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Chesapeake Midstream Partners, L.P. Agrees To Acquire Gas Gathering Assets In Marcellus Shale From Chesapeake Energy Corporation For $865 Million

Chesapeake Midstream Partners, L.P. (NYSE:CHKM) (“CHKM”) today announced it has agreed to acquire Appalachia Midstream Services, L.L.C. (“AMS”), the wholly owned subsidiary of Chesapeake Midstream Development, L.P. that holds its Marcellus Shale midstream assets, for total consideration of $865 million. Chesapeake Midstream Development, L.P. is a wholly owned subsidiary of Chesapeake Energy Corporation (NYSE:CHK) (“Chesapeake”). The addition of the Marcellus assets makes CHKM the industry’s largest gathering and processing master limited partnership as measured by throughput volume.

Through acquiring AMS, CHKM will own approximately 47% of an integrated system of assets that consist of approximately 200 miles of gathering pipeline in the Marcellus Shale, including the liquids-rich Marcellus South region. Throughput for these assets at December 15, 2011 was just over one billion cubic feet per day. AMS operates the assets under 15-year fixed fee gathering agreements with leading Marcellus natural gas and liquids producers. The gathering agreements include significant acreage dedications and annual fee redeterminations that target a mid-teens return on all invested capital in the acquired assets. Chesapeake has committed to generating EBITDA of not less than $100 million in 2012 and $150 million in 2013 from the Marcellus assets for the benefit of CHKM.

The acquisition, which is expected to close by December 30, 2011, will be financed by $600 million of cash drawn from CHKM’s revolving credit facility and equity consideration of $265 million (9.8 million CHKM common units), increasing Chesapeake’s limited partnership ownership of CHKM to 46.1% from 42.3%. On December 20, 2011, CHKM completed an amendment of its credit facility that increased total borrowing capacity to $1.0 billion.

Terms of the transaction were unanimously approved by the Board of Directors of CHKM’s general partner and by the Board’s Conflicts Committee, which is comprised entirely of independent directors. The Conflicts Committee engaged Tudor, Pickering, Holt & Co. Securities, Inc. to act as its financial advisor and Richards, Layton & Finger, P.A. to act as its legal advisor.

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