Chesapeake Energy 2011 Annual Report Download - page 17

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Our shareholders will benefit from the rebound
in natural gas prices that will occur in the next few
years as supply growth stalls and demand growth
accelerates. They will also benefit from Chesa-
peake’s increasing percentage of total production
that will come from our liquids-rich plays — think
of a factory that is shifting its production lines to-
ward liquids-rich widgets that sell for $10–20 per
unit (mcfe) compared to the $2 per unit (mcfe) gas
widgets that we are producing today. As a result,
Chesapeake’s returns on capital and assets should
increase dramatically in the years ahead as a conse-
quence of the ever-increasing percentage of more
valuable widgets we will be selling as the company
transitions from an exclusively natural gas-focused
company to one that will have achieved significant
balance in its production profile.
I am also excited about the big future that
lies ahead for America as Chesapeake and other
producers help create a clear path toward a more
sustainable, aordable, cleaner and independent
energy future. America only needs to embrace
the remarkable gift of U.S. unconventional energy
abundance it has been given.
You have my commitment, and the commit-
ment of Chesapeake’s 12,600 employees, that
every day we will keep working hard to create
increasing shareholder value and an improving
future for our communities, our states and our
country through the continued development of
American unconventional natural gas and oil.
2011 Annual Report | 15
Best regards,
Aubrey K. McClendon
Chairman and Chief Executive Ocer
March 31, 2012
(1)
Reserve replacement is calculated by dividing net reserve additions from all sources by actual production for the corresponding period. We calculate drilling and completion cost on proved properties per mcfe by dividing total proved
well cost incurred during the year by the sum of extensions and discoveries and performance-related proved reserve revisions, excluding price-related revisions.
(2)
A non-GAAP financial measure, as defined below. Please refer to the Investors section of our website at www.chk.com for reconciliations of non-GAAP financial measures to comparable financial measures calculated in accordance
with generally accepted accounting principles.
• Adjusted ebitda is net income (loss) before interest expense, income tax expense (benefit), and depreciation, depletion and amortization expense, as adjusted to remove the effects of certain items that management believes affect
the comparability of operating results.
• Operating cash flow is cash provided by (used in) operating activities before changes in assets and liabilities.
• Adjusted earnings per fully diluted share is net income (loss) per share available to Chesapeake common stockholders, assuming dilution, as adjusted to remove the effects of certain items that management believes affect the
comparability of operating results.
I am profoundly
excited about the
big future that
lies ahead for
Chesapeake, our
shareholders and
our country.