The Barnett Shale is currently the largest natural gas producing field in the U.S. and is producing approximately 50-60% of all shale gas in the U.S. In this play, Chesapeake is the second-largest producer, the most active driller and the largest leasehold owner in the Core and Tier 1 sweet spots of Tarrant and Johnson counties. During the 2009 third quarter, Chesapeake’s average daily net production of 639 mmcfe in the Barnett was approximately flat compared to the 2009 second quarter and increased approximately 22% over the 2008 third quarter. Chesapeake is currently producing a company record monthly average of approximately 685 mmcfe net per day (1,000 mmcfe gross operated) from the Barnett and anticipates reaching approximately 700 mmcfe net per day (1,020 mmcfe gross operated) by year-end 2009, approximately 725 mmcfe net per day (1,060 mmcfe gross operated) by year-end 2010 and approximately 760 mmcfe net per day (1,110 mmcfe gross operated) by year-end 2011. To further develop its 305,000 net acres of leasehold, of which 275,000 net acres are located in the Core and Tier 1 areas, Chesapeake anticipates operating an average of approximately 18 rigs in 2010 to drill approximately 300 net wells. If Chesapeake is successful in finding a joint venture partner for some or all of its Barnett Shale leasehold, the company plans to significantly increase Barnett drilling activity and production in 2010 and beyond. Assuming flat NYMEX natural gas prices of $7.00 per mcf (compared to a recent 10-year NYMEX strip price of approximately $7.25 per mcf), the company’s estimated pre-tax rate of return from a 2.65 bcfe horizontal Barnett well drilled for $2.6 million is approximately 36%.

Two notable recent wells completed by Chesapeake in the Barnett are as follows:
•The Day Kimball Hill A1 in Tarrant County, TX achieved a peak rate of 16.4 mmcf per day and is expected to produce an average of more than 13.0 mmcf per day in its first full month and exceed the previous monthly industry Barnett production record established by two Chesapeake-operated wells this summer that averaged more than 9.0 mmcf per day; and
•The Chaney 2H in Johnson County, TX achieved a peak rate of 10.0 mmcf per day.