before cumulative effect of accounting change	$	2.73		$	1.73		$	1.36
Cumulative effect of accounting change		—			—			0.02
	$	2.73		$	1.73		$	1.38
EARNINGS PER COMMON SHARE – ASSUMING DILUTION:
Income before cumulative effect of accounting change	$	2.51		$	1.53		$	1.20
Cumulative effect of accounting change		—			—			0.01
	$	2.51		$	1.53		$	1.21
CASH DIVIDEND DECLARED PER COMMON SHARE	$	0.195		$	0.170		$	0.135
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in thousands):
Basic		322,034			253,212			211,203
Assuming dilution		366,683			305,718			258,567

The accompanying notes are an integral part of these consolidated financial statements.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME	$	948,302		$	515,155		$	312,981
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation, depletion, and amortization		935,965			605,593			382,004
Deferred income taxes		544,891			289,532			186,664
Loss on repurchases or exchanges of Chesapeake debt		70,419			24,557			20,759
Premiums paid for repurchasing of senior notes		(59,893	)		(16,281	)		(6,695	)
Amortization of loan costs and bond discount		14,784			10,275			5,861
Unrealized (gains) losses on derivatives		(42,722	)		(35,549	)		(3,992	)
Stock-based compensation		15,343			4,828			—
Cumulative effect of accounting change		—			—			(3,853	)
Loss on investment in Seven Seas		—			—			2,015
Other		(1,362	)		4,412			1,490
(Increase) decrease in accounts receivable		(204,860	)		(152,590	)		(72,683	)
(Increase) decrease in inventory and other assets		(66,979	)		(9,481	)		(10,971	)
Increase (decrease) in accounts payable, accrued liabilities and other		92,215			97,635			86,861
Increase (decrease) in current and non-current revenues and royalties due others		160,785			94,188			38,466
Cash provided by operating activities		2,406,888			1,432,274			938,907
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of oil and gas companies, proved properties and unproved properties, net of cash acquired		(3,925,473	)		(1,914,746	)		(1,261,275	)
Exploration and development of oil and gas properties		(2,371,854	)		(1,276,341	)		(727,231	)
Additions to buildings and other fixed assets		(417,470	)		(126,707	)		(71,454	)
Additions to investments		(135,013	)		(36,962	)		(30,750	)
Additions to drilling rig equipment		(66,758	)		(23,093	)		(1,221	)
Deposits for acquisitions		(35,000	)		(16,250	)		(13,250	)
Divestitures of oil and gas properties		9,769			12,048			22,156
Sale of non-oil and gas assets and investments		20,422			860			5,799
Other		(1	)		(13	)		9
Cash used in investing activities		(6,921,378	)		(3,381,204	)		(2,077,217	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings		5,682,000			2,160,000			738,000
Payments on long-term borrowings		(5,765,116	)		(2,101,000	)		(738,000	)
Cash received from issuance of senior notes, net of offering costs		2,924,636			1,165,975			485,445
Proceeds from issuance of preferred stock, net of offering costs		1,341,529			304,936			390,365
Proceeds from issuance of common stock, net of offering costs		985,782			624,187			177,427
Cash paid to purchase or exchange senior notes		(565,868	)		(248,434	)		(106,379	)
Cash paid for common stock dividends		(60,528	)		(38,902	)		(27,253	)
Cash paid for preferred stock dividends		(31,480	)		(40,907	)		(20,916	)
Cash paid for financing cost of credit facilities		(4,672	)		(9,175	)		(2,474	)
Cash paid for treasury stock and preferred stock		(4,000	)		—			(2,109	)
Derivative settlements		(11,642	)		—			—
Net increase in outstanding payments in excess of cash balance		61,171			88,348			28,315
Other financing costs		(5,803	)		(1,770	)		(496	)
Cash received from exercise of stock options and warrants		21,612			11,987			9,329
Cash provided by financing activities		4,567,621			1,915,245			931,254
Net increase (decrease) in cash and cash equivalents		53,131			(33,685	)		(207,056	)
Cash and cash equivalents, beginning of period		6,896			40,581			247,637
Cash and cash equivalents, end of period	$	60,027		$	6,896		$	40,581

The accompanying notes are an integral part of these consolidated financial statements.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

	Years Ended December 31,
	2005		2004		2003
	($ in thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION OF CASH PAYMENTS FOR:
Interest, net of capitalized interest	$	175,416	$	134,000	$	137,146
Income taxes, net of refunds received	$	200	$	239	$	5,160

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

In 2005, holders of our 6.0% cumulative convertible preferred stock converted 3,800 shares into 18,468 shares of common stock at a conversion price of $10.287 per share.

In 2005, holders of our 4.125% and 5.0% (Series 2003) cumulative convertible preferred stock exchanged 224,190 and 699,054 shares, respectively, for 14,321,881 and 4,362,720 shares, respectively, of common stock in privately negotiated exchanges.

In 2005, Chesapeake acquired Columbia Energy Resources, LLC and its subsidiaries including Columbia Natural Resources, LLC (“CNR”) for a total consideration of $3.02 billion, consisting of $2.2 billion of cash and derivative liabilities, prepaid sales agreements and other liabilities of $0.8 billion. See further discussion regarding the CNR acquisition in Note 13 of the notes to our consolidated financial statements.

In 2004, we completed a public exchange offer in which we retired $458.5 million of our 8.125% Senior Notes due 2011 and $10.8 million of accrued interest and issued $72.8 million of our 7.75% Senior Notes due 2015 and $2.8 million of accrued interest and $433.5 million of our 6.875% Senior Notes due 2016 and $4.1 million of accrued interest.

In 2004, we issued an additional $37.0 million of our 6.875% Senior Notes due 2016 and $0.5 million of accrued interest in exchange for $24.3 million of our 8.125% Senior Notes due 2011 and $0.7 million of accrued interest and $9.1 million of our 7.75% Senior Notes due 2015 and $0.1 million of accrued interest in four private exchange transactions.

In 2004, holders of our 6.75% cumulative convertible preferred stock converted 2,998,000 shares into 19,467,482 shares of common stock (at a conversion price of $7.70 per share).

In 2004, holders of our 6.0% cumulative convertible preferred stock exchanged 600,000 shares for 3,225,000 shares of common stock and 3,896,890 shares for 20,754,817 shares of common stock in a privately negotiated exchange and a public exchange offer, respectively.

In 2004, Chesapeake acquired Hallwood Energy Corporation for a total consideration of $292.0 million, consisting of $223.5 million of cash and short-term notes payable of $60.0 million.

In 2003, we issued $86.7 million of our 7.75% Senior Notes due 2015, $63.8 million of our 7.50% Senior Notes due 2013 and accrued interest of $1.0 million in exchange for $71.7 million of our 8.125% Senior Notes due 2011, $40.2 million of our 8.375% Senior Notes due 2008, $32.0 million of our 8.5% Senior Notes due 2012 and $2.2 million of accrued interest, pursuant to privately negotiated transactions. The $71.7 million of our 8.125% Senior Notes, $40.2 million of our 8.375% Senior Notes and $32.0 million of our 8.5% Senior Notes were retired upon receipt.

As of December 31, 2005, 2004 and 2003, dividends payable on our common and preferred stock were $37.9 million, $19.4 million and $15.7 million, respectively.

In 2005, 2004 and 2003 oil and gas properties were adjusted by $251.7 million, $463.9 million and ($4.9) million, respectively, for net tax liabilities related to acquisitions.

During 2005, 2004 and 2003, $27.3 million, $29.7 million, and $18.1 million, respectively, of additions to oil and gas properties were recorded as an increase to accrued exploration and development costs.

We recorded non-cash asset additions to net oil and gas properties of $76.8 million, $20.2 million and $45.7 million in 2005, 2004 and 2003, respectively, for asset retirement obligations.

The accompanying notes are an integral part of these consolidated financial statements.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
PREFERRED STOCK:
Balance, beginning of period	$	490,906		$	552,400		$	149,900
Issuance of 6.00% cumulative convertible preferred stock		—			—			230,000
Issuance of 5.00% cumulative convertible preferred stock (Series 2003)		—			—			172,500
Issuance of 4.125% cumulative convertible preferred stock		—			313,250			—
Issuance of 5.00% cumulative convertible preferred stock (Series 2005)		460,000			—			—
Issuance of 4.50% cumulative convertible preferred stock		345,000			—			—
Issuance of 5.00% cumulative convertible preferred stock (Series 2005B)		575,000			—			—
Exchange of common stock for 224,190 shares of 4.125% preferred stock		(224,190	)		—			—
Exchange of common stock for 699,054 shares of 5.00% preferred stock (Series 2003)		(69,905	)		—			—
Exchange of common stock for 2,998,000 shares of 6.75% preferred stock		—			(149,900	)		—
Exchange of common stock for 3,800, 4,496,890 and 0 shares of 6.00% preferred stock, respectively		(190	)		(224,844	)		—
Balance, end of period		1,576,621			490,906			552,400
COMMON STOCK:
Balance, beginning of period		3,169			2,218			1,949
Issuance of 32,200,000, 46,000,000 and 23,000,000 shares of common stock, respectively		322			460			230
Exchange of 18,703,069, 43,447,299 and 0 shares of common stock for preferred stock		187			435			—
Exercise of stock options and warrants		40			29			39
Restricted stock grants		37			27			—
Balance, end of period		3,755			3,169			2,218
PAID-IN CAPITAL:
Balance, beginning of period		2,440,105			1,389,212			1,205,554
Issuance of common stock		1,024,282			649,520			186,070
Exchange of 18,703,069, 43,447,299 and 0 shares of common stock for preferred stock, respectively		294,098			374,310			—
Equity-based compensation		82,144			41,485			2,292
Offering expenses		(77,293	)		(34,297	)		(21,139	)
Exercise of stock options and warrants		21,573			11,958			9,290
Tax benefit from exercise of stock options and restricted stock		18,506			9,135			7,145
Preferred stock conversion/exchange expenses		(103	)		(1,218	)		—
Balance, end of period		3,803,312			2,440,105			1,389,212
RETAINED EARNINGS (DEFICIT):
Balance, beginning of period		262,987			(168,617	)		(426,085	)
Net income		948,302			515,155			312,981
Dividends on common stock		(64,830	)		(45,229	)		(29,128	)
Dividends on preferred stock		(45,618	)		(38,322	)		(26,385	)
Balance, end of period		1,100,841			262,987			(168,617	)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance, beginning of period		20,425			(20,312	)		(3,461	)
Gain (loss) on hedging activity		(266,312	)		15,946			(16,851	)
Unrealized gain on marketable securities		50,915			24,791			—
Balance, end of period		(194,972	)		20,425			(20,312	)
UNEARNED COMPENSATION:
Balance, beginning of period		(32,618	)		—			—
Restricted stock granted		(79,979	)		(38,949	)		—
Amortization of unearned compensation		23,355			6,331			—
Balance, end of period		(89,242	)		(32,618	)		—
TREASURY STOCK—COMMON:
Balance, beginning of period		(22,091	)		(22,091	)		(19,982	)
Purchase of 257,220, 0 and 279,042 shares of treasury stock, respectively		(4,000	)		—			(2,109	)
401(k) make-up plan distribution of 8,525 shares		99			—			—
Balance, end of period		(25,992	)		(22,091	)		(22,091	)
TOTAL STOCKHOLDERS’ EQUITY	$	6,174,323		$	3,162,883		$	1,732,810

The accompanying notes are an integral part of these consolidated financial statements.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
Net Income	$	948,302		$	515,155		$	312,981
Other comprehensive income (loss), net of income tax:
Change in fair value of derivative instruments, net of income taxes of ($317,772,000), ($44,463,000) and ($15,272,000), respectively		(552,837	)		(79,046	)		(24,917	)
Reclassification of (gain) loss on settled contracts, net of income taxes of $136,841,000, $50,480,000 and $1,448,000, respectively		238,066			89,743			2,363
Ineffective portion of derivatives qualifying for cash flow hedge accounting, net of income taxes of $27,850,000, $2,953,000 and $3,495,000, respectively		48,452			5,249			5,703
Unrealized gain on marketable securities, net of income taxes of $29,266,000, $13,945,000 and $0, respectively		50,915			24,791			—
Other adjustments, net of income taxes of $3,000		6			—			—
Comprehensive income	$	732,904		$	555,892		$	296,130

The accompanying notes are an integral part of these consolidated financial statements.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Company

Chesapeake Energy Corporation (“Chesapeake” or the “company”) is an oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs and the marketing of natural gas and oil for other working interest owners in properties we operate. Our properties are located in Oklahoma, Texas, Arkansas, Louisiana, Kansas, Montana, Colorado, North Dakota, New Mexico, West Virginia, Kentucky, Ohio, New York, Maryland, Michigan, Pennsylvania, Tennessee and Virginia.

Principles of Consolidation

The accompanying consolidated financial statements of Chesapeake include the accounts of our direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in companies and partnerships which give us significant influence, but not control, over the investee are accounted for using the equity method. Other investments are generally carried at cost.

Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Cash Equivalents

For purposes of the consolidated financial statements, Chesapeake considers investments in all highly liquid instruments with original maturities of three months or less at date of purchase to be cash equivalents.

Inventory

Inventory, which is included in current assets, includes tubular goods and other lease and well equipment which we plan to utilize in our ongoing exploration and development activities and is carried at the lower of cost or market using the specific identification method. Oil inventory in tanks is carried at the lower of the estimated cost to produce or market value. Purchased gas inventory is recorded at the lower of weighted average cost or market.

Oil and Gas Properties

Chesapeake follows the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities (see Note 11). Capitalized costs are amortized on a composite unit-of-production method based on proved oil and gas reserves. As of December 31, 2005, approximately 78% of our proved reserves were evaluated by independent petroleum engineers, with the balance evaluated by our internal reservoir engineers. In addition, our internal engineers evaluate all properties on an annual basis. The average composite rates used for depreciation, depletion and amortization were $1.91 per equivalent mcfe in 2005, $1.61 per equivalent mcfe in 2004, and $1.38 per equivalent mcfe in 2003.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. No income is recognized in connection with contractual services provided by Chesapeake to other interest owners on properties in which we hold an economic interest.

The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties and otherwise if impairment has occurred. Unevaluated properties are grouped by major prospect area where individual property costs are not significant and are assessed individually when individual costs are significant.

We review the carrying value of our oil and gas properties under the full-cost accounting rules of the Securities and Exchange Commission on a quarterly basis. Under these rules, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects.

We account for seismic costs in accordance with Rule 4-10 of Regulation S-X. Specifically, rule 4-10 requires that all companies that use the full cost method capitalize exploration costs as part of their oil and gas properties (i.e., full cost pool). Exploration costs may be incurred both before acquiring the related property and after acquiring the property. Further, exploration costs include, among other things, geographical and geophysical studies and salaries and other expenses of geologists, geophysical crews, and others conducting those studies. Such costs are capitalized as incurred.

Seismic costs directly associated with the acquisition and evaluation of unproved properties are excluded from the amortization computation until it is determined whether or not proved reserves can be assigned to the properties. The company reviews its unproved properties and associated seismic costs quarterly in order to ascertain whether impairment has incurred. To the extent that seismic costs cannot be directly associated with specific unevaluated properties, they are included in the amortization base as incurred.

Other Property and Equipment and Drilling Rigs

Other property and equipment consists primarily of gas gathering and processing facilities, drilling rigs, vehicles, land, buildings and improvements, office equipment, and software. Land purchases are made in order to build additional office space at our Oklahoma City headquarters and field offices. Major renewals and betterments are capitalized while the costs of repairs and maintenance are charged to expense as incurred. The costs of assets retired or otherwise disposed of and the applicable accumulated depreciation are removed from the accounts, and the resulting gain or loss is reflected in operations. Other property and equipment costs are depreciated on a straight-line basis. A summary of other property and equipment and the useful lives are as follows:

	December 31,
	2005		2004		Useful Life
	($ in thousands)				(in years)
Land	$	74,466	$	24,153	—
Buildings and improvements		156,110		105,516	15 – 39
Gathering, processing and compression equipment		406,408		112,888	7 – 20
Other fixtures and equipment		113,099		81,938	2 – 7
Drilling rigs		116,133		49,375	15
Total	$	866,216	$	373,870

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments

Investments in securities are accounted for under the equity method in circumstances where we are deemed to exercise significant influence over the operating and investing policies of the investee. Under the equity method, we recognize our share of the investee’s earnings in our consolidated statements of operations. Investments in securities not accounted for under the equity method are accounted for under the cost method. Investments in marketable equity securities accounted for under the cost method have been designated as available for sale and, as such, are recorded at fair value. We have no investments which are required to be consolidated pursuant to the terms of FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities.

Included in investments at December 31, 2005 are equity securities totaling $297.4 million. At December 31, 2005, investments accounted for under the equity method totaled $57.8 million and investments accounted for under the cost method totaled $239.6 million. Included in the investments accounted for under the cost method are an investment in the common stock of Pioneer Drilling Company (AMEX:PDC) reported at a fair market value of $138.1 million (cost basis of $42.7 million) and an investment in the common stock of Gastar Exploration Ltd. (AMEX: GST) reported at a fair market value of $98.4 million (cost basis of $76.0 million). The fair market value of our investments in Pioneer Drilling Company and Gastar Exploration Ltd. at December 31, 2005 are based upon the closing price of their common stock ($17.93 per share and $3.63 per share, respectively).

Capitalized Interest

During 2005, 2004 and 2003, interest of approximately $79.0 million, $36.2 million and $13.0 million, respectively, was capitalized on significant investments in unproved properties that were not being currently depreciated, depleted or amortized and on which exploration activities were in progress. Interest is capitalized using the weighted average interest rate on our outstanding borrowings.

Accounts Payable and Accrued Liabilities

Included in accounts payable at December 31, 2005 and 2004, respectively, are liabilities of approximately $177.8 million and $116.7 million representing the amount by which checks issued, but not yet presented to our banks for collection, exceeded balances in applicable bank accounts. Other accrued liabilities include $88.3 million and $61.0 million of accrued drilling costs as of December 31, 2005 and 2004, respectively.

Debt Issue Costs

Included in other assets are costs associated with the issuance of our senior notes and costs associated with our revolving bank credit facility. The remaining unamortized debt issue costs at December 31, 2005 and 2004 totaled $92.2 million and $54.4 million, respectively, and are being amortized over the life of the senior notes or revolving credit facility.

Asset Retirement Obligations

Effective January 1, 2003, Chesapeake adopted Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligation. This statement applies to obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction and development of the assets.

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SFAS 143 requires that the fair value of a liability for a retirement obligation be recognized in the period in which the liability is incurred. For oil and gas properties, this is the period in which an oil or gas well is acquired or drilled. The asset retirement obligation is capitalized as part of the carrying amount of our oil and gas properties at its discounted fair value. The liability is then accreted each period until the liability is settled or the well is sold, at which time the liability is reversed.

Revenue Recognition

Oil and Natural Gas Sales.    Revenue from the sale of oil and natural gas is recognized when title passes, net of royalties.

Gas Imbalances.    We follow the “sales method” of accounting for our gas revenue whereby we recognize sales revenue on all gas sold to our purchasers, regardless of whether the sales are proportionate to our ownership in the property. An asset or a liability is recognized to the extent that we have an imbalance in excess of the remaining gas reserves on the underlying properties. The gas imbalance net position at December 31, 2005 and 2004 was a liability of $4.5 million and $4.4 million, respectively.

Marketing Sales.    Chesapeake takes title to the natural gas it purchases from other working interest owners in operated wells and arranges for transportation and delivers the natural gas to third parties, at which time revenues are recorded. Chesapeake’s results of operations related to its oil and gas marketing activities are presented on a “gross” basis, because we act as a principal rather than an agent. All significant intercompany accounts and transactions have been eliminated.

Hedging

From time to time, Chesapeake uses commodity price and financial risk management instruments to mitigate our exposure to price fluctuations in oil and natural gas transactions and interest rates. Recognized gains and losses on derivative contracts are reported as a component of the related transaction. Results of oil and gas derivative transactions are reflected in oil and gas sales and results of interest rate hedging transactions are reflected in interest expense. The changes in fair value of derivative instruments not qualifying for designation as either cash flow or fair value hedges that occur prior to maturity are reported currently in the consolidated statement of operations as unrealized gains (losses) within oil and gas sales or interest expense. Cash flows from derivative instruments are classified in the same category within the statement of cash flows as the items being hedged, or on a basis consistent with the nature of the instrument.

We have established the fair value of all derivative instruments using estimates determined by our counterparties and subsequently evaluated internally using established index prices and other sources. These values are based upon, among other things, futures prices, volatility, time to maturity and credit risk. The values we report in our financial statements change as these estimates are revised to reflect actual results, changes in market conditions or other factors.

Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, establishes accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded at fair value and included in the consolidated balance sheet as assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception of a derivative. For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Any change in the fair value resulting from ineffectiveness, as defined by SFAS 133, is recognized immediately

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in oil and gas sales. For derivative instruments designated as fair value hedges (in accordance with SFAS 133), changes in fair value, as well as the offsetting changes in the estimated fair value of the hedged item attributable to the hedged risk, are recognized currently in earnings. Differences between the changes in the fair values of the hedged item and the derivative instrument, if any, represent gains or losses on ineffectiveness and are reflected currently in interest expense. Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time. Changes in fair value of contracts that do not qualify as hedges or are not designated as hedges are also recognized currently in earnings.

Stock Options

Chesapeake has elected to follow APB No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its employee and director stock options. Under APB No. 25, compensation expense is recognized for the difference between the option exercise price and market value on the measurement date. The original issuance of stock options has not resulted in the recognition of compensation expense because the exercise price of the stock options granted under the plans has equaled the market price of the underlying stock on the date of grant. Pursuant to FASB Interpretation No. 44 (FIN 44), which addresses the accounting consequence of various modifications to the terms of a previously granted fixed-price stock option, we recognized stock-based compensation expense in the consolidated statements of operations of $3.9 million, $0.6 million and $0.9 million in 2005, 2004 and 2003, respectively. Of the $3.9 million recognized in 2005, $1.2 million was capitalized to oil and gas properties.

Pro forma information regarding net income and earnings per share is required by Statement of Financial Accounting Standards No. 123, Stock-based Compensation and has been determined as if we had accounted for our employee and director stock options under the fair value method of the statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2005, 2004 and 2003, respectively: interest rates (zero-coupon U.S. government issues with a remaining life equal to the expected term of the options) ranging from 2.24% to 4.35%, dividend yields ranging from 0.52% to 1.53%, and volatility factors of the expected market price of our common stock ranging from 0.29 to 0.46. We used a weighted-average expected life of the options of five years for each of 2005, 2004 and 2003.

Presented below is pro forma financial information assuming Chesapeake had applied the fair value method under SFAS No. 123:

	Years Ended December 31,
	2005			2004			2003
	($ in thousands, except per share amounts)
Net Income:
As reported	$	948,302		$	515,155		$	312,981
Stock-based compensation expense included in net income, net of tax		9,743			3,090			586
Pro forma compensation expense, net of tax		(18,028	)		(14,289	)		(11,604	)
Pro forma	$	940,017		$	503,956		$	301,963
Basic earnings per common share:
As reported	$	2.73		$	1.73		$	1.38
Pro forma	$	2.71		$	1.69		$	1.32
Diluted earnings per common share:
As reported	$	2.51		$	1.53		$	1.21
Pro forma	$	2.48		$	1.49		$	1.17

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For purposes of the pro forma disclosures, the estimated fair value of the options is amortized to expense over the option vesting period, which is four years for employee options.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, which revised the accounting for stock-based compensation under SFAS 123. This statement establishes standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services. SFAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award. The fair value of employee stock options will be estimated using option-pricing models. Excess tax benefits will be recognized as an addition to paid-in capital. Cash retained as a result of those excess tax benefits will be presented in the statement of cash flows as financing cash inflows. The write-off of deferred tax assets relating to unrealized tax benefits associated with recognized compensation cost will be recognized as income tax expense unless there are excess tax benefits from previous awards remaining in paid-in capital to which it can be offset. This statement is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. Chesapeake will implement SFAS 123(R) in the first quarter of 2006 utilizing the modified prospective method, with the Black-Scholes option pricing model continuing to be used to value the stock options as of the grant date. Based on the stock options outstanding and unvested at December 31, 2005 and our current intention to limit future awards of stock options, we do not believe the requirement to expense stock options under SFAS No. 123 (R) will have a significant impact on future results of operations. Chesapeake began issuing shares of restricted common stock to employees in 2004 and to directors in 2005.

Reclassifications

Certain reclassifications have been made to the consolidated financial statements for 2004 and 2003 to conform to the presentation used for the 2005 consolidated financial statements.

2. Net Income Per Share

Statement of Financial Accounting Standards No. 128, Earnings Per Share (EPS), requires presentation of “basic” and “diluted” earnings per share, as defined, on the face of the statements of operations for all entities with complex capital structures. SFAS 128 requires a reconciliation of the numerator and denominator of the basic and diluted EPS computations.

The following securities were not included in the calculation of diluted EPS, as the effect was antidilutive:

• For the years ended December 31, 2005, 2004 and 2003, outstanding options to purchase 0.1 million, 0.1 million and 1.9 million shares of common stock at a weighted-average exercise price of $29.85, $23.82 and $11.15, respectively, were antidilutive because the exercise prices of the options were greater than the average market price of the common stock.

• For the year ended December 31, 2005, diluted shares do not include the common stock equivalent of the 4.125% preferred stock (convertible into 8,610,708 shares) as the effect was antidilutive, and the preferred stock adjustment to net income does not include $28.9 million of dividends and loss on conversion/exchange related to these preferred shares.

• For the year ended December 31, 2004, diluted shares do not include the common stock equivalent of the 6% preferred stock outstanding prior to conversion (convertible into 21,339,375 shares) as the effect was antidilutive and the preferred stock dividend adjustment to net income does not include $12.2 million of dividends related to these preferred shares.

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• For the year ended December 31, 2003, outstanding warrants to purchase 0.4 million shares of common stock at a weighted-average exercise price of $14.55 were antidilutive because the exercise price of the warrants was greater than the average market price of the common stock.

Emerging Issues Task Force (EITF) Issue 04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share, which was issued in September 2004, provides guidance on when the dilutive effect of contingently convertible securities with a market price trigger should be included in diluted EPS. EITF 04-8 states that these securities should be included in the diluted EPS computation regardless of whether the market price trigger has been met. The guidance in EITF 04-8 is effective for all periods ending after December 15, 2004 and has been applied retrospectively by restating previously reported EPS. Accordingly, effective December 15, 2004, the company has assumed the conversion of the 4.125% convertible preferred shares issued in 2004 (if dilutive) for purposes of determining EPS assuming dilution.

A reconciliation for the years ended December 31, 2005, 2004 and 2003 is as follows:

	Income (Numerator)		Shares (Denominator)	Per Share Amount
	(in thousands, except per share data)
For the Year ended December 31, 2005:
Basic EPS:
Income available to common shareholders	$	879,615	322,034	$	2.73
Effect of Dilutive Securities
Assumed conversion as of the beginning of the period of preferred shares outstanding during the period:
Common shares assumed issued for 4.125% convertible preferred stock		—	5,349
Common shares assumed issued for 4.50% convertible preferred stock		—	2,332
Common shares assumed issued for 5.00% (Series 2003) convertible preferred stock		—	6,254
Common shares assumed issued for 5.00% (Series 2005) convertible preferred stock		—	12,532
Common shares assumed issued for 5.00% (Series 2005B) convertible preferred stock		—	2,177
Common shares assumed issued for 6.00% convertible preferred stock		—	483
Common stock equivalent of preferred stock outstanding prior to conversion, 5.00% (Series 2003) convertible preferred stock		—	3,024
Common stock equivalent of preferred stock outstanding prior to conversion, 6.00% convertible preferred stock		—	12
Preferred stock dividends		36,278	—
Loss on redemption of preferred stock		3,519	—
Employee stock options		—	10,861
Restricted stock		—	1,614
Warrants assumed in Gothic acquisition		—	11
Diluted EPS Income available to common shareholders and assumed conversions	$	919,412	366,683	$	2.51

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Income (Numerator)			Shares (Denominator)	Per Share Amount
	(in thousands, except per share data)
For the Year ended December 31, 2004:
Basic EPS:
Income available to common shareholders	$	438,971		253,212	$	1.73
Effect of Dilutive Securities
Assumed conversion as of the beginning of the period of preferred shares outstanding during the period:
Common shares assumed issued for 4.125% convertible preferred stock		—		14,200
Common shares assumed issued for 5.00% (Series 2003) convertible preferred stock		—		10,516
Common shares assumed issued for 6.00% convertible preferred stock		—		501
Common shares assumed issued for 6.75% convertible preferred stock		—		16,971
Preferred stock dividends		27,290		—
Employee stock options		—		10,097
Restricted stock		—		203
Warrants assumed in Gothic acquisition		—		18
Diluted EPS Income available to common shareholders and assumed conversions	$	466,261		305,718	$	1.53
For the Year Ended December 31, 2003:
Income before cumulative effect of accounting change, net of tax	$	310,592
Preferred stock dividends		(22,469	)
Basic EPS:
Income available to common shareholders before cumulative effect of accounting change, net of tax	$	288,123		211,203	$	1.36
Effect of Dilutive Securities
Assumed conversion as of the beginning of the period of preferred shares outstanding during the period:
Common shares assumed issued for 5.00% (Series 2003) convertible preferred stock		—		1,441
Common shares assumed issued for 6.00% convertible preferred stock		—		18,499
Common shares assumed issued for 6.75% convertible preferred stock		—		19,467
Preferred stock dividends		22,469		—
Employee stock options		—		7,957
Diluted EPS Income available to common shareholders before cumulative effect of accounting change, net of tax	$	310,592		258,567	$	1.20

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Senior Notes and Revolving Bank Credit Facility

Our long-term debt consisted of the following at December 31, 2005 and 2004:

	December 31,
	2005			2004
	($ in thousands)
7.5% Senior Notes due 2013	$	363,823		$	363,823
7.0% Senior Notes due 2014		300,000			300,000
7.5% Senior Notes due 2014		300,000			300,000
7.75% Senior Notes due 2015		300,408			300,408
6.375% Senior Notes due 2015		600,000			600,000
6.625% Senior Notes due 2016		600,000			—
6.875% Senior Notes due 2016		670,437			670,437
6.5% Senior Notes due 2017		600,000			—
6.25% Senior Notes due 2018		600,000			—
6.875% Senior Notes due 2020		500,000			—
2.75% Contingent Convertible Senior Notes due 2035 (a)		690,000			—
8.375% Senior Notes due 2008		—			18,990
8.125% Senior Notes due 2011		—			245,407
9.0% Senior Notes due 2012		—			300,000
Revolving bank credit facility		72,000			59,000
Discount on senior notes		(95,577	)		(84,924	)
Premium (discount) for interest rate derivatives (b)		(11,349	)		1,968
Total notes payable and long-term debt	$	5,489,742		$	3,075,109

(a) The holders of the 2.75% Contingent Convertible Senior Notes due 2035 may require us to repurchase all or a portion of these notes on November 15, 2015, 2020, 2025 and 2030 at 100% of the principal amount of the notes.

(b) See Note 10 for further discussion related to these instruments.

During the past three years, we have repurchased or exchanged Chesapeake debt and incurred losses in connection with these transactions. The following table shows the losses related to these transactions for 2005, 2004 and 2003, respectively ($ in millions):

	Notes Retired		Loss on Repurchases/Exchanges
For the Year Ended December 31, 2005:			Premium		Other (a)			Total
8.375% Senior Notes due 2008	$	19.0	$	1.2	$	0.1		$	1.3
8.125% Senior Notes due 2011		245.4		17.3		4.4			21.7
9.0% Senior Notes due 2012		300.0		41.4		6.0			47.4
	$	564.4	$	59.9	$	10.5		$	70.4
For the Year Ended December 31, 2004:
8.375% Senior Notes due 2008	$	190.8	$	16.1	$	1.5		$	17.6
8.5% Senior Notes due 2012		4.3		0.2		0.7			0.9
8.125% Senior Notes due 2011		482.8		—		6.0			6.0
	$	677.9	$	16.3	$	8.2		$	24.5
For the Year Ended December 31, 2003:
8.5% Senior Notes due 2012	$	106.4	$	6.7	$	14.1	(b)	$	20.8

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(a) Includes the write-off of unamortized discounts, deferred charges, transaction costs and derivative charges as described below.

(b) Includes a $12.0 million loss that was recognized based on the hedging relationship between the notes and an associated interest rate derivative.

In 2003 and 2004, we completed financing transactions that extended the maturity and lowered the interest rate of our outstanding senior notes. This was accomplished by issuing new senior notes with lower interest rates and extended maturity dates in exchange for existing senior notes. For accounting purposes, the notes exchanged were determined to have substantially similar terms based on their associated future cash flows. Accordingly, unless otherwise noted, these exchanges resulted in no gain or loss being recorded on our consolidated statements of operations.

In January and February of 2004, we issued $37.0 million of our 6.875% Senior Notes due 2016 in exchange for $24.3 million of our 8.125% Senior Notes due 2011 and $9.1 million of our 7.75% Senior Notes due 2015 in four private exchange transactions. In January 2004, we completed a public exchange offer in which we retired $458.5 million of our 8.125% Senior Notes due 2011 and issued $72.8 million of our 7.75% Senior Notes due 2015 and $433.5 million of our 6.875% Senior Notes due 2016. In connection with this exchange, we recorded a pre-tax charge of $6.0 million, consisting of a $5.7 million underwriter’s fee and $0.3 million in other transaction costs. In October 2003, we issued $63.8 million of our 7.50% Senior Notes due 2013 and $23.7 million of our 7.75% Senior Notes due 2015 in exchange for $71.7 million of our 8.125% Senior Notes due 2011 and $12.3 million of our 8.375% Senior Notes due 2008 pursuant to a privately negotiated transaction. In August 2003, we issued $33.5 million of our 7.75% Senior Notes due 2015 in exchange for $32.0 million of our 8.5% Senior Notes due 2012 pursuant to a privately negotiated transaction. In July 2003, we issued $29.5 million of our 7.75% Senior Notes due 2015 in exchange for $27.9 million of our 8.375% Senior Notes pursuant to a privately negotiated transaction.

The senior note indentures permit us to redeem the senior notes at any time at specified make-whole or redemption prices. The indentures (issued before July 2005) contain covenants limiting our ability and our restricted subsidiaries’ ability to incur additional indebtedness; pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness; make investments and other restricted payments; incur liens; engage in transactions with affiliates; sell assets; and consolidate, merge or transfer assets.

Chesapeake is a holding company and owns no operating assets and has no significant operations independent of its subsidiaries. Our obligations under our outstanding senior notes have been fully and unconditionally guaranteed, on a joint and several basis, by all of our domestic wholly owned subsidiaries.

As of February 2006, we have a $2.0 billion syndicated revolving bank credit facility which matures in February 2011. As of December 31, 2005, we had $72 million of outstanding borrowings under our facility and utilized $53 million of the facility for various letters of credit. Borrowings under our facility are collateralized by certain producing oil and gas properties and bear interest at either (i) the greater of the reference rate of Union Bank of California, N.A. or the federal funds effective rate plus 0.50% or (ii) the London Interbank Offered Rate (LIBOR), at our option, plus a margin that varies from 0.875% to 1.50% according to our senior unsecured long-term debt ratings. The collateral value and borrowing base are determined periodically. The unused portion of the facility is subject to an annual commitment fee that also varies from 0.125% to 0.30% according to our senior unsecured long-term debt ratings. Currently, the annual commitment fee rate is 0.25%. Interest is payable quarterly or, if LIBOR applies, it may be payable at more frequent intervals.

The credit facility agreement contains various covenants and restrictive provisions which govern our ability to incur additional indebtedness, purchase or redeem our capital stock, make investments or loans, and create

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liens. The credit facility agreement requires us to maintain an indebtedness to total capitalization ratio (as defined) not to exceed 0.65 to 1 and an indebtedness to EBITDA ratio (as defined) not to exceed 3.5 to 1. At December 31, 2005, our indebtedness to total capitalization ratio was 0.48 to 1 and our indebtedness to EBITDA ratio was 2.34 to 1. If we should fail to perform our obligations under these and other covenants, the revolving credit commitment could be terminated and any outstanding borrowings under the facility could be declared immediately due and payable. Such acceleration, if involving a principal amount of $10 million ($50 million in the case of our senior notes issued after 2004), would constitute an event of default under our senior note indentures which could in turn result in the acceleration of a significant portion of our senior note indebtedness. The credit facility agreement also has cross default provisions that apply to other indebtedness we may have with an outstanding principal amount in excess of $75 million.

Our subsidiaries, Chesapeake Exploration Limited Partnership and Chesapeake Appalachia, L.L.C., are the borrowers under our revolving bank credit facility. The facility is fully and unconditionally guaranteed, on a joint and several basis, by Chesapeake and all of our other domestic wholly owned subsidiaries.

4. Contingencies and Commitments

Litigation.    Chesapeake is currently involved in various disputes incidental to its business operations. Management, after consultation with legal counsel, is of the opinion that the final resolution of all currently pending or threatened litigation is not likely to have a material adverse effect on our consolidated financial position or results of operations.

Employment Agreements with Officers.    Currently, Chesapeake has employment agreements with its chief executive officer, chief operating officer, chief financial officer and various other senior management personnel, which provide for annual base salaries, bonus compensation and various benefits. The agreements provide for the continuation of salary and benefits for varying terms in the event of termination of employment without cause. The agreement with the chief executive officer has a term of five years commencing July 1, 2005. The term of the agreement is automatically extended for one additional year on each January 31 unless the company provides 30 days notice of non-extension. The agreements with the chief operating officer, chief financial officer and other senior managers expire on September 30, 2006. The company’s employment agreements with the executive officers provide for payments in the event of a change in control. The chief executive officer is entitled to receive a payment in the amount of three times his base compensation and three-times the value of the prior year’s benefits, plus a tax gross-up payment, any stock-based awards held by the chief executive officer will immediately become 100% vested, and any unexercised options will not terminate as a result of his termination of employment. The company will also provide him office space and secretarial and accounting support for a period of 12 months after a change of control. The chief operating officer, chief financial officer and other officers are each entitled to receive a payment in the amount of two times his or her base compensation plus bonuses paid during the prior year. See further discussion regarding the resignation of our former chief operating officer in Note 16 of the notes to our consolidated financial statements.

Environmental Risk.    Due to the nature of the oil and gas business, Chesapeake and its subsidiaries are exposed to possible environmental risks. Chesapeake has implemented various policies and procedures to avoid environmental contamination and risks from environmental contamination. Chesapeake conducts periodic reviews, on a company-wide basis, to identify changes in our environmental risk profile. These reviews evaluate whether there is a probable liability, its amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees who are expected to devote a significant amount of time directly to any possible remediation effort. We manage our exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. Depending on the extent of an

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identified environmental problem, Chesapeake may exclude a property from the acquisition, require the seller to remediate the property to our satisfaction, or agree to assume liability for the remediation of the property. Chesapeake has historically not experienced any significant environmental liability, and is not aware of any potential material environmental issues or claims at December 31, 2005.

Leases.    Chesapeake has entered into various operating leases for office space and equipment. Future minimum lease payments required as of December 31, 2005 related to these operating leases are as follows ($ in thousands):

2006	$	4,124
2007		3,473
2008		2,837
2009		2,204
2010		419
After 2010		702
Total	$	13,759

Rent expense, including short-term rentals, for the years ended December 31, 2005, 2004 and 2003 was $29.8 million, $17.9 million and $13.1 million, respectively.

Transportation Contracts.    In connection with the November 14, 2005 acquisition of Columbia Natural Resources, LLC, Chesapeake assumed various firm pipeline transportation service agreements with expiration dates ranging from one to 94 years. Under the terms of these contracts, we are obligated to pay demand charges as set forth in the transporter’s Federal Energy Regulatory Commission (FERC) gas tariff. In exchange, the company will receive rights to flow natural gas production through pipelines located in highly competitive markets. The aggregate amount of such required demand payments as of December 31, 2005 are as follows (in thousands):

2006	$	7,406
2007		3,331
2008		2,972
2009		2,525
2010		1,076
After 2010		95,467
Total	$	112,777

In addition, the company is required to pay additional amounts depending on actual quantities shipped under the agreement. The company’s total payments under the agreement were $1.4 million in 2005.

Drilling Contracts.    We have contracts with various drilling contractors to use 36 drilling rigs in 2006 with terms of one to three years. Minimum future commitments as of December 31, 2005 are as follows (in thousands):

2006	$	153,321
2007		98,375
2008		62,697
2009		8,818
After 2009		—
Total	$	323,211

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Chesapeake’s wholly owned subsidiary, Nomac Drilling Corporation, as of December 31, 2005, had contracted to acquire 26 rigs to be constructed during 2006. The total cost of the rigs is estimated to be approximately $227 million.

Additionally through Nomac Drilling Corporation, as of December 31, 2005, we had agreed to acquire 13 drilling rigs and related assets from Martex Drilling Company, L.L.P., a privately-held drilling contractor with operations in East Texas and North Louisiana, for $150 million, which was completed in February 2006.

Other.    On December 23, 2005, Chesapeake and a leading investment bank entered into an agreement to lend Mountain Drilling Company up to $25 million each. The agreement matures on December 31, 2009. There were no outstanding borrowings under this agreement at December 31, 2005.

In connection with the CNR acquisition, Chesapeake assumed obligations under forward gas sales agreements to deliver natural gas through February 2006. As of December 31, 2005, the remaining 4.25 bcf of gas scheduled to be delivered under this contract was recorded as a $60.9 million current accrued liability, based on the fair value of the delivery commitment at the date of acquisition.

As of December 31, 2005, Chesapeake had agreed to acquire oil and natural gas assets located in its Barnett Shale, South Texas, Permian Basin, Mid-Continent and East Texas regions from private companies for an aggregate purchase price of approximately $700 million in cash.

As of December 31, 2005, we had agreed to acquire a privately held Oklahoma-based trucking company for $48 million. This acquisition closed in January 2006.

As of December 31, 2005, we had agreed to acquire office buildings in Oklahoma City for $35.5 million. These acquisitions closed in January 2006.

5. Income Taxes

The components of the income tax provision (benefit) for each of the periods presented below are as follows:

	Years Ended December 31,
	2005		2004		2003
	($ in thousands)
Current	$	—	$	—	$	5,000
Deferred		545,091		289,771		186,824
Total	$	545,091	$	289,771	$	191,824	(a)

(a) Includes $1,464,000 of tax expense related to the cumulative effect of a change in accounting principle.

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The effective income tax expense differed from the computed “expected” federal income tax expense on earnings before income taxes for the following reasons:

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
Computed “expected” federal income tax provision	$	522,688		$	281,724		$	176,682
State income taxes and other		22,608			8,230			10,968
Change in valuation allowance		—			—			4,364
Tax percentage depletion		(205	)		(183	)		(190	)
	$	545,091		$	289,771		$	191,824

Deferred income taxes are provided to reflect temporary differences in the basis of net assets for income tax and financial reporting purposes. The tax-effected temporary differences and tax loss carryforwards which comprise deferred taxes are as follows:

	Years Ended December 31,
	2005			2004
	($ in thousands)
Deferred tax liabilities:
Oil and gas properties	$	(2,227,960	)	$	(1,121,776	)
Other property and equipment		(26,679	)		(18,128	)
Derivative instruments		—			(10,798	)
Investments		(42,211	)		(5,944	)
Deferred tax liabilities	$	(2,296,850	)	$	(1,156,646	)
Deferred tax assets:
Net operating loss carryforwards	$	246,857		$	199,897
Asset retirement obligation		59,525			26,907
Derivative instruments		358,660			—
Accrued liabilities		30,648			1,643
Percentage depletion carryforwards		4,603			3,801
Alternative minimum tax credits		5,298			5,344
Other		20,873			3,249
Deferred tax assets	$	726,464		$	240,841
Total deferred tax asset (liability)	$	(1,570,386	)(a)	$	(915,805	)
Reflected in accompanying balance sheets as:
Current deferred income tax asset	$	234,592		$	18,068
Non-current deferred income tax liability		(1,804,978	)		(933,873	)
	$	(1,570,386	)	$	(915,805	)

(a) In addition to the income tax expense of $545.1 million, activity during 2005 includes a net liability of $251.7 million related to acquisitions, a benefit of $153.1 million related to derivative instruments, a liability of $29.6 million related to investments, a benefit of $18.5 million related to stock-based compensation, and a benefit of $0.2 million related to other miscellaneous items. These items were not recorded as part of the provision for income taxes.

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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SFAS 109 requires that we record a valuation allowance when it is more likely than not that some portion or all of deferred tax assets will not be realized. During 2004, we determined that it was more likely than not that $6.8 million of the deferred tax assets related to Louisiana net operating losses, upon which we had previously recorded a valuation allowance, would be realized due to the acquisitions occurring in 2004. The recognition of the deferred tax asset was included as a component of the acquisition of the properties and was not reflected as a reduction of the 2004 provision for income tax.

As of December 31, 2005, we classified $234.6 million of deferred tax assets as current that were attributable to the current portion of derivative liabilities and other current temporary differences. As of December 31, 2004, we classified $18.1 million of deferred tax assets as current that were attributable to the current portion of derivative liabilities and other current temporary differences.

At December 31, 2005, Chesapeake had federal income tax net operating loss (NOL) carryforwards of approximately $564.5 million. Additionally, we had $169.6 million of alternative minimum tax (AMT) NOL carryforwards available as a deduction against future AMT income and approximately $12.3 million of percentage depletion carryforwards. The NOL carryforwards expire from 2012 through 2025. The value of these carryforwards depends on the ability of Chesapeake to generate taxable income. In addition, for AMT purposes, only 90% of AMT income in any given year may be offset by AMT NOLs. A summary of our NOLs follows:

	NOL		AMT NOL
	($ in thousands)
Expiration Date:
December 31, 2012	$	171,588	$	—
December 31, 2018		42,187		—
December 31, 2019		145,855		57,414
December 31, 2020		5,155		1,393
December 31, 2021		15,370		5,313
December 31, 2022		50,410		25,299
December 31, 2023		65,273		37,648
December 31, 2024		60,349		40,062
December 31, 2025		8,264		2,506
Total	$	564,451	$	169,635

The ability of Chesapeake to utilize NOL carryforwards to reduce future federal taxable income and federal income tax of Chesapeake is subject to various limitations under the Internal Revenue Code of 1986, as amended. The utilization of such carryforwards may be limited upon the occurrence of certain ownership changes, including the issuance or exercise of rights to acquire stock, the purchase or sale of stock by 5% stockholders, as defined in the Treasury regulations, and the offering of stock by us during any three-year period resulting in an aggregate change of more than 50% in the beneficial ownership of Chesapeake.

In the event of an ownership change (as defined for income tax purposes), Section 382 of the Code imposes an annual limitation on the amount of a corporation’s taxable income that can be offset by these carryforwards. The limitation is generally equal to the product of (i) the fair market value of the equity of the company multiplied by (ii) a percentage approximately equivalent to the yield on long-term tax exempt bonds during the month in which an ownership change occurs. In addition, the limitation is increased if there are recognized built-in gains during any post-change year, but only to the extent of any net unrealized built-in gains (as defined in the Code) inherent in the assets sold. Certain NOLs acquired through various acquisitions are also subject to limitations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes our net operating losses as of December 31, 2005 and any related limitations:

	Total		Limited		Annual Limitation
	($ in thousands)
Net operating loss	$	564,451	$	49,284	$	27,754
AMT net operating loss	$	169,635	$	11,220	$	6,652

Although no assurances can be made, we do not believe that an ownership change has occurred as of December 31, 2005. Future equity transactions by Chesapeake or by 5% stockholders (including relatively small transactions and transactions beyond our control) could cause an ownership change and therefore a limitation on the annual utilization of NOLs.

6. Related Party Transactions

As of December 31, 2005, we had accrued accounts receivable from our two co-founders, CEO Aubrey K. McClendon and former COO Tom L. Ward, of $6.4 million and $6.4 million, respectively, representing joint interest billings from December 2005 which were invoiced and paid in January 2006. Since Chesapeake was founded in 1989, Messrs. McClendon and Ward have acquired small working interests in certain of our oil and gas properties by participating in our drilling activities. Joint interest billings to them are settled in cash immediately upon delivery of a monthly joint interest billing.

Under the Founder Well Participation Program, approved by our shareholders in June 2005, Messrs. McClendon and Ward may elect to participate in all or none of the wells drilled by or on behalf of Chesapeake, but they are not allowed to participate only in selected wells. A participation election is required to be received by the Compensation Committee of Chesapeake’s Board of Directors 30 days prior to the start of each calendar year. Their participation is permitted only under the terms outlined in the Founder Well Participation Program, which, among other things, limits their individual participation to a maximum working interest of 2.5% in a well and prohibits participation in situations where Chesapeake’s working interest would be reduced below 12.5% as a result of their participation. In addition, the company is reimbursed for the cost of its leasehold acquired by Messrs. McClendon and Ward as a result of their well participation. As a result of the resignation of Mr. Ward on February 10, 2006, his participation in the Founder Well Participation Program will expire on August 10, 2006, which is also the expiration date of non-competition covenants applicable to Mr. Ward.

As disclosed in Note 8, in 2005, Chesapeake had revenues of $851.4 million from oil and gas sales to Eagle Energy Partners I, L.P., an affiliated entity.

During 2005, 2004 and 2003, we paid legal fees of $1.2 million, $1.1 million and $2.1 million, respectively, for legal services provided by a law firm of which a former director is a member.

7. Employee Benefit Plans

We maintain two qualified 401(k) profit sharing plans, the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan, which is open to employees of Chesapeake and all our subsidiaries except Nomac Drilling Corporation, and the Nomac Drilling 401(k) Plan, which is open to employees of Nomac Drilling Corporation. Eligible employees may elect to defer voluntary contributions to the plans, subject to plan limits and those set by the Internal Revenue Service. Chesapeake matches contributions to the Chesapeake Savings and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Incentive Stock Bonus Plan dollar for dollar with Chesapeake common stock purchased in the open market for up to 15% of an employee’s annual compensation. The company contributed $10.0 million, $6.9 million and $4.0 million to this plan during 2005, 2004 and 2003, respectively. The company matched contributions to the Nomac Drilling 401(k) Plan dollar for dollar with Chesapeake common stock purchased in the open market for up to 8% of the participating employee’s annual compensation during 2005. Prior to 2005, the matching contribution to the Nomac plan was 6%. The company contributed $0.4 million, $0.2 million and $0.1 million to this plan in 2005, 2004 and 2003, respectively.

In November 2005, Chesapeake acquired Columbia Natural Resources, LLC., which sponsors the Columbia Natural Resources, LLC 401(k) Plan. Chesapeake’s 401(k) plan was amended effective January 1, 2006 to honor previous service by employees with CNR and predecessor companies. Employees that were offered employment with Chesapeake effective January 1, 2006 are eligible to participate in Chesapeake’s 401(k) plan. This group of employees includes employees in the Charleston, WV headquarters office as well as exempt, administrative field employees. Existing assets of these participants are scheduled for transfer to the Chesapeake plan on March 1, 2006. All non-administrative field employees, including union employees, are excluded from participation in the Chesapeake plan and will continue participation in the existing CNR plan. This plan will remain active and will be adopted by the new employer entity, Chesapeake Appalachia, L.L.C.

In January 2003, we established a 401(k) make-up plan and a deferred compensation plan, both of which are nonqualified deferred compensation plans. To be eligible to participate in the 401(k) make-up plan during 2004 and 2003, an employee had to receive annual compensation (base salary and bonus combined) of at least $90,000, have a minimum of five years of service as a company employee and have made the maximum contribution allowable under the 401(k) plan. The company matched employee contributions to the 401(k) make-up plan in Chesapeake common stock dollar for dollar for up to 15% of the employee’s annual compensation. In December 2004, Chesapeake amended the 401(k) make-up plan and the deferred compensation plan in response to the American Jobs Creation Act of 2004, which set out new guidelines for such plans. The compensation eligibility threshold (base salary and bonus combined) for the 401(k) make-up plan was adjusted to $95,000 in 2005 to correspond with the IRS annual limitations. Effective January 1, 2006, the compensation eligibility threshold (base salary and bonus combined) for the 401(k) make-up plan was increased to $100,000. We contributed $1.6 million, $1.4 million and $1.2 million to the 401(k) make-up plan during 2005, 2004 and 2003, respectively.

Non-employee directors and employees with at least one year of service receiving an annual base salary of at least $100,000 during the 12 months prior to the enrollment date were eligible to participate in the deferred compensation plan in 2003 and 2004. In 2005, the annual base salary compensation limit required for eligibility in the deferred compensation plan was reduced to $95,000. Non-employee directors are able to defer up to 100% of director fees. The maximum compensation that can be deferred under all company deferred compensation plans, including the Chesapeake 401(k) plan, has been increased to a total of 75% of base salary and 100% of performance bonus. Chesapeake made no matching or other contributions to the deferred compensation plan, although the plan permits the company to make discretionary contributions.

Any assets placed in trust by Chesapeake to fund future obligations of the 401(k) make-up plan and the deferred compensation plan are subject to the claims of creditors in the event of insolvency or bankruptcy, and participants are general creditors of the company as to their deferred compensation in the plans.

Chesapeake maintains no post-employment benefit plans except those sponsored by CNR. CNR employees who elected to accept employment with Chesapeake effective January 1, 2006 are no longer eligible to participate in the CNR post-employment benefit plans. As of December 31, 2005, a total of 193 employees remained eligible for these plans. The CNR benefit plans provide health care and life insurance benefits to eligible employees upon retirement. We account for these benefits on an accrual basis. As of December 31, 2005, the company had accrued $2.6 million in accumulated post-employment benefit liability.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Major Customers and Segment Information

Sales to individual customers constituting 10% or more of total revenues were as follows:

Year Ended December 31,	Customer	Amount		Percent of Total Revenues
		($ in thousands)
2005	Eagle Energy Partners I, L.P.	$	851,420	18	%
2004	Eagle Energy Partners I, L.P.	$	467,387	17	%
2003	Reliant Energy Services	$	189,140	11	%
2003	Duke Energy Field Services	$	163,329	10	%

In September 2003, Chesapeake invested $5.8 million in Eagle Energy Partners I, L.P. and received a 25% limited partnership interest. Through additional investments totaling $3.4 million, Chesapeake has increased its limited partner ownership interest to approximately 33% as of December 31, 2005. Chesapeake accounts for its investment in Eagle Energy Partners I, L.P. under the equity method of accounting in accordance with APB 18. In October 2005, Chesapeake purchased a fixed volume of gas in storage from Eagle Energy Partners I, L.P. for approximately $29 million. Along with the gas storage purchased, Chesapeake assumed hedging contracts which Eagle had previously negotiated covering the gas in storage. These hedges have scheduled maturities beginning in December 2005 and ending in March 2006. Eagle Energy has agreed to periodically purchase the gas in storage from Chesapeake at market prices plus a premium of $0.1125 per mcfe beginning in December 2005 and ending in March 2006. As of December 31, 2005, the remaining gas storage had a market value of $29.6 million and the assumed hedges had a market value of ($6.7) million.

In accordance with SFAS 131, Disclosures about Segments of an Enterprise and Related Information, we have identified two reportable operating segments. These segments are managed separately because of the nature of their products and services. Chesapeake’s two reportable segments are the exploration and production segment and the marketing segment. Based upon the growth of the company’s drilling rig operations in 2005, drilling operations have been presented in “Other” for all years presented. These operations previously had been considered a part of the exploration and production segment.

The exploration and production segment is responsible for finding and producing natural gas and crude oil. The marketing segment is responsible for gathering, processing, transporting and selling natural gas and crude oil primarily from Chesapeake operated wells.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Management evaluates the performance of our segments based upon income before income taxes and cumulative effect of accounting change. Revenues from the marketing segment’s sale of oil and gas related to Chesapeake’s ownership interests are reflected as exploration and production revenues. Such amounts totaled $2,395.9 million, $1,349.1 million and $875.3 million for 2005, 2004 and 2003, respectively. Revenues and associated expenses from the drilling of oil and gas wells on Chesapeake-operated properties generally are eliminated and included as part of the carrying value of our oil and gas properties. The following tables present selected financial information for Chesapeake according to our operating segments:

For the Year Ended December 31, 2005:	Exploration and Production		Marketing			Other Operations			Intercompany Eliminations			Consolidated Total
	($ in thousands)
Revenues	$	3,272,585	$	3,788,653		$	60,755		$	(2,456,703	)	$	4,665,290
Intersegment revenues		—		(2,395,948	)		(60,755	)		2,456,703			—
Total Revenues		3,272,585		1,392,705			—			—			4,665,290
Depreciation, depletion and amortization		939,904		5,097			5,897			(5,897	)		945,001
Interest and other income		9,684		523			299			(54	)		10,452
Interest expense		219,800		—			—			—			219,800
Other expense		70,419		—			—			—			70,419
INCOME BEFORE INCOME TAXES	$	1,466,652	$	26,496		$	10,089		$	(9,844	)	$	1,493,393
TOTAL ASSETS	$	15,123,840	$	688,747		$	305,875		$	—		$	16,118,462
CAPITAL EXPENDITURES	$	7,696,400	$	132,817		$	69,945		$	—		$	7,899,162
For the Year Ended December 31, 2004:
Revenues	$	1,936,176	$	2,122,235		$	22,864		$	(1,372,007	)	$	2,709,268
Intersegment revenues		—		(1,349,143	)		(22,864	)		1,372,007			—
Total Revenues		1,936,176		773,092			—			—			2,709,268
Depreciation, depletion and amortization		602,894		8,428			3,775			(3,775	)		611,322
Interest and other income		3,944		532			240			(240	)		4,476
Interest expense		167,328		—			—			—			167,328
Other expense		24,557		—			—			—			24,557
INCOME BEFORE INCOME TAXES	$	801,583	$	3,343		$	(1,995	)	$	1,995		$	804,926
TOTAL ASSETS	$	7,810,772	$	318,246		$	115,491		$	—		$	8,244,509
CAPITAL EXPENDITURES	$	3,845,851	$	42,462		$	23,957		$	—		$	3,912,270
For the Year Ended December 31, 2003:
Revenues	$	1,296,822	$	1,295,872		$	15,652		$	(890,914	)	$	1,717,432
Intersegment revenues		—		(875,262	)		(15,652	)		890,914			—
Total Revenues		1,296,822		420,610			—			—			1,717,432
Depreciation, depletion and amortization		383,065		3,193			3,485			(3,485	)		386,258
Interest and other income		1,673		1,154			29			(29	)		2,827
Interest expense		154,345		11			—			—			154,356
Other expense		22,774		—			—			—			22,774
INCOME BEFORE INCOME TAXES	$	496,133	$	4,819		$	(1,996	)	$	1,996		$	500,952
TOTAL ASSETS	$	4,340,673	$	195,733		$	35,885		$	—		$	4,572,291
CAPITAL EXPENDITURES	$	2,084,896	$	27,265		$	1,206		$	—		$	2,113,367

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Stockholders’ Equity, Restricted Stock and Stock Options

The following is a summary of the changes in our common shares outstanding for 2005, 2004 and 2003:

	2005	2004	2003
	(in millions)
Shares outstanding, beginning of year	317	222	195
Stock option and warrant exercises	4	3	4
Restricted stock issuances	4	3	—
Preferred stock conversions	19	43	—
Common stock issuances	32	46	23
Shares outstanding, end of year	376	317	222

The following is a summary of the changes in our preferred shares outstanding for 2005, 2004 and 2003:

	6.75%		6.00%		5% (2003)		4.125%		5% (2005)	4.50%	5% (2005B)
Shares outstanding, 1/1/05	—		103,110		1,725,000		313,250		—	—	—
Preferred stock issuances	—		—		—		—		4,600,000	3,450,000	5,750,000
Conversion of preferred	—		(3,800	)	—		—		—	—	—
Exchanges of preferred for common stock	—		—		(699,054	)	(224,190	)	—	—	—
Shares outstanding, 12/31/05	—		99,310		1,025,946		89,060		4,600,000	3,450,000	5,750,000
Shares outstanding, 1/1/04	2,998,000		4,600,000		1,725,000		—		—	—	—
Preferred stock issuances	—		—		—		313,250		—	—	—
Conversion by holder	(960,000	)	—		—		—		—	—	—
Mandatory conversion	(2,038,000	)	—		—		—		—	—	—
Exchange of preferred for common stock	—		(600,000	)	—		—		—	—	—
Registered exchange offer	—		(3,896,890	)	—		—		—	—	—
Shares outstanding, 12/31/04	—		103,110		1,725,000		313,250		—	—	—
Shares outstanding, 1/1/03	2,998,000		—		—		—		—	—	—
Preferred stock issuances	—		4,600,000		1,725,000		—		—	—	—
Shares outstanding, 12/31/03	2,998,000		4,600,000		1,725,000		—		—	—	—

In connection with the exchanges noted above, we recorded a loss of $26.9 million in 2005 and $36.7 million in 2004 in the consolidated statements of operations. In general, the loss is equal to the excess of the fair value of all common stock exchanged over the fair value of the securities issuable pursuant to the original conversion terms of the preferred stock.

In 2005, holders of our 6.00% cumulative convertible preferred stock converted 3,800 shares into 18,468 shares of our common stock.

In 2005, holders of our 5.00% (Series 2003) cumulative convertible preferred stock converted 699,054 shares into 4,362,720 shares of our common stock.

In 2005, holders of our 4.125% cumulative convertible preferred stock converted 224,190 shares into 14,321,881 shares of our common stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In April 2005, we issued 4,600,000 shares of 5.00% (Series 2005) cumulative convertible preferred stock, par value $0.01 per share and liquidation preference $100 per share, in a private offering, all of which were outstanding as of December 31, 2005. The net proceeds from the offering were $447.2 million. Each share of preferred stock is convertible, at the holder’s option at any time, initially into approximately 3.8811 shares of our common stock based on an initial conversion price of $25.766 per share, subject to specified adjustments. At December 31, 2005, 17,853,060 shares of our common stock were reserved for issuance upon conversion. The preferred stock is subject to mandatory conversion, at our option, on or after April 15, 2010 (1) at the same rate if the market price of the common stock equals or exceeds 130% of the conversion price, or $33.50, for a specified time period and (2) at the lower of the conversion price and the then current market price of common stock if there are less than 250,000 shares of preferred stock outstanding at the time. Annual cumulative cash dividends of $5.00 per share are payable quarterly on the fifteenth day of each January, April, July and October.

In September 2005, we issued 3,450,000 shares of 4.50% cumulative convertible preferred stock, par value of $0.01 per share and liquidation preference $100 per share, in a public offering, all of which were outstanding as of December 31, 2005. The net proceeds from the offering were $335.2 million. Each share of preferred stock is convertible, at the holder’s option at any time, initially into approximately 2.2639 shares of our common stock based on an initial conversion price of $44.172 per share, subject to specified adjustments. At December 31, 2005, 7,810,455 shares of our common stock were reserved for issuance upon conversion. The preferred stock is subject to mandatory conversion, at our option, on or after September 15, 2010 (1) at the same rate if the market price of the common stock equals or exceeds 130% of the conversion price, or $57.42, for a specified time period and (2) at the lower of the conversion price and the then current market price of common stock if there are less than 250,000 shares of preferred stock outstanding at the time. Annual cumulative cash dividends of $4.50 per share are payable quarterly on the fifteenth day of each March, June, September and December.

In September 2005, we issued 9,200,000 shares of Chesapeake common stock at $32.72 per share in a public offering for net proceeds of $289.4 million.

In November 2005, we issued 5,750,000 shares of 5.00% (Series 2005B) cumulative convertible preferred stock, par value of $0.01 per share and liquidation preference $100 per share, in a private offering, all of which were outstanding as of December 31, 2005. The net proceeds from the offering were $559.1 million. Each share of preferred stock is convertible, at the holder’s option at any time, initially into approximately 2.5595 shares of our common stock based on an initial conversion price of $39.07 per share, subject to specified adjustments. At December 31, 2005, 14,717,125 shares of our common stock were reserved for issuance upon conversion. The preferred stock is subject to mandatory conversion, at our option, on or after November 15, 2010 (1) at the same rate if the market price of the common stock equals or exceeds 130% of the conversion price, or $50.79, for a specified time period and (2) at the lower of the conversion price and the then current market price of common stock if there are less than 250,000 shares of preferred stock outstanding at the time. Annual cumulative cash dividends of $5.00 per share are payable quarterly on the fifteenth day of each February, May, August and November.

In December 2005, we issued 23,000,000 shares of Chesapeake common stock at $31.46 per share in a public offering for net proceeds of $696.4 million.

In 2004, holders of our 6.75% cumulative convertible preferred stock converted 2,998,000 shares into 19,467,482 shares of common stock (at a conversion price of $7.70 per share).

In 2004, a holder of our 6.0% cumulative convertible preferred stock exchanged 600,000 shares for 3,225,000 shares of common stock in a privately negotiated transaction, and holders exchanged 3,896,890 shares of such preferred stock for 20,754,817 shares of common stock in a public exchange offer.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In August 2004, we issued 23,000,000 shares of Chesapeake common stock at $14.75 per share in a public offering for net proceeds of $326.2 million.

In March and April 2004, we issued 313,250 shares of 4.125% cumulative convertible preferred stock, par value $.01 per share and liquidation preference $1,000 per share, in a private offering, 89,060 shares of which were outstanding as of December 31, 2005. The net proceeds from the offering were $304.9 million. Each share of preferred stock is convertible initially into 60.0555 shares of common stock (which is calculated using an initial conversion price of $16.65 per share of common stock), subject to adjustment upon the occurrence of certain events. A holder’s right to convert will arise only when (i) the closing sale price of our common stock reaches or exceeds 130% of the conversion price for a specified period of time; (ii) the trading price of the preferred stock falls below 98% of the product of the closing sale price of our common stock and the conversion price for a specified period of time; or (iii) upon the occurrence of certain corporate transactions. At December 31, 2005, 5,348,542 shares of our common stock were reserved for issuance upon conversion. The preferred stock is subject to mandatory conversion, at our option, on or after March 15, 2009 (1) at the same rate if the market price of the common stock equals or exceeds 130% of the conversion price, or $21.65, for a specified time period and (2) at the lower of the conversion price and the then current market price of common stock if there are less than 25,000 shares of preferred stock outstanding at the time. Annual cumulative cash dividends of $41.25 per share are payable quarterly on the fifteenth day of each March, June, September and December.

In January 2004, we issued 23,000,000 shares of Chesapeake common stock at $13.51 per share in a public offering for net proceeds of $298.1 million.

In November 2003, we issued 1,725,000 shares of 5.00% (Series 2003) cumulative convertible preferred stock, par value $.01 per share and liquidation preference $100 per share, in a public offering, 1,025,946 of which were outstanding as of December 31, 2005. The net proceeds from the offering were $167.6 million. Each preferred share is convertible at any time at the option of the holder into 6.0962 shares of common stock, subject to adjustment. At December 31, 2005, 6,254,372 shares of our common stock were reserved for issuance upon conversion. The conversion rate is based on an initial conversion price of $16.40 per common share plus cash in lieu of fractional shares. The preferred stock is subject to mandatory conversion, at our option, (1) on or after November 18, 2006 at the same rate, if the market price of the common stock equals or exceeds 130% of the conversion price, or $21.32, for a specified time period and (2) on or after November 18, 2008, at the lower of the conversion price and the then current market price of common stock if there are less than 250,000 shares of preferred stock outstanding at the time. Annual cumulative cash dividends of $5.00 per share are payable quarterly on the fifteenth day of each February, May, August and November.

In March 2003, we issued 23,000,000 shares of Chesapeake common stock at $8.10 per share in a public offering for net proceeds of $177.4 million.

In March 2003, we issued 4,600,000 shares of 6.00% cumulative convertible preferred stock, par value $.01 per share and liquidation preference $50 per share, in a private offering, 99,310 shares of which were outstanding as of December 31, 2005. The net proceeds from the offering were $222.8 million. Each preferred share is convertible at any time at the option of the holder into 4.8605 shares of common stock, subject to adjustment. At December 31, 2005, 482,696 shares of common stock were reserved for issuance upon conversion. The conversion rate is based on an initial conversion price of $10.287 per common share plus cash in lieu of fractional shares. The preferred stock is subject to mandatory conversion at our option, (1) on or after March 20, 2006 at the same rate if the market price of the common stock equals or exceeds 130% of the conversion price, or $13.37, at the time and (2) on or after March 20, 2008 at the lower of the conversion price and the then current market price of the common stock if there are less than 250,000 shares of preferred stock outstanding at the time.

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Annual cumulative cash dividends of $3.00 per share are payable quarterly on the fifteenth day of March, June, September and December.

Restricted Stock

During 2005 and 2004, Chesapeake issued 3.9 million shares and 2.7 million shares, respectively, of restricted common stock to directors and employees. The total value of restricted shares granted is recorded as unearned compensation in stockholders’ equity based on the fair market value of the shares on the date of grant. This value is amortized over the vesting period, which is four years from the date of grant. To the extent amortization of compensation cost relates to employees directly involved in acquisition, exploration and development activities, such amounts are capitalized to oil and gas properties. Amounts not capitalized to oil and gas properties are recognized in general and administrative expense. Chesapeake recognized amortization of compensation cost related to restricted stock totaling $23.3 million and $6.3 million during 2005 and 2004. Of these amounts, $12.6 million and $4.2 million were reflected in general and administrative expense with the remaining $10.7 million and $2.1 million capitalized to oil and gas properties. As of December 31, 2005 and 2004, the unamortized balance of unearned compensation recorded as a reduction of stockholders’ equity was $89.2 million and $32.6 million.

The vesting of certain restricted stock grants results in state and federal income tax benefits related to the difference between the market price of the common stock at the date of vesting and the date of grant. During 2005, we recognized a tax benefit of $2.0 million, which was recorded as an adjustment to additional paid-in capital and deferred income taxes with respect to such benefits.

Stock-Based Compensation Plans

Under Chesapeake’s Long Term Incentive Plan, restricted stock, stock options, stock appreciation rights, performance shares and other stock awards may be awarded to employees, directors and consultants of Chesapeake. Subject to any adjustments as provided by the plan, the aggregate number of shares which may be issued and sold may not exceed 3,000,000 shares. The maximum period for exercise of an option or stock appreciation right may not be more than ten years from the date of grant and the exercise price may not be less than the fair market value of the shares underlying the option or stock appreciation right on the date of grant. Awards granted under the plan become vested at dates or upon the satisfaction of certain performance or other criteria determined by a committee of the board of directors. No awards may be granted under this plan after September 30, 2014. This plan has been approved by our shareholders. Stock options to purchase 150,000 and 50,000 shares of our common stock were issued to our directors from this plan in 2005 and 2004, respectively. In addition, 62,500 shares of restricted stock were issued to our directors from this plan in 2005. As of December 31, 2005, there were 2.7 million shares remaining available for issuance under the plan.

Under Chesapeake’s 2003 Stock Incentive Plan, restricted stock and incentive and nonqualified stock options to purchase our common stock may be awarded to employees and consultants of Chesapeake. Subject to any adjustments as provided by the plan, the aggregate number of shares which may be issued and sold may not exceed 10,000,000 shares. The maximum period for exercise of an option may not be more than ten years from the date of grant and the exercise price may not be less than the fair market value of the shares underlying the option on the date of grant. Restricted stock and options granted become vested at dates determined by a committee of the board of directors. No awards may be granted under this plan after April 14, 2013. This plan has been approved by our shareholders. There were 3.9 million restricted shares, net of forfeitures, issued during 2005 from this plan. As of December 31, 2005, there were 3.7 million shares remaining available for issuance under the plan.

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Under Chesapeake’s 2003 Stock Award Plan for Non-Employee Directors, 10,000 shares of Chesapeake’s common stock will be awarded to each newly appointed non-employee director on his or her first day of service. Subject to any adjustments as provided by the plan, the aggregate number of shares which may be issued may not exceed 50,000 shares. This plan was not required to be approved by our shareholders. In 2005, 10,000 shares of common stock were awarded to a new director from this plan. As of December 31, 2005, there are 30,000 shares remaining available for issuance under this plan.

Under Chesapeake’s 2002 Non-Employee Director Stock Option Plan and 1992 Nonstatutory Stock Option Plan, we granted nonqualified options to purchase our common stock to members of our board of directors who are not Chesapeake employees. Subject to any adjustments provided for in the plans, the 2002 plan and the 1992 plan covered a maximum of 500,000 shares and 3,132,000 shares, respectively. No shares remained available for option grants under the plans as of December 31, 2005. The 1992 plan terminated in December 2002 and the 2002 plan terminated in June 2005. Pursuant to a formula award provision in the plans, each non-employee director received a quarterly grant of a ten-year immediately exercisable option to purchase shares of common stock at an exercise price equal to the fair market value of the shares on the date of grant. Both plans were approved by our shareholders.

In addition to the plans described above, we have stock options outstanding to employees under a number of employee stock option plans which are described below. These plans were terminated in June 2005 (with the exception of the 1994 Plan which expired in October 2004) and therefore no shares remain available for stock option grants under the plans. Beginning in 2004, stock-based compensation awards to employees have been made in the form of restricted stock from the 2003 Stock Incentive Plan.

Name of Plan	Eligible Participants	Type of Options	Shares Covered	Shareholder Approved
2002 and 2001 Stock Option Plans	Employees and consultants	Incentive and nonqualified	3,000,000/ 3,200,000	Yes
2001 and 2000 Executive Officer Stock Option Plans	Executive officers	Nonqualified	4,000,000/ 2,500,000 (treasury shares only)	No
2002 and 2001 Nonqualified Stock Option Plans	Employees and consultants	Nonqualified	4,000,000/ 3,000,000	No
2000 Employee and 1999 Stock Option Plans	Employees and consultants	Nonqualified	3,000,000 (each plan)	No
1996 and 1994 Stock Option Plans	Employees and consultants	Incentive and nonqualified	6,000,000/ 4,886,910	Yes

Each of these plans provided that the maximum period for exercise of an option may not be more than ten years from the date of grant and the exercise price may not be less than the fair market value of the shares underlying the options on the date of grant; provided, however, nonqualified stock options not exceeding 10% of the options issuable under each of the plans (except the 1996 and 1994 Stock Option Plans) could have been granted at an exercise price which was not less than 85% of the grant date fair market value. The 1996 Stock Option Plan did not limit the amount of nonqualified stock options that could be granted with an exercise price of at least 85% of the fair market value of the shares underlying the options on the date of grant. The 1994 Stock Option Plan, which terminated in October 2004, did not permit options with an exercise price below the fair market value of the shares underlying the options on the date of grant. Options granted under all these plans become exercisable at dates determined by a committee of the board of directors.

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A summary of our stock option activity and related information follows:

	Years Ended December 31,
	2005					2004					2003
	Options			Weighted-Avg. Exercise Price		Options			Weighted-Avg. Exercise Price		Options			Weighted-Avg. Exercise Price
Outstanding beginning of period		24,228,464		$	6.00		27,233,285		$	5.78		24,576,775		$	4.40
Granted		177,500			18.67		347,250			14.23		7,168,623			8.98
Exercised		(4,032,180	)		5.78		(3,219,877	)		4.94		(4,262,915	)		3.04
Canceled/forfeited		(117,771	)		8.51		(132,194	)		8.21		(249,198	)		8.51
Outstanding end of period		20,256,013		$	6.14		24,228,464		$	6.00		27,233,285		$	5.78
Exercisable end of period		15,960,440		$	5.57		15,441,511		$	5.06		12,131,098		$	4.26
Shares authorized for future grants		6,452,444					8,392,285					11,018,225
Fair value of options granted during period	$	6.21				$	4.66				$	3.36

The following table summarizes information about stock options outstanding at December 31, 2005:

	Outstanding Options				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted-Avg. Remaining Contractual Life	Weighted-Avg. Exercise Price		Number Exercisable	Weighted-Avg. Exercise Price
$ 0.94 – $  1.13	2,381,599	2.89	$	1.08	2,381,599	$	1.08
1.38 –     4.00	2,183,302	4.17		3.26	2,183,302		3.26
4.06 –     4.06	2,058	2.46		4.06	2,058		4.06
5.20 –     5.20	2,714,939	6.56		5.20	1,836,849		5.20
5.35 –     5.96	1,812,027	4.90		5.57	1,787,912		5.56
6.11 –     6.11	4,777,753	5.75		6.11	4,776,816		6.11
6.13 –     7.74	252,771	5.78		6.91	222,673		6.87
7.80 –     7.80	2,739,115	7.02		7.80	1,124,867		7.80
7.86 –   10.01	258,106	6.63		8.48	184,345		8.55
10.08 –   30.63	3,134,343	7.74		11.46	1,460,019		12.78
$ 0.94 – $30.63	20,256,013	5.72	$	6.14	15,960,440	$	5.57

The exercise of certain stock options results in state and federal income tax benefits to us related to the difference between the market price of the common stock at the date of disposition and the option price. During 2005, 2004 and 2003, we recognized tax benefits of $16.5 million, $9.1 million and $7.1 million, which were recorded as adjustments to additional paid-in capital and deferred income taxes with respect to such benefits.

Shareholder Rights Plan

Chesapeake maintains a shareholder rights plan designed to deter coercive or unfair takeover tactics, to prevent a person or group from gaining control of Chesapeake without offering fair value to all shareholders and to deter other abusive takeover tactics which are not in the best interest of shareholders.

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Under the terms of the plan, each share of common stock is accompanied by one right, which given certain acquisition and business combination criteria, entitles the shareholder to purchase from Chesapeake one one-thousandth of a newly issued share of Series A preferred stock at a price of $25.00, subject to adjustment by Chesapeake.

The rights become exercisable 10 days after Chesapeake learns that an acquiring person (as defined in the plan) has acquired 15% or more of the outstanding common stock of Chesapeake or 10 business days after the commencement of a tender offer which would result in a person owning 15% or more of such shares. Chesapeake may redeem the rights for $0.01 per right within ten days following the time Chesapeake learns that a person has become an acquiring person. The rights will expire on July 27, 2008, unless redeemed earlier by Chesapeake.

10. Financial Instruments and Hedging Activities

Oil and Gas Hedging Activities

Our results of operations and operating cash flows are impacted by changes in market prices for oil and gas. To mitigate a portion of the exposure to adverse market changes, we have entered into various derivative instruments. As of December 31, 2005, our oil and gas derivative instruments were comprised of swaps, cap-swaps, basis protection swaps, call options and collars. These instruments allow us to predict with greater certainty the effective oil and gas prices to be received for our hedged production. Although derivatives often fail to achieve 100% effectiveness for accounting purposes, we believe our derivative instruments continue to be highly effective in achieving the risk management objectives for which they were intended.

• For swap instruments, Chesapeake receives a fixed price for the hedged commodity and pays a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

• For cap-swaps, Chesapeake receives a fixed price and pays a floating market price. The fixed price received by Chesapeake includes a premium in exchange for a “cap” limiting the counterparty’s exposure. In other words, there is no limit to Chesapeake’s exposure but there is a limit to the downside exposure of the counterparty.

• Basis protection swaps are arrangements that guarantee a price differential for oil or gas from a specified delivery point. Chesapeake receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract.

• For call options, Chesapeake receives a cash premium from the counterparty in exchange for the sale of a call option. If the market price exceeds the fixed price of the call option, then Chesapeake pays the counterparty such excess. If the market price settles below the fixed price of the call option, no payment is due from Chesapeake.

• Collars contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, Chesapeake receives the fixed price and pays the market price. If the market price is between the call and the put strike price, no payments are due from either party.

Chesapeake enters into counter-swaps from time to time for the purpose of locking-in the value of a swap. Under the counter-swap, Chesapeake receives a floating price for the hedged commodity and pays a fixed price to the counterparty. The counter-swap is 100% effective in locking-in the value of a swap since subsequent changes in the market value of the swap are entirely offset by subsequent changes in the market value of the

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counter-swap. We refer to this locked-in value as a locked swap. At the time Chesapeake enters into a counter-swap, Chesapeake removes the original swap’s designation as a cash flow hedge and classifies the original swap as a non-qualifying hedge under SFAS 133. The reason for this new designation is that collectively the swap and the counter-swap no longer hedge the exposure to variability in expected future cash flows. Instead, the swap and counter-swap effectively lock-in a specific gain (or loss) that will be unaffected by subsequent variability in oil and gas prices. Any locked-in gain or loss is recorded in accumulated other comprehensive income and reclassified to oil and gas sales in the month of related production.

With respect to counter-swaps that are designed to lock-in the value of cap-swaps, the counter-swap is effective in locking-in the value of the cap-swap until the floating price reaches the cap (or floor) stipulated in the cap-swap agreement. The value of the counter-swap will increase (or decrease), but in the opposite direction, as the value of the cap-swap decreases (or increases) until the floating price reaches the pre-determined cap (or floor) stipulated in the cap-swap agreement. However, because of the written put option embedded in the cap-swap, the changes in value of the cap-swap are not completely effective in offsetting changes in value of the corresponding counter-swap. Changes in the value of the cap-swaps and the counter-swaps are recorded as adjustments to oil and gas sales.

Chesapeake enters into derivatives from time to time for the purpose of converting a fixed price gas sales contract to a floating price. We refer to these contracts as floating-price swaps. For a floating-price swap, Chesapeake receives a floating market price from the counterparty and pays a fixed price.

In accordance with FIN No. 39, to the extent that a legal right of setoff exists, Chesapeake nets the value of its derivative arrangements with the same counterparty in the accompanying consolidated balance sheets.

Chesapeake enters into basis protection swaps for the purpose of locking-in a price differential for oil or gas from a specified delivery point. We currently have basis protection swaps covering four different delivery points which correspond to the actual prices we receive for much of our gas production. By entering into these basis protection swaps, we have effectively reduced our exposure to market changes in future gas price differentials. As of December 31, 2005, the fair value of our basis protection swaps was $307.3 million. Currently, our basis protection swaps cover approximately 24% of our anticipated gas production in 2006, 24% in 2007, 20% in 2008 and 14% in 2009.

Gains or losses from derivative transactions are reflected as adjustments to oil and gas sales on the consolidated statements of operations. Realized gains (losses) included in oil and gas sales were ($401.7) million, ($154.9) million and ($17.4) million in 2005, 2004 and 2003, respectively. Pursuant to SFAS 133, certain derivatives do not qualify for designation as cash flow hedges. Changes in the fair value of these non-qualifying derivatives that occur prior to their maturity (i.e., temporary fluctuations in value) are reported currently in the consolidated statements of operations as unrealized gains (losses) within oil and gas sales. Unrealized gains (losses) included in oil and gas sales were $41.1 million, $40.9 million and $10.5 million, in 2005, 2004 and 2003, respectively.

Following provisions of SFAS 133, changes in the fair value of derivative instruments designated as cash flow hedges, to the extent they are effective in offsetting cash flows attributable to the hedged risk, are recorded in other comprehensive income until the hedged item is recognized in earnings. Any change in fair value resulting from ineffectiveness is recognized currently in oil and gas sales as unrealized gains (losses). We recorded a gain (loss) on ineffectiveness of ($76.3) million, ($8.2) million and ($9.2) million in 2005, 2004 and 2003, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The estimated fair values of our oil and gas derivative instruments (including derivatives acquired from CNR) as of December 31, 2005 and 2004 are provided below. The associated carrying values of these instruments are equal to the estimated fair values.

	December 31,
	2005			2004
	($ in thousands)
Derivative assets (liabilities):
Fixed-price gas swaps	$	(1,047,094	)	$	57,073
Gas basis protection swaps		307,308			122,287
Fixed-price gas cap-swaps		(161,056	)		(48,761	)
Fixed-price gas counter-swaps		37,785			4,654
Gas call options (a)		(21,461	)		(5,793	)
Fixed-price gas collars		(9,374	)		(5,573	)
Fixed-price gas locked swaps		(34,229	)		(77,299	)
Floating-price gas swaps		2,607			—
Fixed-price oil swaps		(16,936	)		—
Fixed-price oil cap-swaps		(3,364	)		(8,238	)
Estimated fair value	$	(945,814	)	$	38,350

(a) After adjusting for the remaining $23.0 million and $3.2 million premium paid to Chesapeake by the counterparty, the cumulative unrealized gain (loss) related to these call options as of December 31, 2005 and 2004 was $1.6 million and ($2.6) million, respectively.

Based upon the market prices at December 31, 2005, we expect to transfer approximately $153.8 million (net of income taxes) of the loss included in the balance in accumulated other comprehensive income to earnings during the next 12 months when the transactions actually close. All transactions hedged as of December 31, 2005 are expected to mature by December 31, 2009.

We have two secured hedging facilities, each of which permits us to enter into cash-settled natural gas and oil commodity transactions, valued by the counterparty, for up to $500 million. The scheduled maturity date for these facilities is May 2010. Outstanding transactions under each facility are collateralized by certain of our oil and gas properties that do not secure any of our other obligations. One of the hedging facilities is subject to an annual fee of 0.30% of the maximum total capacity, and each of them has a 1.0% exposure fee, which is assessed quarterly on the average of the daily negative fair market value amounts, if any, during the quarter. As of December 31, 2005, the fair market value of the natural gas and oil hedging transactions was a liability of $92.9 million under one of the facilities and a liability of $10.9 million under the other facility. The hedging facilities contain the standard representations and default provisions that are typical of such agreements. As of March 10, 2006, the fair market value of the same transactions was an asset of approximately $100 million and $400 million, respectively. The agreements also contain various restrictive provisions which govern the aggregate gas and oil production volumes that we are permitted to hedge under all of our agreements at any one time.

We assumed certain liabilities related to open derivative positions in connection with the CNR acquisition. In accordance with SFAS 141, these derivative positions were recorded at fair value in the purchase price allocation as a liability of $592 million. The recognition of the derivative liability and other assumed liabilities resulted in an increase in the total purchase price which is allocated to the assets acquired. Because of this accounting treatment, only cash settlements for changes in fair value subsequent to the acquisition date for the derivative positions assumed will result in adjustments to our oil and gas revenues upon settlement. For example, if the fair value of the derivative positions assumed do not change then upon the sale of the underlying

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production and corresponding settlement of the derivative positions, cash would be paid to the counterparties and there would be no adjustment to oil and gas revenues related to the derivative positions. If, however, the actual sales price is different from the price assumed in the original fair value calculation, the difference would be reflected as either a decrease or increase in oil and gas revenues, depending upon whether the sales price was higher or lower, respectively, than the prices assumed in the original fair value calculation. For accounting purposes, the net effect of these acquired hedges is that we have hedged the production volumes listed below market prices on the date of our acquisition of CNR.

Pursuant to Statement of Financial Accounting Standards No. 149, Amendment of SFAS 133 on Derivative Instruments and Hedging Activities, the derivative instruments assumed in connection with the CNR acquisition are deemed to contain a significant financing element and all cash flows associated with these positions will be reported as financing activity in the statement of cash flows for the periods in which settlement occurs.

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The following details the CNR derivatives we have assumed:

	Volume	Weighted- Average Fixed Price to be Received (Paid)	Weighted Average Put Fixed Price	Weighted- Average Call Fixed Price	SFAS 133 Hedge	Fair Value at December 31, 2005 ($ in thousands)
Natural Gas (mmbtu):
Swaps:
1Q 2006	7,872,500	4.91	—	—	Yes		(50,693	)
2Q 2006	10,510,500	4.86	—	—	Yes		(56,501	)
3Q 2006	10,626,000	4.86	—	—	Yes		(57,355	)
4Q 2006	10,626,000	4.86	—	—	Yes		(62,483	)
1Q 2007	10,350,000	4.82	—	—	Yes		(68,401	)
2Q 2007	10,465,000	4.82	—	—	Yes		(46,158	)
3Q 2007	10,580,000	4.82	—	—	Yes		(46,442	)
4Q 2007	10,580,000	4.82	—	—	Yes		(51,557	)
1Q 2008	9,555,000	4.68	—	—	Yes		(53,954	)
2Q 2008	9,555,000	4.68	—	—	Yes		(33,892	)
3Q 2008	9,660,000	4.68	—	—	Yes		(33,999	)
4Q 2008	9,660,000	4.66	—	—	Yes		(38,487	)
1Q 2009	4,500,000	5.18	—	—	Yes		(18,772	)
2Q 2009	4,550,000	5.18	—	—	Yes		(10,450	)
3Q 2009	4,600,000	5.18	—	—	Yes		(10,508	)
4Q 2009	4,600,000	5.18	—	—	Yes		(12,616	)
Total							(652,268	)
Collars:
1Q 2009	900,000	—	4.50	6.00	Yes		(3,380	)
2Q 2009	910,000	—	4.50	6.00	Yes		(1,754	)
3Q 2009	920,000	—	4.50	6.00	Yes		(1,773	)
4Q 2009	920,000	—	4.50	6.00	Yes		(2,197	)
Total							(9,104	)
Total Natural Gas						$	(661,372	)

Interest Rate Derivatives

We utilize hedging strategies to manage our exposure to changes in interest rates. To the extent interest rate swaps have been designated as fair value hedges, changes in the fair value of the derivative instrument and the corresponding debt are reflected as adjustments to interest expense in the corresponding months covered by the derivative agreement. Changes in the fair value of derivative instruments not qualifying as fair value hedges are recorded currently as adjustments to interest expense.

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As of December 31, 2005, the following interest rate swaps were used to convert a portion of our long-term fixed-rate debt to floating-rate debt were outstanding:

Term	Notional Amount		Fixed Rate		Floating Rate	Fair Value Gain (Loss)
						($ in thousands)
September 2004 – August 2012	$	75,000,000	9.000	%	6 month LIBOR plus 452 basis points	$	(2,734	)
July 2005 – January 2015	$	150,000,000	7.750	%	6 month LIBOR plus 289 basis points	$	(5,133	)
July 2005 – June 2014	$	150,000,000	7.500	%	6 month LIBOR plus 282 basis points	$	(5,327	)
September 2005 – August 2014	$	250,000,000	7.000	%	6 month LIBOR plus 205.5 basis points	$	(5,004	)
October 2005 – June 2015	$	200,000,000	6.375	%	6 month LIBOR plus 112 basis points	$	(1,344	)
October 2005 – January 2018	$	250,000,000	6.250	%	6 month LIBOR plus 99 basis points	$	(3,240	)
October 2005 – January 2016	$	200,000,000	6.625	%	6 month LIBOR plus 129 basis points	$	282

In January 2006, we closed the interest rate swap on our 6.625% Senior Notes for $1.0 million. Subsequent to December 31, 2005, we entered into the following interest rate swaps (which qualify as fair value hedges) to convert a portion of our long-term fixed-rate debt to floating-rate debt:

Term	Notional Amount		Fixed Rate		Floating Rate
January 2006 – January 2016	$	250,000,000	6.625	%	6 month LIBOR plus 129 basis points
March 2006 – January 2016	$	250,000,000	6.875	%	6 month LIBOR plus 120 basis points
March 2006 – August 2017	$	250,000,000	6.500	%	6 month LIBOR plus 125.5 basis points

In 2005, we closed various interest rate swaps for gains totaling $7.1 million respectively. These interest rate swaps were designated as fair value hedges, and the settlement amounts received will be amortized as a reduction to realized interest expense over the remaining terms of the related senior notes.

In March 2004, Chesapeake entered into an interest rate swap which required Chesapeake to pay a fixed rate of 8.68% while the counterparty paid Chesapeake a floating rate of six month LIBOR plus 0.75% on a notional amount of $142.7 million. On March 15, 2005, we elected to terminate the interest rate swap and paid $31.8 million to the counterparty.

Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments. We have determined the estimated fair values by using available market information and valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

The carrying values of items comprising current assets and current liabilities approximate fair values due to the short-term maturities of these instruments. We estimate the fair value of our long-term fixed-rate debt using primarily quoted market prices. Our carrying amounts for such debt, excluding discounts or premiums related to interest rate derivatives, at December 31, 2005 and 2004 were $5.429 billion and $3.014 billion, respectively, compared to approximate fair values of $5.582 billion and $3.281 billion, respectively. The carrying amounts for our convertible preferred stock as of December 31, 2005 and 2004 were $1.577 billion and $490.9 million, respectively, compared to approximate fair values of $1.686 billion and $533.7 million, respectively.

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Concentration of Credit Risk

A significant portion of our liquidity is concentrated in derivative instruments that enable us to hedge a portion of our exposure to price volatility from producing oil and natural gas. These arrangements expose us to credit risk from our counterparties. Other financial instruments which potentially subject us to concentrations of credit risk consist principally of investments in equity instruments and accounts receivable. Our accounts receivable are primarily from purchasers of oil and natural gas products and exploration and production companies which own interests in properties we operate. This industry concentration has the potential to impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, industry or other conditions. We generally require letters of credit for receivables from customers which are judged to have sub-standard credit, unless the credit risk can otherwise be mitigated.

11. Supplemental Disclosures About Oil And Gas Producing Activities

Net Capitalized Costs

Evaluated and unevaluated capitalized costs related to Chesapeake’s oil and gas producing activities are summarized as follows:

	December 31,
	2005			2004
	($ in thousands)
Oil and gas properties:
Proved	$	15,880,919		$	9,451,413
Unproved		1,739,095			761,785
Total		17,620,014			10,213,198
Less accumulated depreciation, depletion and amortization		(3,945,703	)		(3,057,742	)
Net capitalized costs	$	13,674,311		$	7,155,456

Unproved properties not subject to amortization at December 31, 2005 and 2004 consisted mainly of leasehold acquired through corporate and significant oil and gas property acquisitions and through direct purchases of leasehold. We capitalized approximately $79.0 million, $36.2 million and $13.0 million of interest during 2005, 2004 and 2003, respectively, on significant investments in unproved properties that were not yet included in the amortization base of the full-cost pool. We will continue to evaluate our unevaluated properties; however, the timing of the ultimate evaluation and disposition of the properties has not been determined.

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Costs Incurred in Oil and Gas Acquisition, Exploration and Development

Costs incurred in oil and gas property acquisition, exploration and development activities which have been capitalized are summarized as follows:

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
Acquisition of properties:
Proved properties	$	3,554,651		$	1,541,920		$	1,110,077
Unproved properties		1,375,675			570,495			198,394
Deferred income taxes		251,722			463,949			(4,903	)
Total		5,182,048			2,576,364			1,303,568
Development costs:
Development drilling (a)		1,566,730			863,268			474,355
Leasehold acquisition costs		290,946			110,530			84,984
Asset retirement obligation and other (b)		52,619			41,924			54,657
Total		1,910,295			1,015,722			613,996
Exploration costs:
Exploratory drilling		253,341			128,635			103,424
Geological and geophysical costs (c)		70,901			55,618			42,736
Total		324,242			184,253			146,160
Sales of oil and gas properties		(9,769	)		(12,048	)		(22,156	)
Total	$	7,406,816		$	3,764,291		$	2,041,568

(a) Includes capitalized internal cost of $94.1 million, $45.4 million and $30.9 million, respectively.

(b) The 2003 amount includes $24.1 million of asset retirement costs recorded as a result of implementation of SFAS 143 effective January 1, 2003.

(c) Includes capitalized internal cost of $8.1 million, $6.3 million and $4.6 million, respectively.

Results of Operations from Oil and Gas Producing Activities (unaudited)

Chesapeake’s results of operations from oil and gas producing activities are presented below for 2005, 2004 and 2003. The following table includes revenues and expenses associated directly with our oil and gas producing activities. It does not include any interest costs or general and administrative costs and, therefore, is not necessarily indicative of the contribution to consolidated net operating results of our oil and gas operations.

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
Oil and gas sales (a)	$	3,272,585		$	1,936,176		$	1,296,822
Production expenses		(316,956	)		(204,821	)		(137,583	)
Production taxes		(207,898	)		(103,931	)		(77,893	)
Depletion and depreciation		(894,035	)		(582,137	)		(369,465	)
Imputed income tax provision (b)		(676,599	)		(376,303	)		(270,515	)
Results of operations from oil and gas producing activities	$	1,177,097		$	668,984		$	441,366

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(a) Includes $41.1 million, $40.9 million and $10.5 million of unrealized gains (losses) on oil and gas derivatives for the years ended December 31, 2005, 2004 and 2003, respectively.

(b) The imputed income tax provision is hypothetical (at the effective income tax rate) and determined without regard to our deduction for general and administrative expenses, interest costs and other income tax credits and deductions, nor whether the hypothetical tax provision will be payable.

Oil and Gas Reserve Quantities (unaudited)

Independent petroleum engineers and Chesapeake’s petroleum engineers have evaluated our proved reserves. The portion of the proved reserves (by volume) evaluated by each for 2005, 2004 and 2003 is presented below.

	Years ended December 31,
	2005		2004		2003
Netherland, Sewell & Associates, Inc.	25	%	23	%	24	%
Data and Consulting Services, Division of Schlumberger Technology Corporation	16		—		—
Lee Keeling and Associates, Inc.	15		22		16
Ryder Scott Company L.P.	12		13		34
LaRoche Petroleum Consultants, Ltd.	8		10		—
H.J. Gruy and Associates, Inc.	2		6		—
Miller and Lents, Ltd.	—		1		—
Internal petroleum engineers	22		25		26
	100	%	100	%	100	%

The information below on our oil and gas reserves is presented in accordance with regulations prescribed by the Securities and Exchange Commission. Chesapeake emphasizes that reserve estimates are inherently imprecise. Our reserve estimates were generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, these estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.

Proved oil and gas reserves represent the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes (a) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any, and (b) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir. Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the “proved” classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based.

Proved developed oil and gas reserves are those expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and

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mechanisms of primary recovery should be included as “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved.

Presented below is a summary of changes in estimated reserves of Chesapeake for 2005, 2004 and 2003:

	Oil (mbbl)		Gas (mmcf)		Total (mmcfe)
December 31, 2005
Proved reserves, beginning of period	87,960		4,373,989		4,901,751
Extensions, discoveries and other additions	12,460		930,800		1,005,563
Revisions of previous estimates	(2,123	)	53,950		41,204
Production	(7,698	)	(422,389	)	(468,577	)
Sale of reserves-in-place	(26	)	(332	)	(486	)
Purchase of reserves-in-place	12,750		1,964,736		2,041,235
Proved reserves, end of period	103,323		6,900,754		7,520,690
Proved developed reserves:
Beginning of period	62,713		2,842,141		3,218,418
End of period	76,238		4,442,270		4,899,694
December 31, 2004
Proved reserves, beginning of period	51,422		2,860,040		3,168,575
Extensions, discoveries and other additions	7,601		771,125		816,728
Revisions of previous estimates	6,109		108,863		145,518
Production	(6,764	)	(322,009	)	(362,593	)
Sale of reserves-in-place	(102	)	(3,329	)	(3,940	)
Purchase of reserves-in-place	29,694		959,299		1,137,463
Proved reserves, end of period	87,960		4,373,989		4,901,751
Proved developed reserves:
Beginning of period	38,442		2,121,734		2,352,389
End of period	62,713		2,842,141		3,218,418
December 31, 2003
Proved reserves, beginning of period	37,587		1,979,601		2,205,125
Extensions, discoveries and other additions	3,574		359,681		381,123
Revisions of previous estimates	1,329		48,388		56,365
Production	(4,665	)	(240,366	)	(268,356	)
Sale of reserves-in-place	(183	)	(9,626	)	(10,723	)
Purchase of reserves-in-place	13,780		722,362		805,041
Proved reserves, end of period	51,422		2,860,040		3,168,575
Proved developed reserves:
Beginning of period	28,111		1,458,284		1,626,952
End of period	38,442		2,121,734		2,352,389

During 2005, Chesapeake acquired approximately 2.041 tcfe of proved reserves through purchases of oil and gas properties for consideration of $3.806 billion (primarily in 18 separate transactions of greater than $10

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

million each). We also sold 0.5 bcfe of proved reserves for consideration of approximately $9.8 million. During 2005, we recorded upward revisions of 41 bcfe to the December 31, 2004 estimates of our reserves. Approximately 24 bcfe of the upward revisions was caused by higher oil and gas prices at December 31, 2005. Higher prices extend the economic lives of the underlying oil and gas properties and thereby increase the estimated future reserves. The weighted average oil and gas wellhead prices used in computing our reserves were $56.41 per bbl and $8.76 per mcf at December 31, 2005.

During 2004, Chesapeake acquired approximately 1.137 tcfe of proved reserves through purchases of oil and gas properties for consideration of $2.006 billion (primarily in fifteen separate transactions of greater than $10 million each). We also sold 4 bcfe of proved reserves for consideration of approximately $12.0 million. During 2004, we recorded upward revisions of 146 bcfe to the December 31, 2003 estimates of our reserves. Approximately 5 bcfe of the upward revisions was caused by higher oil and gas prices at December 31, 2004. Higher prices extend the economic lives of the underlying oil and gas properties and thereby increase the estimated future reserves. The weighted average oil and gas wellhead prices used in computing our reserves were $39.91 per bbl and $5.65 per mcf at December 31, 2004.

During 2003, Chesapeake acquired approximately 805 bcfe of proved reserves through purchases of oil and gas properties for consideration of $1.105 billion (primarily in nine separate transactions of greater than $10 million each). We also sold 11 bcfe of proved reserves for consideration of approximately $22.2 million. During 2003, we recorded upward revisions of 56 bcfe to the December 31, 2002 estimates of our reserves. Approximately 11.1 bcfe of the upward revisions was caused by higher oil and gas prices at December 31, 2003. Higher prices extend the economic lives of the underlying oil and gas properties and thereby increase the estimated future reserves. The weighted average oil and gas wellhead prices used in computing our reserves were $30.22 per bbl and $5.68 per mcf at December 31, 2003.

Standardized Measure of Discounted Future Net Cash Flows (unaudited)

Statement of Financial Accounting Standards No. 69 prescribes guidelines for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. Chesapeake has followed these guidelines which are briefly discussed below.

Future cash inflows and future production and development costs are determined by applying year-end prices and costs to the estimated quantities of oil and gas to be produced. Actual future prices and costs may be materially higher or lower than the year-end prices and costs used. Estimates are made of quantities of proved reserves and the future periods during which they are expected to be produced based on year-end economic conditions. Estimated future income taxes are computed using current statutory income tax rates including consideration for the current tax basis of the properties and related carryforwards, giving effect to permanent differences and tax credits. The resulting future net cash flows are reduced to present value amounts by applying a 10% annual discount factor.

The assumptions used to compute the standardized measure are those prescribed by the Financial Accounting Standards Board and, as such, do not necessarily reflect our expectations of actual revenue to be derived from those reserves nor their present worth. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these estimates reflect the valuation process.

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The following summary sets forth our future net cash flows relating to proved oil and gas reserves based on the standardized measure prescribed in SFAS 69:

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
Future cash inflows	$	66,286,940	(a)	$	28,245,336	(b)	$	17,807,624	(c)
Future production costs		(14,794,530	)		(6,542,219	)		(3,816,607	)
Future development costs		(4,676,287	)		(2,115,511	)		(912,594	)
Future income tax provisions		(14,856,446	)		(5,663,575	)		(3,827,408	)
Future net cash flows		31,959,677			13,924,031			9,251,015
Less effect of a 10% discount factor		(15,991,766	)		(6,278,492	)		(3,924,262	)
Standardized measure of discounted future net cash flows	$	15,967,911		$	7,645,539		$	5,326,753

(a) Calculated using weighted average prices of $56.41 per barrel of oil and $8.76 per mcf of gas.

(b) Calculated using weighted average prices of $39.91 per barrel of oil and $5.65 per mcf of gas.

(c) Calculated using weighted average prices of $30.22 per barrel of oil and $5.68 per mcf of gas.

The principal sources of change in the standardized measure of discounted future net cash flows are as follows:

	Years Ended December 31,
	2005			2004			2003
	($ in thousands)
Standardized measure, beginning of period (a)	$	7,645,539		$	5,326,753		$	2,833,918
Sales of oil and gas produced, net of production costs (b)		(3,108,277	)		(1,741,438	)		(1,088,184	)
Net changes in prices and production costs		3,249,132			(730,020	)		(2,364	)
Extensions and discoveries, net of production and development costs		3,144,966			1,784,166			1,041,108
Changes in future development costs		(151,133	)		33,284			74,719
Development costs incurred during the period that reduced future development costs		490,902			226,415			130,195
Revisions of previous quantity estimates		122,924			317,518			99,927
Purchase of reserves-in-place (c)		6,252,030			2,580,973			2,012,686
Sales of reserves-in-place (c)		(939	)		(5,604	)		(827	)
Accretion of discount		1,050,439			733,314			371,765
Net change in income taxes		(4,106,833	)		(852,462	)		(1,122,661	)
Changes in production rates and other		1,379,161			(27,360	)		976,471
Standardized measure, end of period (a)	$	15,967,911		$	7,645,539		$	5,326,753

(a) The discounted amounts related to cash flow hedges that would affect future net cash flows have not been included in any of the periods presented.

(b) Excluding gains (losses) on derivatives.

(c) In 2003, purchases and sales of reserves are shown net of the 9.9 bcfe which was acquired and immediately sold for $19 million.

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12. Asset Retirement Obligations

Effective January 1, 2003, Chesapeake adopted SFAS 143, Accounting for Asset Retirement Obligation. This statement applies to obligations associated with the retirement of tangible, long-lived assets that result from the acquisition, construction and development of the assets.

The components of the change in our asset retirement obligations are shown below:

	Years Ended December 31,
	2005			2004
	($ in thousands)
Asset retirement obligations, beginning of period	$	73,718		$	48,812
Additions		51,168			21,862
Revisions (a)		26,731			—
Settlements and disposals		(1,087	)		(1,613	)
Accretion expense		6,063			4,657
Asset retirement obligations, end of period	$	156,593		$	73,718

(a) Based on increasing service costs, we have revised our asset retirement obligation related to oil and gas wells in 2005.

13. Acquisitions and Divestitures

The following table describes acquisitions that we completed in 2005 ($ in millions):

Acquisition	Location	Amount
Columbia Natural Resources, LLC	Appalachian Basin	$	2,200	(a)
BRG Petroleum Corporation	Mid-Continent and Ark-La-Tex		325	(b)
Laredo Energy II, L.L.C.	South Texas		228
Hallwood Energy, III L.P.	Barnett Shale		250	(c)
Houston-based oil and gas company	Texas Gulf Coast/South Texas		202
Pecos Production Company	Permian		198
Laredo II Partners	Texas Gulf Coast/South Texas		139
Corpus Christi-based oil and gas company	Ark-La-Tex		95
Dallas-based oil and gas company	Ark-La-Tex		85
Midland-based oil and gas company	Permian		38
Other	Various		372	(d)
		$	4,132

(a) Includes $175 million related to gathering systems which was allocated to other property and equipment.

(b) We paid $16.3 million of the purchase amount in 2004.

(c) Includes $15 million related to gathering systems which was allocated to other property and equipment.

(d) In 2005, we paid the remaining $57 million of the purchase price related to an acquisition transaction with Hallwood Energy Corporation in the fourth quarter of 2004.

During 2005, we recorded approximately $252 million of deferred tax liability to reflect the tax effect of the cost paid in excess of the tax basis acquired on certain corporate acquisitions.

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Acquisitions were recorded using the purchase method of accounting and, accordingly, results of operations of these acquired activities and oil and gas properties have been included in Chesapeake’s results of operations from the respective closing dates of the acquisitions.

On November 14, 2005, Chesapeake completed its acquisition of Columbia Natural Resources, LLC. (“CNR”), an Appalachian Basin natural gas producer with properties principally located in West Virginia, Kentucky, Ohio, Pennsylvania and New York. The cash purchase price totaled $2.2 billion and was allocated based on the fair values of the assets and liabilities acquired at the date of acquisition. The acquisition was accounted for using the purchase method of accounting and has been included in the consolidated financial statements of Chesapeake since the date of acquisition.

The purchase price paid for CNR was allocated as follows ($ in thousands):

Current assets	$	73,637
Evaluated oil and gas properties		2,368,726
Unevaluated properties		500,000
Other assets		178,431
Current liabilities		(185,003	)
Derivative liability		(591,756	)
Asset retirement obligation		(39,528	)
Deferred taxes		(3,293	)
Credit facility payoff		(96,116	)
Other long-term deferred liabilities		(5,098	)
Net cash consideration	$	2,200,000

The pro forma information below is presented for illustrative purposes only and is based on estimates and assumptions deemed appropriate by Chesapeake. The pro forma information should not be relied upon as an indication of the operating results that Chesapeake would have achieved if the acquisition had occurred at the beginning of each period presented, or of future results that Chesapeake will achieve after the CNR acquisition. The pro forma information for the years ended December 31, 2005 and 2004 reflect the CNR acquisition as if the acquisition occurred on January 1, 2004.

	Years Ended December 31,
	2005		2004
	($ in millions, except per share amounts)
Revenues	$	4,847.4	$	2,913.6
Income from continuing operations	$	1,758.5	$	979.0
Net income available to common shareholders	$	829.9	$	390.3
Income per Common Share:
Basic	$	2.41	$	1.41
Diluted	$	2.23	$	1.28

The strategic benefits of the CNR acquisition include the significant addition of land and gas resource inventories to complement Chesapeake’s already extensive resource inventories. In addition, the underexplored and unconsolidated Appalachian Basin has very similar characteristics to the Mid-Continent region in which Chesapeake already has a significant stronghold.

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14. Quarterly Financial Data (unaudited)

Summarized unaudited quarterly financial data for 2005 and 2004 are as follows ($ in thousands except per share data):

	Quarters Ended
	March 31, 2005			June 30, 2005			September 30, 2005			December 31, 2005
Total revenues	$	783,450		$	1,048,018		$	1,082,843		$	1,750,979
Gross profit (a)		237,537			425,463			335,634			774,526
Net income		125,010	(b)		193,779	(c)		176,988	(d)		452,525	(e)
Net earnings per common share:
Basic	$	0.39		$	0.58		$	0.46		$	1.25
Diluted	$	0.36		$	0.52		$	0.43		$	1.11
	Quarters Ended
	March 31, 2004			June 30, 2004			September 30, 2004			December 31, 2004
Total revenues	$	563,129		$	574,292		$	629,796		$	942,051
Gross profit (a)		228,044			179,280			199,165			385,846
Net income		112,590	(f)		97,155			96,872			208,538	(g)
Net earnings per common share:
Basic	$	0.44		$	0.36		$	0.33		$	0.59
Diluted	$	0.38		$	0.30		$	0.29		$	0.52

(a) Total revenue less operating costs.

(b) Includes a pre-tax loss on repurchases and exchanges of debt of $0.9 million.

(c) Includes a pre-tax loss on repurchases and exchanges of debt of $68.4 million.

(d) Includes a pre-tax loss on repurchases and exchanges of debt of $0.7 million.

(e) Includes a pre-tax loss on repurchases and exchanges of debt of $0.4 million.

(f) Includes a pre-tax loss on repurchases and exchanges of debt of $6.9 million.

(g) Includes a pre-tax loss on repurchases and exchanges of debt of $17.6 million.

15. Recently Issued Accounting Standards

The Financial Accounting Standards Board recently issued the following standards which we reviewed to determine the potential impact on our financial statements upon adoption.

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment, which revised SFAS 123, Accounting for Stock-Based Compensation. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This statement is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. Since the issuance of SFAS 123(R), three FASB Staff Positions (FSPs) have been issued regarding SFAS 123(R): FSP FAS 123(R)-1—Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R), FSP FAS 123(R)-2—Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R), and FSP FAS 123(R)-3—Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. These FSPs will be applicable upon the initial adoption of FAS 123(R). The effect of SFAS123(R) is more fully described in Note 1.

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In March 2005, the FASB issued FASB Interpretation No. (FIN) 47, Accounting for Conditional Asset Retirement Obligations. FIN 47 specifies the accounting treatment for conditional asset retirement obligations under the provisions of SFAS 143. FIN 47 is effective no later than the end of the fiscal year ending after December 15, 2005. We adopted this statement effective December 31, 2005. Implementation of FIN 47 did not have a material effect on our financial statements.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 requires retrospective application to prior period financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. The impact of SFAS 154 will depend on the nature and extent of any voluntary accounting changes and correction of errors after the effective date, but we do not currently expect SFAS 154 to have a material impact on our financial statements.

In June 2005, the EITF reached a consensus on Issue No. 04-10, Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds. EITF Issue 04-10 confirmed that operating segments that do not meet the quantitative thresholds can be aggregated only if aggregation is consistent with the objective and basic principles of SFAS 131, Disclosure about Segments of an Enterprise and Related Information. The consensus in this issue should be applied for fiscal years ending after September 30, 2005, and the corresponding information for earlier periods, including interim periods, should be restated unless it is impractical to do so. The adoption of EITF Issue 04-10 is not expected to have a material impact on our disclosures.

In September 2005, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty. EITF Issue 04-13 requires that purchases and sales of inventory with the same counterparty in the same line of business should be accounted for as a single non-monetary exchange, if entered into in contemplation of one another. The consensus is effective for inventory arrangements entered into, modified or renewed in interim or annual reporting periods beginning after March 15, 2006. The adoption of EITF Issue 04-13 is not expected to have a material impact on our financial statements.

16. Subsequent Events

On January 17, 2006, we announced that we had entered into agreements with private companies to acquire oil and natural gas assets in the Barnett Shale, south Texas, Permian basin, Mid-Continent and East Texas regions for an aggregate purchase price of approximately $700 million in cash. We have recently closed transactions for approximately $640 million in cash and expect to close the remaining acquisition by March 31, 2006. The pending acquisition is subject to customary closing conditions and purchase price adjustments.

On January 5, 2006, we acquired a privately-held Oklahoma-based trucking company for $48 million.

On February 3, 2006, we amended and restated our revolving bank credit facility, increasing the commitments to $2 billion and extending the maturity date to February 2011.

In February 2006, through our wholly-owned subsidiary Nomac Drilling Corporation, we acquired 13 drilling rigs and related assets from Martex Drilling Company, L.L.P., a privately-held drilling contractor with operations in East Texas and North Louisiana, for $150 million.

113

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On February 3, 2006, we issued an additional $500 million of our 6.5% Senior Notes due 2017, in a private placement. Net proceeds from the offering were approximately $486.6 and were used to repay outstanding borrowings under our revolving bank credit facility, incurred primarily to finance our recent acquisitions.

On February 10, 2006, we sold our investment in Pioneer Drilling Company (AMEX: PDC) common stock for proceeds of $159 million and a pre-tax gain of $116 million.

Our President and Chief Operating Officer, Tom L. Ward, resigned as a director, officer and employee of the company effective February 10, 2006. Mr. Ward has agreed to act as a consultant to Chesapeake for a period of six months from the effective date of his resignation, pursuant to a resignation agreement, to assist in the transition of his responsibilities. During the term of his consulting agreement, Mr. Ward will receive no cash compensation but will be provided support staff for personal administrative and accounting services together with access to the company’s fractional shares in aircraft in accordance with historical practices. The resignation agreement provides for the immediate vesting of all of Mr. Ward’s unvested stock options and restricted stock on February 10, 2006. As a result of such vesting, options to purchase 724,615 shares of Chesapeake’s common stock at an average exercise price of $8.01 per share and 1,291,875 shares of restricted common stock became immediately vested. As a result, the company expects to incur a non-cash after-tax charge of approximately $31.8 million in the first quarter 2006. Mr. Ward will have until May 10, 2006 to exercise the stock options granted to him by the company.

114

Schedule II

CHESAPEAKE ENERGY CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

($ in thousands)

			Additions
Description	Balance at Beginning of Period		Charged To Expense		Charged To Other Accounts		Deductions			Balance at End of Period
December 31, 2005:
Allowance for doubtful accounts	$	4,648	$	114	$	142	$	—		$	4,904
Valuation allowance for deferred tax assets	$	—	$	—	$	—	$	—		$	—
December 31, 2004:
Allowance for doubtful accounts	$	2,669	$	975	$	1,004	$	—		$	4,648
Valuation allowance for deferred tax assets	$	6,805	$	—	$	—	$	6,805	(a)	$	—
December 31, 2003:
Allowance for doubtful accounts	$	1,433	$	156	$	1,202	$	122		$	2,669
Valuation allowance for deferred tax assets	$	2,441	$	4,364	$	—	$	—		$	6,805

(a) As of December 31, 2004, we determined that it is more likely than not that the $6.8 million of the net deferred tax assets related to net operating losses generated by Louisiana properties would be realized due to acquisitions which occurred in 2004. Therefore, the $6.8 million valuation allowance was reversed.

115

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

ITEM 9A. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by Chesapeake in reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. As of December 31, 2005, we carried out an evaluation, under the supervision and with the participation of Chesapeake management, including Chesapeake’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of Chesapeake’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2005, to ensure that information required to be disclosed by Chesapeake is accumulated and communicated to Chesapeake management, including Chesapeake’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

No changes in the company’s internal control over financial reporting occurred during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management’s report on internal control over financial reporting and the attestation report of our independent registered public accounting firm are included in Item 8 of this report.

ITEM 9B. Other Information

Unregistered Sales of Equity Securities.

In 2005 and the first quarter of 2006, Chesapeake entered into unsolicited transactions with holders of our 4.125% Cumulative Convertible Preferred Stock and 5.0% (Series 2003) Cumulative Convertible Preferred Stock to issue shares of our common stock in exchange for the 4.125% and 5.0% (Series 2003) preferred stock. The issuances of the shares of common stock in these transactions have not been previously reported under Item 3.02 Unregistered Sales of Equity Securities of Form 8-K because, in the aggregate, the number of shares of common stock issued is less than 1% of our total common shares outstanding:

Transaction Date	Preferred Series	Preferred Shares Received	Liquidation Value of Pref. Shares	Common Shares Issued
11/9/2005	4.125%	26,185	$26,185,000	1,662,608
11/9/2005	4.125%	3,100	3,100,000	196,833
11/9/2005	4.125%	2,000	2,000,000	126,990
12/14/2005	4.125%	1,750	1,750,000	109,813
12/20/2005	4.125%	1,000	1,000,000	62,842
12/20/2005	4.125%	3,000	3,000,000	188,407
1/18/2006	4.125%	1,700	1,700,000	106,731
1/19/2006	5.0% (2003)	125,000	12,500,000	777,655
1/20/2006	4.125%	1,050	1,050,000	65,863
1/20/2006	5.0% (2003)	18,000	1,800,000	111,980
1/23/2006	5.0% (2003)	40,273	4,027,300	250,588
		223,058	$58,112,300	3,660,310

116

PART III

ITEM 10. Directors and Executive Officers of the Registrant

The information called for by this Item 10 is incorporated herein by referenced to the definitive Proxy Statement to be filed by Chesapeake pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 28, 2006.

ITEM 11. Executive Compensation

The information called for by this Item 11 is incorporated herein by reference to the definitive Proxy Statement to be filed by Chesapeake pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 28, 2006.

ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information called for by this Item 12 is incorporated herein by reference to the definitive Proxy Statement to be filed by Chesapeake pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 28, 2006.

ITEM 13.    Certain Relationships and Related Transactions

The information called for by this Item 13 is incorporated herein by reference to the definitive Proxy Statement to be filed by Chesapeake pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 28, 2006.

ITEM 14.    Principal Accounting Fees and Services

The information called for by this Item 14 is incorporated herein by reference to the definitive Proxy Statement to be filed by Chesapeake pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 not later than April 28, 2006.

117

PART IV

ITEM 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements.    Chesapeake’s consolidated financial statements are included in Item 8 of this report. Reference is made to the accompanying Index to Financial Statements.

2. Financial Statement Schedules.    Schedule II is included in Item 8 of this report with our consolidated financial statements. No other financial statement schedules are applicable or required.

3. Exhibits.    The following exhibits are filed herewith pursuant to the requirements of Item 601 of Regulation S-K:

Exhibit Number	Description
3.1.1	Chesapeake’s Restated Certificate of Incorporation, as amended. Incorporated herein by reference to Exhibit 3.1.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005.
3.1.2	Certificate of Designation for Series A Junior Participating Preferred Stock, as amended. Incorporated herein by reference to Exhibit 3.1.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005.
3.1.3*	Certificate of Designation of 6% Cumulative Convertible Preferred Stock, as amended.
3.1.4*	Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2003), as amended.
3.1.5*	Certificate of Designation of 4.125% Cumulative Convertible Preferred Stock, as amended.
3.1.6	Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005), as amended. Incorporated herein by reference to Exhibit 3.1.6 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005.
3.1.7	Certificate of Designation of 4.5% Cumulative Convertible Preferred Stock. Incorporated herein by reference to Exhibit 3.1 to Chesapeake’s current report on Form 8-K dated September 13, 2005.
3.1.8	Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005B). Incorporated herein by reference to Exhibit 3.1 to Chesapeake’s current report on Form 8-K dated November 7, 2005.
3.2	Chesapeake’s Amended and Restated Bylaws. Incorporated herein by reference to Exhibit 3.2 of Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003.
4.1	Indenture dated as of May 27, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and the Bank of New York Trust Company, N.A., as Trustee, with respect to 7.5% senior notes due 2014. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s registration statement on Form S-4 (No. 333-116555). First Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.11.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Second Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.11.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Third Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.1.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Fourth Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.1.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.

118

Exhibit Number	Description
4.1.1*	Fifth Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of May 27, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.50% senior notes due 2014.
4.1.2*	Sixth Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of May 27, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.50% senior notes due 2014.
4.2	Indenture dated as of August 2, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and the Bank of New York Trust Company, N.A., as Trustee, with respect to 7.0% senior notes due 2014. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s registration statement on Form S-4 (No. 333-118378). First Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.12.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Second Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.12.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Third Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.2.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Fourth Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.2.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.2.1*	Fifth Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of August 2, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.00% senior notes due 2014.
4.2.2*	Sixth Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of August 2, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.00% senior notes due 2014.
4.3	Indenture dated as of December 20, 2002 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to our 7.75% Senior Notes due 2015. Incorporated herein by reference to Exhibit 4.5 to Chesapeake’s registration statement on Form S-4 (No. 333-102445) First Supplemental Indenture dated as of February 14, 2003. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s report on Form 10-K/A for the year ended December 31, 2002. Second Supplemental Indenture dated as of May 1, 2003. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2003. Third Supplemental Indenture dated as of August 15, 2003. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003. Fourth Supplemental Indenture dated as of March 5, 2004. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003. Fifth Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Sixth Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.6.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Seventh Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Eighth Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.

119

Exhibit Number	Description
4.3.1*	Ninth Supplemental Indenture dated November 14, 2005 to Indenture dated as of December 20, 2002 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 7.75% Senior Notes due 2015.
4.3.2*	Tenth Supplemental Indenture dated February 24, 2006 to Indenture dated as of December 20, 2002 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 7.75% Senior Notes due 2015.
4.4	Agreement to furnish copies of unfiled long-term debt instruments. Incorporated herein by reference to Chesapeake’s transition report on Form 10-K for the six months ended December 31, 1997.
4.5	Sixth Amended and Restated Credit Agreement, dated as of February 3, 2006, among Chesapeake Energy Corporation, Chesapeake Exploration Limited Partnership and Chesapeake Appalachia, L.L.C., as Co-Borrowers, Union Bank of California, N.A., as Administrative Agent, BNP Paribas, as Syndication Agent, Bank of America, N.A., Calyon New York Branch and SunTrust Bank, as Co-Documentation Agents, and the several lenders from time to time parties thereto. Incorporated herein by reference to Exhibit 4.8 to Chesapeake’s current report on Form 8-K dated February 8, 2006.
4.6	Indenture dated as of March 5, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York, as Trustee, with respect to 7.5% Senior Notes due 2013. First Supplemental Indenture dated as of May 1, 2003. Incorporated herein by reference to Exhibit 4.7.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2003. Second Supplemental Indenture dated as of August 15, 2003. Incorporated herein by reference to Exhibit 4.7.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003. Third Supplemental Indenture dated as of March 5, 2004. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003. Fourth Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Fifth Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.9.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Sixth Supplemental Indenture dated January 31, 2005. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Seventh Supplemental Indenture dated July 15, 2005. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.6.1*	Eighth Supplemental Indenture dated November 14, 2005 to Indenture dated as of March 5, 2003 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York, as Trustee, with respect to 7.5% Senior Notes due 2013.
4.6.2*	Ninth Supplemental Indenture dated February 24, 2006 to Indenture dated as of March 5, 2003 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York, as Trustee, with respect to 7.5% Senior Notes due 2013.
4.7	Indenture dated as of November 26, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York, as Trustee, with respect to 6.875% senior notes due 2016. Incorporated herein by reference to Exhibit 4.2 to Chesapeake’s registration statement on Form S-4/A (No. 333-110668). First Supplemental Indenture dated as of March 5, 2004. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003. Second Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Third Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.10.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Fourth Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Fifth Supplemental Indenture dated July 15, 2005. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.

120

Exhibit Number	Description
4.7.1*	Sixth Supplemental Indenture dated November 14, 2005 to Indenture dated as of November 26, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.875% senior notes due 2016.
4.7.2*	Seventh Supplemental Indenture dated February 24, 2006 to Indenture dated as of November 26, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.875% senior notes due 2016.
4.8	Indenture dated as of December 8, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.375% senior notes due 2015. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s current report on Form 8-K dated December 14, 2004. First Supplemental Indenture dated January 31, 2005. Incorporated herein by reference to Exhibit 4.11.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Second Supplemental Indenture dated May 13, 2005. Incorporated herein by reference to Exhibit 4.11.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005. Third Supplemental Indenture dated July 15, 2005. Incorporated by reference herein to Exhibit 4.11.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.8.1*	Fourth Supplemental Indenture dated November 14, 2005 to Indenture dated as of December 8, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.375% senior notes due 2015.
4.8.2*	Fifth Supplemental Indenture dated February 24, 2006 to Indenture dated as of December 8, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.375% senior notes due 2015.
4.9	Indenture dated as of April 19, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.625% senior notes due 2016. Incorporated herein by reference to Exhibit 4.12 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005. First Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.12.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.9.1*	Second Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of April 19, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.625% senior notes due 2016.
4.9.2*	Third Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of April 19, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.625% senior notes due 2016.
4.10	Indenture dated as of June 20, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.25% senior notes due 2018. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.10.1*	First Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of June 20, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.25% senior notes due 2018.
4.10.2*	Second Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of June 20, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.25% senior notes due 2018.
4.11	Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s current report on Form 8-K dated August 16, 2005.

121

Exhibit Number	Description
4.11.1*	First Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017.
4.11.2*	Second Supplemental Indenture dated as of February 1, 2006 to Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017.
4.11.3*	Third Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017.
4.12	Indenture dated as of November 8, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.875% senior notes due 2020. Incorporated herein by reference to Exhibit 4.1.1 to Chesapeake’s current report on Form 8-K dated November 8, 2005. First Supplemental Indenture dated as of November 14, 2005. Incorporated herein by reference to Exhibit 4.3 to Chesapeake’s registration statement on Form S-4 (No. 333-132263). Second Supplemental Indenture dated as of February 24, 2006. Incorporated herein by reference to Exhibit 4.4 to Chesapeake’s registration statement on Form S-4 (No. 333-132263).
4.13	Indenture dated as of November 8, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 2.75% contingent convertible senior notes due 2035. Incorporated herein by reference to Exhibit 4.1.2 to Chesapeake’s current report on Form 8-K dated November 8, 2005. First Supplemental Indenture dated as of November 14, 2005. Incorporated herein by reference to Exhibit 4.5 to Chesapeake’s registration statement on Form S-3 (No. 333-132261). Second Supplemental Indenture dated as of February 24, 2006. Incorporated herein by reference to Exhibit 4.6 to Chesapeake’s registration statement on Form S-3 (No. 333-132261).
4.14	Registration Rights Agreement dated as of November 8, 2005 among Chesapeake and the Initial Purchasers named therein, with respect to 6.875% Senior Notes due 2020. Incorporated herein by reference to Exhibit 4.1.3 to Chesapeake’s current report on Form 8-K dated November 15, 2005.
4.15	Registration Rights Agreement dated as of February 3, 2006 among Chesapeake and the Initial Purchasers named therein, with respect to 6.5% Senior Notes due 2017. Incorporated herein by reference to Exhibit 4.1.2 to Chesapeake’s current report on Form 8-K dated February 3, 2006.
10.1.1†	Chesapeake’s 2003 Stock Incentive Plan. Incorporated herein by reference to Exhibit A to Chesapeake’s definitive proxy statement for its 2003 annual meeting of shareholders filed April 17, 2003.
10.1.1.1†	Form of Restricted Stock Award Agreement for Chesapeake’s 2003 Stock Incentive Plan. Incorporated herein by reference to Exhibit 10.1.14.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.2†	Chesapeake’s 1992 Nonstatutory Stock Option Plan, as amended. Incorporated herein by reference to Exhibit 10.1.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended December 31, 1996.
10.1.3†	Chesapeake’s 1994 Stock Option Plan, as amended. Incorporated herein by reference to Exhibit 10.1.3 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended December 31, 1996.
10.1.4†	Chesapeake’s 1996 Stock Option Plan. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 1996 annual meeting of shareholders.

122

Exhibit Number	Description
10.1.4.1†	Form of Incentive Stock Option Agreement for Chesapeake’s 1996 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.4.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.4.2†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 1996 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.4.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.5†	Chesapeake’s 1999 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.5 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 1999.
10.1.5.1†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 1999 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.5.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.6†	Chesapeake’s 2000 Employee Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.6 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2000.
10.1.6.1†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 2000 Employee Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.6 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2000.
10.1.7†	Chesapeake’s 2000 Executive Officer Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.7 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2000.
10.1.8†	Chesapeake’s 2001 Stock Option Plan. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 2001 annual meeting of shareholders filed April 30, 2001.
10.1.8.1†	Form of Incentive Stock Option Agreement for Chesapeake’s 2001 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.8.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.8.2†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 2001 Stock Option Plan and 2001 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.8.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.9†	Chesapeake’s 2001 Executive Officer Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.9 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2001.
10.1.10†	Chesapeake’s 2001 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.10 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2001.
10.1.11†	Chesapeake’s 2002 Stock Option Plan. Incorporated herein by reference to Exhibit A to Chesapeake’s definitive proxy statement for its 2002 annual meeting of shareholders filed April 29, 2002.
10.1.11.1†	Form of Incentive Stock Option Agreement for Chesapeake’s 2002 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.11.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.11.2	Form of Nonqualified Stock Option Agreement for Chesapeake’s 2002 Stock Option Plan and 2002 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.11.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.12†	Chesapeake’s 2002 Non-Employee Director Stock Option Plan. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 2002 annual meeting of shareholders filed April 29, 2002.

123

Exhibit Number	Description
10.1.12.1†	Form of Stock Option Agreement for Chesapeake’s 2002 Non-Employee Director Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.12.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.13†	Chesapeake’s 2002 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.11 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2002.
10.1.14†	Chesapeake’s 2003 Stock Award Plan for Non-Employee Directors. Incorporated herein by reference to Exhibit 10.1.14 to Chesapeake’s annual report of Form 10-K/A for the year ended December 31, 2002.
10.1.15†	Chesapeake Energy Corporation 401(k) Make-Up Plan. Incorporated herein by reference to Exhibit 10.1.15 to Chesapeake’s annual report on Form 10-K/A for the year ended December 31, 2002.
10.1.15.1†	Chesapeake Energy Corporation 401(k) Make-Up Plan—2005. Incorporated herein by reference to Exhibit 10.1.15.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004.
10.1.16†	Chesapeake Energy Corporation Deferred Compensation Plan. Incorporated herein by reference to Exhibit 10.1.16 to Chesapeake’s annual report on Form 10-K/A for the year ended December 31, 2002.
10.1.16.1†	Chesapeake Energy Corporation Deferred Compensation Plan—2005. Incorporated herein by reference to Exhibit 10.1.16.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004.
10.1.17†	Form of Stock Option Grant Notice. Incorporated herein by reference to Exhibit 10.1.15 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.18†	Chesapeake’s Long Term Incentive Plan. Incorporated herein by reference to Exhibit A to Chesapeake’s definitive proxy statement for its 2005 annual meeting of shareholders filed April 29, 2005.
10.1.18.1†	Form of Non-Employee Director Stock Option Agreement for the Long Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1.18.1 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.1.18.2†	Form of Restricted Stock Award Agreement for the Long Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1.18.2 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.1.18.3†	Form of Non-Employee Director Restricted Stock Award Agreement for the Long Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1.18.3 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.1.19†	Founder Well Participation Program. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 2005 annual meeting of shareholders filed April 29, 2005.
10.2.1†	Fourth Amended and Restated Employment Agreement dated as of July 1, 2005, between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.1 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.2.2†	Fourth Amended and Restated Employment Agreement dated as of July 1, 2005, between Tom L. Ward and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.2 to Chesapeake’s current report on Form 8-K dated June 16, 2005.

124

Exhibit Number	Description
10.2.3†	Amended and Restated Employment Agreement dated as of July 1, 2003 between Marcus C. Rowland and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.3 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003.
10.2.4†	Employment Agreement dated as of July 1, 2003 between Steven C. Dixon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.4 to Chesapeake’s current report on Form 8-K dated February 15, 2006.
10.2.5†	Resignation Agreement dated as of February 10, 2006 between Tom L. Ward and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.8 to Chesapeake’s current report on Form 8-K dated February 15, 2006.
10.2.8†	Employment Agreement dated as of July 1, 2003 between Michael A. Johnson and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.8 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003.
10.2.9†	Employment Agreement dated as of July 1, 2003 between Martha A. Burger and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.9 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003.
10.3†	Form of Indemnity Agreement for officers and directors of Chesapeake and its subsidiaries. Incorporated herein by reference to Exhibit 10.30 to Chesapeake’s registration statement on Form S-1 (No. 33-55600).
10.4†	Non-Employee Director Compensation. Incorporated herein by reference to Exhibit 10.4 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
10.5†*	Named Executive Officer Compensation.
10.6	Rights Agreement dated July 15, 1998 between Chesapeake and UMB Bank, N.A., as Rights Agent. Incorporated herein by reference to Exhibit 1 to Chesapeake’s registration statement on Form 8-A filed July 16, 1998. Amendment No. 1 dated September 11, 1998. Incorporated herein by reference to Exhibit 10.3 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 1998.
10.6.1*	Amendment No. 2 dated March 3, 2006 to Rights Agreement dated July 15, 1998 between Chesapeake and UMB Bank, N.A., as Rights Agent.
12*	Ratios of Earnings to Fixed Charges and Preferred Dividends.
21*	Subsidiaries of Chesapeake.
23.1*	Consent of Pricewaterhouse Coopers, LLP
23.2*	Consent of Netherland, Sewell & Associates, Inc.
23.3*	Consent of Data & Consulting Services, Division of Schlumberger Technology Corporation
23.4*	Consent of Lee Keeling and Associates, Inc.
23.5*	Consent of Ryder Scott Company L.P.
23.6*	Consent of LaRoche Petroleum Consultants, Ltd.
23.7*	Consent of H.J. Gruy and Associates, Inc.
23.8*	Consent of Miller and Lents, Ltd.
31.1*	Aubrey K. McClendon, Chairman and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

125

Exhibit Number	Description
31.2*	Marcus C. Rowland, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Aubrey K. McClendon, Chairman and Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Marcus C. Rowland, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

† Management contract or compensatory plan or arrangement.

126

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHESAPEAKE ENERGY CORPORATION
By	/s/    AUBREY K. MCCLENDON
	Aubrey K. McClendon Chairman of the Board and Chief Executive Officer

Date: March 13, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Capacity	Date
/s/    AUBREY K. MCCLENDON         Aubrey K. McClendon	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	March 13, 2006
/s/    MARCUS C. ROWLAND         Marcus C. Rowland	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 13, 2006
/s/    MICHAEL A. JOHNSON         Michael A. Johnson	Senior Vice President—Accounting, Controller and Chief Accounting Officer (Principal Accounting Officer)	March 13, 2006
/s/    RICHARD K. DAVIDSON         Richard K. Davidson	Director	March 13, 2006
/s/    FRANK KEATING         Frank Keating	Director	March 13, 2006
/s/    BREENE M. KERR         Breene M. Kerr	Director	March 13, 2006
/s/    CHARLES T. MAXWELL         Charles T. Maxwell	Director	March 13, 2006
/s/    DON NICKLES         Don Nickles	Director	March 13, 2006
/s/    FREDERICK B. WHITTEMORE         Frederick B. Whittemore	Director	March 13, 2006

127

EXHIBIT INDEX

Exhibit Number	Description
3.1.1	Chesapeake’s Restated Certificate of Incorporation, as amended. Incorporated herein by reference to Exhibit 3.1.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005.
3.1.2	Certificate of Designation for Series A Junior Participating Preferred Stock, as amended. Incorporated herein by reference to Exhibit 3.1.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005.
3.1.3*	Certificate of Designation of 6% Cumulative Convertible Preferred Stock, as amended.
3.1.4*	Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2003), as amended.
3.1.5*	Certificate of Designation of 4.125% Cumulative Convertible Preferred Stock, as amended.
3.1.6	Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005), as amended. Incorporated herein by reference to Exhibit 3.1.6 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005.
3.1.7	Certificate of Designation of 4.5% Cumulative Convertible Preferred Stock. Incorporated herein by reference to Exhibit 3.1 to Chesapeake’s current report on Form 8-K dated September 13, 2005.
3.1.8	Certificate of Designation of 5% Cumulative Convertible Preferred Stock (Series 2005B). Incorporated herein by reference to Exhibit 3.1 to Chesapeake’s current report on Form 8-K dated November 7, 2005.
3.2	Chesapeake’s Amended and Restated Bylaws. Incorporated herein by reference to Exhibit 3.2 of Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003.
4.1	Indenture dated as of May 27, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and the Bank of New York Trust Company, N.A., as Trustee, with respect to 7.5% senior notes due 2014. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s registration statement on Form S-4 (No. 333-116555). First Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.11.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Second Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.11.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Third Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.1.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Fourth Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.1.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.1.1*	Fifth Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of May 27, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.50% senior notes due 2014.
4.1.2*	Sixth Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of May 27, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.50% senior notes due 2014.
4.2	Indenture dated as of August 2, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and the Bank of New York Trust Company, N.A., as Trustee, with respect to 7.0% senior notes due 2014. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s registration statement on Form S-4 (No. 333-118378). First Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.12.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Second Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.12.2 to Chesapeake’s quarterly

Exhibit Number	Description
	report on Form 10-Q for the quarter ended September 30, 2004. Third Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.2.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Fourth Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.2.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.2.1*	Fifth Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of August 2, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.00% senior notes due 2014.
4.2.2*	Sixth Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of August 2, 2004 among Chesapeake, as issuer, its subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to the 7.00% senior notes due 2014.
4.3	Indenture dated as of December 20, 2002 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to our 7.75% Senior Notes due 2015. Incorporated herein by reference to Exhibit 4.5 to Chesapeake’s registration statement on Form S-4 (No. 333-102445) First Supplemental Indenture dated as of February 14, 2003. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s report on Form 10-K/A for the year ended December 31, 2002. Second Supplemental Indenture dated as of May 1, 2003. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2003. Third Supplemental Indenture dated as of August 15, 2003. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003. Fourth Supplemental Indenture dated as of March 5, 2004. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003. Fifth Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Sixth Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.6.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Seventh Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Eighth Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.6.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.3.1*	Ninth Supplemental Indenture dated November 14, 2005 to Indenture dated as of December 20, 2002 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 7.75% Senior Notes due 2015.
4.3.2*	Tenth Supplemental Indenture dated February 24, 2006 to Indenture dated as of December 20, 2002 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 7.75% Senior Notes due 2015.
4.4	Agreement to furnish copies of unfiled long-term debt instruments. Incorporated herein by reference to Chesapeake’s transition report on Form 10-K for the six months ended December 31, 1997.
4.5	Sixth Amended and Restated Credit Agreement, dated as of February 3, 2006, among Chesapeake Energy Corporation, Chesapeake Exploration Limited Partnership and Chesapeake Appalachia, L.L.C., as Co-Borrowers, Union Bank of California, N.A., as Administrative Agent, BNP Paribas, as Syndication Agent, Bank of America, N.A., Calyon New York Branch and SunTrust Bank, as Co-Documentation Agents, and the several lenders from time to time parties thereto. Incorporated herein by reference to Exhibit 4.8 to Chesapeake’s current report on Form 8-K dated February 8, 2006.

Exhibit Number	Description
4.6	Indenture dated as of March 5, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York, as Trustee, with respect to 7.5% Senior Notes due 2013. First Supplemental Indenture dated as of May 1, 2003. Incorporated herein by reference to Exhibit 4.7.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2003. Second Supplemental Indenture dated as of August 15, 2003. Incorporated herein by reference to Exhibit 4.7.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003. Third Supplemental Indenture dated as of March 5, 2004. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003. Fourth Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Fifth Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.9.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Sixth Supplemental Indenture dated January 31, 2005. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Seventh Supplemental Indenture dated July 15, 2005. Incorporated herein by reference to Exhibit 4.9.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.6.1*	Eighth Supplemental Indenture dated November 14, 2005 to Indenture dated as of March 5, 2003 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York, as Trustee, with respect to 7.5% Senior Notes due 2013.
4.6.2*	Ninth Supplemental Indenture dated February 24, 2006 to Indenture dated as of March 5, 2003 among Chesapeake, as issuer, its subsidiaries signatory thereto as Subsidiary Guarantors, and The Bank of New York, as Trustee, with respect to 7.5% Senior Notes due 2013.
4.7	Indenture dated as of November 26, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York, as Trustee, with respect to 6.875% senior notes due 2016. Incorporated herein by reference to Exhibit 4.2 to Chesapeake’s registration statement on Form S-4/A (No. 333-110668). First Supplemental Indenture dated as of March 5, 2004. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2003. Second Supplemental Indenture dated as of August 30, 2004. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Third Supplemental Indenture dated as of September 27, 2004. Incorporated herein by reference to Exhibit 4.10.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004. Fourth Supplemental Indenture dated as of January 31, 2005. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Fifth Supplemental Indenture dated July 15, 2005. Incorporated herein by reference to Exhibit 4.10.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.7.1*	Sixth Supplemental Indenture dated November 14, 2005 to Indenture dated as of November 26, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.875% senior notes due 2016.
4.7.2*	Seventh Supplemental Indenture dated February 24, 2006 to Indenture dated as of November 26, 2003 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.875% senior notes due 2016.
4.8	Indenture dated as of December 8, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.375% senior notes due 2015. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s current report on Form 8-K dated December 14, 2004. First Supplemental Indenture dated January 31, 2005. Incorporated herein by reference to Exhibit 4.11.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004. Second Supplemental Indenture dated May 13, 2005. Incorporated herein by reference to Exhibit 4.11.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005. Third Supplemental Indenture dated July 15, 2005. Incorporated by reference herein to Exhibit 4.11.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.

Exhibit Number	Description
4.8.1*	Fourth Supplemental Indenture dated November 14, 2005 to Indenture dated as of December 8, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.375% senior notes due 2015.
4.8.2*	Fifth Supplemental Indenture dated February 24, 2006 to Indenture dated as of December 8, 2004 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.375% senior notes due 2015.
4.9	Indenture dated as of April 19, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.625% senior notes due 2016. Incorporated herein by reference to Exhibit 4.12 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2005. First Supplemental Indenture dated as of July 15, 2005. Incorporated herein by reference to Exhibit 4.12.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.9.1*	Second Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of April 19, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.625% senior notes due 2016.
4.9.2*	Third Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of April 19, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.625% senior notes due 2016.
4.10	Indenture dated as of June 20, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.25% senior notes due 2018. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
4.10.1*	First Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of June 20, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.25% senior notes due 2018.
4.10.2*	Second Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of June 20, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.25% senior notes due 2018.
4.11	Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017. Incorporated herein by reference to Exhibit 4.1 to Chesapeake’s current report on Form 8-K dated August 16, 2005.
4.11.1*	First Supplemental Indenture dated as of November 14, 2005 to Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017.
4.11.2*	Second Supplemental Indenture dated as of February 1, 2006 to Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017.
4.11.3*	Third Supplemental Indenture dated as of February 24, 2006 to Indenture dated as of August 16, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.50% senior notes due 2017.

Exhibit Number	Description
4.12	Indenture dated as of November 8, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 6.875% senior notes due 2020. Incorporated herein by reference to Exhibit 4.1.1 to Chesapeake’s current report on Form 8-K dated November 8, 2005. First Supplemental Indenture dated as of November 14, 2005. Incorporated herein by reference to Exhibit 4.3 to Chesapeake’s registration statement on Form S-4 (No. 333-132263). Second Supplemental Indenture dated as of February 24, 2006. Incorporated herein by reference to Exhibit 4.4 to Chesapeake’s registration statement on Form S-4 (No. 333-132263).
4.13	Indenture dated as of November 8, 2005 among Chesapeake, as issuer, the subsidiaries signatory thereto, as Subsidiary Guarantors and The Bank of New York Trust Company, N.A., as Trustee, with respect to 2.75% contingent convertible senior notes due 2035. Incorporated herein by reference to Exhibit 4.1.2 to Chesapeake’s current report on Form 8-K dated November 8, 2005. First Supplemental Indenture dated as of November 14, 2005. Incorporated herein by reference to Exhibit 4.5 to Chesapeake’s registration statement on Form S-3 (No. 333-132261). Second Supplemental Indenture dated as of February 24, 2006. Incorporated herein by reference to Exhibit 4.6 to Chesapeake’s registration statement on Form S-3 (No. 333-132261).
4.14	Registration Rights Agreement dated as of November 8, 2005 among Chesapeake and the Initial Purchasers named therein, with respect to 6.875% Senior Notes due 2020. Incorporated herein by reference to Exhibit 4.1.3 to Chesapeake’s current report on Form 8-K dated November 15, 2005.
4.15	Registration Rights Agreement dated as of February 3, 2006 among Chesapeake and the Initial Purchasers named therein, with respect to 6.5% Senior Notes due 2017. Incorporated herein by reference to Exhibit 4.1.2 to Chesapeake’s current report on Form 8-K dated February 3, 2006.
10.1.1†	Chesapeake’s 2003 Stock Incentive Plan. Incorporated herein by reference to Exhibit A to Chesapeake’s definitive proxy statement for its 2003 annual meeting of shareholders filed April 17, 2003.
10.1.1.1†	Form of Restricted Stock Award Agreement for Chesapeake’s 2003 Stock Incentive Plan. Incorporated herein by reference to Exhibit 10.1.14.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.2†	Chesapeake’s 1992 Nonstatutory Stock Option Plan, as amended. Incorporated herein by reference to Exhibit 10.1.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended December 31, 1996.
10.1.3†	Chesapeake’s 1994 Stock Option Plan, as amended. Incorporated herein by reference to Exhibit 10.1.3 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended December 31, 1996.
10.1.4†	Chesapeake’s 1996 Stock Option Plan. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 1996 annual meeting of shareholders.
10.1.4.1†	Form of Incentive Stock Option Agreement for Chesapeake’s 1996 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.4.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.4.2†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 1996 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.4.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.5†	Chesapeake’s 1999 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.5 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 1999.
10.1.5.1†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 1999 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.5.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.

Exhibit Number	Description
10.1.6†	Chesapeake’s 2000 Employee Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.6 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2000.
10.1.6.1†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 2000 Employee Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.6 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2000.
10.1.7†	Chesapeake’s 2000 Executive Officer Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.7 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended March 31, 2000.
10.1.8†	Chesapeake’s 2001 Stock Option Plan. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 2001 annual meeting of shareholders filed April 30, 2001.
10.1.8.1†	Form of Incentive Stock Option Agreement for Chesapeake’s 2001 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.8.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.8.2†	Form of Nonqualified Stock Option Agreement for Chesapeake’s 2001 Stock Option Plan and 2001 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.8.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.9†	Chesapeake’s 2001 Executive Officer Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.9 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2001.
10.1.10†	Chesapeake’s 2001 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.10 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2001.
10.1.11†	Chesapeake’s 2002 Stock Option Plan. Incorporated herein by reference to Exhibit A to Chesapeake’s definitive proxy statement for its 2002 annual meeting of shareholders filed April 29, 2002.
10.1.11.1†	Form of Incentive Stock Option Agreement for Chesapeake’s 2002 Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.11.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.11.2	Form of Nonqualified Stock Option Agreement for Chesapeake’s 2002 Stock Option Plan and 2002 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.11.2 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.12†	Chesapeake’s 2002 Non-Employee Director Stock Option Plan. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 2002 annual meeting of shareholders filed April 29, 2002.
10.1.12.1†	Form of Stock Option Agreement for Chesapeake’s 2002 Non-Employee Director Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.12.1 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.13†	Chesapeake’s 2002 Nonqualified Stock Option Plan. Incorporated herein by reference to Exhibit 10.1.11 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2002.
10.1.14†	Chesapeake’s 2003 Stock Award Plan for Non-Employee Directors. Incorporated herein by reference to Exhibit 10.1.14 to Chesapeake’s annual report of Form 10-K/A for the year ended December 31, 2002.
10.1.15†	Chesapeake Energy Corporation 401(k) Make-Up Plan. Incorporated herein by reference to Exhibit 10.1.15 to Chesapeake’s annual report on Form 10-K/A for the year ended December 31, 2002.

Exhibit Number	Description
10.1.15.1†	Chesapeake Energy Corporation 401(k) Make-Up Plan—2005. Incorporated herein by reference to Exhibit 10.1.15.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004.
10.1.16†	Chesapeake Energy Corporation Deferred Compensation Plan. Incorporated herein by reference to Exhibit 10.1.16 to Chesapeake’s annual report on Form 10-K/A for the year ended December 31, 2002.
10.1.16.1†	Chesapeake Energy Corporation Deferred Compensation Plan—2005. Incorporated herein by reference to Exhibit 10.1.16.1 to Chesapeake’s annual report on Form 10-K for the year ended December 31, 2004.
10.1.17†	Form of Stock Option Grant Notice. Incorporated herein by reference to Exhibit 10.1.15 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2004.
10.1.18†	Chesapeake’s Long Term Incentive Plan. Incorporated herein by reference to Exhibit A to Chesapeake’s definitive proxy statement for its 2005 annual meeting of shareholders filed April 29, 2005.
10.1.18.1†	Form of Non-Employee Director Stock Option Agreement for the Long Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1.18.1 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.1.18.2†	Form of Restricted Stock Award Agreement for the Long Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1.18.2 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.1.18.3†	Form of Non-Employee Director Restricted Stock Award Agreement for the Long Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1.18.3 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.1.19†	Founder Well Participation Program. Incorporated herein by reference to Exhibit B to Chesapeake’s definitive proxy statement for its 2005 annual meeting of shareholders filed April 29, 2005.
10.2.1†	Fourth Amended and Restated Employment Agreement dated as of July 1, 2005, between Aubrey K. McClendon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.1 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.2.2†	Fourth Amended and Restated Employment Agreement dated as of July 1, 2005, between Tom L. Ward and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.2 to Chesapeake’s current report on Form 8-K dated June 16, 2005.
10.2.3†	Amended and Restated Employment Agreement dated as of July 1, 2003 between Marcus C. Rowland and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.3 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003.
10.2.4†	Employment Agreement dated as of July 1, 2003 between Steven C. Dixon and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.4 to Chesapeake’s current report on Form 8-K dated February 15, 2006.
10.2.5†	Resignation Agreement dated as of February 10, 2006 between Tom L. Ward and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.8 to Chesapeake’s current report on Form 8-K dated February 15, 2006.
10.2.8†	Employment Agreement dated as of July 1, 2003 between Michael A. Johnson and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.8 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003.
10.2.9†	Employment Agreement dated as of July 1, 2003 between Martha A. Burger and Chesapeake Energy Corporation. Incorporated herein by reference to Exhibit 10.2.9 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 2003.

Exhibit Number	Description
10.3†	Form of Indemnity Agreement for officers and directors of Chesapeake and its subsidiaries. Incorporated herein by reference to Exhibit 10.30 to Chesapeake’s registration statement on Form S-1 (No. 33-55600).
10.4†	Non-Employee Director Compensation. Incorporated herein by reference to Exhibit 10.4 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended June 30, 2005.
10.5†*	Named Executive Officer Compensation.
10.6	Rights Agreement dated July 15, 1998 between Chesapeake and UMB Bank, N.A., as Rights Agent. Incorporated herein by reference to Exhibit 1 to Chesapeake’s registration statement on Form 8-A filed July 16, 1998. Amendment No. 1 dated September 11, 1998. Incorporated herein by reference to Exhibit 10.3 to Chesapeake’s quarterly report on Form 10-Q for the quarter ended September 30, 1998.
10.6.1*	Amendment No. 2 dated March 3, 2006 to Rights Agreement dated July 15, 1998 between Chesapeake and UMB Bank, N.A., as Rights Agent.
12*	Ratios of Earnings to Fixed Charges and Preferred Dividends.
21*	Subsidiaries of Chesapeake.
23.1*	Consent of Pricewaterhouse Coopers, LLP
23.2*	Consent of Netherland, Sewell & Associates, Inc.
23.3*	Consent of Data & Consulting Services, Division of Schlumberger Technology Corporation
23.4*	Consent of Lee Keeling and Associates, Inc.
23.5*	Consent of Ryder Scott Company L.P.
23.6*	Consent of LaRoche Petroleum Consultants, Ltd.
23.7*	Consent of H.J. Gruy and Associates, Inc.
23.8*	Consent of Miller and Lents, Ltd.
31.1*	Aubrey K. McClendon, Chairman and Chief Executive Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Marcus C. Rowland, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Aubrey K. McClendon, Chairman and Chief Executive Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Marcus C. Rowland, Executive Vice President and Chief Financial Officer, Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

† Management contract or compensatory plan or arrangement.

EX-3.1.3

EXHIBIT 3.1.3

EXECUTION COPY

CERTIFICATE OF DESIGNATION

OF

6.00% CUMULATIVE CONVERTIBLE PREFERRED STOCK

OF

CHESAPEAKE ENERGY CORPORATION

Pursuant to Section 1032(G) of the Oklahoma General Corporation Act

CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation (the “Company”), does hereby certify that the following resolution was duly adopted by action of the Board of Directors of the Company, with the provisions thereof fixing the number of shares of the series and the dividend rate being set by action of the Board of Directors of the Company:

RESOLVED that pursuant to the authority expressly granted to and vested in the Board of Directors of the Company by the provisions of Article IV, Section 1 of the Certificate of Incorporation of the Company, as amended from time to time (the “Certificate of Incorporation”), and pursuant to Section 1032(G) of the Oklahoma General Corporation Act, the Board of Directors hereby creates a series of preferred stock of the Company and hereby states that the voting powers, designations, preferences and relative, participating, optional or other special rights of which, and qualifications, limitations or restrictions thereof (in addition to the provisions set forth in the Certificate of Incorporation which are applicable to the preferred stock of all classes and series), shall be as follows:

1. Designation and Amount; Ranking. (a) There shall be created from the 10,000,000 shares of preferred stock, par value $0.01 per share, of the Company authorized to be issued pursuant to the Certificate of Incorporation, a series of preferred stock, designated as the “6.00% Cumulative Convertible Preferred Stock,” par value $0.01 per share (the “Preferred Stock”), and the number of shares of such series shall be 4,600,000. Such number of shares may be decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Preferred Stock to a number less than that of the shares of Preferred Stock then outstanding plus the number of shares issuable upon exercise of options or rights then outstanding.

(b) The Preferred Stock will, with respect to both dividend rights and rights upon the liquidation, winding-up or dissolution of the Company, rank on a parity with the 6.75% Preferred Stock, and the Preferred Stock will, with respect to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company rank (i) senior to all Junior Stock, (ii) on a parity with all other Parity Stock and (iii) junior to all Senior Stock.

2. Definitions. As used herein, the following terms shall have the following meanings:

(1) “Accrued Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the accrued and unpaid dividends on such share from and including the most recent Dividend Payment Date (or the Issue Date, if such date is prior to the first Dividend Payment Date) to but not including such date.

(2) “Accumulated Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the aggregate accumulated and unpaid dividends on such share from the Issue Date until the most recent Dividend Payment Date on or prior to such date. There shall be no Accumulated Dividends with respect to any share of Preferred Stock prior to the first Dividend Payment Date.

(3) “Affiliate” shall have the meaning ascribed to it, on the date hereof, under Rule 405 of the Securities Act of 1933, as amended.

(4) “Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.

(5) “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to close.

(6) “Change of Control” shall mean any of the following events: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Company’s assets (determined on a consolidated basis) to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than to Permitted Holders; (ii) the adoption of a plan the consummation of which would result in the liquidation or dissolution of the Company; (iii) the acquisition, directly or indirectly, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than Permitted Holders, of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more

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than 50% of the aggregate voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other Person or group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this definition, such other Person or group shall be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation, if such other Person or group is the beneficial owner (as defined above), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent corporation and the Permitted Holders beneficially own (as defined in this proviso), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent corporation and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent corporation); or (iv) during any period of two consecutive years, individuals who at the beginning of such period comprised the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66 ²/3% of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. For purposes of this definition of “Change of Control,” the term “Permitted Holders” means Aubrey K. McClendon and Tom L. Ward and their respective Affiliates.

(7) “Change of Control Date” shall mean the date on which the Change of Control event occurs.

(8) “Conversion Price” shall mean $10.287, subject to adjustment as set forth in Section 7(c).

(9) “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company, or any other class of stock resulting from successive changes or reclassifications of such common stock consisting solely of changes in par value, or from par value to no par value, or as a result of a subdivision, combination, or merger, consolidation or similar transaction in which the Company is a constituent corporation.

(10) “DTC” or “Depository” means The Depository Trust Company.

(11) “Dividend Payment Date” shall mean March 15, June 15, September 15 and December 15 of each year, commencing June 15, 2003.

(12) “Dividend Record Date” shall mean March 1, June 1, September 1 and December 1 of each year.

(13) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(14) “Holder” or “holder” shall mean a holder of record of the Preferred Stock.

(15) “Issue Date” shall mean March 5, 2003, the original date of issuance of the Preferred Stock.

(16) “Junior Stock” shall mean all classes of common stock of the Company and the Series A Junior Participating Convertible Preferred Stock and each other class of capital stock or series of preferred stock established after the Issue Date, by the Board of Directors, the terms of which do not expressly provide that such class or series ranks senior to or on parity with the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(17) “Liquidation Preference” shall mean, with respect to each share of Preferred Stock, $50.

(18) “Market Value” shall mean the average closing price of the Common Stock for a five consecutive trading day period on the NYSE (or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation or, if the Common Stock is not so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Common Stock).

(19) “NYSE” shall mean the New York Stock Exchange, Inc.

(20) “Officer” means the Chairman of the Board of Directors, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.

(21) “Officers’ Certificate” means a certificate signed by two Officers.

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(22) “Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Transfer Agent. The counsel may be an employee of or counsel to the Company or the Transfer Agent.

(23) “Parity Stock” shall mean the 6.75% Preferred Stock and any class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank on parity with the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(24) “Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

(25) “Purchase Agreement” shall mean that certain Purchase Agreement with respect to the Preferred Stock, dated February 27, 2003, among the Company, Credit Suisse First Boston LLC, Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc. and the other initial purchasers named therein.

(26) “Registration Rights Agreement” means the Registration Rights Agreement dated March 5, 2003, among the Company, Credit Suisse First Boston LLC, Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc. and the other initial purchasers named in the Purchase Agreement, with respect to the Preferred Stock.

(27) “SEC” or “Commission” shall mean the Securities and Exchange Commission.

(28) “Securities Act” means the Securities Act of 1933, as amended.

(29) “Senior Stock” shall mean each class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank senior to the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(30) “Shelf Registration Statement” shall mean a shelf registration statement filed with the SEC to cover resales of Transfer Restricted Securities by holders thereof, as required by the Registration Rights Agreement.

(31) “6.75% Preferred Stock” shall mean the series of preferred stock, par value $0.01 per share, of the Company designated as the “6.75% Cumulative Convertible Preferred Stock.”

(32) “Transfer Agent” shall mean UMB Bank, N.A., the Company’s duly appointed transfer agent, registrar and conversion and dividend disbursing agent for the Preferred Stock. The Company may, in its sole discretion, remove the Transfer Agent with 10 days’ prior notice to the Transfer Agent; provided, that the Company shall appoint a successor Transfer Agent who shall accept such appointment prior to the effectiveness or such removal.

(33) “Transfer Restricted Securities” shall mean each share of Preferred Stock (or the shares of Common Stock into which such share of Preferred Stock is convertible) until (i) the date on which such security or its predecessor has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (ii) the date on which such security or predecessor is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

(34) “Voting Rights Triggering Event” shall mean the failure of the Company to pay dividends on the Preferred Stock with respect to six or more quarterly periods (whether or not consecutive).

(35) “Voting Stock” shall mean, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of contingency) to vote in the election of members of the Board of Directors or other governing body of such Person. For purposes of this definition, “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of corporate stock or partnership interests and any and all warrants, options and rights with respect thereto (whether or not currently exercisable), including each class of common stock and preferred stock of such Person.

3. Dividends.

(1) The holders of shares of the outstanding Preferred Stock shall be entitled, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, to receive cumulative cash dividends at the rate per annum of 6.00% per share on the Liquidation Preference (equivalent to $3.00 per annum per share), payable quarterly in arrears (the “Dividend Rate”). The Dividend Rate may be increased in the circumstances described in

3

Section 3(b) below. Dividends payable for each full dividend period will be computed by dividing the Dividend Rate by four and shall be payable in arrears on each Dividend Payment Date (commencing June 15, 2003) for the quarterly period ending immediately prior to such Dividend Payment Date, to the holders of record of Preferred Stock at the close of business on the Dividend Record Date applicable to such Dividend Payment Date. Such dividends shall be cumulative from the most recent date as to which dividends shall have been paid or, if no dividends have been paid, from the Issue Date (whether or not in any dividend period or periods there shall be funds of the Company legally available for the payment of such dividends) and shall accrue on a day-to-day basis, whether or not earned or declared, from and after the Issue Date. Dividends payable for any partial dividend period shall be computed on the basis of days elapsed over a 360-day year consisting of twelve 30-day months. Accumulations of dividends on shares of Preferred Stock shall not bear interest.

(2) If (i) by May 5, 2003, the Shelf Registration Statement has not been filed with the Commission, (ii) by September 1, 2003, the Shelf Registration Statement has not been declared effective by the Commission or (iii) after the Shelf Registration Statement has been declared effective, (A) the Shelf Registration Statement thereafter ceases to be effective or (B) the Shelf Registration Statement or the related prospectus ceases to be usable (in each case, subject to the exceptions described below) in connection with resales of Transfer Restricted Securities during the period that any Transfer Restricted Securities remain outstanding (each such event referred to in clauses (i), (ii) and (iii), a “Registration Default”), additional dividends shall accrue on the Preferred Stock at the rate of .50% per annum (resulting in a Dividend Rate of 6.50% per annum during the continuance of a Registration Default), from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. At all other times, dividends shall accumulate on the Preferred Stock at the Dividend Rate as described in Section 3(a).

A Registration Default referred to in clause (iii) of Section 3(b) shall be deemed not to have occurred and be continuing in relation to the Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to the Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in the Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default referred to in clause (iii) of Section 3(b) occurs for a continuous period in excess of 30 days, additional dividends as described in Section 3(b) shall be payable in accordance therewith from the day such Registration Default occurs until such Registration Default is cured.

(3) No dividend will be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Preferred Stock with respect to any dividend period unless all dividends for all preceding dividend periods have been declared and paid or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Preferred Stock.

(4) No dividends or other distributions (other than a dividend or distribution payable solely in shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and other than cash paid in lieu of fractional shares) may be declared, made or paid, or set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity Stock or Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for the redemption of any Parity Stock or Junior Stock) by or on behalf of the Company (except by conversion into or exchange for shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock)), unless full Accumulated Dividends shall have been or contemporaneously are declared and paid, or are declared and a sum sufficient for the payment thereof is set apart for such payment, on the Preferred Stock and any Parity Stock for all dividend payment periods terminating on or prior to the date of such declaration, payment, redemption, purchase or acquisition. Notwithstanding the foregoing, if full dividends have not been paid on the Preferred Stock and any Parity Stock, dividends may be declared and paid on the Preferred Stock and such Parity Stock so long as the dividends are declared and paid pro rata so that the amounts of dividends declared per share on the Preferred Stock and such Parity Stock will in all cases bear to each other the same ratio that accumulated and unpaid dividends per share on the shares of Preferred Stock and such other Parity Stock bear to each other.

(5) Holders of shares of Preferred Stock shall not be entitled to any dividends on the Preferred Stock, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Stock which may be in arrears.

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(6) The holders of shares of Preferred Stock at the close of business on a Dividend Record Date will be entitled to receive the dividend payment on those shares on the corresponding Dividend Payment Date notwithstanding the subsequent conversion thereof or the Company’s default in payment of the dividend due on that Dividend Payment Date. However, shares of Preferred Stock surrendered for conversion during the period between the close of business on any Dividend Record Date and the close of business on the Business Day immediately preceding the applicable Dividend Payment Date must be accompanied by payment of an amount equal to the dividend payable on the shares on that Dividend Payment Date. A holder of shares of Preferred Stock on a Dividend Record Date who (or whose transferee) tenders any shares for conversion on the corresponding Dividend Payment Date will receive the dividend payable by the Company on the Preferred Stock on that date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Preferred Stock for conversion. Except as provided above with respect to a voluntary conversion pursuant to Section 7, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon conversion.

4. Change of Control.

(1) Upon the occurrence of a Change of Control, each holder of Preferred Stock shall, in the event that the Market Value for the period ending on the Change of Control Date is less than the Conversion Price, have a one-time option (the “Change of Control Option”) to convert all of such holder’s outstanding shares of Preferred Stock into fully paid and nonassessable shares of Common Stock at an adjusted Conversion Price equal to the greater of (i) the Market Value for the period ending on the Change of Control Date and (ii) $5.47. The Change of Control Option must be exercised, if at all, during the period of not less than 30 days nor more than 60 days commencing on the third Business Day after notice of a Change in Control has been given by the Company in accordance with Section 4(b). In lieu of issuing the shares of Common Stock issuable upon conversion in the event of a Change of Control, the Company may, at its option, make a cash payment equal to the Market Value for each share of such Common Stock otherwise issuable determined for the period ending on the Change of Control Date. Notwithstanding the foregoing, upon the occurrence of a Change of Control in which (i) each holder of Common Stock receives consideration consisting solely of common stock of the successor, acquiror or other third party (and cash paid in lieu of fractional shares) that is listed on a national securities exchange or quoted on the NASDAQ National Market and (ii) all the Common Stock has been exchanged for, converted into or acquired for common stock of the successor, acquiror or other third party (and cash in lieu of factional shares), and the Preferred Stock becomes convertible solely into such common stock, the Conversion Price will not be adjusted as described in this Section 4(a).

(2) In the event of a Change of Control (other than a Change of Control described in the last sentence of Section 4(a)), notice of such Change of Control shall be given, within five Business Days of the Change of Control Date, by the Company by first-class mail to each record holder of shares of Preferred Stock, at such holder’s address as the same appears on the books of the Company. Each such notice shall state (i) that a Change of Control has occurred; (ii) the last day on which the Change of Control Option may be exercised (the “Expiration Date”) pursuant to the terms hereof; (iii) the name and address of the Transfer Agent; and (iv) the procedures that holders must follow to exercise the Change of Control Option.

(3) On or before the Expiration Date, each holder of shares of Preferred Stock wishing to exercise the Change of Control Option shall surrender the certificate or certificates representing the shares of Preferred Stock to be converted, in the manner and at the place designated in the notice described in Section 4(b), and on such date the cash or shares of Common Stock due to such holder shall be delivered to the Person whose name appears on such certificate or certificates as the owner thereof and the shares represented by each surrendered certificate shall be returned to authorized but unissued shares. Upon surrender (in accordance with the notice described in Section 4(b)) of the certificate or certificates representing any shares to be so converted (properly endorsed or assigned for transfer, if the Company shall so require and the notice shall so state), such shares shall be converted by the Company at the adjusted Conversion Price, if applicable, as described in Section 4(a).

(4) The rights of holders of Preferred Stock pursuant to this Section 4 are in addition to, and not in lieu of, the rights of holders of Preferred Stock provided for in Section 7 hereof.

5. Voting.

(1) The shares of Preferred Stock shall have no voting rights except as set forth below or as otherwise required by Oklahoma law from time to time:

(i) If and whenever at any time or times a Voting Rights Triggering Event occurs, then the holders of shares of Preferred Stock, voting as a single class with any other preferred stock or preference securities having similar voting rights that are exercisable (the “Voting Rights Class”), will be entitled at the next regular or special meeting of stockholders of the Company to elect two additional directors of the Company, unless the Board of Directors is comprised of fewer than six directors at such time, in which case the Voting Rights Class shall be entitled to elect one additional director. Upon the election of any such additional directors, the number of directors that comprise the Board of Directors shall be increased by such number of additional directors.

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(ii) Such voting rights may be exercised at a special meeting of the holders of the shares of the Voting Rights Class, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends in arrears on the shares of Preferred Stock shall have been paid in full, at which time or times such voting rights and the term of the directors elected pursuant to Section 5(a)(i) shall terminate.

(iii) At any time when such voting rights shall have vested in holders of shares of the Voting Rights Class, an Officer of the Company may call, and, upon written request of the record holders of shares representing at least twenty-five percent (25%) of the voting power of the shares then outstanding of the Voting Rights Class, addressed to the Secretary of the Company, shall call a special meeting of the holders of shares of the Voting Rights Class. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company, or, if none, at a place designated by the Board of Directors. Notwithstanding the provisions of this Section 5(a)(iii), no such special meeting shall be called during a period within the 60 days immediately preceding the date fixed for the next annual meeting of stockholders in which such case, the election of directors pursuant to Section 5(a)(i) shall be held at such annual meeting of stockholders.

(iv) At any meeting held for the purpose of electing directors at which the holders of the Voting Rights Class shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. The affirmative vote of the holders of shares of Preferred Stock constituting a majority of the shares of Preferred Stock present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

(v) Any director elected pursuant to the voting rights created under this Section 5(a) shall hold office until the next annual meeting of stockholders (unless such term has previously terminated pursuant to Section 5 (a)(ii)) and any vacancy in respect of any such director shall be filled only by vote of the remaining director so elected by holders of the Voting Rights Class, or if there be no such remaining director, by the holders of shares of the Voting Rights Class at a special meeting called in accordance with the procedures set forth in this Section 5, or, if no such special meeting is called, at the next annual meeting of stockholders. Upon any termination of such voting rights, the term of office of all directors elected pursuant to this Section 5 shall terminate.

(vi) So long as any shares of Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the Company shall not, without the affirmative vote or consent of the holders of at least 66 ²/3% of the outstanding Preferred Stock voting or consenting, as the case may be, separately as one class, (i) create, authorize or issue any class or series of Senior Stock (or any security convertible into Senior Stock) or (ii) amend the Certificate of Incorporation so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of Preferred Stock.

(vii) In exercising the voting rights set forth in this Section 5(a), each share of Preferred Stock shall be entitled to one vote.

(2) The Company may authorize, increase the authorized amount of, or issue any class or series of Parity Stock or Junior Stock, without the consent of the holders of Preferred Stock, and in taking such actions the Company shall not be deemed to have affected adversely the rights, preferences, privileges or voting rights of holders of shares of Preferred Stock.

6. Liquidation Rights.

(1) In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary of involuntary, each holder of shares of Preferred Stock shall be entitled to receive and to be paid out of the assets of the Company

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available for distribution to its stockholders the Liquidation Preference plus Accumulated Dividends and Accrued Dividends thereon in preference to the holders of, and before any payment or distribution is made on, any Junior Stock, including, without limitation, on any Common Stock.

(2) Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the assets or business of the Company (other than in connection with the liquidation, winding-up or dissolution of its business) nor the merger or consolidation of the Company into or with any other Person shall be deemed to be a liquidation, winding-up or dissolution, voluntary or involuntary, for the purposes of this Section 6.

(3) After the payment to the holders of the shares of Preferred Stock of full preferential amounts provided for in this Section 6, the holders of Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company.

(4) In the event the assets of the Company available for distribution to the holders of shares of Preferred Stock upon any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section 6(a), no such distribution shall be made on account of any shares of Parity Stock upon such liquidation, dissolution or winding-up unless proportionate distributable amounts shall be paid on account of the shares of Preferred Stock, ratably, in proportion to the full distributable amounts for which holders of all Preferred Stock and of any Parity Stock are entitled upon such liquidation, winding-up or dissolution.

7. Conversion.

(a) Each holder of Preferred Stock shall have the right, at its option, exercisable at any time and from time to time from the Issue Date to convert, subject to the terms and provisions of this Section 7, any or all of such holder’s shares of Preferred Stock. In such case, the shares of Preferred Stock shall be converted into such whole number of fully paid and nonassessable shares of Common Stock as is equal, subject to Section 7(g), to the product of the number of shares of Preferred Stock being so converted multiplied by the quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price (as defined below) then in effect. The Conversion Price initially shall be $10.287, subject to adjustment as set forth in Section 7(c).

The conversion right of a holder of Preferred Stock shall be exercised by the holder by the surrender to the Company of the certificates representing shares to be converted at any time during usual business hours at its principal place of business or the offices of its duly appointed Transfer Agent to be maintained by it, accompanied by written notice to the Company in the form of Exhibit B that the holder elects to convert all or a portion of the shares of Preferred Stock represented by such certificate and specifying the name or names (with address) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Company or its duly appointed Transfer Agent) by a written instrument or instruments of transfer in form reasonably satisfactory to the Company or its duly appointed Transfer Agent duly executed by the holder or its duly authorized legal representative and transfer tax stamps or funds therefor, if required pursuant to Section 7(i). Immediately prior to the close of business on the date of receipt by the Company or its duly appointed Transfer Agent of notice of conversion of shares of Preferred Stock, each converting holder of Preferred Stock shall be deemed to be the holder of record of Common Stock issuable upon conversion of such holder’s Preferred Stock notwithstanding that the share register of the Company shall then be closed or that certificates representing such Common Stock shall not then be actually delivered to such holder. On the date of any conversion, all rights with respect to the shares of Preferred Stock so converted, including the rights, if any, to receive notices, will terminate, except only the rights of holders thereof to (i) receive certificates for the number of whole shares of Common Stock into which such shares of Preferred Stock have been converted and cash, in lieu of any fractional shares as provided in Section 7(f); and (ii) exercise the rights to which they are entitled as holders of Common Stock.

(b) If the last day for the exercise of the conversion right shall not be a Business Day, then such conversion right may be exercised on the next preceding Business Day.

(c) The Conversion Price shall be subject to adjustment as follows:

(i) In case the Company shall at any time or from time to time (A) pay a dividend (or other distribution) payable in shares of Common Stock on any class of capital stock (which, for purposes of this Section 7(c) shall include, without limitation, any dividends or distributions in the form of options, warrants or other rights to acquire capital stock) of the Company (other than the issuance of shares of Common Stock in connection with the conversion of preferred stock); (B) subdivide the outstanding shares of Common Stock into a larger number of shares; (C) combine the outstanding shares of Common Stock into a smaller number of shares; (D) issue any

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shares of its capital stock in a reclassification of the Common Stock; or (E) pay a dividend or make a distribution to all holders of shares of Common Stock (other than a dividend or distribution subject to Section 7(c)(ii)) pursuant to a stockholder rights plan, “poison pill” or similar arrangement and excluding dividends payable on the Preferred Stock then, and in each such case, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted into shares of Common Stock immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 7(c)(i) shall become effective retroactively (x) in the case of any such dividend or distribution, to the day immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (y) in the case of any such subdivision, combination or reclassification, to the close of business on the day upon which such corporate action becomes effective.

(ii) In case the Company shall at any time or from time to time issue to all holders of its Common Stock rights, options or warrants entitling the holders thereof to subscribe for or purchase shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) at a price per share less than the Market Value for the period ending on the date of issuance (treating the price per share of any security convertible, or exchangeable or exercisable into Common Stock as equal to (A) the sum of the price paid to acquire such security convertible, exchangeable or exercisable into Common Stock plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such security into Common Stock divided by (B) the number of shares of Common Stock into which such convertible, exchangeable or exercisable security is initially convertible, exchangeable or exercisable), other than (I) issuances of such rights, options or warrants if the holder of Preferred Stock would be entitled to receive such rights, options or warrants upon conversion at any time of shares of Preferred Stock into Common Stock and (II) issuances that are subject to certain triggering events (until such time as such triggering events occur), then, and in each such case, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect on the day immediately prior to the record date of such issuance by a fraction (y) the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock issued or to be issued upon or as a result of the issuance of such rights, options or warrants (or the maximum number into or for which such convertible or exchangeable securities initially may convert or exchange or for which such options, warrants or other rights initially may be exercised) and (z) the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate consideration for the total number of such additional shares of Common Stock so issued (or into or for which such convertible or exchangeable securities may convert or exchange or for which such options, warrants or other rights may be exercised plus the aggregate amount of any additional consideration initially payable upon the conversion, exchange or exercise of such security) would purchase at the Market Value for the period ending on the date of conversion; provided, that if the Company distributes rights or warrants (other than those referred to above in this subparagraph (c)(ii)) pro rata to the holders of Common Stock, so long as such rights or warrants have not expired or been redeemed by the Company, (y) the holder of any Preferred Stock surrendered for conversion shall be entitled to receive upon such conversion, in addition to the shares of Common Stock then issuable upon such conversion (the “Conversion Shares”), a number of rights or warrants to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or warrants (the “Distribution Date”), the same number of rights or warrants to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions applicable to the rights or warrants and (ii) if such conversion occurs after the Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Common Stock into which such Preferred Stock was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date had such Preferred Stock been converted immediately prior to such Distribution Date in accordance with the terms and provisions applicable to the rights and warrants, and (z) the Conversion Price shall not be subject to adjustment on account of any declaration, distribution or exercise of such rights or warrants.

(iii) In case the Company shall at any time or from time to time (A) make a pro rata distribution to all holders of shares of its Common Stock consisting exclusively of cash (excluding any cash portion of distributions referred to in clause (E) of paragraph (c)(i) above, or cash distributed upon a merger or consolidation to which paragraph (g) below applies), that, when combined together with (x) all other such all-cash distributions made within the then-preceding 12 months in respect of which no adjustment has been made and (y) any cash and the

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fair market value of other consideration paid or payable in respect of any tender offer by the Company or any of its subsidiaries for shares of Common Stock concluded within the then-preceding 12 months in respect of which no adjustment pursuant to this Section 7(c) has been made, in the aggregate exceeds 15% of the Company’s market capitalization (defined as the product of the Market Value for the period ending on the record date of such distribution times the number of shares of Common Stock outstanding on such record date) on the record date of such distribution; (B) complete a tender or exchange offer by the Company or any of its subsidiaries for shares of Common Stock that involves an aggregate consideration that, together with (I) any cash and other consideration payable in a tender or exchange offer by the Company or any of its subsidiaries for shares of Common Stock expiring within the then-preceding 12 months in respect of which no adjustment pursuant to this Section 7(c) has been made and (II) the aggregate amount of any such all-cash distributions referred to in clause (A) above to all holders of shares of Common Stock within the then-preceding 12 months in respect of which no adjustments have been made, exceeds 15% of the Company’s market capitalization on the expiration of such tender offer; or (C) make a distribution to all holders of its Common Stock consisting of evidences of indebtedness, shares of its capital stock other than Common Stock or assets (including securities, but excluding those dividends, rights, options, warrants and distributions referred to in paragraphs (c)(i), (c)(ii) above or this (c)(iii)), then, and in each such case, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect immediately prior to the date of such distribution or completion of such tender or exchange offer, as the case may be, by a fraction (x) the numerator of which shall be the Market Value for the period ending on the record date referred to below, or, if such adjustment is made upon the completion of a tender or exchange offer, on the payment date for such offer, and (y) the denominator of which shall be such Market Value less the then fair market value (as determined by the Board of Directors of the Company) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or paid in such tender or exchange offer, applicable to one share of Common Stock (but such denominator shall not be less than one); provided, however, that no adjustment shall be made with respect to any distribution of rights to purchase securities of the Company if the holder of shares of Preferred Stock would otherwise be entitled to receive such rights upon conversion at any time of shares of Preferred Stock into shares of Common Stock unless such rights are subsequently redeemed by the Company, in which case such redemption shall be treated for purposes of this Section 7(c)(iii) as a dividend on the Common Stock. Such adjustment shall be made whenever any such distribution is made or tender or exchange offer is completed, as the case may be, and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution.

(iv) In the case the Company at any time or from time to time shall take any action affecting its Common Stock (it being understood that the issuance or sale of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock, or any options, warrants or other rights to acquire shares of Common Stock) to any Person at a price per share less than the Conversion Price then in effect shall not be deemed such an action), other than an action described in any of Section 7(c)(i) through Section 7(c)(iii), inclusive, or Section 7(g), then the Conversion Price shall be adjusted in such manner and at such time as the Board of Directors of the Company in good faith determines to be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of the Preferred Stock).

(v) Notwithstanding anything herein to the contrary, no adjustment under this Section 7(c) need be made to the Conversion Price unless such adjustment would require an increase or decrease of at least 1% of the Conversion Price then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Conversion Price.

(vi) The Company reserves the right to make such reductions in the Conversion Price in addition to those required in the foregoing provisions as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. In the event the Company elects to make such a reduction in the Conversion Price, the Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Conversion Price.

(d) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the Conversion Price then in effect shall be required by reason of the taking of such record.

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(e) Upon any increase or decrease in the Conversion Price, then, and in each such case, the Company promptly shall deliver to each holder of Preferred Stock a certificate signed by an authorized officer of the Company, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment.

(f) No fractional shares or securities representing fractional shares of Common Stock shall be issued upon the conversion of any shares of Preferred Stock, whether voluntary or mandatory. If more than one share of Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate Liquidation Preference of the shares of Preferred Stock so surrendered. If the conversion of any share or shares of Preferred Stock results in a fraction, an amount equal to such fraction multiplied by the last reported sale price of the Common Stock on the NYSE (or on such other national securities exchange or automated quotation system on which the Common Stock is then listed for trading or authorized for quotation or, if the Common Stock is not then so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Common Stock) at the close of business on the trading day next preceding the day of conversion shall be paid to such holder in cash by the Company.

(g) In the event of any reclassification of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value), or in the event of any consolidation or merger of the Company with or into another Person or any merger of another Person with or into the Company (other than a consolidation or merger in which the Company is the resulting or surviving Person and which does not result in any reclassification or change of outstanding Common Stock), or in the event of any sale or other disposition to another Person of all or substantially all of the assets of the Company (computed on a consolidated basis) (any of the foregoing, a “Transaction”), each share of Preferred Stock then outstanding shall, without the consent of any holder of Preferred Stock, become convertible at any time, at the option of the holder thereof, only into the kind and amount of securities (of the Company or another issuer), cash and other property receivable upon such Transaction by a holder of the number of shares of Common Stock into which such share of Preferred Stock could have been converted immediately prior to such Transaction, after giving effect to any adjustment event. The provisions of this Section 7(g) and any equivalent thereof in any such securities similarly shall apply to successive Transactions. The provisions of this Section 7(g) shall be the sole right of holders of Preferred Stock in connection with any Transaction and such holders shall have no separate vote thereon.

(h) The Company shall at all times reserve and keep available for issuance upon the conversion of the Preferred Stock such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock.

(i) The issuance or delivery of certificates for Common Stock upon the conversion of shares of Preferred Stock shall be made without charge to the converting holder of shares of Preferred Stock for such certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, and such certificates shall be issued or delivered in the respective names of, or in such names as may be directed by, the holders of the shares of Preferred Stock converted; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of Preferred Stock converted, and the Company shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid.

8. Mandatory Conversion.

(a) At any time on or after March 20, 2006, the Company shall have the right, at its option, to cause the Preferred Stock, in whole but not in part, to be automatically converted into that number of whole shares of Common Stock for each share of Preferred Stock equal to the quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price then in effect, with any resulting fractional shares of Common Stock to be settled in accordance with Section 7(f). The Company may exercise its right to cause a mandatory conversion pursuant to this Section 8(a) only if the closing price of the Common Stock equals or exceeds 130% of the Conversion Price then in effect for at least 20 trading days in any consecutive 30-day trading period on the NYSE (or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation, including the last trading day of such 30-day period, ending on the trading day prior to the Company’s issuance of a press release announcing the mandatory conversion as described in Section 8(b).

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(b) To exercise the mandatory conversion right described in Section 8(a), the Company must issue a press release for publication on the Dow Jones News Service prior to the opening of business on the first trading day following any date on which the conditions described in Section 8(a) are met, announcing such a mandatory conversion. The Company shall also give notice by mail or by publication (with subsequent prompt notice by mail) to the holders of Preferred Stock (not more than four Business Days after the date of the press release) of the mandatory conversion announcing the Company’s intention to convert the Preferred Stock. The conversion date will be a date selected by the Company (the “Mandatory Conversion Date”) and will be no more than five days after the date on which the Company issues the press release described in this Section 8(b).

(c) In addition to any information required by applicable law or regulation, the press release and notice of a mandatory conversion described in Section 8(b) shall state, as appropriate: (i) the Mandatory Conversion Date; (ii) the number of shares of Common Stock to be issued upon conversion of each share of Preferred Stock; (iii) the number of shares of Preferred Stock to be converted; and (iv) that dividends on the Preferred Stock to be converted will cease to accrue on the Mandatory Conversion Date.

(d) On and after the Mandatory Conversion Date, dividends will cease to accrue on the Preferred Stock called for a mandatory conversion pursuant to Section 8(a) and all rights of holders of such Preferred Stock will terminate except for the right to receive the whole shares of Common Stock issuable upon conversion thereof and cash, in lieu of any fractional shares of Common Stock in accordance with Section 7(f). The dividend payment with respect to the Preferred Stock called for a mandatory conversion pursuant to Section 8(a) on a date during the period between the close of business on any Dividend Record Date to the close of business on the corresponding Dividend Payment Date will be payable on such Dividend Payment Date to the record holder of such share on such Dividend Record Date if such share has been converted after such Dividend Record Date and prior to such Dividend Payment Date. Except as provided in the immediately preceding sentence with respect to a mandatory conversion pursuant to Section 8(a), no payment or adjustment will be made upon conversion of Preferred Stock for Accrued Dividends or for dividends with respect to the Common Stock issued upon such conversion.

(e) The Company may not authorize, issue a press release or give notice of any mandatory conversion pursuant to Section 8(a) unless, prior to giving the conversion notice, all Accumulated Dividends on the Preferred Stock for periods ended prior to the date of such conversion notice shall have been paid in cash.

(f) In addition to the mandatory conversion right described in Section 8(a), if there are less than 250,000 shares of Preferred Stock outstanding, the Company shall have the right, at any time on or after March 20, 2008, at its option, to cause the Preferred Stock to be automatically converted into that number of whole shares of Common Stock equal to the quotient of (i) the Liquidation Preference divided by (ii) the lesser of (A) the Conversion Price then in effect and (B) the Market Value for the period ending on the second trading day immediately prior to the Mandatory Conversion Date, with any resulting fractional shares of Common Stock to be settled in cash in accordance with Section 7(f). The provisions of clauses (b), (c), (d) and (e) of this Section 8 shall apply to any mandatory conversion pursuant to this clause (f); provided that (i) the Mandatory Conversion Date described in Section 8(b) shall not be less than 15 days nor more than 30 days after the date on which the Company issues a press release pursuant to Section 8(b) announcing such mandatory conversion and (ii) the press release and notice of mandatory conversion described in Section 8(c) will not state the number of shares of Common Stock to be issued upon conversion of each share of Preferred Stock.

9. Consolidation, Merger and Sale of Assets.

(a) The Company, without the consent of the holders of any of the outstanding Preferred Stock, may consolidate with or merge into any other Person or convey, transfer or lease all or substantially all its assets to any Person or may permit any Person to consolidate with or merge into, or transfer or lease all or substantially all its properties to, the Company; provided, however, that (a) the successor, transferee or lessee is organized under the laws of the United States or any political subdivision thereof; (b) the shares of Preferred Stock will become shares of such successor, transferee or lessee, having in respect of such successor, transferee or lessee the same powers, preferences and relative participating, optional or other special rights and the qualification, limitations or restrictions thereon, the Preferred Stock had immediately prior to such transaction; and (c) the Company delivers to the Transfer Agent an Officers’ Certificate and an Opinion of Counsel stating that such transaction complies with this Certificate of Designation.

(b) Upon any consolidation by the Company with, or merger by the Company into, any other person or any conveyance, transfer or lease of all or substantially all the assets of the Company as described in Section 9(a), the successor resulting from such consolidation or into which the Company is merged or the transferee or lessee to which such conveyance, transfer or lease is made, will succeed to, and be substituted for, and may exercise every right and

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power of, the Company under the shares of Preferred Stock, and thereafter, except in the case of a lease, the predecessor (if still in existence) will be released from its obligations and covenants with respect to the Preferred Stock.

10. SEC Reports.

Whether or not the Company is required to file reports with the Commission, if any shares of Preferred Stock are outstanding, the Company shall file with the Commission all such reports and other information as it would be required to file with the Commission by Section 13(a)or 15(d) under the Exchange Act. The Company shall supply each holder of Preferred Stock, upon request, without cost to such holder, copies of such reports or other information.

11. Certificates.

(a) Form and Dating. The Preferred Stock and the Transfer Agent’s certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Certificate of Designation. The Preferred Stock certificate may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Preferred Stock certificate shall be dated the date of its authentication. The terms of the Preferred Stock certificate set forth in Exhibit A are part of the terms of this Certificate of Designation.

(i) Global Preferred Stock. The Preferred Stock shall be issued initially in the form of one or more fully registered global certificates with the global securities legend and restricted securities legend set forth in Exhibit A hereto (the “Global Preferred Stock”), which shall be deposited on behalf of the purchasers represented thereby with the Transfer Agent, as custodian for DTC (or with such other custodian as DTC may direct), and registered in the name of DTC or a nominee of DTC, duly executed by the Company and authenticated by the Transfer Agent as hereinafter provided. The number of shares of Preferred Stock represented by Global Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Transfer Agent and DTC or its nominee as hereinafter provided. With respect to shares of Preferred Stock that are not “restricted securities” as defined in Rule 144 on a conversion date, all shares of Common Stock distributed on such conversion date will be freely transferable without restriction under the Securities Act (other than by affiliates), and such shares will be eligible for receipt in global form through the facilities of DTC.

(ii) Book-Entry Provisions. In the event Global Preferred Stock is deposited with or on behalf of DTC, the Company shall execute and the Transfer Agent shall authenticate and deliver initially one or more Global Preferred Stock certificates that (a) shall be registered in the name of DTC as depository for such Global Preferred Stock or the nominee of DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC’s instructions or held by the Transfer Agent as custodian for DTC.

Members of, or participants in, DTC (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Preferred Stock held on their behalf by DTC or by the Transfer Agent as the custodian of DTC or under such Global Preferred Stock, and DTC may be treated by the Company, the Transfer Agent and any agent of the Company or the Transfer Agent as the absolute owner of such Global Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Transfer Agent or any agent of the Company or the Transfer Agent from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Stock.

(iii) Certificated Preferred Stock; Certificated Common Stock. Except as provided in this paragraph 11(a) or in paragraph 11(c), owners of beneficial interests in Global Preferred Stock will not be entitled to receive physical delivery of Preferred Stock in fully registered certificated form (“Certificated Preferred Stock”). With respect to shares of Preferred Stock that are “restricted securities” as defined in Rule 144 on a conversion date, all shares of Common Stock issuable on conversion of such shares on such conversion date will be issued in fully registered certificated form (“Certificated Common Stock”). Certificates of Certificated Common Stock will be mailed or made available at the office of the Transfer Agent for the Preferred Stock on or as soon as reasonably practicable after the relevant conversion date to the converting holder.

After a transfer of any Preferred Stock or Certificated Common Stock during the period of the effectiveness of a Shelf Registration Statement with respect to such Preferred Stock or such Certificated Common Stock, all requirements pertaining to legends on such Preferred Stock (including Global Preferred Stock) or Certificated Common Stock will cease to apply, the requirements requiring that any such Certificated

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Common Stock issued to Holders be issued in certificated form, as the case may, will cease to apply, and Preferred Stock or Common Stock, as the case may be, in global or fully registered certificated form, in either case without legends, will be available to the transferee of the Holder of such Preferred Stock or Certificated Common Stock upon exchange of such transferring Holder’s Preferred Stock or Common Stock or directions to transfer such Holder’s interest in the Global Preferred Stock, as applicable.

(b) Execution and Authentication. Two Officers shall sign the Preferred Stock certificate for the Company by manual or facsimile signature.

If an Officer whose signature is on a Preferred Stock certificate no longer holds that office at the time the Transfer Agent authenticates the Preferred Stock certificate, the Preferred Stock certificate shall be valid nevertheless.

A Preferred Stock certificate shall not be valid until an authorized signatory of the Transfer Agent manually signs the certificate of authentication on the Preferred Stock certificate. The signature shall be conclusive evidence that the Preferred Stock certificate has been authenticated under this Certificate of Designation.

The Transfer Agent shall authenticate and deliver certificates for up to 4,600,000 shares of Preferred Stock for original issue upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. Such order shall specify the number of shares of Preferred Stock to be authenticated and the date on which the original issue of Preferred Stock is to be authenticated.

The Transfer Agent may appoint an authenticating agent reasonably acceptable to the Company to authenticate the certificates for Preferred Stock. Unless limited by the terms of such appointment, an authenticating agent may authenticate certificates for Preferred Stock whenever the Transfer Agent may do so. Each reference in this Certificate of Designation to authentication by the Transfer Agent includes authentication by such agent. An authenticating agent has the same rights as the Transfer Agent or agent for service of notices and demands.

(c) Transfer and Exchange. (i) Transfer and Exchange of Certificated Preferred Stock. When Certificated Preferred Stock is presented to the Transfer Agent with a request to register the transfer of such Certificated Preferred Stock or to exchange such Certificated Preferred Stock for an equal number of shares of Certificated Preferred Stock, the Transfer Agent shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Preferred Stock surrendered for transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Transfer Agent, duly executed by the Holder thereof or its attorney duly authorized in writing; and

(2) is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (I) or (II) below, and is accompanied by the following additional information and documents, as applicable:

(I) if such Certificated Preferred Stock is being delivered to the Transfer Agent by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect in substantially the form of Exhibit C hereto; or

(II) if such Certificated Preferred Stock is being transferred to the Company or to a “qualified institutional buyer” (“QIB”) in accordance with Rule 144A under the Securities Act or pursuant to another exemption from registration under the Securities Act, (i) a certification to that effect (in substantially the form of Exhibit C hereto) and (ii) if the Company so requests, an Opinion of Counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in paragraph 11 (c) (vii).

(ii) Restrictions on Transfer of Certificated Preferred Stock for a Beneficial Interest in Global Preferred Stock. Certificated Preferred Stock may not be exchanged for a beneficial interest in Global Preferred Stock except upon satisfaction of the requirements set forth below. Upon receipt by the Transfer Agent of Certificated Preferred Stock, duly endorsed or accompanied by appropriate instruments of transfer, in form reasonably satisfactory to the Company and the Transfer Agent, together with written instructions directing the Transfer Agent to make, or to direct DTC to make, an adjustment on its books and records with respect to such Global Preferred Stock to reflect an increase in the number of shares of Preferred Stock represented by the Global Preferred Stock, then the Transfer Agent shall cancel such Certificated Preferred Stock and cause, or direct DTC to cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number of shares of Preferred Stock represented by the Global Preferred Stock to be increased

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accordingly. If no Global Preferred Stock is then outstanding, the Company shall issue and the Transfer Agent shall authenticate, upon written order of the Company in the form of an Officers’ Certificate, a new Global Preferred Stock representing the appropriate number of shares.

(iii) Transfer and Exchange of Global Preferred Stock. The transfer and exchange of Global Preferred Stock or beneficial interests therein shall be effected through DTC, in accordance with this Certificate of Designation (including applicable restrictions on transfer set forth herein, if any) and the procedures of DTC therefor.

(iv) Transfer of a Beneficial Interest in Global Preferred Stock for a Certificated Preferred Stock.

(1) Any Person having a beneficial interest in Preferred Stock that is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to another exemption from registration thereunder may upon request, but only with the consent of the Company, and if accompanied by a certification from such Person to that effect (in substantially the form of Exhibit C hereto), exchange such beneficial interest for Certificated Preferred Stock representing the same number of shares of Preferred Stock. Upon receipt by the Transfer Agent of written instructions or such other form of instructions as is customary for DTC from DTC or its nominee on behalf of any Person having a beneficial interest in Global Preferred Stock and upon receipt by the Transfer Agent of a written order or such other form of instructions as is customary for DTC or the Person designated by DTC as having such a beneficial interest in a Transfer Restricted Security only, then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number of shares of Preferred Stock represented by Global Preferred Stock to be reduced on its books and records and, following such reduction, the Company will execute and the Transfer Agent will authenticate and deliver to the transferee Certificated Preferred Stock.

(2) Certificated Preferred Stock issued in exchange for a beneficial interest in a Global Preferred Stock pursuant to this paragraph 11(c)(iv) shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Transfer Agent. The Transfer Agent shall deliver such Certificated Preferred Stock to the Persons in whose names such Preferred Stock are so registered in accordance with the instructions of DTC.

(v) Restrictions on Transfer and Exchange of Global Preferred Stock.

(1) Notwithstanding any other provisions of this Certificate of Designation (other than the provisions set forth in paragraph 11(c)(vi)), Global Preferred Stock may not be transferred as a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor depository or a nominee of such successor depository.

(2) In the event that the Global Preferred Stock is exchanged for Preferred Stock in definitive registered form pursuant to paragraph 11(c)(vi) prior to the effectiveness of a Shelf Registration Statement with respect to such securities, such Preferred Stock may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this paragraph 11(c) (including the certification requirements set forth in the Exhibits to this Certificate of Designation intended to ensure that such transfers comply with Rule 144A or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company.

(vi) Authentication of Certificated Preferred Stock. If at any time:

(1) DTC notifies the Company that DTC is unwilling or unable to continue as depository for the Global Preferred Stock and a successor depository for the Global Preferred Stock is not appointed by the Company within 90 days after delivery of such notice;

(2) DTC ceases to be a clearing agency registered under the Exchange Act and a successor depository for the Global Preferred Stock is not appointed by the Company within 90 days; or

(3) the Company, in its sole discretion, notifies the Transfer Agent in writing that it elects to cause the issuance of Certificated Preferred Stock under this Certificate of Designation,

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then the Company will execute, and the Transfer Agent, upon receipt of a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company requesting the authentication and delivery of Certificated Preferred Stock to the Persons designated by the Company, will authenticate and deliver Certificated Preferred Stock equal to the number of shares of Preferred Stock represented by the Global Preferred Stock, in exchange for such Global Preferred Stock.

(vii) Legend. (1) Except as permitted by the following paragraph (2) and in paragraph 11(a)(iii), each certificate evidencing the Global Preferred Stock, the Certificated Preferred Stock and Certificated Common Stock shall bear a legend in substantially the following form:

“THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND THIS SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) OUTSIDE OF THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (1) THROUGH (5) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER OF THIS SECURITY WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THE SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.” (1)

1 Subject to removal upon registration under the Securities Act of 1933 or otherwise when the security shall no longer be a Transfer Restricted Security.

(2) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by Global Preferred Stock) pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act or an effective registration statement under the Securities Act:

(I) in the case of any Transfer Restricted Security that is a Certificated Preferred Stock, the Transfer Agent shall permit the Holder thereof to exchange such Transfer Restricted Security for Certificated Preferred Stock that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and

(II) in the case of any Transfer Restricted Security that is represented by a Global Preferred Stock, with the consent of the Company, the Transfer Agent shall permit the Holder thereof to exchange such Transfer Restricted Security for Certificated Preferred Stock that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder’s request for such exchange was made in reliance on Rule 144 or another exemption from registration under the Securities Act and the Holder certifies to that effect in writing to the Transfer Agent (such certification to be in the form set forth in Exhibit C hereto).

(viii) Cancelation or Adjustment of Global Preferred Stock. At such time as all beneficial interests in Global Preferred Stock have either been exchanged for Certificated Preferred Stock, converted or canceled, such Global Preferred Stock shall be returned to DTC for cancelation or retained and canceled by the Transfer Agent. At any time prior to such cancelation, if any beneficial interest in Global Preferred Stock is exchanged for Certificated Preferred

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Stock, converted or canceled, the number of shares of Preferred Stock represented by such Global Preferred Stock shall be reduced and an adjustment shall be made on the books and records of the Transfer Agent with respect to such Global Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

(ix) Obligations with Respect to Transfers and Exchanges of Preferred Stock. (1) To permit registrations of transfers and exchanges, the Company shall execute and the Transfer Agent shall authenticate Certificated Preferred Stock and Global Preferred Stock as required pursuant to the provisions of this paragraph 11(c).

(2) All Certificated Preferred Stock and Global Preferred Stock issued upon any registration of transfer or exchange of Certificated Preferred Stock or Global Preferred Stock shall be the valid obligations of the Company, entitled to the same benefits under this Certificate of Designation as the Certificated Preferred Stock or Global Preferred Stock surrendered upon such registration of transfer or exchange.

(3) Prior to due presentment for registration of transfer of any shares of Preferred Stock, the Transfer Agent and the Company may deem and treat the Person in whose name such shares of Preferred Stock are registered as the absolute owner of such Preferred Stock and neither the Transfer Agent nor the Company shall be affected by notice to the contrary.

(4) No service charge shall be made to a Holder for any registration of transfer or exchange upon surrender of any Preferred Stock certificate or Common Stock certificate at the office of the Transfer Agent maintained for that purpose. However, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Preferred Stock certificates or Common Stock certificates.

(5) Upon any sale or transfer of shares of Preferred Stock (including any Preferred Stock represented by a Global Preferred Stock Certificate) or of Certificated Common Stock pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 or another exemption from registration under the Securities Act (and based upon an Opinion of Counsel reasonably satisfactory to the Company if it so requests):

(A) in the case of any Certificated Preferred Stock or Certificated Common Stock, the Company and the Transfer Agent shall permit the holder thereof to exchange such Preferred Stock or Certificated Common Stock for Certificated Preferred Stock or Certificated Common Stock, as the case may be, that does not bear the legend set forth in paragraph (c)(vii) above and rescind any restriction on the transfer of such Preferred Stock or Common Stock issuable in respect of the conversion of the Preferred Stock; and

(B) in the case of any Global Preferred Stock, such Preferred Stock shall not be required to bear the legend set forth in paragraph (c)(vii) above but shall continue to be subject to the provisions of paragraph (c)(iv) hereof; provided, however, that with respect to any request for an exchange of Preferred Stock that is represented by Global Preferred Stock for Certificated Preferred Stock that does not bear the legend set forth in paragraph (c)(vii) above in connection with a sale or transfer thereof pursuant to Rule 144 or another exemption from registration under the Securities Act (and based upon an Opinion of Counsel if the Company so requests), the Holder thereof shall certify in writing to the Transfer Agent that such request is being made pursuant to such exemption (such certification to be substantially in the form of Exhibit C hereto).

(x) No Obligation of the Transfer Agent.

(1) The Transfer Agent shall have no responsibility or obligation to any beneficial owner of Global Preferred Stock, a member of, or a participant in DTC or any other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Preferred Stock or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice or the payment of any amount, under or with respect to such Global Preferred Stock. All notices and communications to be given to the Holders and all payments to be made to Holders under the Preferred Stock shall be given or made only to the Holders (which shall be DTC or its nominee in the case of the Global Preferred Stock). The rights of beneficial owners in any Global Preferred Stock shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Transfer Agent may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.

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(2) The Transfer Agent shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Certificate of Designation or under applicable law with respect to any transfer of any interest in any Preferred Stock (including any transfers between or among DTC participants, members or beneficial owners in any Global Preferred Stock) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Certificate of Designation, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(d) Replacement Certificates. If a mutilated Preferred Stock certificate is surrendered to the Transfer Agent or if the Holder of a Preferred Stock certificate claims that the Preferred Stock certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Transfer Agent shall countersign a replacement Preferred Stock certificate if the reasonable requirements of the Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the State of Oklahoma are met. If required by the Transfer Agent or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Transfer Agent to protect the Company and the Transfer Agent from any loss which either of them may suffer if a Preferred Stock certificate is replaced. The Company and the Transfer Agent may charge the Holder for their expenses in replacing a Preferred Stock certificate.

(e) Temporary Certificates. Until definitive Preferred Stock certificates are ready for delivery, the Company may prepare and the Transfer Agent shall countersign temporary Preferred Stock certificates. Temporary Preferred Stock certificates shall be substantially in the form of definitive Preferred Stock certificates but may have variations that the Company considers appropriate for temporary Preferred Stock certificates. Without unreasonable delay, the Company shall prepare and the Transfer Agent shall countersign definitive Preferred Stock certificates and deliver them in exchange for temporary Preferred Stock certificates.

(f) Cancelation. (i) In the event the Company shall purchase or otherwise acquire Certificated Preferred Stock, the same shall thereupon be delivered to the Transfer Agent for cancelation.

(ii) At such time as all beneficial interests in Global Preferred Stock have either been exchanged for Certificated Preferred Stock, converted, repurchased or canceled, such Global Preferred Stock shall thereupon be delivered to the Transfer Agent for cancelation.

(iii) The Transfer Agent and no one else shall cancel and destroy all Preferred Stock certificates surrendered for transfer, exchange, replacement or cancelation and deliver a certificate of such destruction to the Company unless the Company directs the Transfer Agent to deliver canceled Preferred Stock certificates to the Company. The Company may not issue new Preferred Stock certificates to replace Preferred Stock certificates to the extent they evidence Preferred Stock which the Company has purchased or otherwise acquired.

12. Additional Rights of Holders. In addition to the rights provided to Holders under this Certificate of Designation, Holders shall have the rights set forth in the Registration Rights Agreement.

13. Other Provisions.

(1) With respect to any notice to a holder of shares of Preferred Stock required to be provided hereunder, neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice.

(2) Shares of Preferred Stock issued and reacquired will be retired and canceled promptly after reacquisition thereof and, upon compliance with the applicable requirements of Oklahoma law, have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series and may with any and all other authorized but unissued shares of preferred stock of the Company be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Corporation, except that any issuance or reissuance of shares of Preferred Stock must be in compliance with this Certificate of Designation.

(3) The shares of Preferred Stock shall be issuable only in whole shares.

(4) All notice periods referred to herein shall commence on the date of the mailing of the applicable notice.

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IN WITNESS WHEREOF, the Company has caused this certificate to be signed and attested this 28th day of February, 2003.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ TOM L. WARD
	Tom L. Ward

Attest:	/s/ JENNIFER M. GRIGSBY
	Jennifer M. Grigsby

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EXHIBIT A

FORM OF PREFERRED STOCK

FACE OF SECURITY

[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND THIS SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (1) THROUGH (5) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER OF THIS SECURITY WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THE SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.”(2)

2 Subject to removal upon registration under the Securities Act of 1933 or otherwise when the security shall no longer be a Transfer Restricted Security.

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.] (3)

[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.] (3)

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Certificate Number	Number of Shares of
	Convertible Preferred Stock
[    ]	[            ]
	CUSIP NO. : 165167 60 2 (4)

6.00% Cumulative Convertible Preferred Stock (par value $0.01) (liquidation

19

preference $50 per share of Convertible Preferred Stock)

of

Chesapeake Energy Corporation

3 Subject to removal if not a global security.

4 CUSIP Number 165167 70 1, if not a Transfer Restricted Security.

Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), hereby certifies that [    ] (the “Holder”) is the registered owner of [    ] fully paid and non-assessable preferred securities of the Company designated the 6.00% Cumulative Convertible Preferred Stock (par value $0.01) (liquidation preference $50 per share of Preferred Stock) (the “Preferred Stock”). The shares of Preferred Stock are transferable on the books and records of the Transfer Agent, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Stock represented hereby are issued and shall in all respects be subject to the provisions of the Certificate of Designation dated February 28, 2003, as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.

Reference is hereby made to select provisions of the Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.

Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.

Unless the Transfer Agent’s Certificate of Authentication hereon has been properly executed, these shares of Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has executed this certificate this      day of             , 2003.

CHESAPEAKE ENERGY CORPORATION

By:

Name:

Title:

By:

Name:

Title:

20

TRANSFER AGENT’S CERTIFICATE OF AUTHENTICATION

These are shares of the Preferred Stock referred to in the within-mentioned Certificate of Designation.

Dated:                     , 2003

UMB BANK, N.A., as Transfer Agent,
By:
	Authorized Signatory

21

REVERSE OF SECURITY

Cash dividends on each share of Preferred Stock shall be payable at a rate per annum set forth in the face hereof or as provided in the Certificate of Designation.

The shares of Preferred Stock shall be convertible into the Company’s Common Stock in the manner and according to the terms set forth in the Certificate of Designation.

The Company will furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock and the qualifications, limitations or restrictions of such preferences and/or rights.

22

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Preferred Stock evidenced hereby to:

(Insert assignee’s social security or tax identification number)

(Insert address and zip code of assignee)

and irrevocably appoints:

agent to transfer the shares of Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.

Date:                     

Signature:

(Sign exactly as your name appears on the other side of this Preferred Stock Certificate)

Signature Guarantee:(5)

5 (Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)

23

EXHIBIT B

NOTICE OF CONVERSION

(To be Executed by the Holder

in order to Convert the Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”) shares of 6.00% Cumulative Convertible Preferred Stock (the “Preferred Stock”), represented by stock certificate No(s). (the “Preferred Stock Certificates”) into shares of common stock (“Common Stock”) of Chesapeake Energy Corporation (the “Company”) according to the conditions of the Certificate of Designation of the Preferred Stock (the “Certificate of Designation”), as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith the Preferred Stock Certificates. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. A copy of each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof).

The undersigned represents and warrants that all offers and sales by the undersigned of the shares of Common Stock issuable to the undersigned upon conversion of the Preferred Stock shall be made pursuant to registration of the Common Stock under the Securities Act of 1933 (the “Act”), or pursuant to any exemption from registration under the Act.

Any holder, upon the exercise of its conversion rights in accordance with the terms of the Certificate of Designation and the Preferred Stock, agrees to be bound by the terms of the Registration Rights Agreement.

Capitalized terms used but not defined herein shall have the meanings ascribed thereto in or pursuant to the Certificate of Designation.

Date of Conversion:

Applicable Conversion Price:

Number of shares of

Preferred Stock to be Converted:

Number of shares of

Common Stock to be Issued:*

Signature:

Name:

Address:**

Fax No.:

* The Company is not required to issue shares of Common Stock until the original Preferred Stock Certificate(s) (or evidence of loss, theft or destruction thereof) to be converted are received by the Company or its Transfer Agent. The Company shall issue and deliver shares of Common Stock to an overnight courier not later than three business days following receipt of the original Preferred Stock Certificate(s) to be converted.

** Address where shares of Common Stock and any other payments or certificates shall be sent by the Company.

24

EXHIBIT C

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER OF PREFERRED STOCK

Re: 6.00% Cumulative Convertible Preferred Stock (the “Preferred Stock”) of

Chesapeake Energy Corporation (the “Company”)

This Certificate relates to              shares of Preferred Stock held in |    | */ book-entry or |    | */ definitive form by                  (the “Transferor”).

The Transferor*:

|    | has requested the Transfer Agent by written order to deliver in exchange for its beneficial interest in the Preferred Stock held by the Depository shares of Preferred Stock in definitive, registered form equal to its beneficial interest in such Preferred Stock (or the portion thereof indicated above); or

|    | has requested the Transfer Agent by written order to exchange or register the transfer of Preferred Stock.

In connection with such request and in respect of such Preferred Stock, the Transferor does hereby certify that the Transferor is familiar with the Certificate of Designation relating to the above-captioned Preferred Stock and that the transfer of this Preferred Stock does not require registration under the Securities Act of 1933 (the “Securities Act”) because */:

|    | Such Preferred Stock is being acquired for the Transferor’s own account without transfer.

|    | Such Preferred Stock is being transferred to the Company.

|    | Such Preferred Stock is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act), in reliance on Rule 144A.

* /Please check applicable box.

|    | Such Preferred Stock is being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act (and based on an Opinion of Counsel if the Company so requests).

[ INSERT NAME OF TRANSFEROR ]

by

Date:                     

25

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 600,000 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 600,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 600,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $6,000.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 24^th day of November, 2004.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ MARTHA A BURGER
	Martha A. Burger
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

/s/ JENNIFER M. GRIGSBY

Jennifer M. Grigsby, Secretary

26

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 3,896,890 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 3,896,890 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 3,896,890 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $38,968.90.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 13^th day of January, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ MARTHA A BURGER
	Martha A. Burger
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

/s/ JENNIFER M. GRIGSBY

Jennifer M. Grigsby, Secretary

27

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 500 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 500 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 500 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $5.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 22^nd day of March, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ MARTHA A BURGER
	Martha A. Burger
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

/s/ JENNIFER M. GRIGSBY

Jennifer M. Grigsby, Secretary

28

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 1,235 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 1,235 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 1,235 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $12.35.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 28^th day of June, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby, Secretary

29

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 100 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 100 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 100 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $1.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 12^th day of July, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/S/ MARTHA A. BURGER
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

By:	/s/ JENNIFER M. GRIGSBY
	Jennifer M. Grigsby, Secretary

30

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 600 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 600 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 600 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $6.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 10^th day of October, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/S/ MARTHA A. BURGER
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

By:	/s/ JENNIFER M. GRIGSBY
	Jennifer M. Grigsby, Secretary

31

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 365 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 365 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 365 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $3.65.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 14^th day of November, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/S/ MARTHA A. BURGER
	Treasurer and
	Senior Vice President – Human Resources

ATTEST:

By:	/s/ JENNIFER M. GRIGSBY
	Jennifer M. Grigsby, Secretary

32

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 1,000 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 1,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 1,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $10.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 15^th day of December, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President- Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

33

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 50 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 50 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 50 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $0.50.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 7^th day of February, 2006.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President- Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

34

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 134 shares of its 6.00% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 6.00% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 6.00% Cumulative Convertible Preferred Stock by 134 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 134 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $1.34.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President - Human Resources and attested to by its Secretary, this 17^th day of February, 2006.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President- Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

35

EX-3.1.4

EXHIBIT 3.1.4

CERTIFICATE OF DESIGNATION

OF

5% CUMULATIVE CONVERTIBLE PREFERRED STOCK

OF

CHESAPEAKE ENERGY CORPORATION

Pursuant to Section 1032(G) of the Oklahoma General Corporation Act

CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation (the “Company”), does hereby certify that the following resolution was duly adopted by action of the Board of Directors of the Company, with the provisions thereof fixing the number of shares of the series and the dividend rate being set by action of the Board of Directors of the Company:

RESOLVED that pursuant to the authority expressly granted to and vested in the Board of Directors of the Company by the provisions of Article IV, Section 1 of the Certificate of Incorporation of the Company, as amended from time to time (the “Certificate of Incorporation”), and pursuant to Section 1032(G) of the Oklahoma General Corporation Act, the Board of Directors hereby creates a series of preferred stock of the Company and hereby states that the voting powers, designations, preferences and relative, participating, optional or other special rights of which, and qualifications, limitations or restrictions thereof (in addition to the provisions set forth in the Certificate of Incorporation which are applicable to the preferred stock of all classes and series), shall be as follows:

1. Designation and Amount; Ranking. (a) There shall be created from the 10,000,000 shares of preferred stock, par value $0.01 per share, of the Company authorized to be issued pursuant to the Certificate of Incorporation, a series of preferred stock, designated as the “5% Cumulative Convertible Preferred Stock,” par value $0.01 per share (the “Preferred Stock”), and the number of shares of such series shall be 1,725,000. Such number of shares may be decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Preferred Stock to a number less than that of the shares of Preferred Stock then outstanding plus the number of shares issuable upon exercise of options or rights then outstanding.

(b) The Preferred Stock will, with respect to both dividend rights and rights upon the liquidation, winding-up or dissolution of the Company, rank on a parity with the 6.75% Preferred Stock and the 6.00% Preferred Stock, and the Preferred Stock will, with respect to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company rank (i) senior to all Junior Stock, (ii) on a parity with all other Parity Stock and (iii) junior to all Senior Stock.

2. Definitions. As used herein, the following terms shall have the following meanings:

(a) “Accrued Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the accrued and unpaid dividends on such share from and including the most recent Dividend Payment Date (or the Issue Date, if such date is prior to the first Dividend Payment Date) to but not including such date.

(b) “Accumulated Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the aggregate accumulated and unpaid dividends on such share from the Issue Date until the most recent Dividend Payment Date on or prior to such date. There shall be no Accumulated Dividends with respect to any share of Preferred Stock prior to the first Dividend Payment Date.

(c) “Affiliate” shall have the meaning ascribed to it, on the date hereof, under Rule 405 of the Securities Act of 1933, as amended.

(d) “Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.

(e) “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to close.

(f) “Change of Control” shall mean any of the following events: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Company’s assets (determined on a consolidated basis) to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than to Permitted Holders; (ii) the adoption of a plan the consummation of which would result in the liquidation or dissolution of the Company; (iii) the acquisition, directly or indirectly, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than Permitted Holders, of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other Person or group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this definition, such other Person or group shall be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation, if such other Person or group is the beneficial owner (as defined above), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent corporation and the Permitted Holders beneficially own (as defined in this proviso), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent corporation and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent corporation); or (iv) during any period of two consecutive years, individuals who at the beginning of such period comprised the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66 ²/3% of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. For purposes of this definition of “Change of Control,” the term “Permitted Holders” means Aubrey K. McClendon and Tom L. Ward and their respective Affiliates.

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(g) “Change of Control Date” shall mean the date on which the Change of Control event occurs.

(h) “Conversion Price” shall mean $16.4037, subject to adjustment as set forth in Section 7(c).

(i) “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company, or any other class of stock resulting from successive changes or reclassifications of such common stock consisting solely of changes in par value, or from par value to no par value, or as a result of a subdivision, combination, or merger, consolidation or similar transaction in which the Company is a constituent corporation.

(j) “DTC” or “Depository” shall mean The Depository Trust Company.

(k) “Dividend Payment Date” shall mean February 15, May 15, August 15 and November 15 of each year, commencing February 15, 2004.

(l) “Dividend Record Date” shall mean February 1, May 1, August 1 and November 1 of each year.

(m) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(n) “Holder” or “holder” shall mean a holder of record of the Preferred Stock.

(o) “Issue Date” shall mean November 18, 2003, the original date of issuance of the Preferred Stock.

(p) “Junior Stock” shall mean all classes of common stock of the Company and the Series A Junior Participating Convertible Preferred Stock and each other class of capital stock or series of preferred stock established after the Issue Date, by the Board of Directors, the terms of which do not expressly provide that such class or series ranks senior to or on parity with the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(q) “Liquidation Preference” shall mean, with respect to each share of Preferred Stock, $100.00.

(r) “Market Value” shall mean the average closing price of the Common Stock for a five consecutive trading day period on the NYSE (or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation or, if the Common Stock is not so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Common Stock).

(s) “NYSE” shall mean the New York Stock Exchange, Inc.

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(t) “Officer” shall mean the Chairman of the Board of Directors, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.

(u) “Officers’ Certificate” shall mean a certificate signed by two Officers.

(v) “Opinion of Counsel” shall mean a written opinion from legal counsel who is acceptable to the Transfer Agent. The counsel may be an employee of or counsel to the Company or the Transfer Agent.

(w) “Parity Stock” shall mean the 6.00% Preferred Stock, the 6.75% Preferred Stock and any class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank on parity with the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(x) “Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

(y) “SEC” or “Commission” shall mean the Securities and Exchange Commission.

(z) “Securities Act” shall mean the Securities Act of 1933, as amended.

(aa) “Senior Stock” shall mean each class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank senior to the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(bb) “Shelf Registration Statement” shall mean a shelf registration statement filed with the SEC to cover resales of any Transfer Restricted Securities by holders thereof.

(cc) “6.00% Preferred Stock” shall mean the series of preferred stock, par value $0.01 per share, of the Company designated as the “6.00% Cumulative Convertible Preferred Stock.”

(dd) “6.75% Preferred Stock” shall mean the series of preferred stock, par value $0.01 per share, of the Company designated as the “6.75% Cumulative Convertible Preferred Stock.”

(ee) “Transfer Agent” shall mean UMB Bank, N.A., the Company’s duly appointed transfer agent, registrar and conversion and dividend disbursing agent for the Preferred Stock. The Company may, in its sole discretion, remove the Transfer Agent with 10 days’ prior notice to the Transfer Agent; provided, that the Company shall appoint a successor Transfer Agent who shall accept such appointment prior to the effectiveness of such removal.

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(ff) “Transfer Restricted Securities” shall mean each share of Preferred Stock (or the shares of Common Stock into which such share of Preferred Stock is convertible) until (i) the date on which such security or its predecessor has been effectively registered under the Securities Act and disposed of in accordance therewith or (ii) the date on which such security or predecessor is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

(gg) “Underwriting Agreement” shall mean that certain Underwriting Agreement with respect to the Preferred Stock, dated November 12, 2003, among the Company and Lehman Brothers Inc., Banc of America Securities LLC and Morgan Stanley & Co. Incorporated, as representatives of the several underwriters named therein.

(hh) “Voting Rights Triggering Event” shall mean the failure of the Company to pay dividends on the Preferred Stock with respect to six or more quarterly periods (whether or not consecutive).

(ii) “Voting Stock” shall mean, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of contingency) to vote in the election of members of the Board of Directors or other governing body of such Person. For purposes of this definition, “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of corporate stock or partnership interests and any and all warrants, options and rights with respect thereto (whether or not currently exercisable), including each class of common stock and preferred stock of such Person.

3. Dividends.

(a) The holders of shares of the outstanding Preferred Stock shall be entitled, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, to receive cumulative cash dividends at the rate per annum of 5.00% per share on the Liquidation Preference (equivalent to $5.00 per annum per share), payable quarterly in arrears (the “Dividend Rate”). The Dividend Rate may be increased in the circumstances described in Section 3(b) below. Dividends payable for each full dividend period will be computed by dividing the Dividend Rate by four and shall be payable in arrears on each Dividend Payment Date (commencing May 15, 2004) for the quarterly period ending immediately prior to such Dividend Payment Date, to the holders of record of Preferred Stock at the close of business on the Dividend Record Date applicable to such Dividend Payment Date. Such dividends shall be cumulative from the most recent date as to which dividends shall have been paid or, if no dividends have been paid, from the Issue Date (whether or not in any dividend period or periods there shall be funds of the Company legally available for the payment of such dividends) and shall accrue on a day-to-day basis, whether or not earned or declared, from and after the Issue Date. Dividends payable for any partial dividend period, including the initial partial dividend period ending immediately prior to February 15, 2004, shall be computed on the basis of days elapsed over a 360-day year consisting of twelve 30-day months. Accumulations of dividends on shares of Preferred Stock shall not bear interest.

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(b) No dividend will be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Preferred Stock with respect to any dividend period unless all dividends for all preceding dividend periods have been declared and paid or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Preferred Stock.

(c) No dividends or other distributions (other than a dividend or distribution payable solely in shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and other than cash paid in lieu of fractional shares) may be declared, made or paid, or set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity Stock or Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for the redemption of any Parity Stock or Junior Stock) by or on behalf of the Company (except by conversion into or exchange for shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock)), unless full Accumulated Dividends shall have been or contemporaneously are declared and paid, or are declared and a sum sufficient for the payment thereof is set apart for such payment, on the Preferred Stock and any Parity Stock for all dividend payment periods terminating on or prior to the date of such declaration, payment, redemption, purchase or acquisition. Notwithstanding the foregoing, if full dividends have not been paid on the Preferred Stock and any Parity Stock, dividends may be declared and paid on the Preferred Stock and such Parity Stock so long as the dividends are declared and paid pro rata so that the amounts of dividends declared per share on the Preferred Stock and such Parity Stock will in all cases bear to each other the same ratio that accumulated and unpaid dividends per share on the shares of Preferred Stock and such other Parity Stock bear to each other.

(d) Holders of shares of Preferred Stock shall not be entitled to any dividends on the Preferred Stock, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Stock which may be in arrears.

(e) The holders of shares of Preferred Stock at the close of business on a Dividend Record Date will be entitled to receive the dividend payment on those shares on the next following Dividend Payment Date notwithstanding the subsequent conversion thereof or the Company’s default in payment of the dividend due on that Dividend Payment Date. However, shares of Preferred Stock surrendered for conversion during the period between the close of business on any Dividend Record Date and the close of business on the Business Day immediately preceding the applicable Dividend Payment Date must be accompanied by payment of an amount equal to the dividend payable on the shares on that Dividend Payment Date. A holder of shares of Preferred Stock on a Dividend Record Date who (or whose transferee) tenders any shares for conversion on the corresponding Dividend Payment Date will receive the dividend payable by the Company on the Preferred Stock on that date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Preferred Stock for conversion. Except as provided above with respect to a voluntary conversion pursuant to Section 7, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon conversion.

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4. Change of Control.

(a) Upon the occurrence of a Change of Control, each holder of Preferred Stock shall, in the event that the Market Value for the period ending on the Change of Control Date is less than the Conversion Price, have a one-time option (the “Change of Control Option”) to convert all of such holder’s outstanding shares of Preferred Stock into fully paid and nonassessable shares of Common Stock at an adjusted Conversion Price equal to the greater of (i) the Market Value for the period ending on the Change of Control Date and (ii) $7.9533. The Change of Control Option must be exercised, if at all, during the period of not less than 30 days nor more than 60 days commencing on the third Business Day after notice of a Change in Control has been given by the Company in accordance with Section 4(b). In lieu of issuing the shares of Common Stock issuable upon conversion in the event of a Change of Control, the Company may, at its option, make a cash payment equal to the Market Value for each share of such Common Stock otherwise issuable determined for the period ending on the Change of Control Date. Notwithstanding the foregoing, upon the occurrence of a Change of Control in which (i) each holder of Common Stock receives consideration consisting solely of common stock of the successor, acquiror or other third party (and cash paid in lieu of fractional shares) that is listed on a national securities exchange or quoted on the NASDAQ National Market and (ii) all the Common Stock has been exchanged for, converted into or acquired for common stock of the successor, acquiror or other third party (and cash in lieu of factional shares), and the Preferred Stock becomes convertible solely into such common stock, the Conversion Price will not be adjusted as described in this Section 4(a).

(b) In the event of a Change of Control (other than a Change of Control described in the last sentence of Section 4(a)), notice of such Change of Control shall be given, within five Business Days of the Change of Control Date, by the Company by first-class mail to each record holder of shares of Preferred Stock, at such holder’s address as the same appears on the books of the Company. Each such notice shall state (i) that a Change of Control has occurred; (ii) the last day on which the Change of Control Option may be exercised (the “Expiration Date”) pursuant to the terms hereof; (iii) the name and address of the Transfer Agent; and (iv) the procedures that holders must follow to exercise the Change of Control Option.

(c) On or before the Expiration Date, each holder of shares of Preferred Stock wishing to exercise the Change of Control Option shall surrender the certificate or certificates representing the shares of Preferred Stock to be converted, in the manner and at the place designated in the notice described in Section 4(b), and on such date the cash or shares of Common Stock due to such holder shall be delivered to the Person whose name appears on such certificate or certificates as the owner thereof and the shares represented by each surrendered certificate shall be returned to authorized but unissued shares. Upon surrender (in accordance with the notice described in Section 4(b)) of the certificate or certificates representing any shares to be so converted (properly endorsed or assigned for transfer, if the Company shall so require and the notice shall so state), such shares shall be converted by the Company at the adjusted Conversion Price, if applicable, as described in Section 4(a).

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(d) The rights of holders of Preferred Stock pursuant to this Section 4 are in addition to, and not in lieu of, the rights of holders of Preferred Stock provided for in Section 7 hereof.

5. Voting.

(a) The shares of Preferred Stock shall have no voting rights except as set forth below or as otherwise required by Oklahoma law from time to time:

(i) If and whenever at any time or times a Voting Rights Triggering Event occurs, then the holders of shares of Preferred Stock, voting as a single class with any other preferred stock or preference securities having similar voting rights that are exercisable, including the 6.00% Preferred Stock and the 6.75% Preferred Stock (the “Voting Rights Class”), will be entitled at the next regular or special meeting of stockholders of the Company to elect two additional directors of the Company. Upon the election of any such additional directors, the number of directors that comprise the Board of Directors shall be increased by such number of additional directors.

(ii) Such voting rights may be exercised at a special meeting of the holders of the shares of the Voting Rights Class, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends in arrears on the shares of Preferred Stock shall have been paid in full, at which time or times such voting rights and the term of the directors elected pursuant to Section 5(a)(i) shall terminate.

(iii) At any time when such voting rights shall have vested in holders of shares of the Voting Rights Class, an Officer of the Company may call, and, upon written request of the record holders of shares representing at least twenty-five percent (25%) of the voting power of the shares then outstanding of the Voting Rights Class, addressed to the Secretary of the Company, shall call a special meeting of the holders of shares of the Voting Rights Class. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company, or, if none, at a place designated by the Board of Directors. Notwithstanding the provisions of this Section 5(a)(iii), no such special meeting shall be called during a period within the 60 days immediately preceding the date fixed for the next annual meeting of stockholders in which such case, the election of directors pursuant to Section 5(a)(i) shall be held at such annual meeting of stockholders.

(iv) At any meeting held for the purpose of electing directors at which the holders of the Voting Rights Class shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. The affirmative vote of the holders of shares of Preferred Stock constituting a majority of the shares of Preferred Stock present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

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(v) Any director elected pursuant to the voting rights created under this Section 5(a) shall hold office until the next annual meeting of stockholders (unless such term has previously terminated pursuant to Section 5(a)(ii) ) and any vacancy in respect of any such director shall be filled only by vote of the remaining director so elected by holders of the Voting Rights Class, or if there be no such remaining director, by the holders of shares of the Voting Rights Class at a special meeting called in accordance with the procedures set forth in this Section 5, or, if no such special meeting is called, at the next annual meeting of stockholders. Upon any termination of such voting rights, the term of office of all directors elected pursuant to this Section 5 shall terminate.

(vi) So long as any shares of Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the Company shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding Preferred Stock voting or consenting, as the case may be, separately as one class, (i) create, authorize or issue any class or series of Senior Stock (or any security convertible into Senior Stock) or (ii) amend the Certificate of Incorporation so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of Preferred Stock.

(vii) In exercising the voting rights set forth in this Section 5(a), each share of Preferred Stock shall be entitled to one vote.

(b) The Company may authorize, increase the authorized amount of, or issue any class or series of Parity Stock or Junior Stock, without the consent of the holders of Preferred Stock, and in taking such actions the Company shall not be deemed to have affected adversely the rights, preferences, privileges or voting rights of holders of shares of Preferred Stock.

6. Liquidation Rights.

(a) In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary of involuntary, each holder of shares of Preferred Stock shall be entitled to receive and to be paid out of the assets of the Company available for distribution to its stockholders the Liquidation Preference plus Accumulated Dividends and Accrued Dividends thereon in preference to the holders of, and before any payment or distribution is made on, any Junior Stock, including, without limitation, on any Common Stock.

(b) Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the assets or business of the Company (other than in connection with the liquidation, winding-up or dissolution of its business) nor the merger or consolidation of the Company into or with any other Person shall be deemed to be a liquidation, winding-up or dissolution, voluntary or involuntary, for the purposes of this Section 6.

(c) After the payment to the holders of the shares of Preferred Stock of full preferential amounts provided for in this Section 6, the holders of Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company.

(d) In the event the assets of the Company available for distribution to the holders of shares of Preferred Stock upon any liquidation, winding-up or dissolution of the

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Company, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section 6(a), no such distribution shall be made on account of any shares of Parity Stock upon such liquidation, dissolution or winding-up unless proportionate distributable amounts shall be paid on account of the shares of Preferred Stock, ratably, in proportion to the full distributable amounts for which holders of all Preferred Stock and of any Parity Stock are entitled upon such liquidation, winding-up or dissolution.

7. Conversion.

(a) Each holder of Preferred Stock shall have the right, at its option, exercisable at any time and from time to time from the Issue Date to convert, subject to the terms and provisions of this Section 7, any or all of such holder’s shares of Preferred Stock. In such case, the shares of Preferred Stock shall be converted into such whole number of fully paid and nonassessable shares of Common Stock as is equal, subject to Section 7(g), to the product of the number of shares of Preferred Stock being so converted multiplied by the quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price (as defined below) then in effect. The Conversion Price initially shall be $16.4037, subject to adjustment as set forth in Section 7(c).

The conversion right of a holder of Preferred Stock shall be exercised by the holder by the surrender to the Company of the certificates representing shares to be converted at any time during usual business hours at its principal place of business or the offices of its duly appointed Transfer Agent to be maintained by it, accompanied by written notice to the Company in the form of Exhibit B that the holder elects to convert all or a portion of the shares of Preferred Stock represented by such certificate and specifying the name or names (with address) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Company or its duly appointed Transfer Agent) by a written instrument or instruments of transfer in form reasonably satisfactory to the Company or its duly appointed Transfer Agent duly executed by the holder or its duly authorized legal representative and transfer tax stamps or funds therefor, if required pursuant to Section 7(i) . Immediately prior to the close of business on the date of receipt by the Company or its duly appointed Transfer Agent of notice of conversion of shares of Preferred Stock, each converting holder of Preferred Stock shall be deemed to be the holder of record of Common Stock issuable upon conversion of such holder’s Preferred Stock notwithstanding that the share register of the Company shall then be closed or that certificates representing such Common Stock shall not then be actually delivered to such holder. On the date of any conversion, all rights with respect to the shares of Preferred Stock so converted, including the rights, if any, to receive notices, will terminate, except only the rights of holders thereof to (i) receive certificates for the number of whole shares of Common Stock into which such shares of Preferred Stock have been converted and cash, in lieu of any fractional shares as provided in Section 7(f); and (ii) exercise the rights to which they are entitled as holders of Common Stock.

(b) If the last day for the exercise of the conversion right shall not be a Business Day, then such conversion right may be exercised on the next preceding Business Day.

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(c) The Conversion Price shall be subject to adjustment as follows:

(i) In case the Company shall at any time or from time to time (A) pay a dividend (or other distribution) payable in shares of Common Stock on any class of capital stock (which, for purposes of this Section 7(c) shall include, without limitation, any dividends or distributions in the form of options, warrants or other rights to acquire capital stock) of the Company (other than the issuance of shares of Common Stock in connection with the conversion of preferred stock); (B) subdivide the outstanding shares of Common Stock into a larger number of shares; (C) combine the outstanding shares of Common Stock into a smaller number of shares; (D) issue any shares of its capital stock in a reclassification of the Common Stock; or (E) pay a dividend or make a distribution to all holders of shares of Common Stock (other than a dividend or distribution subject to Section 7(c)(ii)) pursuant to a stockholder rights plan, “poison pill” or similar arrangement and excluding dividends payable on the Preferred Stock then, and in each such case, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted into shares of Common Stock immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 7(c)(i) shall become effective retroactively (x) in the case of any such dividend or distribution, to the day immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (y) in the case of any such subdivision, combination or reclassification, to the close of business on the day upon which such corporate action becomes effective.

(ii) In case the Company shall at any time or from time to time issue to all holders of its Common Stock rights, options or warrants entitling the holders thereof to subscribe for or purchase shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) at a price per share less than the Market Value for the period ending on the date of issuance (treating the price per share of any security convertible or exchangeable or exercisable into Common Stock as equal to (A) the sum of the price paid to acquire such security convertible, exchangeable or exercisable into Common Stock plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such security into Common Stock divided by (B) the number of shares of Common Stock into which such convertible, exchangeable or exercisable security is initially convertible, exchangeable or exercisable), other than (i) issuances of such rights, options or warrants if the holder of Preferred Stock would be entitled to receive such rights, options or warrants upon conversion at any time of shares of Preferred Stock into Common Stock and (ii) issuances that are subject to certain triggering events (until such time as such triggering events occur), then, and in each such case, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect on the day immediately prior to the record date of such issuance by a fraction (y) the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock issued or to be issued upon or as a result of the issuance of such rights, options or warrants (or the maximum number into or for which such convertible or exchangeable securities initially may convert or exchange or for which such options, warrants or other rights initially may be exercised) and (z) the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of shares

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of Common Stock which the aggregate consideration for the total number of such additional shares of Common Stock so issued (or into or for which such convertible or exchangeable securities may convert or exchange or for which such options, warrants or other rights may be exercised plus the aggregate amount of any additional consideration initially payable upon the conversion, exchange or exercise of such security) would purchase at the Market Value for the period ending on the date of conversion; provided, that if the Company distributes rights or warrants (other than those referred to above in this subparagraph (c)(ii)) pro rata to the holders of Common Stock, so long as such rights or warrants have not expired or been redeemed by the Company, (y) the holder of any Preferred Stock surrendered for conversion shall be entitled to receive upon such conversion, in addition to the shares of Common Stock then issuable upon such conversion (the “Conversion Shares”), a number of rights or warrants to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or warrants (the “Distribution Date”), the same number of rights or warrants to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions applicable to the rights or warrants and (ii) if such conversion occurs after the Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Common Stock into which such Preferred Stock was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date had such Preferred Stock been converted immediately prior to such Distribution Date in accordance with the terms and provisions applicable to the rights and warrants and (z) the Conversion Price shall not be subject to adjustment on account of any declaration, distribution or exercise of such rights or warrants.

(iii) If the Company shall at any time make a distribution, by dividend or otherwise, to all holders of shares of its Common Stock consisting exclusively of cash (excluding any cash portion of distributions referred to in clause (E) of paragraph (c)(i) above and cash distributed upon a merger or consolidation to which paragraph (g) below applies) in an amount per share of Common Stock that, when combined with the per share amounts of all other all-cash distributions to all holders of shares of its Common Stock made within the 90-day period ending on the record date for the distribution giving rise to an adjustment pursuant to this Section 7(c)(iii), exceeds $0.05 per share of Common Stock (the “Distribution Threshold Amount”), then the Conversion Price will be adjusted by multiplying:

(1) the Conversion Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive such distribution by

(2) a fraction, the numerator of which will be the Market Value on the fourth trading day on the NYSE prior to such record date minus the amount of cash per share of Common Stock so distributed in excess of the Dividend Threshold Amount for which an adjustment has not otherwise been made pursuant to this Section 7(c)(iii) and the denominator of which will be the Market Value on the fourth trading day on the NYSE prior to such record date.

Subject to Section 7(d), such adjustment shall become effective immediately after the record date for the determination of holders of Common Stock entitled to receive the distribution giving rise to an adjustment pursuant to this Section 7(c)(iii). The Dividend Threshold Amount is subject to adjustment under the same circumstances under which the Conversion Price is subject to adjustment pursuant to Section 7(c)(i) or Section 7(c)(ii).

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(iv) In the case the Company at any time or from time to time shall take any action affecting its Common Stock (it being understood that the issuance or sale of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock, or any options, warrants or other rights to acquire shares of Common Stock) to any Person at a price per share less than the Conversion Price then in effect shall not be deemed such an action), other than an action described in any of Section 7(c)(i) through Section 7(c)(iii), inclusive, or Section 7(g), then the Conversion Price shall be adjusted in such manner and at such time as the Board of Directors of the Company in good faith determines to be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of the Preferred Stock).

(v) Notwithstanding anything herein to the contrary, no adjustment under this Section 7(c) need be made to the Conversion Price unless such adjustment would require an increase or decrease of at least 1% of the Conversion Price then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Conversion Price.

(vi) The Company reserves the right to make such reductions in the Conversion Price in addition to those required in the foregoing provisions as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. In the event the Company elects to make such a reduction in the Conversion Price, the Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Conversion Price.

(d) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the Conversion Price then in effect shall be required by reason of the taking of such record.

(e) Upon any increase or decrease in the Conversion Price, then, and in each such case, the Company promptly shall deliver to each holder of Preferred Stock a certificate signed by an authorized officer of the Company, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment.

(f) No fractional shares or securities representing fractional shares of Common Stock shall be issued upon the conversion of any shares of Preferred Stock, whether voluntary or mandatory. If more than one share of Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate Liquidation Preference

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of the shares of Preferred Stock so surrendered. If the conversion of any share or shares of Preferred Stock results in a fraction, an amount equal to such fraction multiplied by the last reported sale price of the Common Stock on the NYSE (or on such other national securities exchange or automated quotation system on which the Common Stock is then listed for trading or authorized for quotation or, if the Common Stock is not then so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Common Stock) at the close of business on the trading day next preceding the day of conversion shall be paid to such holder in cash by the Company.

(g) In the event of any reclassification of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value), or in the event of any consolidation or merger of the Company with or into another Person or any merger of another Person with or into the Company (other than a consolidation or merger in which the Company is the resulting or surviving Person and which does not result in any reclassification or change of outstanding Common Stock), or in the event of any sale or other disposition to another Person of all or substantially all of the assets of the Company (computed on a consolidated basis) (any of the foregoing, a “Transaction”), each share of Preferred Stock then outstanding shall, without the consent of any holder of Preferred Stock, become convertible at any time, at the option of the holder thereof, only into the kind and amount of securities (of the Company or another issuer), cash and other property receivable upon such Transaction by a holder of the number of shares of Common Stock into which such share of Preferred Stock could have been converted immediately prior to such Transaction, after giving effect to any adjustment event. The provisions of this Section 7(g) and any equivalent thereof in any such securities similarly shall apply to successive Transactions. The provisions of this Section 7(g) shall be the sole right of holders of Preferred Stock in connection with any Transaction and such holders shall have no separate vote thereon.

(h) The Company shall at all times reserve and keep available for issuance upon the conversion of the Preferred Stock such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock.

(i) The issuance or delivery of certificates for Common Stock upon the conversion of shares of Preferred Stock shall be made without charge to the converting holder of shares of Preferred Stock for such certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, and such certificates shall be issued or delivered in the respective names of, or in such names as may be directed by, the holders of the shares of Preferred Stock converted; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of Preferred Stock converted, and the Company shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid.

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8. Mandatory Conversion.

(a) At any time on or after November 18, 2006, the Company shall have the right, at its option, to cause the Preferred Stock, in whole but not in part, to be automatically converted into that number of whole shares of Common Stock for each share of Preferred Stock equal to the quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price then in effect, with any resulting fractional shares of Common Stock to be settled in accordance with Section 7(f). The Company may exercise its right to cause a mandatory conversion pursuant to this Section 8(a) only if the closing price of the Common Stock equals or exceeds 130% of the Conversion Price then in effect for at least 20 trading days in any consecutive 30-day trading period on the NYSE (or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation), including the last trading day of such 30-day period, ending on the trading day prior to the Company’s issuance of a press release announcing the mandatory conversion as described in Section 8(b).

(b) To exercise the mandatory conversion right described in Section 8(a), the Company must issue a press release for publication on the Dow Jones News Service prior to the opening of business on the first trading day following any date on which the conditions described in Section 8(a) are met, announcing such a mandatory conversion. The Company shall also give notice by mail or by publication (with subsequent prompt notice by mail) to the holders of Preferred Stock (not more than four Business Days after the date of the press release) of the mandatory conversion announcing the Company’s intention to convert the Preferred Stock. The conversion date will be a date selected by the Company (the “Mandatory Conversion Date”) and will be no more than five days after the date on which the Company issues the press release described in this Section 8(b).

(c) In addition to any information required by applicable law or regulation, the press release and notice of a mandatory conversion described in Section 8(b) shall state, as appropriate: (i) the Mandatory Conversion Date; (ii) the number of shares of Common Stock to be issued upon conversion of each share of Preferred Stock; (iii) the number of shares of Preferred Stock to be converted; and (iv) that dividends on the Preferred Stock to be converted will cease to accrue on the Mandatory Conversion Date.

(d) On and after the Mandatory Conversion Date, dividends will cease to accrue on the Preferred Stock called for a mandatory conversion pursuant to Section 8(a) and all rights of holders of such Preferred Stock will terminate except for the right to receive the whole shares of Common Stock issuable upon conversion thereof and cash, in lieu of any fractional shares of Common Stock in accordance with Section 7(f). The dividend payment with respect to the Preferred Stock called for a mandatory conversion pursuant to Section 8(a) on a date during the period between the close of business on any Dividend Record Date to the close of business on the corresponding Dividend Payment Date will be payable on such Dividend Payment Date to the record holder of such share on such Dividend Record Date if such share has been converted after such Dividend Record Date and prior to such Dividend Payment Date. Except as provided in the immediately preceding sentence with respect to a mandatory conversion pursuant to Section 8(a), no payment or adjustment will be made upon conversion of Preferred Stock for Accrued Dividends or for dividends with respect to the Common Stock issued upon such conversion.

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(e) The Company may not authorize, issue a press release or give notice of any mandatory conversion pursuant to Section 8(a) unless, prior to giving the conversion notice, all Accumulated Dividends on the Preferred Stock for periods ended prior to the date of such conversion notice shall have been paid in cash.

(f) In addition to the mandatory conversion right described in Section 8(a), if there are less than 250,000 shares of Preferred Stock outstanding, the Company shall have the right, at any time on or after November 18, 2008, at its option, to cause the Preferred Stock to be automatically converted into that number of whole shares of Common Stock equal to the quotient of (i) the Liquidation Preference divided by (ii) the lesser of (A) the Conversion Price then in effect and (B) the Market Value for the period ending on the second trading day immediately prior to the Mandatory Conversion Date, with any resulting fractional shares of Common Stock to be settled in cash in accordance with Section 7(f). The provisions of clauses (b), (c), (d) and (e) of this Section 8 shall apply to any mandatory conversion pursuant to this clause (f); provided that (i) the Mandatory Conversion Date described in Section 8(b) shall not be less than 15 days nor more than 30 days after the date on which the Company issues a press release pursuant to Section 8(b) announcing such mandatory conversion and (ii) the press release and notice of mandatory conversion described in Section 8(c) will not state the number of shares of Common Stock to be issued upon conversion of each share of Preferred Stock.

9. Consolidation, Merger and Sale of Assets.

(a) The Company, without the consent of the holders of any of the outstanding Preferred Stock, may consolidate with or merge into any other Person or convey, transfer or lease all or substantially all its assets to any Person or may permit any Person to consolidate with or merge into, or transfer or lease all or substantially all its properties to, the Company; provided, however, that (a) the successor, transferee or lessee is organized under the laws of the United States or any political subdivision thereof; (b) the shares of Preferred Stock will become shares of such successor, transferee or lessee, having in respect of such successor, transferee or lessee the same powers, preferences and relative participating, optional or other special rights and the qualification, limitations or restrictions thereon, the Preferred Stock had immediately prior to such transaction; and (c) the Company delivers to the Transfer Agent an Officers’ Certificate and an Opinion of Counsel stating that such transaction complies with this Certificate of Designation.

(b) Upon any consolidation by the Company with, or merger by the Company into, any other person or any conveyance, transfer or lease of all or substantially all the assets of the Company as described in Section 9(a), the successor resulting from such consolidation or into which the Company is merged or the transferee or lessee to which such conveyance, transfer or lease is made, will succeed to, and be substituted for, and may exercise every right and power of, the Company under the shares of Preferred Stock, and thereafter, except in the case of a lease, the predecessor (if still in existence) will be released from its obligations and covenants with respect to the Preferred Stock.

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10. SEC Reports.

Whether or not the Company is required to file reports with the Commission, if any shares of Preferred Stock are outstanding, the Company shall file with the Commission all such reports and other information as it would be required to file with the Commission by Section 13(a) or 15(d) under the Exchange Act. The Company shall supply each holder of Preferred Stock, upon request, without cost to such holder, copies of such reports or other information.

11. Certificates.

(a) Form and Dating. The Preferred Stock and the Transfer Agent’s certificate of authentication shall be substantially in the form set forth in Exhibit A, which is hereby incorporated in and expressly made a part of this Certificate of Designation. The Preferred Stock certificate may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Preferred Stock certificate shall be dated the date of its authentication. The terms of the Preferred Stock certificate set forth in Exhibit A are part of the terms of this Certificate of Designation.

(i) Global Preferred Stock. The Preferred Stock shall be issued initially in the form of one or more fully registered global certificates with the global securities legend set forth in Exhibit A hereto (the “Global Preferred Stock”), which shall be deposited on behalf of the purchasers represented thereby with the Transfer Agent, as custodian for DTC (or with such other custodian as DTC may direct), and registered in the name of DTC or a nominee of DTC, duly executed by the Company and authenticated by the Transfer Agent as hereinafter provided. The number of shares of Preferred Stock represented by Global Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Transfer Agent and DTC or its nominee as hereinafter provided. With respect to shares of Preferred Stock that are not “restricted securities” as defined in Rule 144 on a conversion date, all shares of Common Stock distributed on such conversion date will be freely transferable without restriction under the Securities Act (other than by affiliates), and such shares will be eligible for receipt in global form through the facilities of DTC.

(ii) Book-Entry Provisions. In the event Global Preferred Stock is deposited with or on behalf of DTC, the Company shall execute and the Transfer Agent shall authenticate and deliver initially one or more Global Preferred Stock certificates that (a) shall be registered in the name of DTC as depository for such Global Preferred Stock or the nominee of DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC’s instructions or held by the Transfer Agent as custodian for DTC.

Members of, or participants in, DTC (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Preferred Stock held on their behalf by DTC or by the Transfer Agent as the custodian of DTC or under such Global Preferred Stock, and DTC may be treated by the Company, the Transfer Agent and any agent of the Company or the Transfer Agent as the absolute owner of such Global Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company,

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the Transfer Agent or any agent of the Company or the Transfer Agent from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Stock.

(iii) Certificated Preferred Stock; Certificated Common Stock. Except as provided in this paragraph 11(a) or in paragraph 11(c), owners of beneficial interests in Global Preferred Stock will not be entitled to receive physical delivery of Preferred Stock in fully registered certificated form (“Certificated Preferred Stock”). With respect to shares of Preferred Stock that are “restricted securities” as defined in Rule 144 on a conversion date, all shares of Common Stock issuable on conversion of such shares on such conversion date will be issued in fully registered certificated form (“Certificated Common Stock”). Certificates of Certificated Common Stock will be mailed or made available at the office of the Transfer Agent for the Preferred Stock on or as soon as reasonably practicable after the relevant conversion date to the converting holder.

After a transfer of any Preferred Stock or Certificated Common Stock during the period of the effectiveness of a Shelf Registration Statement with respect to such Preferred Stock or such Certificated Common Stock, all requirements pertaining to legends on such Preferred Stock (including Global Preferred Stock) or Certificated Common Stock will cease to apply, the requirements requiring that any such Certificated Common Stock issued to Holders be issued in certificated form, as the case may, will cease to apply, and Preferred Stock or Common Stock, as the case may be, in global or fully registered certificated form, in either case without legends, will be available to the transferee of the Holder of such Preferred Stock or Certificated Common Stock upon exchange of such transferring Holder’s Preferred Stock or Common Stock or directions to transfer such Holder’s interest in the Global Preferred Stock, as applicable.

(b) Execution and Authentication. Two Officers shall sign the Preferred Stock certificate for the Company by manual or facsimile signature.

If an Officer whose signature is on a Preferred Stock certificate no longer holds that office at the time the Transfer Agent authenticates the Preferred Stock certificate, the Preferred Stock certificate shall be valid nevertheless.

A Preferred Stock certificate shall not be valid until an authorized signatory of the Transfer Agent manually signs the certificate of authentication on the Preferred Stock certificate. The signature shall be conclusive evidence that the Preferred Stock certificate has been authenticated under this Certificate of Designation.

The Transfer Agent shall authenticate and deliver certificates for up to 1,725,000 shares of Preferred Stock for original issue upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. Such order shall specify the number of shares of Preferred Stock to be authenticated and the date on which the original issue of Preferred Stock is to be authenticated.

The Transfer Agent may appoint an authenticating agent reasonably acceptable to the Company to authenticate the certificates for Preferred Stock. Unless limited by the terms of

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such appointment, an authenticating agent may authenticate certificates for Preferred Stock whenever the Transfer Agent may do so. Each reference in this Certificate of Designation to authentication by the Transfer Agent includes authentication by such agent. An authenticating agent has the same rights as the Transfer Agent or agent for service of notices and demands.

(c) Transfer and Exchange. (i) Transfer and Exchange of Certificated Preferred Stock. When Certificated Preferred Stock is presented to the Transfer Agent with a request to register the transfer of such Certificated Preferred Stock or to exchange such Certificated Preferred Stock for an equal number of shares of Certificated Preferred Stock, the Transfer Agent shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Preferred Stock surrendered for transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Transfer Agent, duly executed by the Holder thereof or its attorney duly authorized in writing; and

(2) is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (i) or (ii) below, and is accompanied by the following additional information and documents, as applicable:

(I) if such Certificated Preferred Stock is being delivered to the Transfer Agent by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect in substantially the form of Exhibit C hereto; or

(II) if such Certificated Preferred Stock is being transferred to the Company or pursuant to an exemption from registration under the Securities Act, (i) a certification to that effect (in substantially the form of Exhibit C hereto) and (ii) if the Company so requests, an Opinion of Counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in paragraph 11(c) (vii).

(ii) Restrictions on Transfer of Certificated Preferred Stock for a Beneficial Interest in Global Preferred Stock. Certificated Preferred Stock may not be exchanged for a beneficial interest in Global Preferred Stock except upon satisfaction of the requirements set forth below. Upon receipt by the Transfer Agent of Certificated Preferred Stock, duly endorsed or accompanied by appropriate instruments of transfer, in form reasonably satisfactory to the Company and the Transfer Agent, together with written instructions directing the Transfer Agent to make, or to direct DTC to make, an adjustment on its books and records with respect to such Global Preferred Stock to reflect an increase in the number of shares of Preferred Stock represented by the Global Preferred Stock, then the Transfer Agent shall cancel such Certificated Preferred Stock and cause, or direct DTC to cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number

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of shares of Preferred Stock represented by the Global Preferred Stock to be increased accordingly. If no Global Preferred Stock is then outstanding, the Company shall issue and the Transfer Agent shall authenticate, upon written order of the Company in the form of an Officers’ Certificate, a new Global Preferred Stock representing the appropriate number of shares.

(iii) Transfer and Exchange of Global Preferred Stock. The transfer and exchange of Global Preferred Stock or beneficial interests therein shall be effected through DTC, in accordance with this Certificate of Designation (including applicable restrictions on transfer set forth herein, if any) and the procedures of DTC therefor.

(iv) Transfer of a Beneficial Interest in Global Preferred Stock for a Certificated Preferred Stock.

(1) Any Person having a beneficial interest in Preferred Stock that is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to another exemption from registration thereunder may upon request, but only with the consent of the Company, and if accompanied by a certification from such Person to that effect (in substantially the form of Exhibit C hereto), exchange such beneficial interest for Certificated Preferred Stock representing the same number of shares of Preferred Stock. Upon receipt by the Transfer Agent of written instructions or such other form of instructions as is customary for DTC from DTC or its nominee on behalf of any Person having a beneficial interest in Global Preferred Stock and upon receipt by the Transfer Agent of a written order or such other form of instructions as is customary for DTC or the Person designated by DTC as having such a beneficial interest in a Transfer Restricted Security only, then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number of shares of Preferred Stock represented by Global Preferred Stock to be reduced on its books and records and, following such reduction, the Company will execute and the Transfer Agent will authenticate and deliver to the transferee Certificated Preferred Stock.

(2) Certificated Preferred Stock issued in exchange for a beneficial interest in a Global Preferred Stock pursuant to this paragraph 11(c)(iv) shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Transfer Agent. The Transfer Agent shall deliver such Certificated Preferred Stock to the Persons in whose names such Preferred Stock are so registered in accordance with the instructions of DTC.

(v) Restrictions on Transfer and Exchange of Global Preferred Stock.

(1) Notwithstanding any other provisions of this Certificate of Designation (other than the provisions set forth in paragraph 11(c)(vi)), Global Preferred Stock may not be transferred as a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor depository or a nominee of such successor depository.

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(2) In the event that the Global Preferred Stock is exchanged for Preferred Stock in definitive registered form pursuant to paragraph 11(c)(vi) prior to the effectiveness of a Shelf Registration Statement with respect to such securities, such Preferred Stock may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this paragraph 11(c) (including the certification requirements set forth in the Exhibits to this Certificate of Designation intended to ensure that such transfers comply with applicable exemptions from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company.

(vi) Authentication of Certificated Preferred Stock. If at any time:

(1) DTC notifies the Company that DTC is unwilling or unable to continue as depository for the Global Preferred Stock and a successor depository for the Global Preferred Stock is not appointed by the Company within 90 days after delivery of such notice;

(2) DTC ceases to be a clearing agency registered under the Exchange Act and a successor depository for the Global Preferred Stock is not appointed by the Company within 90 days; or

(3) the Company, in its sole discretion, notifies the Transfer Agent in writing that it elects to cause the issuance of Certificated Preferred Stock under this Certificate of Designation,

then the Company will execute, and the Transfer Agent, upon receipt of a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company requesting the authentication and delivery of Certificated Preferred Stock to the Persons designated by the Company, will authenticate and deliver Certificated Preferred Stock equal to the number of shares of Preferred Stock represented by the Global Preferred Stock, in exchange for such Global Preferred Stock.

(vii) Legend.

(1) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by Global Preferred Stock) pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act or an effective registration statement under the Securities Act:

(I) in the case of any Transfer Restricted Security that is a Certificated Preferred Stock, the Transfer Agent shall permit the Holder thereof to exchange such Transfer Restricted Security for Certificated Preferred Stock that does not bear a restrictive legend and rescind any restriction on the transfer of such Transfer Restricted Security; and

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(II) in the case of any Transfer Restricted Security that is represented by a Global Preferred Stock, with the consent of the Company, the Transfer Agent shall permit the Holder thereof to exchange such Transfer Restricted Security for Certificated Preferred Stock that does not bear a restrictive legend and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder’s request for such exchange was made in reliance on Rule 144 or another exemption from registration under the Securities Act and the Holder certifies to that effect in writing to the Transfer Agent (such certification to be in the form set forth in Exhibit C hereto).

(viii) Cancelation or Adjustment of Global Preferred Stock. At such time as all beneficial interests in Global Preferred Stock have either been exchanged for Certificated Preferred Stock, converted or canceled, such Global Preferred Stock shall be returned to DTC for cancelation or retained and canceled by the Transfer Agent. At any time prior to such cancelation, if any beneficial interest in Global Preferred Stock is exchanged for Certificated Preferred Stock, converted or canceled, the number of shares of Preferred Stock represented by such Global Preferred Stock shall be reduced and an adjustment shall be made on the books and records of the Transfer Agent with respect to such Global Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

(ix) Obligations with Respect to Transfers and Exchanges of Preferred Stock.

(1) To permit registrations of transfers and exchanges, the Company shall execute and the Transfer Agent shall authenticate Certificated Preferred Stock and Global Preferred Stock as required pursuant to the provisions of this paragraph 11(c).

(2) All Certificated Preferred Stock and Global Preferred Stock issued upon any registration of transfer or exchange of Certificated Preferred Stock or Global Preferred Stock shall be the valid obligations of the Company, entitled to the same benefits under this Certificate of Designation as the Certificated Preferred Stock or Global Preferred Stock surrendered upon such registration of transfer or exchange.

(3) Prior to due presentment for registration of transfer of any shares of Preferred Stock, the Transfer Agent and the Company may deem and treat the Person in whose name such shares of Preferred Stock are registered as the absolute owner of such Preferred Stock and neither the Transfer Agent nor the Company shall be affected by notice to the contrary.

(4) No service charge shall be made to a Holder for any registration of transfer or exchange upon surrender of any Preferred Stock

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certificate or Common Stock certificate at the office of the Transfer Agent maintained for that purpose. However, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Preferred Stock certificates or Common Stock certificates.

(5) Upon any sale or transfer of shares of Preferred Stock (including any Preferred Stock represented by a Global Preferred Stock Certificate) or of Certificated Common Stock pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 or another exemption from registration under the Securities Act (and based upon an Opinion of Counsel reasonably satisfactory to the Company if it so requests):

(A) in the case of any Certificated Preferred Stock or Certificated Common Stock, the Company and the Transfer Agent shall permit the holder thereof to exchange such Preferred Stock or Certificated Common Stock for Certificated Preferred Stock or Certificated Common Stock, as the case may be, that does not bear a restrictive legend and rescind any restriction on the transfer of such Preferred Stock or Common Stock issuable in respect of the conversion of the Preferred Stock; and

(B) in the case of any Global Preferred Stock, such Preferred Stock shall not be required to bear the legend set forth in paragraph (c)(vii) above but shall continue to be subject to the provisions of paragraph (c)(iv) hereof; provided, however, that with respect to any request for an exchange of Preferred Stock that is represented by Global Preferred Stock for Certificated Preferred Stock that does not bear a restrictive legend in connection with a sale or transfer thereof pursuant to Rule 144 or another exemption from registration under the Securities Act (and based upon an Opinion of Counsel if the Company so requests), the Holder thereof shall certify in writing to the Transfer Agent that such request is being made pursuant to such exemption (such certification to be substantially in the form of Exhibit C hereto).

(x) No Obligation of the Transfer Agent.

(1) The Transfer Agent shall have no responsibility or obligation to any beneficial owner of Global Preferred Stock, a member of, or a participant in DTC or any other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Preferred Stock or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice or the payment of any amount, under or with respect to such Global Preferred Stock. All notices and communications to be given to the Holders and all payments to be made to Holders under the Preferred Stock shall be given or made only to the Holders (which shall be DTC or its nominee in the case of the Global Preferred Stock). The rights of beneficial owners in any Global Preferred Stock shall be exercised only through DTC subject to the applicable rules and

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procedures of DTC. The Transfer Agent may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.

(2) The Transfer Agent shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Certificate of Designation or under applicable law with respect to any transfer of any interest in any Preferred Stock (including any transfers between or among DTC participants, members or beneficial owners in any Global Preferred Stock) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Certificate of Designation, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(d) Replacement Certificates. If a mutilated Preferred Stock certificate is surrendered to the Transfer Agent or if the Holder of a Preferred Stock certificate claims that the Preferred Stock certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Transfer Agent shall countersign a replacement Preferred Stock certificate if the reasonable requirements of the Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the State of Oklahoma are met. If required by the Transfer Agent or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Transfer Agent to protect the Company and the Transfer Agent from any loss which either of them may suffer if a Preferred Stock certificate is replaced. The Company and the Transfer Agent may charge the Holder for their expenses in replacing a Preferred Stock certificate.

(e) Temporary Certificates. Until definitive Preferred Stock certificates are ready for delivery, the Company may prepare and the Transfer Agent shall countersign temporary Preferred Stock certificates. Temporary Preferred Stock certificates shall be substantially in the form of definitive Preferred Stock certificates but may have variations that the Company considers appropriate for temporary Preferred Stock certificates. Without unreasonable delay, the Company shall prepare and the Transfer Agent shall countersign definitive Preferred Stock certificates and deliver them in exchange for temporary Preferred Stock certificates.

(f) Cancelation. (i) In the event the Company shall purchase or otherwise acquire Certificated Preferred Stock, the same shall thereupon be delivered to the Transfer Agent for cancelation.

(ii) At such time as all beneficial interests in Global Preferred Stock have either been exchanged for Certificated Preferred Stock, converted, repurchased or canceled, such Global Preferred Stock shall thereupon be delivered to the Transfer Agent for cancelation.

(iii) The Transfer Agent and no one else shall cancel and destroy all Preferred Stock certificates surrendered for transfer, exchange, replacement or cancelation and deliver a certificate of such destruction to the Company unless the Company directs the Transfer

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Agent to deliver canceled Preferred Stock certificates to the Company. The Company may not issue new Preferred Stock certificates to replace Preferred Stock certificates to the extent they evidence Preferred Stock which the Company has purchased or otherwise acquired.

12. Additional Rights of Holders. [Reserved.]

13. Other Provisions.

(a) With respect to any notice to a holder of shares of Preferred Stock required to be provided hereunder, neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice.

(b) Shares of Preferred Stock issued and reacquired will be retired and canceled promptly after reacquisition thereof and, upon compliance with the applicable requirements of Oklahoma law, have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series and may with any and all other authorized but unissued shares of preferred stock of the Company be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Corporation, except that any issuance or reissuance of shares of Preferred Stock must be in compliance with this Certificate of Designation.

(c) The shares of Preferred Stock shall be issuable only in whole shares.

(d) All notice periods referred to herein shall commence on the date of the mailing of the applicable notice.

IN WITNESS WHEREOF, the Company has caused this certificate to be signed and attested this 18th day of November, 2003.

		CHESAPEAKE ENERGY CORPORATION
Attest:	/s/ Jennifer M. Grigsby	By:	/s/ Martha A. Burger
	Jennifer M. Grigsby, Secretary		Martha A. Burger
			Treasurer and Senior Vice President -
			Human Resources

25

EXHIBIT A

FORM OF PREFERRED STOCK

FACE OF SECURITY

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE& CO. HAS AN INTEREST HEREIN.]¹

[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]²

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

¹ Subject to removal if not a global security.

² CUSIP Number 165167 80 0, if not a Transfer Restricted Security.

A-1

Certificate Number	Number of Shares of Convertible Preferred Stock
[            ]	[            ]

CUSIP NO.: 165167             

5% Cumulative Convertible Preferred Stock (par value $0.01)

(liquidation preference $100 per share of Convertible Preferred Stock)

of

Chesapeake Energy Corporation

Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), hereby certifies that [                    ] (the “Holder”) is the registered owner of [                    ] fully paid and non-assessable preferred securities of the Company designated the 5% Cumulative Convertible Preferred Stock (par value $0.01) (liquidation preference $100 per share of Preferred Stock) (the “Preferred Stock”). The shares of Preferred Stock are transferable on the books and records of the Transfer Agent, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Stock represented hereby are issued and shall in all respects be subject to the provisions of the Certificate of Designation dated November 18, 2003, as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.

Reference is hereby made to select provisions of the Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.

Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.

Unless the Transfer Agent’s Certificate of Authentication hereon has been properly executed, these shares of Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has executed this certificate this [    ] day of [                    ], 2003.

A-2

CHESAPEAKE ENERGY CORPORATION

By:

Name:

Title:

By:

Name:

Title:

A-3

TRANSFER AGENT’S CERTIFICATE OF AUTHENTICATION

These are shares of the Preferred Stock referred to in the within-mentioned Certificate of Designation.

Dated:                     , 2003

UMB BANK, N.A., as Transfer Agent,

By:

Authorized Signatory

A-4

REVERSE OF SECURITY

Cash dividends on each share of Preferred Stock shall be payable at a rate per annum set forth in the face hereof or as provided in the Certificate of Designation.

The shares of Preferred Stock shall be convertible into the Company’s Common Stock in the manner and according to the terms set forth in the Certificate of Designation.

The Company will furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock and the qualifications, limitations or restrictions of such preferences and/or rights.

A-5

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Preferred Stock evidenced hereby to:

(Insert assignee’s social security or tax identification number)

(Insert address and zip code of assignee)

and irrevocably appoints:

agent to transfer the shares of Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.

Date:

Signature:

(Sign exactly as your name appears on the other side of this Preferred Stock Certificate)

Signature Guarantee:³

³ (Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)

A-6

EXHIBIT B

NOTICE OF CONVERSION

(To be Executed by the Holder

in order to Convert the Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”) shares of 5% Cumulative Convertible Preferred Stock (the “Preferred Stock”), represented by stock certificate No(s).             (the “Preferred Stock Certificates”) into shares of common stock (“Common Stock”) of Chesapeake Energy Corporation (the “Company”) according to the conditions of the Certificate of Designation of the Preferred Stock (the “Certificate of Designation”), as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith the Preferred Stock Certificates. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. A copy of each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof).

The undersigned represents and warrants that all offers and sales by the undersigned of the shares of Common Stock issuable to the undersigned upon conversion of the Preferred Stock shall be made pursuant to registration of the Common Stock under the Securities Act of 1933 (the “Act”), or pursuant to any exemption from registration under the Act.

Capitalized terms used but not defined herein shall have the meanings ascribed thereto in or pursuant to the Certificate of Designation.

Date of Conversion:________________________________________________________

Applicable Conversion Price:_________________________________________________

Number of shares of Preferred Stock to be Converted: _____________________________

Number of shares of Common Stock to be Issued: *_______________________________

Signature:________________________________________________________________

Name:___________________________________________________________________

Address:**_______________________________________________________________

Fax No.:__________________________________________________________________

* The Company is not required to issue shares of Common Stock until the original Preferred Stock Certificate(s) (or evidence of loss, theft or destruction thereof) to be converted are received by the Company or its Transfer Agent. The Company shall issue and deliver shares of Common Stock to an overnight courier not later than three business days following receipt of the original Preferred Stock Certificate(s) to be converted.

** Address where shares of Common Stock and any other payments or certificates shall be sent by the Company.

B-1

EXHIBIT C

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER OF PREFERRED STOCK

Re: 5% Cumulative Convertible Preferred Stock (the “Preferred Stock”) of Chesapeake Energy Corporation (the “Company”)

This Certificate relates to              shares of Preferred Stock held in */ book-entry or */ definitive form by                      (the “Transferor”).

The Transferor*:

• has requested the Transfer Agent by written order to deliver in exchange for its beneficial interest in the Preferred Stock held by the Depository shares of Preferred Stock in definitive, registered form equal to its beneficial interest in such Preferred Stock (or the portion thereof indicated above); or

• has requested the Transfer Agent by written order to exchange or register the transfer of Preferred Stock.

In connection with such request and in respect of such Preferred Stock, the Transferor does hereby certify that the Transferor is familiar with the Certificate of Designation relating to the above-captioned Preferred Stock and that the transfer of this Preferred Stock does not require registration under the Securities Act of 1933 (the “Securities Act”) because */:

• Such Preferred Stock is being acquired for the Transferor’s own account without transfer.

• Such Preferred Stock is being transferred to the Company.

• Such Preferred Stock is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Securities Act (and based on an Opinion of Counsel if the Company so requests).

[INSERT NAME OF TRANSFEROR]

by:

Date:

*/ Please check applicable box.

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 136,820 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 136,820 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 136,820 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $1368.20.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 15^th day of August, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 100,000 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 100,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 100,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $1,000.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 27^th day of September, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 195,734 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 195,734 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 195,734 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $1,957.34.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 28^th day of September, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 265,170 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 265,170 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 265,170 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $2,651.70.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 30^th day of September, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 1,330 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 1,330 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 1,330 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $13.30.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 6th day of October, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 18,000 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 18,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 18,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $180.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 23^rd day of January, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 125,000 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 125,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 125,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $1,250.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 24^th day of January, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 40,273 shares of its 5.0% Cumulative Convertible Preferred Stock (Series 2003), par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 5.0% Cumulative Convertible Preferred Stock (Series 2003) (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 5.0% Cumulative Convertible Preferred Stock (Series 2003) by 40,273 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 40,273 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $402.73.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 27^th day of January, 2006.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

EX-3.1.5

EXHIBIT 3.1.5

CERTIFICATE OF DESIGNATION

OF

4.125% CUMULATIVE CONVERTIBLE PREFERRED STOCK

OF

CHESAPEAKE ENERGY CORPORATION

Pursuant to Section 1032(G) of the Oklahoma General Corporation Act

CHESAPEAKE ENERGY CORPORATION, an Oklahoma corporation (the “Company”), does hereby certify that the following resolution was duly adopted by action of the Board of Directors of the Company, with the provisions thereof fixing the number of shares of the series and the dividend rate being set by action of the Board of Directors of the Company:

RESOLVED that pursuant to the authority expressly granted to and vested in the Board of Directors of the Company by the provisions of Article IV, Section 1 of the Certificate of Incorporation of the Company, as amended from time to time (the “Certificate of Incorporation”), and pursuant to Section 1032(G) of the Oklahoma General Corporation Act, the Board of Directors hereby creates a series of preferred stock of the Company and hereby states that the voting powers, designations, preferences and relative, participating, optional or other special rights of which, and qualifications, limitations or restrictions thereof (in addition to the provisions set forth in the Certificate of Incorporation which are applicable to the preferred stock of all classes and series), shall be as follows:

1. Designation and Amount; Ranking

(a) There shall be created from the 10,000,000 shares of preferred stock, par value $0.01 per share, of the Company authorized to be issued pursuant to the Certificate of Incorporation, a series of preferred stock, designated as the “4.125% Cumulative Convertible Preferred Stock,” par value $0.01 per share (the “Preferred Stock”), and the number of shares of such series shall be 313,250. Such number of shares may be decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Preferred Stock to a number less than that of the shares of Preferred Stock then outstanding plus the number of shares issuable upon exercise of options or rights then outstanding.

(b) The Preferred Stock will, with respect to both dividend rights and rights upon the liquidation, winding-up or dissolution of the Company, rank on a parity with the 6.75% Preferred Stock, the 6.00% Preferred Stock and the 5.00% Preferred Stock, and the Preferred Stock will, with respect to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company rank (i) senior to all Junior Stock, (ii) on a parity with all other Parity Stock and (iii) junior to all Senior Stock.

2. Definitions. As used herein, the following terms shall have the following meanings:

(a) “Accrued Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the accrued and unpaid dividends on such share from and including the most recent Dividend Payment Date (or the Issue Date, if such date is prior to the first Dividend Payment Date) to but not including such date.

(b) “Accumulated Dividends” shall mean, with respect to any share of Preferred Stock, as of any date, the aggregate accumulated and unpaid dividends on such share from the Issue Date until the most recent Dividend Payment Date on or prior to such date. There shall be no Accumulated Dividends with respect to any share of Preferred Stock prior to the first Dividend Payment Date.

(c) “Affiliate” shall have the meaning ascribed to it, on the date hereof, under Rule 405 of the Securities Act of 1933, as amended.

(d) “Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.

(e) “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to close.

(f) “Change of Control” shall mean any of the following events: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Company’s assets (determined on a consolidated basis) to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than to Permitted Holders; (ii) the adoption of a plan the consummation of which would result in the liquidation or dissolution of the Company; (iii) the acquisition, directly or indirectly, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than Permitted Holders, of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other Person or group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this definition, such other Person or group shall be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation, if such other Person or group is the beneficial owner (as defined above), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent corporation and the Permitted Holders beneficially own (as defined in this proviso), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent corporation and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent corporation); or (iv) during any period of two consecutive years, individuals who at the beginning of such period comprised the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a vote of 66 ²/3% of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. For purposes of this definition of “Change of Control,” the term “Permitted Holders” means Aubrey K. McClendon and Tom L. Ward and their respective Affiliates.

2

(g) “Change of Control Date” shall mean the date on which the Change of Control event occurs.

(h) “Closing Sale Price” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by Nasdaq or by the National Quotation Bureau Incorporated. In the absence of such a quotation, the Company will determine the Closing Sale Price on the basis it considers appropriate.

(i) “Conversion Price” shall mean $16.6513, subject to adjustment as set forth in Section 7(d).

(j) “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company, or any other class of stock resulting from successive changes or reclassifications of such common stock consisting solely of changes in par value, or from par value to no par value, or as a result of a subdivision, combination, or merger, consolidation or similar transaction in which the Company is a constituent corporation.

(k) “DTC” or “Depository” shall mean The Depository Trust Company.

(l) “Dividend Payment Date” shall mean March 15, June 15, September 15 and December 15 of each year, commencing June 15, 2004.

(m) “Dividend Record Date” shall mean March 1, June 1, September 1 and December 1 of each year.

(n) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(o) “Holder” or “holder” shall mean a holder of record of the Preferred Stock.

(p) “Issue Date” shall mean March 30, 2004, the original date of issuance of the Preferred Stock.

(q) “Junior Stock” shall mean all classes of common stock of the Company and the Series A Junior Participating Convertible Preferred Stock and each other class of capital stock or series of preferred stock established after the Issue Date, by the Board of Directors, the terms of which do not expressly provide that such class or series ranks senior to or on parity with the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(r) “Liquidation Preference” shall mean, with respect to each share of Preferred Stock, $1,000.00.

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(s) “Market Value” shall mean the average closing price of the Common Stock for a five consecutive trading day period on the NYSE (or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation or, if the Common Stock is not so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Common Stock).

(t) “NYSE” shall mean the New York Stock Exchange, Inc.

(u) “Officer” shall mean the Chairman of the Board of Directors, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.

(v) “Officers’ Certificate” shall mean a certificate signed by two Officers.

(w) “Opinion of Counsel” shall mean a written opinion from legal counsel who is acceptable to the Transfer Agent. The counsel may be an employee of or counsel to the Company or the Transfer Agent.

(x) “Parity Stock” shall mean the 6.00% Preferred Stock, the 6.75% Preferred Stock, the 5.00% Preferred Stock and any class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank on parity with the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

(y) “Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

(z) “Purchase Agreement” shall mean that certain Purchase Agreement with respect to the Preferred Stock, dated March 24, 2004, among the Company, Lehman Brothers Inc., Banc of America Securities LLC, Bear, Stearns & Co. Inc. and Credit Suisse First Boston LLC and the other initial purchasers named therein.

(aa) “Registration Rights Agreement” means the Registration Rights Agreement dated March 30, 2004, among the Company, Lehman Brothers Inc., Banc of America Securities LLC, Bear, Stearns & Co. Inc. and Credit Suisse First Boston LLC and the other initial purchasers named in the Purchase Agreement, with respect to the Preferred Stock.

(bb) “SEC” or “Commission” shall mean the Securities and Exchange Commission.

(cc) “Securities Act” shall mean the Securities Act of 1933, as amended.

(dd) “Senior Stock” shall mean each class of capital stock or series of preferred stock established after the Issue Date by the Board of Directors, the terms of which expressly provide that such class or series will rank senior to the Preferred Stock as to dividend rights or rights upon the liquidation, winding-up or dissolution of the Company.

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(ee) “Shelf Registration Statement” shall mean a shelf registration statement filed with the SEC to cover resales of Transfer Restricted Securities by holders thereof, as required by the Registration Rights Agreement.

(ff) “5.00% Preferred Stock” shall mean the series of preferred stock, par value $0.01 per share, of the Company designated as the “5.00% Cumulative Convertible Preferred Stock.”

(gg) “6.00% Preferred Stock” shall mean the series of preferred stock, par value $0.01 per share, of the Company designated as the “6.00% Cumulative Convertible Preferred Stock.”

(hh) “6.75% Preferred Stock” shall mean the series of preferred stock, par value $0.01 per share, of the Company designated as the “6.75% Cumulative Convertible Preferred Stock.”

(ii) “Trading Day” shall mean a day during which trading in securities generally occurs on the New York Stock Exchange or, if Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which Common Stock is then listed or, if Common Stock is not listed on a national or regional securities exchange, on Nasdaq or, if Common Stock is not quoted on Nasdaq, on the principal other market on which Common Stock is then traded.

(jj) “Trading Price” of the Preferred Stock on any date of determination means the average of the secondary market bid quotations obtained by the Company or the calculation agent for 5,000 shares of Preferred Stock at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers that the Company or the calculation agent selects; provided that if three such bids cannot reasonably be obtained by the Company or the calculation agent, but two such bids are obtained, the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Company or the calculation agent, that one bid shall be used. If the Company or the calculation agent cannot reasonably obtain at least one bid for 5,000 shares of Preferred Stock from a nationally recognized securities dealer, then the Trading Price per share of Preferred Stock will be deemed to be less than 98% of the product of (A) the Closing Sale Price of the Common Stock on such date (B) and the Conversion Price on such date.

(kk) “Transfer Agent” shall mean UMB Bank, N.A., the Company’s duly appointed transfer agent, registrar and conversion and dividend disbursing agent for the Preferred Stock. The Company may, in its sole discretion, remove the Transfer Agent with 10 days’ prior notice to the Transfer Agent; provided, that the Company shall appoint a successor Transfer Agent who shall accept such appointment prior to the effectiveness of such removal.

(ll) “Transfer Restricted Securities” shall mean each share of Preferred Stock (or the shares of Common Stock into which such share of Preferred Stock is convertible) until (i) the date on which such security or its predecessor has been effectively registered under the

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Securities Act and disposed of in accordance with the Shelf Registration Statement or (ii) the date on which such security or predecessor is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

(mm) “Voting Rights Triggering Event” shall mean the failure of the Company to pay dividends on the Preferred Stock with respect to six or more quarterly periods (whether or not consecutive).

(nn) “Voting Stock” shall mean, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of contingency) to vote in the election of members of the Board of Directors or other governing body of such Person. For purposes of this definition, “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of corporate stock or partnership interests and any and all warrants, options and rights with respect thereto (whether or not currently exercisable), including each class of common stock and preferred stock of such Person.

3. Dividends.

(a) The holders of shares of the outstanding Preferred Stock shall be entitled, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, to receive cumulative cash dividends at the rate per annum of 4.125 % per share on the Liquidation Preference (equivalent to $41.25 per annum per share), payable quarterly in arrears (the “Dividend Rate”). The Dividend Rate may be increased in the circumstances described in Section 3(b) below. Dividends payable for each full dividend period will be computed by dividing the Dividend Rate by four and shall be payable in arrears on each Dividend Payment Date (commencing June 15, 2004) for the quarterly period ending immediately prior to such Dividend Payment Date, to the holders of record of Preferred Stock at the close of business on the Dividend Record Date applicable to such Dividend Payment Date. Such dividends shall be cumulative from the most recent date as to which dividends shall have been paid or, if no dividends have been paid, from the Issue Date (whether or not in any dividend period or periods there shall be funds of the Company legally available for the payment of such dividends) and shall accrue on a day-to-day basis, whether or not earned or declared, from and after the Issue Date. Dividends payable for any partial dividend period, including the initial partial dividend period ending immediately prior to June 15, 2004, shall be computed on the basis of days elapsed over a 360-day year consisting of twelve 30-day months. Accumulations of dividends on shares of Preferred Stock shall not bear interest.

(b) If (i) by July 28, 2004, the Shelf Registration Statement has not been filed with the Commission, (ii) by November 25, 2004, the Shelf Registration Statement has not been declared effective by the Commission or (iii) after the Shelf Registration Statement has been declared effective, (A) the Shelf Registration Statement thereafter ceases to be effective or (B) the Shelf Registration Statement or the related prospectus ceases to be usable (in each case, subject to the exceptions described below) in connection with resales of Transfer Restricted Securities during the period that any Transfer Restricted Securities (other than Transfer Restricted Securities held or beneficially owned by affiliates of the Company) remain

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outstanding (each such event referred to in clauses (i), (ii) and (iii), a “Registration Default”), additional dividends shall accrue on the Preferred Stock at the rate of .50% per annum (resulting in a Dividend Rate of 4.625% per annum during the continuance of a Registration Default), from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. At all other times, dividends shall accumulate on the Preferred Stock at the Dividend Rate as described in Section 3(a).

A Registration Default referred to in clause (iii) of Section 3(b) shall be deemed not to have occurred and be continuing in relation to the Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to the Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in the Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default referred to in clause (iii) of Section 3(b) occurs for a continuous period in excess of 30 days, additional dividends as described in Section 3(b) shall be payable in accordance therewith from the day such Registration Default occurs until such Registration Default is cured.

(c) No dividend will be declared or paid upon, or any sum set apart for the payment of dividends upon, any outstanding share of the Preferred Stock with respect to any dividend period unless all dividends for all preceding dividend periods have been declared and paid or declared and a sufficient sum set apart for the payment of such dividend, upon all outstanding shares of Preferred Stock.

(d) No dividends or other distributions (other than a dividend or distribution payable solely in shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock) and other than cash paid in lieu of fractional shares) may be declared, made or paid, or set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity Stock or Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any money paid to or made available for a sinking fund for the redemption of any Parity Stock or Junior Stock) by or on behalf of the Company (except by conversion into or exchange for shares of Parity Stock or Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of Junior Stock)), unless full Accumulated Dividends shall have been or contemporaneously are declared and paid, or are declared and a sum sufficient for the payment thereof is set apart for such payment, on the Preferred Stock and any Parity Stock for all dividend payment periods terminating on or prior to the date of such declaration, payment, redemption, purchase or acquisition. Notwithstanding the foregoing, if full dividends have not been paid on the Preferred Stock and any Parity Stock, dividends may be declared and paid on the Preferred Stock and such Parity Stock so long as the dividends are declared and paid pro rata so that the amounts of dividends declared per share on the Preferred Stock and such Parity Stock will in all cases bear to each other the same ratio that accumulated and unpaid dividends per share on the shares of Preferred Stock and such other Parity Stock bear to each other.

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(e) Holders of shares of Preferred Stock shall not be entitled to any dividends on the Preferred Stock, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Stock which may be in arrears.

(f) The holders of shares of Preferred Stock at the close of business on a Dividend Record Date will be entitled to receive the dividend payment on those shares on the next following Dividend Payment Date notwithstanding the subsequent conversion thereof or the Company’s default in payment of the dividend due on that Dividend Payment Date. However, shares of Preferred Stock surrendered for conversion during the period between the close of business on any Dividend Record Date and the close of business on the Business Day immediately preceding the applicable Dividend Payment Date must be accompanied by payment of an amount equal to the dividend payable on the shares on that Dividend Payment Date. A holder of shares of Preferred Stock on a Dividend Record Date who (or whose transferee) tenders any shares for conversion on the corresponding Dividend Payment Date will receive the dividend payable by the Company on the Preferred Stock on that date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Preferred Stock for conversion. Except as provided above with respect to a voluntary conversion pursuant to Section 7, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon conversion.

4. Change of Control.

(a) Upon the occurrence of a Change of Control, each holder of Preferred Stock shall, in the event that the Market Value for the period ending on the Change of Control Date is less than the Conversion Price, have a one-time option (the “Change of Control Option”) to convert all of such holder’s outstanding shares of Preferred Stock into fully paid and nonassessable shares of Common Stock at an adjusted Conversion Price equal to the greater of (i) the Market Value for the period ending on the Change of Control Date and (ii) $8.0733. The Change of Control Option must be exercised, if at all, during the period of not less than 30 days nor more than 60 days commencing on the third Business Day after notice of a Change in Control has been given by the Company in accordance with Section 4(b). In lieu of issuing the shares of Common Stock issuable upon conversion in the event of a Change of Control, the Company may, at its option, make a cash payment equal to the Market Value for each share of such Common Stock otherwise issuable determined for the period ending on the Change of Control Date. Notwithstanding the foregoing, upon the occurrence of a Change of Control in which (i) each holder of Common Stock receives consideration consisting solely of common stock of the successor, acquiror or other third party (and cash paid in lieu of fractional shares) that is listed on a national securities exchange or quoted on the NASDAQ National Market and (ii) all the Common Stock has been exchanged for, converted into or acquired for common stock of the successor, acquiror or other third party (and cash in lieu of factional shares), and the Preferred Stock becomes convertible solely into such common stock, the Conversion Price will not be adjusted as described in this Section 4(a).

(b) In the event of a Change of Control (other than a Change of Control described in the last sentence of Section 4(a)), notice of such Change of Control shall be given,

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within five Business Days of the Change of Control Date, by the Company by first-class mail to each record holder of shares of Preferred Stock, at such holder’s address as the same appears on the books of the Company. Each such notice shall state (i) that a Change of Control has occurred; (ii) the last day on which the Change of Control Option may be exercised (the “Expiration Date”) pursuant to the terms hereof; (iii) the name and address of the Transfer Agent; and (iv) the procedures that holders must follow to exercise the Change of Control Option.

(c) On or before the Expiration Date, each holder of shares of Preferred Stock wishing to exercise the Change of Control Option shall surrender the certificate or certificates representing the shares of Preferred Stock to be converted, in the manner and at the place designated in the notice described in Section 4(b), and on such date the cash or shares of Common Stock due to such holder shall be delivered to the Person whose name appears on such certificate or certificates as the owner thereof and the shares represented by each surrendered certificate shall be returned to authorized but unissued shares. Upon surrender (in accordance with the notice described in Section 4(b)) of the certificate or certificates representing any shares to be so converted (properly endorsed or assigned for transfer, if the Company shall so require and the notice shall so state), such shares shall be converted by the Company at the adjusted Conversion Price, if applicable, as described in Section 4(a).

(d) The rights of holders of Preferred Stock pursuant to this Section 4 are in addition to, and not in lieu of, the rights of holders of Preferred Stock provided for in Section 7 hereof.

5. Voting.

(a) The shares of Preferred Stock shall have no voting rights except as set forth below or as otherwise required by Oklahoma law from time to time:

(i) If and whenever at any time or times a Voting Rights Triggering Event occurs, then the holders of shares of Preferred Stock, voting as a single class with any other preferred stock or preference securities having similar voting rights that are exercisable, including the 5.00% Preferred Stock, the 6.00% Preferred Stock and the 6.75% Preferred Stock (the “Voting Rights Class”), will be entitled at the next regular or special meeting of stockholders of the Company to elect two additional directors of the Company. Upon the election of any such additional directors, the number of directors that comprise the Board of Directors shall be increased by such number of additional directors.

(ii) Such voting rights may be exercised at a special meeting of the holders of the shares of the Voting Rights Class, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends in arrears on the shares of Preferred Stock shall have been paid in full, at which time or times such voting rights and the term of the directors elected pursuant to Section 5(a)(i) shall terminate.

(iii) At any time when such voting rights shall have vested in holders of shares of the Voting Rights Class, an Officer of the Company may call, and, upon

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written request of the record holders of shares representing at least twenty-five percent (25%) of the voting power of the shares then outstanding of the Voting Rights Class, addressed to the Secretary of the Company, shall call a special meeting of the holders of shares of the Voting Rights Class. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company, or, if none, at a place designated by the Board of Directors. Notwithstanding the provisions of this Section 5(a)(iii), no such special meeting shall be called during a period within the 60 days immediately preceding the date fixed for the next annual meeting of stockholders in which such case, the election of directors pursuant to Section 5(a)(i) shall be held at such annual meeting of stockholders.

(iv) At any meeting held for the purpose of electing directors at which the holders of the Voting Rights Class shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of shares representing more than fifty percent (50%) in voting power of the then outstanding shares of the Voting Rights Class shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. The affirmative vote of the holders of shares of Preferred Stock constituting a majority of the shares of Preferred Stock present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

(v) Any director elected pursuant to the voting rights created under this Section 5(a) shall hold office until the next annual meeting of stockholders (unless such term has previously terminated pursuant to Section 5(a)(ii) ) and any vacancy in respect of any such director shall be filled only by vote of the remaining director so elected by holders of the Voting Rights Class, or if there be no such remaining director, by the holders of shares of the Voting Rights Class at a special meeting called in accordance with the procedures set forth in this Section 5, or, if no such special meeting is called, at the next annual meeting of stockholders. Upon any termination of such voting rights, the term of office of all directors elected pursuant to this Section 5 shall terminate.

(vi) So long as any shares of Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the Company shall not, without the affirmative vote or consent of the holders of at least 66 ²/3% of the outstanding Preferred Stock voting or consenting, as the case may be, separately as one class, (i) create, authorize or issue any class or series of Senior Stock (or any security convertible into Senior Stock) or (ii) amend the Certificate of Incorporation so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of Preferred Stock.

(vii) In exercising the voting rights set forth in this Section 5(a), each share of Preferred Stock shall be entitled to one vote.

(b) The Company may authorize, increase the authorized amount of, or issue any class or series of Parity Stock or Junior Stock, without the consent of the holders of Preferred Stock, and in taking such actions the Company shall not be deemed to have affected adversely the rights, preferences, privileges or voting rights of holders of shares of Preferred Stock.

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6. Liquidation Rights.

(a) In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary of involuntary, each holder of shares of Preferred Stock shall be entitled to receive and to be paid out of the assets of the Company available for distribution to its stockholders the Liquidation Preference plus Accumulated Dividends and Accrued Dividends thereon in preference to the holders of, and before any payment or distribution is made on, any Junior Stock, including, without limitation, on any Common Stock.

(b) Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the assets or business of the Company (other than in connection with the liquidation, winding-up or dissolution of its business) nor the merger or consolidation of the Company into or with any other Person shall be deemed to be a liquidation, winding-up or dissolution, voluntary or involuntary, for the purposes of this Section 6.

(c) After the payment to the holders of the shares of Preferred Stock of full preferential amounts provided for in this Section 6, the holders of Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company.

(d) In the event the assets of the Company available for distribution to the holders of shares of Preferred Stock upon any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section 6(a), no such distribution shall be made on account of any shares of Parity Stock upon such liquidation, dissolution or winding-up unless proportionate distributable amounts shall be paid on account of the shares of Preferred Stock, ratably, in proportion to the full distributable amounts for which holders of all Preferred Stock and of any Parity Stock are entitled upon such liquidation, winding-up or dissolution.

7. Conversion.

(a) Each holder of Preferred Stock shall have the right, only on or after the occurrence of the conversion triggering events described in Section 7(b), at its option, from the Issue Date to convert, subject to the terms and provisions of this Section 7, any or all of such holder’s shares of Preferred Stock. In such case, the shares of Preferred Stock shall be converted into such whole number of fully paid and nonassessable shares of Common Stock as is equal, subject to Section 7(h), to the product of the number of shares of Preferred Stock being so converted multiplied by the quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price (as defined below) then in effect. The Conversion Price initially shall be $16.6513, subject to adjustment as set forth in Section 7(d).

The conversion right of a holder of Preferred Stock shall be exercised by the holder by the surrender to the Company of the certificates representing shares to be converted at any time during usual business hours at its principal place of business or the offices of its duly appointed Transfer Agent to be maintained by it, accompanied by written notice to the Company in the form of Exhibit B that the holder elects to convert all or a portion of the shares of Preferred Stock represented by such certificate and specifying the name or names (with address) in which a

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certificate or certificates for shares of Common Stock are to be issued and (if so required by the Company or its duly appointed Transfer Agent) by a written instrument or instruments of transfer in form reasonably satisfactory to the Company or its duly appointed Transfer Agent duly executed by the holder or its duly authorized legal representative and transfer tax stamps or funds therefor, if required pursuant to Section 7(j). Immediately prior to the close of business on the date of receipt by the Company or its duly appointed Transfer Agent of notice of conversion of shares of Preferred Stock, each converting holder of Preferred Stock shall be deemed to be the holder of record of Common Stock issuable upon conversion of such holder’s Preferred Stock notwithstanding that the share register of the Company shall then be closed or that certificates representing such Common Stock shall not then be actually delivered to such holder. On the date of any conversion, all rights with respect to the shares of Preferred Stock so converted, including the rights, if any, to receive notices, will terminate, except only the rights of holders thereof to (i) receive certificates for the number of whole shares of Common Stock into which such shares of Preferred Stock have been converted and cash, in lieu of any fractional shares as provided in Section 7(g); and (ii) exercise the rights to which they are entitled as holders of Common Stock.

(b) A holder’s right to convert its shares of Preferred Stock will arise only upon the occurrence of the following events:

(i) Conversion Rights Based on Common Share Price. A holder may surrender shares of Preferred Stock for conversion into shares of Common Stock during any fiscal quarter after the fiscal quarter ending June 30, 2004 (and only during such fiscal quarter) if the Closing Sale Price of Common Stock for at least 20 Trading Days in a period of 30 consecutive Trading Days ending on the last Trading Day of the immediately preceding fiscal quarter is more than 130% of the Conversion Price on such Trading Day. If this Closing Sale Price condition is not satisfied at the end of any fiscal quarter, then conversion pursuant to this Section 7(b)(i) will not be permitted in the following fiscal quarter. The Company shall determine for each Trading Day during the 30 consecutive Trading Day period specified in this Section 7(b)(i) whether the Closing Sale Price exceeds 130% of the Conversion Price and whether the Preferred Stock shall be convertible as a result of the occurrence of the event set forth in this Section 7(b)(i).

(ii) Conversion Upon Satisfaction of Trading Price Condition. A holder may surrender its shares of Preferred Stock for conversion into Common Stock during the five business day period after any five consecutive Trading Day period in which the Trading Price of the Preferred Stock for each day of such five Trading Day period was less than 98% of the product of the Closing Sale Price of the Common Stock and the Conversion Price in effect on each such day. The Company shall determine whether the Preferred Stock may be converted pursuant to this Section 7(b)(ii) based on Trading Prices obtained from three independent nationally known securities dealers. The Company shall have no obligation to determine the Trading Price unless a holder of Preferred Stock provides it with reasonable evidence that the Trading Price was less than 98% of the product of the Closing Sale Price and the then-current Conversion Price. If such evidence is provided, the Company shall determine the Trading Price of the Preferred Stock beginning on the next Trading Day and on each successive Trading Day until the Trading Price is greater than or equal to 98% of the product of the Closing Sale Price and the then current Conversion Price.

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(iii) Conversion Rights Upon Occurrence of Certain Corporate Transactions.

(1) If the Company is party to a consolidation, merger, binding share exchange or sale of all or substantially all of the Company’s assets, in each case pursuant to which the Common Stock would be converted into cash, securities or other property, a holder may surrender its shares of Preferred Stock for conversion into Common Stock at any time from and after the date that is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual date of such transaction and, at the effective time, the right to convert shares of Preferred Stock into Common Stock will be changed into a right to convert such Preferred Stock into the kind and amount of cash, securities or other property of the Company or another person that the holder would have received if the holder had converted the holder’s Preferred Stock immediately prior to the transaction.

(2) If the Company elects to (A) distribute to all holders of Common Stock rights or warrants entitling them to purchase, for a period expiring within 45 days of the record date for such distribution, Common Stock at less than the average Closing Sale Price for the ten consecutive Trading Days immediately preceding the declaration date for such distribution or (B) distribute to all holders of Common Stock, cash, assets, debt securities or rights to purchase the Company’s securities, which distribution has a per share value exceeding 5% of the Closing Sale Price of Common Stock on the Trading Day immediately preceding the declaration date for such distribution; then, in either case, the Company must notify holders of Preferred Stock at least 20 days prior to the ex-dividend date for such distribution. Once the Company has given such notice, a holder may surrender its shares of Preferred Stock for conversion at any time until the earlier of the close of business on the business day immediately preceding the ex-dividend date or any announcement by the Company that such distribution will not take place. Notwithstanding the foregoing, holders shall not have the right to surrender shares of Preferred Stock for conversion pursuant to this Section 7(b)(iii)(2), and no adjustment to the Conversion Price will be made, if all holders of the Preferred Stock will otherwise participate, on the same basis as a holder of Common Shares, in the distribution described above without first converting Preferred Stock into Common Shares.

(iv) Upon a Change of Control, holders of Preferred Stock shall, if the Market Value at such time is less than the Conversion Price, have a one-time option to convert all of their outstanding shares of Preferred Stock into Common Stock pursuant to Section 4.

(v) Upon determination that holders of Preferred Stock are or will be entitled to convert their Preferred Stock into Common Stock in accordance with any of the provisions of this Section 7(b), the Company will issue a press release and publish such information on its website on the World Wide Web.

(c) If the last day for the exercise of the conversion right shall not be a Business Day, then such conversion right may be exercised on the next preceding Business Day.

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(d) The Conversion Price shall be subject to adjustment as follows:

(i) In case the Company shall at any time or from time to time (A) pay a dividend (or other distribution) payable in shares of Common Stock on any class of capital stock (which, for purposes of this Section 7(d) shall include, without limitation, any dividends or distributions in the form of options, warrants or other rights to acquire capital stock) of the Company (other than the issuance of shares of Common Stock in connection with the conversion of preferred stock); (B) subdivide the outstanding shares of Common Stock into a larger number of shares; (C) combine the outstanding shares of Common Stock into a smaller number of shares; (D) issue any shares of its capital stock in a reclassification of the Common Stock; or (E) pay a dividend or make a distribution to all holders of shares of Common Stock (other than a dividend or distribution subject to Section 7(d)(ii)) pursuant to a stockholder rights plan, “poison pill” or similar arrangement and excluding dividends payable on the Preferred Stock then, and in each such case, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted into shares of Common Stock immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 7(d)(i) shall become effective retroactively (x) in the case of any such dividend or distribution, to the day immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (y) in the case of any such subdivision, combination or reclassification, to the close of business on the day upon which such corporate action becomes effective.

(ii) In case the Company shall at any time or from time to time issue to all holders of its Common Stock rights, options or warrants entitling the holders thereof to subscribe for or purchase shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) at a price per share less than the Market Value for the period ending on the date of issuance (treating the price per share of any security convertible or exchangeable or exercisable into Common Stock as equal to (A) the sum of the price paid to acquire such security convertible, exchangeable or exercisable into Common Stock plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such security into Common Stock divided by (B) the number of shares of Common Stock into which such convertible, exchangeable or exercisable security is initially convertible, exchangeable or exercisable), other than (i) issuances of such rights, options or warrants if the holder of Preferred Stock would be entitled to receive such rights, options or warrants upon conversion at any time of shares of Preferred Stock into Common Stock and (ii) issuances that are subject to certain triggering events (until such time as such triggering events occur), then, and in each such case, the Conversion Price then in effect shall be adjusted by dividing the Conversion Price in effect on the day immediately prior to the record date of such issuance by a fraction (y) the numerator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock issued or to be issued upon or as a result of the issuance of such rights, options or warrants (or the maximum number into or for which such convertible or exchangeable securities initially may convert or exchange or for which such options, warrants or other rights initially may be exercised) and (z) the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date plus the number of shares

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of Common Stock which the aggregate consideration for the total number of such additional shares of Common Stock so issued (or into or for which such convertible or exchangeable securities may convert or exchange or for which such options, warrants or other rights may be exercised plus the aggregate amount of any additional consideration initially payable upon the conversion, exchange or exercise of such security) would purchase at the Market Value for the period ending on the date of conversion; provided, that if the Company distributes rights or warrants (other than those referred to above in this subparagraph (d)(ii)) pro rata to the holders of Common Stock, so long as such rights or warrants have not expired or been redeemed by the Company, (y) the holder of any Preferred Stock surrendered for conversion shall be entitled to receive upon such conversion, in addition to the shares of Common Stock then issuable upon such conversion (the “Conversion Shares”), a number of rights or warrants to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of rights or warrants of separate certificates evidencing such rights or warrants (the “Distribution Date”), the same number of rights or warrants to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions applicable to the rights or warrants and (ii) if such conversion occurs after the Distribution Date, the same number of rights or warrants to which a holder of the number of shares of Common Stock into which such Preferred Stock was convertible immediately prior to such Distribution Date would have been entitled on such Distribution Date had such Preferred Stock been converted immediately prior to such Distribution Date in accordance with the terms and provisions applicable to the rights and warrants and (z) the Conversion Price shall not be subject to adjustment on account of any declaration, distribution or exercise of such rights or warrants.

(iii) If the Company shall at any time make a distribution, by dividend or otherwise, to all holders of shares of its Common Stock consisting exclusively of cash (excluding any cash portion of distributions referred to in clause (E) of paragraph (d)(i) above and cash distributed upon a merger or consolidation to which paragraph (h) below applies) in an amount per share of Common Stock that, when combined with the per share amounts of all other all-cash distributions to all holders of shares of its Common Stock made within the 90-day period ending on the record date for the distribution giving rise to an adjustment pursuant to this Section 7(d)(iii), exceeds $0.055 per share of Common Stock (the “Distribution Threshold Amount”), then the Conversion Price will be adjusted by multiplying:

(1) the Conversion Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive such distribution by

(2) a fraction, the numerator of which will be the Market Value on the fourth trading day on the NYSE prior to such record date minus the amount of cash per share of Common Stock so distributed in excess of the Dividend Threshold Amount for which an adjustment has not otherwise been made pursuant to this Section 7(d)(iii) and the denominator of which will be the Market Value on the fourth trading day on the NYSE prior to such record date.

Subject to Section 7(e), such adjustment shall become effective immediately after the record date for the determination of holders of Common Stock entitled to receive the distribution giving rise to an adjustment pursuant to this Section 7(d)(iii). The Dividend Threshold Amount is subject to adjustment under the same circumstances under which the Conversion Price is subject to adjustment pursuant to Section 7(d)(i) or Section 7(d)(ii).

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(iv) In the case the Company at any time or from time to time shall take any action affecting its Common Stock (it being understood that the issuance or sale of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock, or any options, warrants or other rights to acquire shares of Common Stock) to any Person at a price per share less than the Conversion Price then in effect shall not be deemed such an action), other than an action described in any of Section 7(d)(i) through Section 7(d)(iii), inclusive, or Section 7(h), then the Conversion Price shall be adjusted in such manner and at such time as the Board of Directors of the Company in good faith determines to be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of the Preferred Stock).

(v) Notwithstanding anything herein to the contrary, no adjustment under this Section 7(d) need be made to the Conversion Price unless such adjustment would require an increase or decrease of at least 1% of the Conversion Price then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, if any, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Conversion; provided, however, that with respect to adjustments to be made to the Conversion Price in connection with cash dividends paid by the Company, the Company shall make such adjustments, regardless of whether such aggregate adjustments amount to 1% or more of the Conversion Price, no later than March 15 of each calendar year.

(vi) The Company reserves the right to make such reductions in the Conversion Price in addition to those required in the foregoing provisions as it considers advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. In the event the Company elects to make such a reduction in the Conversion Price, the Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder if and to the extent that such laws and regulations are applicable in connection with the reduction of the Conversion Price.

(e) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the Conversion Price then in effect shall be required by reason of the taking of such record.

(f) Upon any increase or decrease in the Conversion Price, then, and in each such case, the Company promptly shall deliver to each holder of Preferred Stock a certificate signed by an authorized officer of the Company, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment.

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(g) No fractional shares or securities representing fractional shares of Common Stock shall be issued upon the conversion of any shares of Preferred Stock, whether voluntary or mandatory. If more than one share of Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate Liquidation Preference of the shares of Preferred Stock so surrendered. If the conversion of any share or shares of Preferred Stock results in a fraction, an amount equal to such fraction multiplied by the last reported sale price of the Common Stock on the NYSE (or on such other national securities exchange or automated quotation system on which the Common Stock is then listed for trading or authorized for quotation or, if the Common Stock is not then so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of the Common Stock) at the close of business on the trading day next preceding the day of conversion shall be paid to such holder in cash by the Company.

(h) In the event of any reclassification of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value), or in the event of any consolidation or merger of the Company with or into another Person or any merger of another Person with or into the Company (other than a consolidation or merger in which the Company is the resulting or surviving Person and which does not result in any reclassification or change of outstanding Common Stock), or in the event of any sale or other disposition to another Person of all or substantially all of the assets of the Company (computed on a consolidated basis) (any of the foregoing, a “Transaction”), each share of Preferred Stock then outstanding shall, without the consent of any holder of Preferred Stock, become convertible at any time, at the option of the holder thereof, only into the kind and amount of securities (of the Company or another issuer), cash and other property receivable upon such Transaction by a holder of the number of shares of Common Stock into which such share of Preferred Stock could have been converted immediately prior to such Transaction, after giving effect to any adjustment event. The provisions of this Section 7(h) and any equivalent thereof in any such securities similarly shall apply to successive Transactions. The provisions of this Section 7(h) shall be the sole right of holders of Preferred Stock in connection with any Transaction and such holders shall have no separate vote thereon.

(i) The Company shall at all times reserve and keep available for issuance upon the conversion of the Preferred Stock such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock.

(j) The issuance or delivery of certificates for Common Stock upon the conversion of shares of Preferred Stock shall be made without charge to the converting holder of shares of Preferred Stock for such certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, and such certificates shall be issued or delivered in the respective names of, or in such names as may be directed by, the holders of the shares of Preferred Stock converted; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and

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delivery of any such certificate in a name other than that of the holder of the shares of Preferred Stock converted, and the Company shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid.

8. Mandatory Conversion.

(a) At any time on or after March 15, 2009, the Company shall have the right, at its option, to cause the Preferred Stock, in whole but not in part, to be automatically converted into that number of whole shares of Common Stock for each share of Preferred Stock equal to the quotient of (i) the Liquidation Preference divided by (ii) the Conversion Price then in effect, with any resulting fractional shares of Common Stock to be settled in accordance with Section 7(g). The Company may exercise its right to cause a mandatory conversion pursuant to this Section 8(a) only if the closing price of the Common Stock equals or exceeds 130% of the Conversion Price then in effect for at least 20 trading days in any consecutive 30-day trading period on the NYSE (or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation), including the last trading day of such 30-day period, ending on the trading day prior to the Company’s issuance of a press release announcing the mandatory conversion as described in Section 8(b).

(b) To exercise the mandatory conversion right described in Section 8(a), the Company must issue a press release for publication on the Dow Jones News Service prior to the opening of business on the first trading day following any date on which the conditions described in Section 8(a) are met, announcing such a mandatory conversion. The Company shall also give notice by mail or by publication (with subsequent prompt notice by mail) to the holders of Preferred Stock (not more than four Business Days after the date of the press release) of the mandatory conversion announcing the Company’s intention to convert the Preferred Stock. The conversion date will be a date selected by the Company (the “Mandatory Conversion Date”) and will be no more than five days after the date on which the Company issues the press release described in this Section 8(b).

(c) In addition to any information required by applicable law or regulation, the press release and notice of a mandatory conversion described in Section 8(b) shall state, as appropriate: (i) the Mandatory Conversion Date; (ii) the number of shares of Common Stock to be issued upon conversion of each share of Preferred Stock; (iii) the number of shares of Preferred Stock to be converted; and (iv) that dividends on the Preferred Stock to be converted will cease to accrue on the Mandatory Conversion Date.

(d) On and after the Mandatory Conversion Date, dividends will cease to accrue on the Preferred Stock called for a mandatory conversion pursuant to Section 8(a) and all rights of holders of such Preferred Stock will terminate except for the right to receive the whole shares of Common Stock issuable upon conversion thereof and cash, in lieu of any fractional shares of Common Stock in accordance with Section 7(g). The dividend payment with respect to the Preferred Stock called for a mandatory conversion pursuant to Section 8(a) on a date during the period between the close of business on any Dividend Record Date to the close of business on the corresponding Dividend Payment Date will be payable on such Dividend Payment Date to

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the record holder of such share on such Dividend Record Date if such share has been converted after such Dividend Record Date and prior to such Dividend Payment Date. Except as provided in the immediately preceding sentence with respect to a mandatory conversion pursuant to Section 8(a), no payment or adjustment will be made upon conversion of Preferred Stock for Accrued Dividends or for dividends with respect to the Common Stock issued upon such conversion.

(e) The Company may not authorize, issue a press release or give notice of any mandatory conversion pursuant to Section 8(a) unless, prior to giving the conversion notice, all Accumulated Dividends on the Preferred Stock for periods ended prior to the date of such conversion notice shall have been paid in cash.

(f) In addition to the mandatory conversion right described in Section 8(a), if there are less than 25,000 shares of Preferred Stock outstanding, the Company shall have the right, at any time on or after March 15, 2009, at its option, to cause the Preferred Stock to be automatically converted into that number of whole shares of Common Stock equal to the quotient of (i) the Liquidation Preference divided by (ii) the lesser of (A) the Conversion Price then in effect and (B) the Market Value for the period ending on the second trading day immediately prior to the Mandatory Conversion Date, with any resulting fractional shares of Common Stock to be settled in cash in accordance with Section 7(g). The provisions of clauses (b), (c), (d) and (e) of this Section 8 shall apply to any mandatory conversion pursuant to this clause (f); provided that (i) the Mandatory Conversion Date described in Section 8(b) shall not be less than 15 days nor more than 30 days after the date on which the Company issues a press release pursuant to Section 8(b) announcing such mandatory conversion and (ii) the press release and notice of mandatory conversion described in Section 8(c) will not state the number of shares of Common Stock to be issued upon conversion of each share of Preferred Stock.

9. Consolidation, Merger and Sale of Assets.

(a) The Company, without the consent of the holders of any of the outstanding Preferred Stock, may consolidate with or merge into any other Person or convey, transfer or lease all or substantially all its assets to any Person or may permit any Person to consolidate with or merge into, or transfer or lease all or substantially all its properties to, the Company; provided, however, that (a) the successor, transferee or lessee is organized under the laws of the United States or any political subdivision thereof; (b) the shares of Preferred Stock will become shares of such successor, transferee or lessee, having in respect of such successor, transferee or lessee the same powers, preferences and relative participating, optional or other special rights and the qualification, limitations or restrictions thereon, the Preferred Stock had immediately prior to such transaction; and (c) the Company delivers to the Transfer Agent an Officers’ Certificate and an Opinion of Counsel stating that such transaction complies with this Certificate of Designation.

(b) Upon any consolidation by the Company with, or merger by the Company into, any other person or any conveyance, transfer or lease of all or substantially all the assets of the Company as described in Section 9(a), the successor resulting from such consolidation or into which the Company is merged or the transferee or lessee to which such conveyance, transfer or lease is made, will succeed to, and be substituted for, and may exercise every right and power

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of, the Company under the shares of Preferred Stock, and thereafter, except in the case of a lease, the predecessor (if still in existence) will be released from its obligations and covenants with respect to the Preferred Stock.

10. SEC Reports.

Whether or not the Company is required to file reports with the Commission, if any shares of Preferred Stock are outstanding, the Company shall file with the Commission all such reports and other information as it would be required to file with the Commission by Section 13(a)or 15(d) under the Exchange Act. The Company shall supply each holder of Preferred Stock, upon request, without cost to such holder, copies of such reports or other information.

11. Certificates.

(a) Form and Dating. The Preferred Stock and the Transfer Agent’s certificate of authentication shall be substantially in the form set forth in Exhibit A, which is hereby incorporated in and expressly made a part of this Certificate of Designation. The Preferred Stock certificate may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Preferred Stock certificate shall be dated the date of its authentication. The terms of the Preferred Stock certificate set forth in Exhibit A are part of the terms of this Certificate of Designation.

(i) Global Preferred Stock. The Preferred Stock shall be issued initially in the form of one or more fully registered global certificates with the global securities legend and restricted securities legend set forth in Exhibit A hereto (the “Global Preferred Stock”), which shall be deposited on behalf of the purchasers represented thereby with the Transfer Agent, as custodian for DTC (or with such other custodian as DTC may direct), and registered in the name of DTC or a nominee of DTC, duly executed by the Company and authenticated by the Transfer Agent as hereinafter provided. The number of shares of Preferred Stock represented by Global Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Transfer Agent and DTC or its nominee as hereinafter provided. With respect to shares of Preferred Stock that are not “restricted securities” as defined in Rule 144 on a conversion date, all shares of Common Stock distributed on such conversion date will be freely transferable without restriction under the Securities Act (other than by affiliates), and such shares will be eligible for receipt in global form through the facilities of DTC.

(ii) Book-Entry Provisions. In the event Global Preferred Stock is deposited with or on behalf of DTC, the Company shall execute and the Transfer Agent shall authenticate and deliver initially one or more Global Preferred Stock certificates that (a) shall be registered in the name of DTC as depository for such Global Preferred Stock or the nominee of DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC’s instructions or held by the Transfer Agent as custodian for DTC.

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Members of, or participants in, DTC (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Preferred Stock held on their behalf by DTC or by the Transfer Agent as the custodian of DTC or under such Global Preferred Stock, and DTC may be treated by the Company, the Transfer Agent and any agent of the Company or the Transfer Agent as the absolute owner of such Global Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Transfer Agent or any agent of the Company or the Transfer Agent from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Stock.

(iii) Certificated Preferred Stock; Certificated Common Stock. Except as provided in this paragraph 11(a) or in paragraph 11(c), owners of beneficial interests in Global Preferred Stock will not be entitled to receive physical delivery of Preferred Stock in fully registered certificated form (“Certificated Preferred Stock”). With respect to shares of Preferred Stock that are “restricted securities” as defined in Rule 144 on a conversion date, all shares of Common Stock issuable on conversion of such shares on such conversion date will be issued in fully registered certificated form (“Certificated Common Stock”). Certificates of Certificated Common Stock will be mailed or made available at the office of the Transfer Agent for the Preferred Stock on or as soon as reasonably practicable after the relevant conversion date to the converting holder.

After a transfer of any Preferred Stock or Certificated Common Stock during the period of the effectiveness of a Shelf Registration Statement with respect to such Preferred Stock or such Certificated Common Stock, all requirements pertaining to legends on such Preferred Stock (including Global Preferred Stock) or Certificated Common Stock will cease to apply, the requirements requiring that any such Certificated Common Stock issued to Holders be issued in certificated form, as the case may, will cease to apply, and Preferred Stock or Common Stock, as the case may be, in global or fully registered certificated form, in either case without legends, will be available to the transferee of the Holder of such Preferred Stock or Certificated Common Stock upon exchange of such transferring Holder’s Preferred Stock or Common Stock or directions to transfer such Holder’s interest in the Global Preferred Stock, as applicable.

(b) Execution and Authentication. Two Officers shall sign the Preferred Stock certificate for the Company by manual or facsimile signature.

If an Officer whose signature is on a Preferred Stock certificate no longer holds that office at the time the Transfer Agent authenticates the Preferred Stock certificate, the Preferred Stock certificate shall be valid nevertheless.

A Preferred Stock certificate shall not be valid until an authorized signatory of the Transfer Agent manually signs the certificate of authentication on the Preferred Stock certificate. The signature shall be conclusive evidence that the Preferred Stock certificate has been authenticated under this Certificate of Designation.

The Transfer Agent shall authenticate and deliver certificates for up to 313,250 shares of Preferred Stock for original issue upon a written order of the Company signed by two

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Officers or by an Officer and an Assistant Treasurer of the Company. Such order shall specify the number of shares of Preferred Stock to be authenticated and the date on which the original issue of Preferred Stock is to be authenticated.

The Transfer Agent may appoint an authenticating agent reasonably acceptable to the Company to authenticate the certificates for Preferred Stock. Unless limited by the terms of such appointment, an authenticating agent may authenticate certificates for Preferred Stock whenever the Transfer Agent may do so. Each reference in this Certificate of Designation to authentication by the Transfer Agent includes authentication by such agent. An authenticating agent has the same rights as the Transfer Agent or agent for service of notices and demands.

(c) Transfer and Exchange. (i) Transfer and Exchange of Certificated Preferred Stock. When Certificated Preferred Stock is presented to the Transfer Agent with a request to register the transfer of such Certificated Preferred Stock or to exchange such Certificated Preferred Stock for an equal number of shares of Certificated Preferred Stock, the Transfer Agent shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Preferred Stock surrendered for transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Transfer Agent, duly executed by the Holder thereof or its attorney duly authorized in writing; and

(2) is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (i) or (ii) below, and is accompanied by the following additional information and documents, as applicable:

(I) if such Certificated Preferred Stock is being delivered to the Transfer Agent by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect in substantially the form of Exhibit C hereto; or

(II) if such Certificated Preferred Stock is being transferred to the Company or to a “qualified institutional buyer (“QIB”) in accordance with Rule 144A under the Securities Act or pursuant to another exemption from registration under the Securities Act, (i) a certification to that effect (in substantially the form of Exhibit C hereto) and (ii) if the Company so requests, an Opinion of Counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in paragraph 11(c) (vii).

(ii) Restrictions on Transfer of Certificated Preferred Stock for a Beneficial Interest in Global Preferred Stock. Certificated Preferred Stock may not be exchanged for a beneficial interest in Global Preferred Stock except upon satisfaction of the requirements set forth below. Upon receipt by the Transfer Agent of Certificated Preferred Stock, duly endorsed or accompanied by appropriate instruments of transfer, in form reasonably satisfactory to the Company and the Transfer Agent, together with written instructions directing

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the Transfer Agent to make, or to direct DTC to make, an adjustment on its books and records with respect to such Global Preferred Stock to reflect an increase in the number of shares of Preferred Stock represented by the Global Preferred Stock, then the Transfer Agent shall cancel such Certificated Preferred Stock and cause, or direct DTC to cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number of shares of Preferred Stock represented by the Global Preferred Stock to be increased accordingly. If no Global Preferred Stock is then outstanding, the Company shall issue and the Transfer Agent shall authenticate, upon written order of the Company in the form of an Officers’ Certificate, a new Global Preferred Stock representing the appropriate number of shares.

(iii) Transfer and Exchange of Global Preferred Stock. The transfer and exchange of Global Preferred Stock or beneficial interests therein shall be effected through DTC, in accordance with this Certificate of Designation (including applicable restrictions on transfer set forth herein, if any) and the procedures of DTC therefor.

(iv) Transfer of a Beneficial Interest in Global Preferred Stock for a Certificated Preferred Stock.

(1) Any Person having a beneficial interest in Preferred Stock that is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to another exemption from registration thereunder may upon request, but only with the consent of the Company, and if accompanied by a certification from such Person to that effect (in substantially the form of Exhibit C hereto), exchange such beneficial interest for Certificated Preferred Stock representing the same number of shares of Preferred Stock. Upon receipt by the Transfer Agent of written instructions or such other form of instructions as is customary for DTC from DTC or its nominee on behalf of any Person having a beneficial interest in Global Preferred Stock and upon receipt by the Transfer Agent of a written order or such other form of instructions as is customary for DTC or the Person designated by DTC as having such a beneficial interest in a Transfer Restricted Security only, then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will cause, in accordance with the standing instructions and procedures existing between DTC and the Transfer Agent, the number of shares of Preferred Stock represented by Global Preferred Stock to be reduced on its books and records and, following such reduction, the Company will execute and the Transfer Agent will authenticate and deliver to the transferee Certificated Preferred Stock.

(2) Certificated Preferred Stock issued in exchange for a beneficial interest in a Global Preferred Stock pursuant to this paragraph 11(c)(iv) shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Transfer Agent. The Transfer Agent shall deliver such Certificated Preferred Stock to the Persons in whose names such Preferred Stock are so registered in accordance with the instructions of DTC.

(v) Restrictions on Transfer and Exchange of Global Preferred Stock.

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(1) Notwithstanding any other provisions of this Certificate of Designation (other than the provisions set forth in paragraph 11(c)(vi)), Global Preferred Stock may not be transferred as a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor depository or a nominee of such successor depository.

(2) In the event that the Global Preferred Stock is exchanged for Preferred Stock in definitive registered form pursuant to paragraph 11(c)(vi) prior to the effectiveness of a Shelf Registration Statement with respect to such securities, such Preferred Stock may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this paragraph 11(c) (including the certification requirements set forth in the Exhibits to this Certificate of Designation intended to ensure that such transfers comply with Rule 144A or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company.

(vi) Authentication of Certificated Preferred Stock. If at any time:

(1) DTC notifies the Company that DTC is unwilling or unable to continue as depository for the Global Preferred Stock and a successor depository for the Global Preferred Stock is not appointed by the Company within 90 days after delivery of such notice;

(2) DTC ceases to be a clearing agency registered under the Exchange Act and a successor depository for the Global Preferred Stock is not appointed by the Company within 90 days; or

(3) the Company, in its sole discretion, notifies the Transfer Agent in writing that it elects to cause the issuance of Certificated Preferred Stock under this Certificate of Designation,

then the Company will execute, and the Transfer Agent, upon receipt of a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company requesting the authentication and delivery of Certificated Preferred Stock to the Persons designated by the Company, will authenticate and deliver Certificated Preferred Stock equal to the number of shares of Preferred Stock represented by the Global Preferred Stock, in exchange for such Global Preferred Stock.

(vii) Legend.

(1) Except as permitted by the following paragraph (2) and in paragraph 11(a)(iii), each certificate evidencing the Global Preferred Stock, the Certificated Preferred Stock and Certificated Common Stock shall bear a legend in substantially the following form:

“THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT

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OF 1933 (THE “SECURITIES ACT”), AND THIS SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO THE COMPANY OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (1) THROUGH (4) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER OF THIS SECURITY WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THE SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.”¹

(2) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by Global Preferred Stock) pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act or an effective registration statement under the Securities Act:

(I) in the case of any Transfer Restricted Security that is a Certificated Preferred Stock, the Transfer Agent shall permit the Holder thereof to exchange such Transfer Restricted Security for Certificated Preferred Stock that does not bear a restrictive legend and rescind any restriction on the transfer of such Transfer Restricted Security; and

¹ Subject to removal upon registration under the Securities Act of 1933 or otherwise when the security shall no longer be a Transfer Restricted Security.

25

(II) in the case of any Transfer Restricted Security that is represented by a Global Preferred Stock, with the consent of the Company, the Transfer Agent shall permit the Holder thereof to exchange such Transfer Restricted Security for Certificated Preferred Stock that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder’s request for such exchange was made in reliance on Rule 144 or another exemption from registration under the Securities Act and the Holder certifies to that effect in writing to the Transfer Agent (such certification to be in the form set forth in Exhibit C hereto).

(viii) Cancelation or Adjustment of Global Preferred Stock. At such time as all beneficial interests in Global Preferred Stock have either been exchanged for Certificated Preferred Stock, converted or canceled, such Global Preferred Stock shall be returned to DTC for cancelation or retained and canceled by the Transfer Agent. At any time prior to such cancelation, if any beneficial interest in Global Preferred Stock is exchanged for Certificated Preferred Stock, converted or canceled, the number of shares of Preferred Stock represented by such Global Preferred Stock shall be reduced and an adjustment shall be made on the books and records of the Transfer Agent with respect to such Global Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

(ix) Obligations with Respect to Transfers and Exchanges of Preferred Stock.

(1) To permit registrations of transfers and exchanges, the Company shall execute and the Transfer Agent shall authenticate Certificated Preferred Stock and Global Preferred Stock as required pursuant to the provisions of this paragraph 11(c).

(2) All Certificated Preferred Stock and Global Preferred Stock issued upon any registration of transfer or exchange of Certificated Preferred Stock or Global Preferred Stock shall be the valid obligations of the Company, entitled to the same benefits under this Certificate of Designation as the Certificated Preferred Stock or Global Preferred Stock surrendered upon such registration of transfer or exchange.

(3) Prior to due presentment for registration of transfer of any shares of Preferred Stock, the Transfer Agent and the Company may deem and treat the Person in whose name such shares of Preferred Stock are registered as the absolute owner of such Preferred Stock and neither the Transfer Agent nor the Company shall be affected by notice to the contrary.

(4) No service charge shall be made to a Holder for any registration of transfer or exchange upon surrender of any Preferred Stock certificate or Common Stock certificate at the office of the Transfer Agent maintained for that purpose. However, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Preferred Stock certificates or Common Stock certificates.

26

(5) Upon any sale or transfer of shares of Preferred Stock (including any Preferred Stock represented by a Global Preferred Stock Certificate) or of Certificated Common Stock pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 or another exemption from registration under the Securities Act (and based upon an Opinion of Counsel reasonably satisfactory to the Company if it so requests):

(A) in the case of any Certificated Preferred Stock or Certificated Common Stock, the Company and the Transfer Agent shall permit the holder thereof to exchange such Preferred Stock or Certificated Common Stock for Certificated Preferred Stock or Certificated Common Stock, as the case may be, that does not bear a restrictive legend and rescind any restriction on the transfer of such Preferred Stock or Common Stock issuable in respect of the conversion of the Preferred Stock; and

(B) in the case of any Global Preferred Stock, such Preferred Stock shall not be required to bear the legend set forth in paragraph (c)(vii) above but shall continue to be subject to the provisions of paragraph (c)(iv) hereof; provided, however, that with respect to any request for an exchange of Preferred Stock that is represented by Global Preferred Stock for Certificated Preferred Stock that does not bear the legend set forth in paragraph (c)(vii) above in connection with a sale or transfer thereof pursuant to Rule 144 or another exemption from registration under the Securities Act (and based upon an Opinion of Counsel if the Company so requests), the Holder thereof shall certify in writing to the Transfer Agent that such request is being made pursuant to such exemption (such certification to be substantially in the form of Exhibit C hereto).

(x) No Obligation of the Transfer Agent.

(1) The Transfer Agent shall have no responsibility or obligation to any beneficial owner of Global Preferred Stock, a member of, or a participant in DTC or any other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Preferred Stock or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice or the payment of any amount, under or with respect to such Global Preferred Stock. All notices and communications to be given to the Holders and all payments to be made to Holders under the Preferred Stock shall be given or made only to the Holders (which shall be DTC or its nominee in the case of the Global Preferred Stock). The rights of beneficial owners in any Global Preferred Stock shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Transfer Agent may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.

27

(2) The Transfer Agent shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Certificate of Designation or under applicable law with respect to any transfer of any interest in any Preferred Stock (including any transfers between or among DTC participants, members or beneficial owners in any Global Preferred Stock) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Certificate of Designation, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(d) Replacement Certificates. If a mutilated Preferred Stock certificate is surrendered to the Transfer Agent or if the Holder of a Preferred Stock certificate claims that the Preferred Stock certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Transfer Agent shall countersign a replacement Preferred Stock certificate if the reasonable requirements of the Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the State of Oklahoma are met. If required by the Transfer Agent or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Transfer Agent to protect the Company and the Transfer Agent from any loss which either of them may suffer if a Preferred Stock certificate is replaced. The Company and the Transfer Agent may charge the Holder for their expenses in replacing a Preferred Stock certificate.

(e) Temporary Certificates. Until definitive Preferred Stock certificates are ready for delivery, the Company may prepare and the Transfer Agent shall countersign temporary Preferred Stock certificates. Temporary Preferred Stock certificates shall be substantially in the form of definitive Preferred Stock certificates but may have variations that the Company considers appropriate for temporary Preferred Stock certificates. Without unreasonable delay, the Company shall prepare and the Transfer Agent shall countersign definitive Preferred Stock certificates and deliver them in exchange for temporary Preferred Stock certificates.

(f) Cancelation. (i) In the event the Company shall purchase or otherwise acquire Certificated Preferred Stock, the same shall thereupon be delivered to the Transfer Agent for cancelation.

(ii) At such time as all beneficial interests in Global Preferred Stock have either been exchanged for Certificated Preferred Stock, converted, repurchased or canceled, such Global Preferred Stock shall thereupon be delivered to the Transfer Agent for cancelation.

(iii) The Transfer Agent and no one else shall cancel and destroy all Preferred Stock certificates surrendered for transfer, exchange, replacement or cancelation and deliver a certificate of such destruction to the Company unless the Company directs the Transfer Agent to deliver canceled Preferred Stock certificates to the Company. The Company may not issue new Preferred Stock certificates to replace Preferred Stock certificates to the extent they evidence Preferred Stock which the Company has purchased or otherwise acquired.

28

12. Additional Rights of Holders. In addition to the rights provided to Holders under this Certificate of Designation, Holders shall have the rights set forth in the Registration Rights Agreement.

13. Other Provisions.

(a) With respect to any notice to a holder of shares of Preferred Stock required to be provided hereunder, neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other holders or affect the legality or validity of any distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon any such action. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice.

(b) Shares of Preferred Stock issued and reacquired will be retired and canceled promptly after reacquisition thereof and, upon compliance with the applicable requirements of Oklahoma law, have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series and may with any and all other authorized but unissued shares of preferred stock of the Company be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Corporation, except that any issuance or reissuance of shares of Preferred Stock must be in compliance with this Certificate of Designation.

(c) The shares of Preferred Stock shall be issuable only in whole shares.

(d) All notice periods referred to herein shall commence on the date of the mailing of the applicable notice.

IN WITNESS WHEREOF, the Company has caused this certificate to be signed and attested this 29th day of March, 2004.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ MARTHA A. BURGER
	Martha A. Burger
	Treasurer & Sr. Vice President

Attest:	/s/ JENNIFER M. GRIGSBY
	Jennifer M. Grigsby
	Assistant Treasurer & Corporate Secretary

29

EXHIBIT A

FORM OF PREFERRED STOCK

FACE OF SECURITY

[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND THIS SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO THE COMPANY OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (1) THROUGH (4) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER OF THIS SECURITY WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THE SECURITY EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.]¹

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY

¹ Subject to removal upon registration under the Securities Act of 1933 or otherwise when the security shall no longer be a Transfer Restricted Security.

A-1

PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.]²

[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]²

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

² Subject to removal if not a global security.

A-2

Certificate Number	Number of Shares of
	Convertible Preferred Stock
[            ]	[            ]

CUSIP NO.: 165167883

4.125% Cumulative Convertible Preferred Stock (par value $0.01)

(liquidation preference $1000 per share of Convertible Preferred Stock)

of

Chesapeake Energy Corporation

Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), hereby certifies that [                    ] (the “Holder”) is the registered owner of [                    ] fully paid and non-assessable preferred securities of the Company designated the 4.125% Cumulative Convertible Preferred Stock (par value $0.01) (liquidation preference $1000 per share of Preferred Stock) (the “Preferred Stock”). The shares of Preferred Stock are transferable on the books and records of the Transfer Agent, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Stock represented hereby are issued and shall in all respects be subject to the provisions of the Certificate of Designation dated March 29, 2004, as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.

Reference is hereby made to select provisions of the Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.

Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.

Unless the Transfer Agent’s Certificate of Authentication hereon has been properly executed, these shares of Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.

A-3

IN WITNESS WHEREOF, the Company has executed this certificate this [    ] day of [                    ], 2004.

CHESAPEAKE ENERGY CORPORATION

By:

Name:

Title:

By:

Name:

Title:

A-4

TRANSFER AGENT’S CERTIFICATE OF AUTHENTICATION

These are shares of the Preferred Stock referred to in the within-mentioned Certificate of Designation.

Dated:                     , 2004

UMB BANK, N.A., as Transfer Agent,
By:
	Authorized Signatory

A-5

REVERSE OF SECURITY

Cash dividends on each share of Preferred Stock shall be payable at a rate per annum set forth in the face hereof or as provided in the Certificate of Designation.

The shares of Preferred Stock shall be convertible into the Company’s Common Stock in the manner and according to the terms set forth in the Certificate of Designation.

The Company will furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock and the qualifications, limitations or restrictions of such preferences and/or rights.

A-6

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Preferred Stock evidenced hereby to:

(Insert assignee’s social security or tax identification number)

(Insert address and zip code of assignee)

and irrevocably appoints:                                                                                                                                                                                 

agent to transfer the shares of Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.

Date:                     

Signature:                                 

(Sign exactly as your name appears on the other side of this Preferred Stock Certificate)

Signature Guarantee:³

³ (Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)

A-7

EXHIBIT B

NOTICE OF CONVERSION

(To be Executed by the Holder

in order to Convert the Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”) shares of 4.125% Cumulative Convertible Preferred Stock (the “Preferred Stock”), represented by stock certificate No(s).             (the “Preferred Stock Certificates”) into shares of common stock (“Common Stock”) of Chesapeake Energy Corporation (the “Company”) according to the conditions of the Certificate of Designation of the Preferred Stock (the “Certificate of Designation”), as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith the Preferred Stock Certificates. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. A copy of each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof).

The undersigned represents and warrants that all offers and sales by the undersigned of the shares of Common Stock issuable to the undersigned upon conversion of the Preferred Stock shall be made pursuant to registration of the Common Stock under the Securities Act of 1933 (the “Act”), or pursuant to any exemption from registration under the Act.

Any holder, upon the exercise of its conversion rights in accordance with the terms of the Certificate of Designation and the Preferred Stock, agrees to be bound by the terms of the Registration Rights Agreement.

Capitalized terms used but not defined herein shall have the meanings ascribed thereto in or pursuant to the Certificate of Designation.

Date of Conversion:________________________________________________________

Applicable Conversion Price:_________________________________________________

Number of shares of Preferred Stock to be Converted:_____________________________

Number of shares of Common Stock to be Issued: *_______________________________

Signature:________________________________________________________________

Name:___________________________________________________________________

Address:**_______________________________________________________________

Fax No.:_________________________________________________________________

* The Company is not required to issue shares of Common Stock until the original Preferred Stock Certificate(s) (or evidence of loss, theft or destruction thereof) to be converted are received by the Company or its Transfer Agent. The Company shall issue and deliver shares of Common Stock to an overnight courier not later than three business days following receipt of the original Preferred Stock Certificate(s) to be converted.

** Address where shares of Common Stock and any other payments or certificates shall be sent by the Company.

B-1

EXHIBIT C

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER OF PREFERRED STOCK

Re: 4.125% Cumulative Convertible Preferred Stock (the “Preferred Stock”) of Chesapeake Energy Corporation (the “Company”)

This Certificate relates to              shares of Preferred Stock held in */ book-entry or */ definitive form by                      (the “Transferor”).

The Transferor*:

has requested the Transfer Agent by written order to deliver in exchange for its beneficial interest in the Preferred Stock held by the Depository shares of Preferred Stock in definitive, registered form equal to its beneficial interest in such Preferred Stock (or the portion thereof indicated above); or

has requested the Transfer Agent by written order to exchange or register the transfer of Preferred Stock.

In connection with such request and in respect of such Preferred Stock, the Transferor does hereby certify that the Transferor is familiar with the Certificate of Designation relating to the above-captioned Preferred Stock and that the transfer of this Preferred Stock does not require registration under the Securities Act of 1933 (the “Securities Act”) because */:

Such Preferred Stock is being acquired for the Transferor’s own account without transfer.

Such Preferred Stock is being transferred to the Company.

Such Preferred Stock is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act), in reliance on Rule 144A.

Such Preferred Stock is being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act (and based on an Opinion of Counsel if the Company so requests).

[INSERT NAME OF TRANSFEROR]

by:

Date:                     

*/ Please check applicable box.

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 45,000 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 45,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 45,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $450.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Executive Vice President and Chief Financial Officer, and attested to by its Secretary, this 1^st day of July, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Marcus C. Rowland
	Marcus C. Rowland
	Executive Vice President &
	Chief Financial Officer

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby, Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 34,452 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 34,452 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 34,452 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $344.52.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 22^nd day of July, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ MARTHA A. BURGER
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ JENNIFER M. GRIGSBY

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 41,765 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 41,765 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 41,765 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $417.65.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 15^th day of August, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 12,558 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 12,558 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 12,558 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $125.58.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 17^th day of August, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 13,540 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 13,540 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 13,540 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $135.40.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 23^rd day of August, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 27,325 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 27,325 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 27,325 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $273.25.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 27^th day of September, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 4,035 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 4,035 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 4,035 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $40.35.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 30^th day of September, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 4,530 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 4,530 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 4,530 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $45.30.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 6^th day of October, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 3,950 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 3,950 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 3,950 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $39.50.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 21^st day of October, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 29,285 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 29,285 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 29,285 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $292.85.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 14^th day of November, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 2,000 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 2,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 2,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $20.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 18^th day of November, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 1,750 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 1,750 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 1,750 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $17.50.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 20^th day of December, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 4,000 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 4,000 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 4,000 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $40.00.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 23^rd day of December, 2005.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

CERTIFICATE OF ELIMINATION

Chesapeake Energy Corporation (the “Corporation”), a corporation organized and existing under the Oklahoma General Corporation Act,

DOES HEREBY CERTIFY:

FIRST: That the Corporation has acquired 2,750 shares of its 4.125% Cumulative Convertible Preferred Stock, par value $.01 per share (the “Acquired Shares”).

SECOND: That the Board of Directors of the Corporation has adopted resolutions retiring the Acquired Shares.

THIRD: That the Certificate of Designation for the 4.125% Cumulative Convertible Preferred Stock (the “Certificate of Designation”) prohibits the reissuance of shares when so retired and, pursuant to the provisions of Section 1078 of the Oklahoma General Corporation Act, upon the date of the filing of this Certificate of Elimination, the Certificate of Designation shall be amended so as to reduce the number of authorized shares of the 4.125% Cumulative Convertible Preferred Stock by 2,750 shares, being the total number of the Acquired Shares retired by the Board of Directors. Accordingly, the number of authorized but undesignated shares of preferred stock of the Company shall be increased by 2,750 shares. The retired Acquired Shares have a par value of $.01 per share and an aggregate par value of $27.50.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its Treasurer and Senior Vice President-Human Resources, and attested to by its Secretary, this 23^rd day of January, 2006.

CHESAPEAKE ENERGY CORPORATION
By:	/s/ Martha A. Burger
	Martha A. Burger
	Treasurer & Senior Vice President
	Human Resources

ATTEST:

/s/ Jennifer M. Grigsby

Jennifer M. Grigsby

Secretary

EX-4.1.1

EXHIBIT 4.1.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.5% SENIOR NOTES DUE 2014

FIFTH SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK

as Trustee

THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of November 14, 2005 is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York, as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of May 27, 2004, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $300,000,000 in principal amount of 7.5% Senior Notes due 2014 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Fifth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Fifth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Fifth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

- 1 -

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Fifth Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Fifth Supplemental Indenture. This Fifth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS FIFTH SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this Fifth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA     CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

CHESAPEAKE EP, L.L.C.

- 4 -

CHESAPEAKE LAND COMPANY, L.L.C.
CHESAPEAKE ORC, L.L.C.
CHESAPEAKE ROYALTY, L.L.C.
GOTHIC PRODUCTION, L.L.C.
JOHN C. OXLEY, L.L.C.
MC MINERAL COMPANY, L.L.C.
MAYFIELD PROCESSING, L.L.C.
TRUSTEE:
THE BANK OF NEW YORK, as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.1.2

EXHIBIT 4.1.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.5% SENIOR NOTES DUE 2014

SIXTH SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK

as Trustee

THIS SIXTH SUPPLEMENTAL INDENTURE, dated as of February 24, 2006 is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York, as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of May 27, 2004, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $300,000,000 in principal amount of 7.5% Senior Notes due 2014 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Sixth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Sixth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Sixth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Sixth Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Sixth Supplemental Indenture. This Sixth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SIXTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Sixth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

- 4 -

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.2.1

EXHIBIT 4.2.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.00% SENIOR NOTES DUE 2014

FIFTH SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK

as Trustee

THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York, as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of August 2, 2004, as supplemented prior to the date hereof(the “Indenture”), pursuant to which the Company has originally issued $300,000,000 in principal amount of 7.00% Senior Notes due 2014 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Fifth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Fifth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

- 1 -

Section 1.02. This Fifth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Fifth Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Fifth Supplemental Indenture. This Fifth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS FIFTH SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this Fifth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of

the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED

    PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

CHESAPEAKE EP, L.L.C.

- 4 -

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:

THE BANK OF NEW YORK, as Trustee

By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.2.2

EXHIBIT 4.2.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.00% SENIOR NOTES DUE 2014

SIXTH SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS SIXTH SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A. as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of August 2, 2004, as supplemented prior to the date hereof(the “Indenture”), pursuant to which the Company has originally issued $300,000,000 in principal amount of 7.00% Senior Notes due 2014 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Sixth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Sixth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Sixth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Sixth Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Sixth Supplemental Indenture. This Sixth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SIXTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Sixth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of

the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

- 4 -

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.3.1

EXHIBIT 4.3.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.75% SENIOR NOTES DUE 2015

NINTH SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK

as Trustee

THIS NINTH SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York, as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of December 20, 2002, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $150,000,000 in principal amount of 7.75% Senior Notes due 2015 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Ninth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Ninth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Ninth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

- 1 -

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Ninth Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Ninth Supplemental Indenture. This Ninth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS NINTH SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this Ninth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Ninth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

CHESAPEAKE EP, L.L.C.

- 4 -

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK, as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.3.2

EXHIBIT 4.3.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.75% SENIOR NOTES DUE 2015

TENTH SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS TENTH SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of December 20, 2002, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $150,000,000 in principal amount of 7.75% Senior Notes due 2015 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Tenth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Tenth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Tenth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Tenth Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Tenth Supplemental Indenture. This Tenth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS TENTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Tenth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Tenth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

- 4 -

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.6.1

EXHIBIT 4.6.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.5% SENIOR NOTES DUE 2013

EIGHTH SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK

as Trustee

THIS EIGHTH SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York, as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of March 5, 2003, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $300,000,000 in principal amount of 7.5% Senior Notes due 2013 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Eighth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Eighth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

- 1 -

Section 1.02. This Eighth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Eighth Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Eighth Supplemental Indenture. This Eighth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS EIGHTH SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this Eighth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Eighth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of

the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED

PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

CHESAPEAKE EP, L.L.C.

- 4 -

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK, as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.6.2

EXHIBIT 4.6.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

7.5% SENIOR NOTES DUE 2013

NINTH SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS NINTH SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of March 5, 2003, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $300,000,000 in principal amount of 7.5% Senior Notes due 2013 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Ninth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Ninth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Ninth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Ninth Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Ninth Supplemental Indenture. This Ninth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS NINTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Ninth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Ninth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

- 4 -

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.7.1

EXHIBIT 4.7.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.875% SENIOR NOTES DUE 2016

SIXTH SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK

as Trustee

THIS SIXTH SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York, as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of November 26, 2003, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $200,000,000 in principal amount of 6.875% Senior Notes due 2016 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Sixth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Sixth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Sixth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

- 1 -

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Sixth Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Sixth Supplemental Indenture. This Sixth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SIXTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Sixth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA     CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

CHESAPEAKE EP, L.L.C.

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CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK, as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

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EX-4.7.2

EXHIBIT 4.7.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.875% SENIOR NOTES DUE 2016

SEVENTH SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS SEVENTH SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of November 26, 2003, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $200,000,000 in principal amount of 6.875% Senior Notes due 2016 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Seventh Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

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ARTICLE 1

Section 1.01. This Seventh Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Seventh Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Seventh Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

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Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Seventh Supplemental Indenture. This Seventh Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SEVENTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Seventh Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

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CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

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EX-4.8.1

EXHIBIT 4.8.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.375% SENIOR NOTES DUE 2015

FOURTH SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS FOURTH SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of December 8, 2004, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.375% Senior Notes due 2015 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Fourth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Fourth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Fourth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Fourth Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Fourth Supplemental Indenture. This Fourth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

- 2 -

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS FOURTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Fourth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

CHESAPEAKE EP, L.L.C.

- 4 -

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.8.2

EXHIBIT 4.8.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.375% SENIOR NOTES DUE 2015

FIFTH SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of December 8, 2004, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.375% Senior Notes due 2015 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Fifth Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

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ARTICLE 1

Section 1.01. This Fifth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Fifth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Fifth Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Fifth Supplemental Indenture. This Fifth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS FIFTH SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Fifth Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company

and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED
PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

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CHESAPEAKE ORC, L.L.C.
CHESAPEAKE ROYALTY, L.L.C.
GOTHIC PRODUCTION, L.L.C.
MC MINERAL COMPANY, L.L.C.
MAYFIELD PROCESSING, L.L.C.
TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

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EX-4.9.1

EXHIBIT 4.9.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.625% SENIOR NOTES DUE 2016

SECOND SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS SECOND SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of April 19 2005, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.625% Senior Notes due 2016 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Second Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Second Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

- 1 -

Section 1.02. This Second Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Second Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Second Supplemental Indenture. This Second Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SECOND SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

- 4 -

CHESAPEAKE EP, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.9.2

EXHIBIT 4.9.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.625% SENIOR NOTES DUE 2016

THIRD SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS THIRD SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of April 19, 2005, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.625% Senior Notes due 2016 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Third Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Third Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Third Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Third Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Third Supplemental Indenture. This Third Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS THIRD SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Third Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

- 4 -

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.10.1

EXHIBIT 4.10.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.25% SENIOR NOTES DUE 2018

FIRST SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS FIRST SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of June 20 2005, (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.25% Senior Notes due 2018 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this First Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This First Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

- 1 -

Section 1.02. This First Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this First Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this First Supplemental Indenture. This First Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS FIRST SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

- 4 -

CHESAPEAKE EP, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.10.2

EXHIBIT 4.10.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.25% SENIOR NOTES DUE 2018

SECOND SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS SECOND SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of June 20, 2005, (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.25% Senior Notes due 2018 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Second Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Second Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Second Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Second Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

- 2 -

Section 3.05. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Second Supplemental Indenture. This Second Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SECOND SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

- 4 -

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee

By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.11.1

EXHIBIT 4.11.1

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.5% SENIOR NOTES DUE 2017

FIRST SUPPLEMENTAL INDENTURE

DATED AS OF NOVEMBER 14, 2005

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS FIRST SUPPLEMENTAL INDENTURE, dated as of November 14, 2005, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of August 16 2005, (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.5% Senior Notes due 2017 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect: (a) the addition of any Subsidiary Guarantor, as provided for in the Indenture, and (b) the release of any Subsidiary Guarantor as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake Permian Acquisition, L.L.C. (“Permian”), an Oklahoma limited liability company as a Subsidiary Guarantor;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this First Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This First Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

- 1 -

Section 1.02. This First Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this First Supplemental Indenture, Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C., all Delaware limited liability companies, and Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of Permian with and into Chesapeake Permian, L.P., an Oklahoma limited partnership (“CPLP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, Permian shall for all purposes be released as a Subsidiary Guarantor from all of its Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Permian; and the signature of an Officer of Permian.

Section 3.02. As the surviving entity in its merger with Permian and a Subsidiary Guarantor, CPLP hereby agrees to assume all of the obligations of Permian.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this First Supplemental Indenture. This First Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Chesapeake Appalachia, L.L.C., Columbia Natural Resources, L.L.C., Columbia Energy Resources, L.L.C., and Hawg Hauling & Disposal, L.L.C. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS FIRST SUPPLEMENTAL INDENTURE.

- 2 -

Section 4.05. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE PRH CORP.

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESPEAKE NFW, L.P.

CHESAPEAKE PERMIAN, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE-STAGHORN ACQUISITION, L.P.

CHESAPEAKE ZAPATA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

COLUMBIA NATURAL RESOURCES, L.L.C.

COLUMBIA ENERGY RESOURCES, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE ENO ACQUISITION, L.L.C.

- 4 -

CHESAPEAKE EP, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

JOHN C. OXLEY, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.11.2

EXHIBIT 4.11.2

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.5% SENIOR NOTES DUE 2017

SECOND SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 1, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS SECOND SUPPLEMENTAL INDENTURE, dated as of February 1, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of August 16, 2005, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.5% Senior Notes due 2017 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect the addition of any Subsidiary Guarantor, as provided for in the Indenture; and

WHEREAS, the Board of Directors of the Company has designated Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. as Restricted Subsidiaries of the Company and desires to add the entities as Subsidiary Guarantors under the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake PRH Corp. (“PRH”), a Texas corporation, Chesapeake ENO Acquisition, L.L.C. (“ENO”), an Oklahoma limited liability company, Chesapeake EP, L.L.C. (“EP”), an Oklahoma limited liability company, John C. Oxley, L.L.C. (“Oxley”), an Oklahoma limited liability company, Columbia Natural Resources, L.L.C. (“CNR”), a Delaware limited liability company, Columbia Energy Resources, L.L.C. (“CER”), a Delaware limited liability company, Chesapeake NFW, L.P. (“NFW”), an Oklahoma limited partnership, Chesapeake Permian, L.P. (“Permian”), an Oklahoma limited partnership, and Chesapeake Zapata, L.P. (“Zapata”), an Oklahoma Limited Partnership;

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Second Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

- 1 -

ARTICLE 1

Section 1.01. This Second Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Second Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

ARTICLE 2

Section 2.01. From this date, in accordance with Section 10.03 of the Indenture and by executing this Second Supplemental Indenture, Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc., all Oklahoma corporations, are subject to the provisions of the Indenture as Subsidiary Guarantors to the extent provided for in Article Ten thereunder.

ARTICLE 3

Section 3.01. As a result of the merger of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, with and into Chesapeake Exploration Limited Partnership, an Oklahoma limited partnership (“CELP”), which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, PRH, ENO, EP, Oxley, NFW, Permian, and Zapata shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata, the signature of an Officer of each of PRH, ENO, EP and Oxley and the signature of an Officer of Chesapeake Operating, Inc. on behalf of NFW, Permian and Zapata.

Section 3.02. As the surviving entity in its merger with PRH, ENO, EP, Oxley, NFW, Permian, and Zapata and a Subsidiary Guarantor, CELP hereby agrees to assume all of the obligations of PRH, ENO, EP, Oxley, NFW, Permian, and Zapata.

Section 3.03. As a result of the merger of CNR and CER, with and into Chesapeake Appalachia, L.L.C., an Oklahoma limited liability company, which constitutes a merger with a Subsidiary Guarantor under Section 10.02(a) of the Indenture, CNR and CER shall for all purposes be released as Subsidiary Guarantors from all of their Guarantees and related obligations in the Indenture, pursuant to Section 10.04 of the Indenture. The notation on the Securities relating to the Guarantee shall be deemed to exclude the names of CNR and CER, the signature of an Officer of CNR and the signature of an Officer of CER.

- 2 -

Section 3.04. As the surviving entity in its merger with CER and CNR and a Subsidiary Guarantor, Chesapeake Appalachia, L.L.C. hereby agrees to assume all of the obligations of CNR and CER.

ARTICLE 4

Section 4.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 4.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Second Supplemental Indenture. This Second Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 4.03. The Company hereby notifies the Trustee that Hodges Holding Company, Inc., Hodges Oilfield Company, Hodges Trucking Company, Nomac 100 Corp. and W.W. Realty, Inc. have been designated by the Board of Directors of the Company as Restricted Subsidiaries (as that term is defined in the Indenture).

Section 4.04. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS SECOND SUPPLEMENTAL INDENTURE.

Section 4.05. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED

PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE STAGHORN ACQUISITION

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the

following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

CHESAPEAKE ROYALTY, L.L.C.

- 4 -

GOTHIC PRODUCTION, L.L.C.
MC MINERAL COMPANY, L.L.C.
MAYFIELD PROCESSING, L.L.C.
TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 5 -

EX-4.11.3

EXHIBIT 4.11.3

CHESAPEAKE ENERGY CORPORATION

and

the Subsidiary Guarantors named herein

6.5% SENIOR NOTES DUE 2017

THIRD SUPPLEMENTAL INDENTURE

DATED AS OF FEBRUARY 24, 2006

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

THIS THIRD SUPPLEMENTAL INDENTURE, dated as of February 24, 2006, is among Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and The Bank of New York Trust Company, N.A., as Trustee.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors a party thereto and the Trustee entered into an Indenture, dated as of August 16, 2005, as supplemented prior to the date hereof (the “Indenture”), pursuant to which the Company has originally issued $600,000,000 in principal amount of 6.5% Senior Notes due 2017 (the “Notes”); and

WHEREAS, Section 9.01(3) of the Indenture provides that the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture without notice to or consent of any Holder to reflect the addition of any Subsidiary Guarantor, as provided for in the Indenture; and

WHEREAS, the Company has taken all actions required to effect the release, pursuant to Sections 10.02 and 10.04 of the Indenture, of Chesapeake-Staghorn Acquisition, L.P. (“Staghorn”), an Oklahoma limited partnership.

WHEREAS, all acts and things prescribed by the Indenture, by law and by the charter and the bylaws (or comparable constituent documents) of the Company, of the Subsidiary Guarantors and of the Trustee necessary to make this Third Supplemental Indenture a valid instrument legally binding on the Company, the Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

Section 1.01. This Third Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

Section 1.02. This Third Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Company, the Subsidiary Guarantors and the Trustee.

- 1 -

ARTICLE 2

Section 2.01. As a result of the dissolution of Staghorn, the Company has taken all actions required to effect the release, pursuant to Section 10.04 of the Indenture, of Staghorn as a Subsidiary Guarantor. The notation on the Securities relating to the Guarantee shall be deemed to exclude the name of Staghorn and the signature of an Officer of Staghorn on its behalf.

ARTICLE 3

Section 3.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

Section 3.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Third Supplemental Indenture. This Third Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

Section 3.03. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND ENFORCE THIS THIRD SUPPLEMENTAL INDENTURE.

Section 3.04. The parties may sign any number of copies of this Third Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

- 2 -

IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed, all as of the date first written above.

/s/ Aubrey K. McClendon

Aubrey K. McClendon

Chief Executive Officer of the Company and of the Subsidiaries listed below:

Corporate Subsidiaries:

CHESAPEAKE EAGLE CANADA CORP.

CHESAPEAKE ENERGY LOUISIANA CORPORATION

CHESAPEAKE SOUTH TEXAS CORP.

NOMAC DRILLING CORPORATION

OXLEY PETROLEUM CO.

HODGES HOLDING COMPANY, INC.

HODGES OILFIELD COMPANY

HODGES TRUCKING COMPANY

NOMAC 100 CORP.

W.W. REALTY, INC.

CHESAPEAKE OPERATING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP

CHESAPEAKE LOUISIANA, L.P.

CHESAPEAKE SIGMA, L.P.

CHESAPEAKE ENERGY MARKETING, INC.,

On behalf of itself and, as general partner, the following limited partnerships:

MIDCON COMPRESSION, L.P.

Limited Liability Company Subsidiaries:

CHESAPEAKE APPALACHIA, L.L.C.

HAWG HAULING & DISPOSAL, L.L.C.

CARMEN ACQUISITION, L.L.C.

CHESAPEAKE ACQUISITION, L.L.C.

CHESAPEAKE LAND COMPANY, L.L.C.

CHESAPEAKE ORC, L.L.C.

- 3 -

CHESAPEAKE ROYALTY, L.L.C.

GOTHIC PRODUCTION, L.L.C.

MC MINERAL COMPANY, L.L.C.

MAYFIELD PROCESSING, L.L.C.

TRUSTEE:
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ Linda Garcia
Name:	Linda Garcia
Title:	Assistant Vice President

- 4 -

EX-10.5

Exhibit 10.5

Named Executive Officer Compensation

Effective January 1, 2006, the Compensation Committee of the Board of Directors (the “Committee”) of Chesapeake Energy Corporation set the 2006 annual base salaries of the named executive officers at $975,000 for Aubrey K. McClendon and Tom L. Ward, $625,000 for Marcus C. Rowland, $500,000 for Martha A. Burger and $375,000 for Michael A. Johnson. In addition, the Committee awarded cash bonuses to the named executive officers, payable on January 15, 2006, of $700,000 for Aubrey K. McClendon and Tom L. Ward, $400,000 for Marcus C. Rowland, $275,000 for Martha A. Burger and $150,000 for Michael A. Johnson. Effective February 13, 2006, Steven C. Dixon was named Chesapeake’s Executive Vice President – Operations and Chief Operating Officer. His 2006 annual base salary is $625,000. Mr. Ward resigned as President and Chief Operating Officer effective February 10, 2006.

EX-10.6.1

Exhibit 10.6.1

AMENDMENT NO. 2 TO RIGHTS AGREEMENT

BETWEEN

CHESAPEAKE ENERGY CORPORATION

AND

UMB BANK, N.A., AS RIGHTS AGENT

THIS AMENDMENT NO. 2 TO RIGHTS AGREEMENT (this “Second Amendment”), dated as of March 3, 2006, is by and between Chesapeake Energy Corporation, an Oklahoma corporation (the “Company”), and UMB Bank, N.A., as Rights Agent (the “Rights Agent”).

R E C I T A L S:

WHEREAS, the Company and the Rights Agent have heretofore entered into a Rights Agreement, dated as of July 15, 1998, as amended on September 11, 1998 (the Rights Agreement”); and

WHEREAS, the Company desires to amend the Rights Agreement to revise Section 1(p); and

WHEREAS, the Board of Directors of the Company has unanimously approved the amendment to the Rights Agreement effected hereby and in accordance with Section 27 of the Rights Agreement, this Second Amendment can be effected without the approval of any holders of the Rights.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth and in accordance with Section 27 of the Rights Agreement, the parties hereby agree as follows:

1. Section 1(p) of the Rights Agreement is hereby amended, effective as of the date set forth above, by revising such Section to read in its entirety as follows:

“Exempt Person” shall mean (i) the Company or any Subsidiary (as such term is hereinafter defined) of the Company or any employee benefit plan of the Company, (ii) Aubrey K. McClendon, his spouse, lineal descendants and ascendants, heirs, executors or other legal representatives and any trusts established for the benefit of the foregoing, or any other person or entity in which the foregoing persons or entities are at the time of determination the direct record and beneficial owners of all outstanding voting securities (each a

1

“McClendon Stockholder”), or (iii) any Person that is not a McClendon Stockholder but who or which is a Beneficial Owner of Common Stock Beneficially Owned by a McClendon Stockholder (a “Second Tier Stockholder”), but only if the shares of Common Stock otherwise Beneficially Owned by such Second Tier Stockholder (“Second Tier Holder Shares”) do not exceed the sum of (A) such holder’s Second Tier Holder Shares held on the date hereof and (B) 1% of the shares of Common Stock of the Company then outstanding.

2. Except to the extent amended by this Second Amendment, the Rights Agreement shall continue in full force and effect.

3. Capitalized terms used herein but not defined shall have the meanings assigned to such terms in the Rights Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed, all as of the day and year first above written.

CHESAPEAKE ENERGY CORPORATION
	/s/ Aubrey K. McClendon
	AubreyK. McClendon Chairmanof the Board and Chief Executive Officer
	UMB BANK, N.A.
	/s/ Mark B. Flannagan
	Name:Mark B. Flannagan Title: Vice President

2

EX-12

Exhibit 12

CHESAPEAKE ENERGY CORPORATION

RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS

(dollars in 000’s)

	Year Ended December 31, 2000		Year Ended December 31, 2001		Year Ended December 31, 2002		Year Ended December 31, 2003		Year Ended December 31, 2004			Year Ended December 31, 2005
EARNINGS:
Income before income taxes and cumulative effect of accounting change	$	196,162	$	361,698	$	67,140	$	500,952	$	804,926		$	1,493,393
Interest expense (a)		86,256		98,321		111,280		147,817		161,990			221,385
(Gain)/loss on investment in equity investees in excess of distributed earnings		—		—		—		409		(606	)		766
Amortization of capitalized interest		1,226		1,784		1,804		2,519		4,620			9,702
Bond discount amortization (b)		—		—		—		—		—			—
Loan cost amortization		3,669		4,022		4,962		4,254		5,728			9,036
Earnings	$	287,313	$	465,825	$	185,186	$	655,951	$	976,658		$	1,734,282
FIXED CHARGES:
Interest expense	$	86,256	$	98,321	$	111,280	$	147,817	$	161,990		$	221,385
Capitalized interest		2,452		4,719		4,976		13,041		36,240			78,959
Bond discount amortization (b)		—		—		—		—		—			—
Loan cost amortization		3,669		4,022		4,962		4,254		5,728			9,037
Fixed Charges	$	92,377	$	107,062	$	121,218	$	165,112	$	203,958		$	309,381
Preferred Stock Dividends
Preferred Dividend Requirements	$	8,484	$	2,050	$	10,117	$	22,469	$	39,506		$	41,813
Ratio of income before provision for taxes to net income (c)		N/A		1.66		1.67		1.61		1.56			1.57
Subtotal – Preferred Dividends	$	8,484	$	3,411	$	16,861	$	36,240	$	61,629		$	65,646
Combined Fixed Charges and Preferred Dividends	$	100,861	$	110,473	$	138,079	$	201,352	$	265,587		$	375,027
Ratio of Earnings to Fixed Charges		3.1		4.4		1.5		4.0		4.8			5.6
Insufficient coverage	$	—	$	—	$	—	$	—	$	—		$	—
Ratio of Earnings to Combined Fixed Charges and Preferred Dividends		2.8		4.2		1.3		3.3		3.7			4.6
Insufficient coverage	$	—	$	—	$	—	$	—	$	—		$	—

(a) Excludes the effect of unrealized gains or losses on interest rate derivatives.

(b) Amortization of bond discount is excluded since it is included in interest expense.

(c) Amounts of income before provision for taxes and of net income exclude the cumulative effect of accounting change.

EX-21

Exhibit 21

SUBSIDIARIES

OF

CHESAPEAKE ENERGY CORPORATION

Oklahoma Corporation

Corporations	State of Organization
Chesapeake Eagle Canada Corp.	New Brunswick
Chesapeake Energy Louisiana Corporation	Oklahoma
Chesapeake Energy Marketing, Inc.	Oklahoma
Chesapeake Operating, Inc.	Oklahoma
Chesapeake South Texas Corp.	Oklahoma
Columbia Natural Resources Canada, Ltd.	Alberta
Hallwood SWD, Inc.	Delaware
Hodges Holding Company, Inc.	Oklahoma
Hodges Oilfield Company	Oklahoma
Hodges Trucking Company	Oklahoma
Nomac Drilling Corporation	Oklahoma
Nomac 100 Corp.	Oklahoma
Oxley Petroleum Co.	Oklahoma
W. W. Realty, Inc.	Oklahoma
Limited Liability Companies	State of Formation
Carmen Acquisition, L.L.C.	Oklahoma
Chesapeake Acquisition, L.L.C.	Oklahoma
Chesapeake Appalachia, L.L.C.	Oklahoma
Chesapeake Land Company, L.L.C.	Oklahoma
Chesapeake ORC, L.L.C.	Oklahoma
Chesapeake Royalty, L.L.C.	Oklahoma
Gothic Production, L.L.C.	Oklahoma
Hawg Hauling & Disposal, LLC	Delaware
MC Mineral Company, L.L.C.	Oklahoma
Mayfield Processing, L.L.C.	Oklahoma
Partnerships
Chesapeake Exploration Limited Partnership	Oklahoma
Chesapeake Louisiana, L.P.	Oklahoma
Chesapeake Sigma, L.P.	Oklahoma
MidCon Compression, L.P.	Oklahoma

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262) and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of our report dated March 13, 2006 relating to the consolidated financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

Oklahoma City, Oklahoma

March 13, 2006

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

As independent oil and gas consultants, Netherland, Sewell & Associates hereby consents to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262), and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of information from our reserve report dated February 27, 2006, entitled “Estimate of Reserves and Future Revenue to the Chesapeake Energy Corporation Interest in Certain Oil and Gas Properties located in the United States as of December 31, 2005, Based on Constant Prices and Costs in accordance with Securities and Exchange Commission Guidelines” and all references to our firm included in or made a part of the Chesapeake Energy Corporation Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 13, 2006.

/s/ NETHERLAND, SEWELL & ASSOCIATES, INC.

Dallas, Texas

March 10, 2006

EX-23.3

EXHIBIT 23.3

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

As independent oil and gas consultants, Schlumberger Data & Consulting Services hereby consents to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262), and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of information from our reserve report dated February 27, 2006, entitled “Estimate of Reserves and Future Revenue to the Chesapeake Energy Corporation Interest in Certain Oil and Gas Properties located in the United States as of December 31, 2005, Based on Constant Prices and Costs in accordance with Securities and Exchange Commission Guidelines” and all references to our firm included in or made a part of the Chesapeake Energy Corporation Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 13, 2006.

SCHLUMBERGER DATA & CONSULTING SERVICES
/s/ Joseph H. Frantz, Jr.
Name:	Joseph H. Frantz, Jr. P.E.
Title:	Consulting and Solutions Services Operations Manager U.S. Land East- North

March 10, 2006

EX-23.4

Exhibit 23.4

CONSENT OF LEE KEELING AND ASSOCIATES

As independent oil and gas consultants, Lee Keeling and Associates. hereby consents to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262), and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of information from our reserve report dated February 28, 2006, entitled “Appraisal Oil and Gas Properties Interests Owned by Chesapeake Energy Corporation Selected Properties Constant Prices and Expenses Effective Date January 1, 2006” and all references to our firm included in or made a part of the Chesapeake Energy Corporation Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 13, 2006.

/s/ LEE KEELING AND ASSOCIATES

Tulsa, Oklahoma

March 10, 2006

EX-23.5

Exhibit 23.5

CONSENT OF RYDER SCOTT COMPANY, L.P.

As independent oil and gas consultants, Ryder Scott Company, L.P. hereby consents to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262), and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of information from our reserve report dated February 25, 2006, entitled “Chesapeake Energy Corporation – Estimated Future Reserves and Income Attributable to Certain Leasehold Interests (SEC Parameters)” and all references to our firm included in or made a part of the Chesapeake Energy Corporation Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 13, 2006.

/s/ RYDER SCOTT COMPANY, L.P.

Houston, Texas

March 10, 2006

EX-23.6

Exhibit 23.6

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

As independent oil and gas consultants, Laroche Petroleum Consultants, Ltd. hereby consents to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262), and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of information from our reserve report dated February 27, 2006, entitled “Chesapeake Energy Corporation Interest in certain properties located in Oklahoma as of December 31, 2005, Prepared in Accordance with Securities and Exchange Commission Guidelines” and all references to our firm included in or made a part of the Chesapeake Energy Corporation Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 13, 2006.

LAROCHE PETROLEUM CONSULTANTS, LTD.
By:	/s/ Richard G. Green
Name:	Richard G. Green
Title:	Partner

March 10, 2006

EX-23.7

Exhibit 23.7

CONSENT OF H.J. GRUY AND ASSOCIATES, INC.

We hereby consent to the use of the name H.J. Gruy and Associates, Inc. and of references to H.J. Gruy and Associates, Inc. and to inclusion of and references to our report, or information contained therein, dated February 25, 2006, prepared for Chesapeake Energy Corporation in the Chesapeake Energy Corporation Annual Report on Form 10-K for the year ended December 31, 2005, to be filed on or about March 13, 2006, and the incorporation by reference into the applicable previous filings with the Securities and Exchange Commission. We are unable to verify the accuracy of the reserves and discounted present worth values contained therein because our estimates of reserves and discounted present worth have been combined with estimates of reserves and present worth prepared by other petroleum consultants.

H.J. GRUY AND ASSOCIATES, INC.
By:	/s/ Sylvia Castileja
Sylvia Castileja, P.E. Senior Vice President

March 10, 2006

Houston, Texas

EX-23.8

Exhibit 23.8

CONSENT OF MILLER AND LENTS, LTD.

As independent oil and gas consultants, Miller and Lents, Ltd. hereby consents to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-84258, 33-89282, 33-88196, 333-27525, 333-07255, 333-30324, 333-46129, 333-30478, 333-52668, 333-52666, 333-67734, 333-67736, 333-67740, 333-109162, 333-118312, 333-118325 and 333-126191), Form S-3 (File Nos. 333-104394, 333-116461, 333-125682, 333-130196, 333-132261 and 333-132262), and Form S-4 (File Nos. 333-128453 and 333-132263) of Chesapeake Energy Corporation of information from our reserve report dated February 27, 2006, entitled “Proved Reserves and Future Net Revenues as of December 31, 2005” and all references to our firm included in or made a part of the Chesapeake Energy Corporation Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 13, 2006.

MILLER AND LENTS, LTD.
By:	/s/ Carl D. Richard
	Carl D. Richard Senior Vice President

Houston, Texas

March 10, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Aubrey K. McClendon, certify that:

1. I have reviewed this annual report on Form 10-K of Chesapeake Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006	/s/    AUBREY K. MCCLENDON
	Aubrey K. McClendon
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Marcus C. Rowland, certify that:

1. I have reviewed this annual report on Form 10-K of Chesapeake Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006	/s/    MARCUS C. ROWLAND
	Marcus C. Rowland
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Chesapeake Energy Corporation (the “Company”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Aubrey K. McClendon, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    AUBREY K. MCCLENDON        

Aubrey K. McClendon

Chairman of the Board and Chief Executive Officer

Date: March 13, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Chesapeake Energy Corporation (the “Company”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marcus C. Rowland, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    MARCUS C. ROWLAND        

Marcus C. Rowland

Executive Vice President and Chief Financial Officer

Date: March 13, 2006