2011 ANNUAL REPORT BOLD MOVES BIG FUTURE BOLD MOVES BIG FUTURE BOLD MOVE: BOLD MOVE: Shifting our focus Declaring to liquids America’s Energy With our liquids production up 72% in 2011, we have Independence the second-best track Leading the charge to saying “yes” record of liquids production to American natural gas and “no” growth in the industry to OPEC BOLD MOVE: BOLD MOVE: BIG FUTURE: Developing Vertically integrating Capturing the value-added our operations nation’s largest financing strategies Creating value for shareholders while resource base streamlining Expediting development and re- Significant discoveries and aggressive operating couping leasehold investment while leasehold acquisitions led to industry- efficiency and retaining major interests in new plays leading positions in top U.S. uncon- reducing costs ventional natural gas and liquids plays CORPORATE PROFILE CONTENTS Chesapeake Energy Corporation (NYSE:CHK) is the second-largest 1 Financial Review producer of natural gas, a Top 15 producer of oil and natural gas liquids and 4 Letter to Shareholders the most active driller of new wells in the U.S. Headquartered in Oklahoma 16 Operating Areas City, the company’s operations are focused on discovering and developing 20 unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns Investor Q&A leading positions in the Barnett, Haynesville, Bossier, Marcellus and Pearsall 22 Social Responsibility natural gas shale plays and in the Eagle Ford, Utica, Granite Wash, Cleveland, 24 Community Relations Tonkawa, Mississippi Lime, Bone Spring, Avalon, Wolfcamp, Wolfberry and 26 Environmental, Health and Safety Niobrara unconventional liquids plays. The company has also vertically 28 integrated its operations and owns substantial marketing, midstream and Board of Directors oilfield services businesses directly and indirectly through its subsidiaries 28 Governance Chesapeake Energy Marketing Inc., Chesapeake Midstream Development, L.P. 29 Executive Officers and Chesapeake Oilfield Services, L.L.C. and its affiliate Chesapeake Midstream 30 Employees Partners, L.P. (NYSE:CHKM). Further information is available at www.chk.com where Chesapeake routinely posts announcements, updates, events, investor 49 Form 10-K information, presentations and news releases. Inside Back Cover Corporate Information PRODUCTION GROWTH PROVED RESERVE GROWTH TOTAL RESOURCE BASE GROWTH* Average mmcfe per day for year Bcfe at end of year Bcfe at end of year 3,500 20,000 400,000 3,000 350,000 15,000 300,000 2,500 250,000 2,000 10,000 200,000 1,500 150,000 1,000 5,000 100,000 500 50,000 0 0 0 01 02 03 04 05 06 07 08 09 10 11 01 02 03 04 05 06 07 08 09 10 11 01 02 03 04 05 06 07 08 09 10 11 *Proved and unrisked, unproved resources CHESAPEAKE’S COMMON STOCK PRICE Chesapeake’s Stock Price at Month End Henry Hub Natural Gas Spot Price at Month End $ 70 $ 17.50 $ 60 $ 15.00 $ 50 $ 12.50 $ 40 $ 10.00 $ 30 $ 7.50 $/mcf $ 20 $ 5.00 CHK Common Stock Price Stock CHK Common $ 10 $ 2.50 $ 0 $ 0 DEC 01 DEC 02 DEC 03 DEC 04 DEC 05 DEC 06 DEC 07 DEC 08 DEC 09 DEC 10 DEC 11 CHESAPEAKE’S FIVE-YEAR AND TEN-YEAR COMMON STOCK PERFORMANCE The graphs below compare the performance of our common stock to the S&P 500 Stock Index and to a group of peer companies for the past five and 10 years. The graph on the left assumes an investment of $100 on December 31, 2006 and the reinvestment of all dividends. The graph on the right assumes an invest- ment of $100 on December 31, 2001 and the reinvestment of all dividends. The graphs show the value of the investment at the end of each year. Five-Year Performance Ten-Year Performance As of December 31 CHK Peer Group (1) S&P 500 As of December 31 CHK Peer Group (1) S&P 500 $ 200 $ 700 $ 600 $ 150 $ 500 $ 400 $ 100 $ 300 $ 200 $ 50 $ 100 $ 0 $ 0 06 07 08 09 10 11 0102 03 04 05 06 07 08 09 10 11 (1) The peer group is comprised of Anadarko Petroleum Corporation, Apache Corporation, Devon Energy Corporation, Encana Corporation and EOG Resources, Inc. 2011 Annual Report | 3 FINANCIAL REVIEW Six Months ($ in millions, except per share data) Years Ended December 31 Ended Years Ended June 30 December 31 Financial and Operating Data 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1997 1996 1995 1994 1993 Revenues: Natural gas and oil $ 6,024 $ 5,647 $ 5,049 $ 7,858 $ 5,624 $ 5,619 $ 3,273 $ 1,936 $ 1,297 $ 568 $ 820 $ 470 $ 280 $ 257 $ 96 $ 193 $ 111 $ 57 $ 22 $ 12 Marketing, gathering and compression 5,090 3,479 2,463 3,598 2,040 1,577 1,392 773 420 171 149 158 75 121 58 76 35 9 7 5 Oilfield services 521 240 190 173 136 130 — — — — — — — — — — — — — — Total revenues $ 11,635 $ 9,366 $ 7,702 $ 11,629 $ 7,800 $ 7,326 $ 4,665 $ 2,709 $ 1,717 $ 739 $ 969 $ 628 $ 355 $ 378 $ 154 $ 269 $ 146 $ 66 $ 29 $ 17 Operating expenses: Natural gas and oil production 1,073 893 876 889 640 490 317 205 138 98 75 50 46 51 8 11 6 3 2 3 Production taxes 192 157 107 284 216 176 208 104 78 30 33 25 13 8 2 4 2 1 2 — Marketing, gathering and compression 4,967 3,352 2,316 3,505 1,969 1,522 1,358 755 410 166 144 152 72 119 58 75 33 8 5 4 Oilfield services 402 208 182 143 94 68 — — — — — — — — — — — — — — General and administrative 548 453 349 377 243 139 64 37 24 18 15 13 13 20 6 9 5 4 3 3 Depreciation, depletion and amortization 1,923 1,614 1,615 2,144 1,988 1,462 945 611 386 235 182 109 103 155 63 107 54 27 10 5 Impairments and other (391) (116 ) 11,202 2,830 — 55 — 5 6 — — — — 881 110 236 — — — 1 Total operating expenses 8,714 6,561 16,647 10,172 5,150 3,912 2,892 1,717 1,042 547 449 349 247 1,234 247 442 100 43 22 16 Income (loss) from operations 2,921 2,805 (8,945 ) 1,457 2,650 3,414 1,773 992 675 192 520 279 108 (856 ) (93 ) (173 ) 46 23 7 1 Interest expense (44 ) (19 ) (113 ) (271 ) (401 ) (316 ) (221 ) (167 ) (154 ) (112 ) (98 ) (86 ) (81 ) (68 ) (18 ) (18 ) (14 ) (7 ) (3 ) (2 ) Other income (expense) 179 243 (28 ) (11 ) 15 26 10 5 1 7 3 3 8 4 79 11 4 2 1 1 Miscellaneous gains (losses) (176 ) (145 ) (202 ) (184 ) 83 117 (70 ) (25 ) (21 ) (20 ) (63 ) — — (14 ) — (7 ) — — — — Total other income (expense) (41 ) 79 (343 ) (466 ) (303 ) (173 ) (281 ) (187 ) (174 ) (125 ) (158 ) (83 ) (73 ) (78 ) 61 (14 ) (10 ) (5 ) (2 ) (1 ) Income (loss) before income taxes and cumulative effect of accounting change 2,880 2,884 (9,288 ) 991 2,347 3,241 1,492 805 501 67 362 196 35 (934 ) (32 ) (187 ) 36 18 5 — Income tax expense (benefit): Current 13 — 4 423 29 5 — — 5 (2 ) 4 — — — — — — — — — Deferred 1,110 1,110 (3,487 ) (36 ) 863 1,242 545 290 185 29 141 (260 ) 2 — — (4 ) 13 6 1 — Net income (loss) before cumulative effect of accounting change, net of tax 1,757 1,774 (5,805 ) 604 1,455 1,994 947 515 311 40 217 456 33 (934 ) (32 ) (183 ) 23 12 4 — Net income attributable to noncontrolling interests (15 ) — (25 ) — — — — — — — — — — — — — — — — — Cumulative effect of accounting change, net of tax — — — — — — — — 2 — — — — — — — — — — — Net income (loss) $ 1,742 $ 1,774 $ (5,830 ) $ 604 $ 1,455 $ 1,994 $ 947 $ 515 $ 313 $ 40 $ 217 $ 456 $ 33 $ (934 ) $ (32 ) $ (183 ) $ 23 $ 12 $ 4 $ — Preferred stock dividends (172 ) (111 ) (23 ) (33 ) (94 ) (89 ) (42 ) (40 ) (22 ) (10 ) (2 ) (9 ) (16 ) (12 ) — — — — — (1 ) Gain (loss) on conversion/exchange of preferred stock — — — (67 ) (128 ) (10 ) (26 ) (36 ) — — — 7 — — — — — — — — Net income (loss) available to common stockholders $ 1,570 $ 1,663 $ (5,853 ) $ 504 $ 1,233 $ 1,895 $ 879 $ 439 $ 291 $ 30 $ 215 $ 454 $ 17 $ (946 ) $ (32 ) $ (183 ) $ 23 $ 12 $ 4 $ (1 ) Earnings per common share – basic: Income (loss) before cumulative effect of accounting change $ 2.47 $ 2.63 $ (9.57 ) $ 0.94 $ 2.70 $ 4.76 $ 2.73 $ 1.73 $ 1.36 $ 0.18 $ 1.33 $ 3.52 $ 0.17 $ (9.97 ) $ (0.45 ) $ (2.79 ) $ 0.43 $ 0.22 $ 0.08 $ (0.02 ) Cumulative effect of accounting change — — — — — — — — 0.02 — — — — — — — — — — — EPS – basic $ 2.47 $ 2.63 $ (9.57 ) $ 0.94 $ 2.70 $ 4.76 $ 2.73 $ 1.73 $ 1.38 $ 0.18 $ 1.33 $ 3.52 $ 0.17 $ (9.97) $ (0.45 ) $ (2.79 ) $ 0.43 $ 0.22 $ 0.08 $ (0.02 ) Earnings per common share – diluted: Income (loss) before cumulative effect of accounting change $ 2.32 $ 2.51 $ (9.57 ) $ 0.93 $ 2.63 $ 4.33 $ 2.51 $ 1.53 $ 1.20 $ 0.17 $ 1.25 $ 3.01 $ 0.16 $ (9.97 ) $ (0.45 ) $ (2.79 ) $ 0.40 $ 0.21 $ 0.08 $ (0.02 ) Cumulative effect of accounting change — — — — — — — — 0.01 — — — — — — — — — — — EPS – diluted $ 2.32 $ 2.51 $ (9.57 ) $ 0.93 $ 2.63 $ 4.33 $ 2.51 $ 1.53 $ 1.21 $ 0.17 $ 1.25 $ 3.01 $ 0.16 $ (9.97 ) $ (0.45 ) $ (2.79 ) $ 0.40 $ 0.21 $ 0.08 $ (0.02 ) Cash provided by (used in) operating activities (GAAP) $ 5,903 $ 5,117 $ 4,356 $ 5,357 $ 4,974 $ 4,843 $ 2,407 $ 1,432 $ 939 $ 429 $ 478 $ 315 $ 145 $ 95 $ 139 $ 84 $ 121 $ 55 $ 19 $ (1 ) Operating cash flow (non-GAAP)* $ 5,309 $ 5,168 $ 4,487 $ 5,299 $ 4,675 $ 4,040 $ 2,426 $ 1,403 $ 897 $ 409 $ 443 $ 306 $ 139 $ 118 $ 68 $ 161 $ 88 $ 46 $ 16 $ 4 Balance Sheet Data (at end of period) Total assets $ 41,835 $ 37,179 $ 29,914 $ 38,593 $ 30,764 $ 24,413 $ 16,114 $ 8,245 $ 4,572 $ 2,876 $ 2,287 $ 1,440 $ 851 $ 813 $ 953 $ 949 $ 572 $ 277 $ 126 $ 79 Long-term debt, net of current maturities $ 10,626 $ 12,640 $ 12,295 $ 13,175 $ 10,178 $ 7,187 $ 5,286 $ 3,075 $ 2,058 $ 1,651 $ 1,329 $ 945 $ 964 $ 919 $ 509 $ 509 $ 268 $ 146 $ 48 $ 14 Total equity (deficit) $ 17,961 $ 15,264 $ 12,341 $ 17,017 $ 12,624 $ 11,366 $ 6,299 $ 3,163 $ 1,733 $ 908 $ 767 $ 313 $ (218 ) $ (249 ) $ 280 $ 287 $ 178 $ 45 $ 31 $ 31 Other Operating and Financial Data Proved reserves in natural gas equivalents (bcfe) 18,789 17,096 14,254 12,051 10,879 8,956 7,521 4,902 3,169 2,205 1,780 1,355 1,206 1,091