Good day everyone and welcome to the Chesapeake Energy first quarter earnings results conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Jeff Mobley. Please go ahead, sir.

Good morning and thank you for joining Chesapeake's 2008 first quarter Earnings Call. Hopefully you've had a chance to review our press release and updated investor presentation that we've posted to our website. Before I turn the call over to Aubrey and Marc, I need to provide you with disclosure concerning the forward-looking statements that Chesapeake's management will make during the course of this call. The statements that describe our beliefs, goals, expectations, projections or assumptions are considered forward-looking. Please note that the company's actual results may differ from those contained in such forward-looking statement. Additional information concerning these statements is available in the company's SEC filings. In addition, I would also like to point out that during the course of our discussion this morning, we will mention terms such as operating cash flow and EBITDA, and we'll also mention items that we believe are typically excluded from analyst estimates. These are all non-GAAP financial measures. Reconciliations to the comparable GAAP measures can be found on page 18 of our press release issued yesterday afternoon. While these are not GAAP measures of financial performance, we believe they are common and useful tools in evaluating the company's overall performance. Our prepared comments this morning should last approximately 5 to 10 minutes, and then we will move to Q&A. I will now turn the call over to Aubrey who will introduce the rest of the participants on the call.

Thanks, Jeff, and good morning. Probably, we will take closer to 15 minutes, I think. We got Marc Rowland, our CFO; Steve Dixon, our COO; and Mark Lester, our Executive VP of Exploration. And then Marc's can lead all today with his thoughts and then I will follow with Marc.

Thanks Aubrey and good morning everyone. Jumping right in, this quarter was a just a great one for Chesapeake. It was a record quarter. On an adjusted basis we earned $1.09 per share, the highest in the company's 15-year history. Over the years our common and preferred share issuance has led some to comment that we have grown absolutely but not on a per share basis. Not true, not only have we grown reserves and production per share, but now earnings per share sets a 15-year high water mark. Mentioning preferred stock as I just did, we have continued to convert those shares into common equity. At the end of this quarter, preferred stood at $956 million, down from $1.955 billion at September 30th. In April, we have converted an additional $100 million plus of preferred into common shares. This of course reduces our fixed charges without materially changing fully diluted shares outstanding. On the cost side of the equation, we continue to see service cost at moderate or decreasing levels, just about everywhere, except in the steel area, which is on the upswing for numerous reasons. And of course, fuel cost for diesel and our rig cost for diesel are higher, reflective of current oil prices. We just returned from London visiting our underwriters there, and insurance rates, for example should be down by 15% to 20% next year for our drilling program. You may have noted our DD&A rate which was also down again. In the last four quarters, our DD&A rate has steadily gone down from $2.60 one year ago to $2.57 an mcf in the third quarter to $2.55 and now $2.52. This is partially due to declining service cost in 2007 and today in 2008, but substantially due to a shift in CapEx through our…

Thanks Marc. In addition to the points you made, I would like to focus on three major points of my own. First, I would like to highlight how well our major plays are doing individually and how well the company is doing overall operationally. Secondly, I would like to provide some color on the industry and the stock markets validation of the value of our lease hold inventory. The advantages of our first new strategy in various shale plays and the remarkable opportunities this creates for our shareholders. Finally, I would like to offer some commentary on gas markets both in the US and also internationally. First, I hope you noticed the first time inclusion of the two tables on page 9 of our press release detailing our results over the past five quarters from new wells in the Barnett and Fayetteville Plays. We saw similar table in Southwestern press release last week, and thought it provided some nice disclosure, so we have adopted it as well. Later this year, we expect to be able to add a similar table for the Haynesville and perhaps, next year, we can also add the Marcellus. As I hope you can tell, our well completions in the Barnett and Fayetteville have become better with time. Our finding cost per mcfe has decreased overtime and we expect further improvements in the quarters ahead. This is a central key to understanding Shale Plays these days. They almost always get better over time. This is very different from most conventional plays or well result tends to get worse overtime. I think this also bodes well for our Haynesville play. We are very happy with our well results today but I really doubt that our first four horizontal wells are going to be the best four wells…

Thank you. (Operator Instructions). We'll go to David Heikkinen with Tudor, Pickering.

Good morning. I had a question as you think about selling assets and then reinvesting that capital into things like the Haynesville. Can you talk about the rate of return difference between the Woodford asset that you are selling and the Haynesville asset that you are deploying that capital in to?

Probably easier David to think about the rate of return difference from the assets we sold in the VPP, Marc mention that we sold out to 6.78% rate of return, I think we are on record is saying that we think the Haynesville returns to us probably better than Barnett returns, I think those are well established in the marketplace today. So let other people do that maths. So we'd like divesting this up 7% and reinvesting that -- many multiples of that in new assets. With regard to the Woodford really I can't tell you that answer, because I don't know how people will end up bidding for the acreage. But again, we think that in some other plays that we have our rates of return will be higher than what they have been in the Woodford. And Woodford is really turned around in the past year, we turned some acreage a couple of quarters ago that we considered to be non-core. And as we look at our programs in the Barnett and in the Haynesville, Fayetteville, we recognize that we probably needed to high grade our portfolio a little bit and there is a lot of industry interest in the Woodford, where a lot of companies have done well there over the past couple of years and so, we're excited about the possibility of seeing those assets falling into some hands of people that it might be a better fit for them and for us. So that's how we think about divesting of lower valued assets and putting them into assets that we think has higher return.

And then as you think about the Haynesville and your Barnett position, the growth that you're projecting in the Haynesville, can you talk about access to gas markets, the impact on the Perryville hub, what you're doing to get your gas from the Haynesville to the east and then what you're doing as far as the Barnett gas that you're already producing as you project your impact on the task of moving gas East out of Texas into Louisiana and that's it?

Midstream company, and I think you're aware and it’s a good bit of its going to get dropped in to this new MLP. They've been working for the past year on the Haynesville challenge and nothing is easy these days but as I mentioned in our conference call, that’s when I first started to talk about the Haynesville. The fact that this gas is going to get priced at Perryville opposed to being priced further back to the West, means that somewhere between $0.25 and $0.40, better per Mcfe than, say Barnett gas, probably with lower gathering cost as well and perhaps lower compression cost also. It's our view that probably Perryville overtime becomes a more important pricing hub than Henry hub and we are confident that we will be able to get our gas out of this area and that's from Perryville. There are number of a additional projects that you're aware of that, some of which take the gas to the southeast, which is probably the market that will show the most growth in [electric/fire] generation in 10 years to come. So, it's never easy to gets huge amounts of gas out of the play but it's going to be much easier to get them out of Northern Louisiana than it would be out of downtown Forth Worth, for example.

Can you talk about unit volumes that you're lining up already here or is it too soon?

We're not prepared to do that yet, but we don't intend to have strain of gas there.

Okay, thanks guys.

We'll go next to Michael Hall with Stifel Nicolaus.

Hi. Great quarter this. Just wanted to kind of think about 2009 I guess and kind of in context of the Woodford sale or announced intents of sale. Should we think about kind of additional high grading as you call it, going forward and to what extent do you think maybe there is upside to assets sale figures?

Yeah, Michael its -- you may not have noticed this yet, but on the bottom of the page 19 in our outlook -- and on top of page 20. We did highlight that we plan to sell additional properties in 2009 and 2010 and we included in there, the word undeveloped leasehold. So, we think its very reasonable to consider that not only do we like to sell proved reserves or lets call it, $6 an mcfe and $6.50 and make them -- make new ones at $2 to $2.50. I think it's also reasonable to be early to some of this plays and buy acreage to the extent that turnaround and sell some of it at 5,10, 15 times X and so I think we'll continue to do that. So, I got a few e-mails and I guess the other guys did here about some concern about increase in CapEx and I think Marc did a nice job going through and on a net basis it's really not that big of a deal in what we are doing something that before in the past have accused us of not doing, which is basically high grading the portfolio, not doing enough of that. And, so going forward everywhere we turn, we have acreage, there are people that want that acreage that we are late to apply and it's one of our greatest competitive strength. It's also been a, it's been a kind of corporate finance challenge to be able to pay for all this stuff. So, we believe that we can trim up in some areas and sell some nice acreage to some other companies. That maybe you are looking for a play and at the end of the day keep our CapEx equivalent to our cash flow as projected to be in 2009, 2010. So, we have got a lot of optionality around that $14 million of acreage leasehold that do a lot a different value creative things with it.

Thanks. Great that could be referred now, and definitely I agree, I like the strategy. It seems like it's a great way to make some quick value for shareholders. What would be the impact on the cost pool and how you do we think about that. I mean, how to imagine it?

Sure. Well, the cost, this is Marc, Mike.

Yeah.

The cost of our full cost fuel gets reduced by the gross proceeds from either a VPP, which is treated as a sale for accounting purposes or from the acreage, part of that could be undeveloped or unevaluated acreage, and so would reduce that part if they were strictly unevaluated acreage almost anything we do is likely to have some evaluated portion. For example the Arkoma step that we've talked about the Arkoma Woodford Shale sale would almost all come out of the full cost fuel and would further reduce our DD&A rate, which is another way of saying that we are selling for more than we had originally cost us plus the future cost of development.

Great, sort of figured. Well, I appreciate time and great quarter. Thanks guys.

We're doing. Thank you Michael.

You bet.

We'll go next to Tom Gardner with Simmons & Company. Tom Gardner - Simmons & Company: Good morning guys.

Hi, Tom.

Aubrey, I'm wanted to focus on the Marcellus for a minute. We've heard some cautionary statements by some companies with respect to how fast production can be ramped up due to infrastructure issues. Do you share this view? Simmons & Company: Aubrey, I'm wanted to focus on the Marcellus for a minute. We've heard some cautionary statements by some companies with respect to how fast production can be ramped up due to infrastructure issues. Do you share this view?

Yeah, we've been on record now for over a year that this is a play that will go a lot slower than some parts of the Barnett, certainly slower than the Fayetteville and Woodford and a lot slower than the Haynesville. Anyone ever phoned from New York to virtually anywhere west, you phone over Pennsylvania and it’s a rugged area, beautiful area but rugged and no real gathering infrastructure, certainly no high pressure or higher pressure, gathering infrastructure very little modern service company infrastructure. So we've had a lot of experience in building, gathering infrastructure, and service company infrastructure in Arkansas and that was a little bit of wild and wily are area to begin with. So, it will take several years to what Pennsylvania has that Arkansas doesn't as there is lot of topographical complexities. So, I don't think you're going to see that play go to multiple 100's of rigs in a short period of time and that's why as you get excited about companies buying leases up there, I mean, you need to focus on how long the lease terms are because, three to five years is not likely to get it for most leases up there. So, anyway, it's a play that we are thrilled to be the leading lease hold owner in it. We drill our first well or spot our first well in Northern Pennsylvania in the next, in May and our second rig comes in this summer. So, we concentrate our efforts today around some of our legacy CNR acreage down in West Virginia. Then than blocking our proposition in Pennsylvania and so look forward to doing that but, the challenge to gas markets over the next few years is going to come from more from a play like the Haynesville than it's ever going to come from a play like Marcellus in my opinion.

Do you see any other issues in the Marcellus? I have heard reports of water issues, I don't if they are speaking of procurement issues or potential water production issues have you? Simmons & Company: Do you see any other issues in the Marcellus? I have heard reports of water issues, I don't if they are speaking of procurement issues or potential water production issues have you?

Yeah, there, I believe they're talking about surface water issues and we had the same problem in Arkansas and did a couple of innovative things there. We built a lake and used and then built a water distribution system. So, it's going require companies that have the experience and scale to be able to create those kind of innovative solutions, I will say to build a lake these days is not the easiest thing and it took us probably close to two years to get it done on the Fayetteville. So it's just another reminder that if you are worried about the Marcellus swamping the U.S. in gas, I think there other plays to be worried about more. At the same time, we like the rock in certain parts of play and that's why we concentrated our buying efforts. And guess it's another thing, I've seen maps here the big blob of Marcellus it goes in southern New York down to West Virginia and if you do that map, it something like 40 million acres or 45 million acres of perspective Marcellus. We think the play will be much smaller than that, just like if you look at the Barnett today and it's not a 12 county play. It's really 2 or 3 or 4 county play and so we think that's the way it will end up for the Marcellus as well.

You shared your thoughts on that, one last question on your view of gas supply growth for '08 and '09 domestic U.S.? Simmons & Company: You shared your thoughts on that, one last question on your view of gas supply growth for '08 and '09 domestic U.S.?

I think it will be higher. Now, Jeff, are we thinking…

So, it will be higher as everyone else is flat, just because of us, so.

At our rate we are producing just over or just under, I guess 4% of the Nations gas and we're going to be adding close to 1% increase in the Nations gas supply just ourselves. So going forward, I've told everybody who'll listen, that I think in the U.S. will increase it's gas supply by at least 5% per year, pretty much as far as that I can see until you get to point where the play is like the Barnett roll over. And we don't see that happening probably until 2013, 2014 something like that. So it's really -- it's a perfect match between a time when we can attract much LNG here because of worldwide demand for natural gas. But luckily it's at a time when we don't need much LNG because of the efforts of again probably a handful and no more than two handfuls of companies that are leading the charge and finding new reserves of natural gas and I think that's longer term. How we ever deal with our transportation fuels problem in the U.S. and around the world is we are going to have to rely on something other than something made from oil and in my view that's going to be abundant natural gas. So, I am really excited about the role of natural gas that's going to play in this country's economy and I do believe it's going to give us a durable economic advantage over some places around the world where gas prices might end up trading at over twice what they go for in the U.S. and at the same time I think there will be plenty of money to be made here by the producers round on the work Jeff, are you working under a higher number than I am on 5% per year.

Well the EI-914 data came out and the year we has increased -- February was pretty large, but last years had to freeze of and you have the start of Independence hub, which is not repeatable. So on a sustained basis something plus or minus 2.5 to 3.5 bcf might be doable depending on the rate count.

Yeah, we don't believe that whole industry increases production by 10% year-over-year from February to February on accounts sustainable basis. So I can't throw that headline number out. There are a ot of people who have been focused on the last of couple of days.

Thank you. I appreciate your comments. Simmons & Company: Thank you. I appreciate your comments.

You're welcome.

We will go next to David Tameron with Wachovia.

Good morning. Question for you, how do you think about your production volumes, you will have doubled production volumes by the end of '09 from '05 or '06 levels. How do you manage that type of growth as a CEO and how do you put in place systems and infrastructure that doesn't allow cost to escalate etcetera when you growing at that rapid pace?

Dave, you anticipate it and that's one of things that again I think important about our ability to project growth. We today are already thinking about 2010 here in the first part of 2008 because we can see it over the horizon. And in 2005, 2006 I think we could see some things over the horizon that haven’t shown up. If you come to see this on our campus and I pay to use this forum to drop this big news but I think we are actually going to have an Analyst Day or what do you call -- whatever. We are actually going to have one, you'll kind of get to hear the commentary and you will see 2500 employees at work here in our headquarters complex, which is for too long, it will be a 1 million square feet, 40% of our employees are under the age of 30. So we've got a lot of hard working young people, we've been bringing in to the business. I would like to tell you, it's easy to double the size of the company with that in a few years but its not that we've got hard working, cohesive, motivated management team here that feel like they are collectively at the top of their gains and we are excited about what we're doing and I feel like we run a very, very tight shift and I think the best way to see that is to come see us in action. So we can't wait till this fall. Come see us in the next couple of months and we’d be happy to give you the grand tour.

Okay, along those same lines. Let me ask one more question about Barnett. It seems you are one of the few companies this quarter that's been able to grow sequential production and I may be way of base on that, but is that an accurate, just look at the numbers from XTO EOG and get a range and you guys grew fleet about by may be what differential are or it is just a strictly midstream issue?

I'm sorry, I missed the question, pardon, can you tell again please?

Yeah, when I look at volumes coming out of Barnett from XTO it kind of range, et cetera EOG, which did disclose there's but it looks like sequential production, one Q or 4 Q was flat or down?

For the industry?

Just, for those individual producers in the Barnett and you guys seems to be grow…?

Okay, so what's the difference? You know, we compete against a lot of companies that are obviously excellent companies. I would just say that if you look at our sequential production growth and I do think we don't hide behind numbers. We give you our numbers every quarter, so you can track our progress. I think that we have an excellent operation that is integrated from top to bottom, and we've got mid streamers and we've got up streamers that work together. And, we have the toughest area to get gas out of it. I mean, we're drilling inside of what' the limit. So, it happens to be in all-terrain County. We think, the best rock in the whole play, but the hardest place to get gas out of and I would just tip my hat at our midstream teams working with our upstream teams that we've been able to move gas and ways that other people haven't, and I think, that's again, I think, very few people really appreciate the scale of our operation, and I think, Marc would like to say some other things about how we have anticipated this growth and how we built systems forward and why you don't feel this company report surprises that result from unanticipated bottlenecks in our growth, and remember on a quarterly basis and we're building the equivalent of multi billion dollar companies every quarter over the course of the year, if we can increase our gas production 400 million to 500 million, that's the equivalent of the top 15 gas producer in the U.S. We build that every year. So, we've been doing this for awhile, but I think Mark has some thoughts, he'd like to share.

Well, that’s exactly what I was timing with, if you think about the areas of integration, and I don't follow every one of our peer group companies that carefully. But, I suspect, we're quite a bit different and I just tick off a few things. The rig business, I know we're completely different here, we've got 81 rigs that we operate that we own. That a custom build for our place and our brand new, we've got an additional 10 rigs in order to satisfied the increase in drilling that we've talked in the several place. If you think about the midstream business, we're operating one of the largest midstream businesses now in the whole country and we build that through Jim Johnson and his crew help in the last three years. This is a business that's going to benefit value by independent parties within the next month at around $3.5 billion. That's all been build by Chesapeake with a investment of about $800 million today. We have our own compression business, where we supply our compression equipment now which a lot of it we manufacture. We have a 100,000 square foot compression manufacturing business leads by Al L and his crew and we're able to build equipment and not have bottlenecks on receiving that. Then if you look at just the business from the third parties that we do business with, which are sort of the further downstream from our gathering and compression efforts, we've made take away commitments to half a dozen to 8 or 10 different large projects as some of which came up in the first question today and with respect to Haynesville people recognize us as a leader in there and their building facilities and we are in there committing to those facilities so that we can take it away. Reservoir technology business is the same thing last year and a half and they will also see this when they come. This is a business where we are doing around coring and shale analysis work and we don't have to go to the limited number of people that are capable of doing that are even in the business to do it. So, our integration, while we are not integrated in the sense of the traditional downstream- upstream major business, our integration in the part of the business that we do focus on I think is well either unknown or under appreciating.

Alright. Thanks Marc, thanks Aubrey.

Thank you.

We will go next to Jeff Robertson with Lehman Brothers.

Thanks. Good morning, Aubrey.

Hey Jeff.

Can you talk a little bit more about the recent increase in the rates you all have seen in the Fayetteville Shale and whether or not that's tied to the increased laterals that you are drilling or is it that plus a combination of better completions or better geology or all of the above.

Actually, I think we have affair with all of the above. I will mention that we were second into the play, but this was not our first shale play and so we didn't get sidetracked on different kinds of completion treatments. We went in with kind of the slick-water jobs that we've been using ever since we get going. So, we started off drilling longer laterals than others and nearly completing the wells I think in the right way. We also were early to shoot seismic. This is a, because it's a complicated area geologically and you want to stay away from fault and so having that treaty advantage I think enabled us to drill some longer laterals and to have fewer wells that were non-productive or under par. So, looking then add our results you can see that in the first quarter of 2008 and peak rate was to highest that we've ever had, and our lateral length was the longest to drill. So I think it’s a combination of, remember this company drilled more shales than any other company in the industry. We are tracking in a different types of shale and environments all the way from far west Texas up to Pennsylvania and so we have an information advantage over other companies that honestly we should be better than others because we've got more information and Marc mentioned our Reservoir Technology Center not only can evaluate shale cores that we call also model different completion techniques. So Jeff I think its really kind of the best of Chesapeake in some of these plays that we are able to bring to bear our petrophysical advantages or geological and geophysical advantages and our operative experience in shales. That's why I think when we started in Fayetteville we were about 1.6 bcfe per well and today we're up to 2.2 and my guess overtime we are going to try and continue to do better. And again its the nature of these shale plays that we are in that they do tend to get better over time.

Secondly, you've talked about the lease terms in the Marcellus, of your 1.2 million net acres about how much of that do you think is production?

Excellent question, and I'm going to need to get back to you on the exact number but knowing how much we had from CNR I'm going to guess that its right around the 50% number but Mark Lester thinks that's about the numbers as well, but we'll try that down, I should have a office copy here…

Okay and finally, Aubrey, in the guidance, you all, it looks like you've added a million barrels to your oil guidance for 2009.

Yes sure

Is that because of some of the un-conditional oil plays that you referenced a few weeks back?

Jeff, I'll just put it to you this way, we've seen continued growth on our oil production. We do think some of those plays are going to work and so the answer is yes.

Okay, thank you

We go next to Brian Singer with Goldman Sachs

Thanks and I was going to ask another question on your oil plays as well. It sounds like, you weren’t that interest in providing some additional color on that but perhaps you still could and may be talk about how much CapEx you're assuming for oil related activities in the next couple of years?

Yeah, Brian, we really don't break it out by oil and gas, I think, we've recovered this a six weeks or so ago when we said that we -- actually five weeks ago, where we said, we had a number of play, so we thought we're going to be very successful and we're working on those and not enough has happened since that time, they'll really be more forthcoming. I'll just remind everybody, we're working on five different oil plays, four of which are shale and they're in four different states in various stages of activity. I think we did talk about how oily our colony wash play is and its in Western Oklahoma and that's been a big area of growth for us. Also, we talked about, again five weeks ago, the mountain front granite wash play and the southern end extension of that is very oily as well, we touched several 500 barrel a day wells comes from some horizontal granite wash wells down in the Southwestern Part of the mountain front granite wash play. So, we've got a number of oil plays underway and as we're able for competitive reasons to talk about and we will certainly do that. We are well aware of the, guys s barrel oil is relative to an mcf of gas and we're focused on to finding more of those barrels.

Thanks. And can you give us an update on just, where you feel like you're in the process with regards to the land grab in 2.1 billion to 2.6 billion in acquisitions guidance for this year less for next year. How do you think about the areas existing versus new regions where you look to acquire and what kind of volatility around the '09 and '10 guidance do you expect?

Brian, it's a very good question but almost impossible to answer, because so much about is dependent upon the actions of people, we like to control, but we can't; our competitors. And so, really just -- we think these are good numbers based on what we know but they clearly a very large percentage of the increase in leasehold that we're projecting for 2008 is focused in the Haynesville and secondarily in Marcellus. Those are plays were acreage values have escalated dramatically in the past couple of months. And so, we have the option of either dropping out or continue in the play, and we think it makes sense to continue to play, whether it be point at which time we don't want to -- sure that's theoretically possible. But we started out with 300,000 acres in the Haynesville at a cost basis that will always be very, very substantially below what anybody else would have come on any kind of a acreage base that could even remotely approach that. Same with the Marcellus that 4 or 5 or 600,000 acres that came from CNR. We allocated I believe $500 – about $500 million to whole company. So, I think it was about $150 an acre has been allocated to that on our books since we bought that – made that acquisition in November 2005. So, anyway it's a lot of money. But, the opportunities are quite substantial as well as 100,000 acres of Haynesville leasehold might give you the opportunity to drill as many as 1250 wells and kind of do the math on how much CapEx that can require, that can require how much gas that might bring forward. So, locking down these acreage positions early is credibly important, but very expensive and along the way we have been and we will be criticized by others in the financial community who would rather pass by some of these opportunities but I believe that we are benefiting our shareholders for years if not decades by making these commitments to these acreage position. And, I think we found some pretty innovative ways to finance some of this as well, so pleased to walk everybody through that today as well.

Thank you.

Okay. Thank you, Brian.

We will go next to Gil Yang with Citi.

Hi, Aubrey. And, answer to your previous question, you said you were sustaining the Barnett is at three to four County Play. Can you comment on your certainty about the Fayetteville as to how of the 250,000 acres or 300,000 acres you have there, how consistent that acreage is and how confident you are that it's all prospective?

Hi, Aubrey. And, answer to your previous question, you said you were sustaining the Barnett is at three to four County Play. Can you comment on your certainty about the Fayetteville as to how of the 250,000 acres or 300,000 acres you have there, how consistent that acreage is and how confident you are that it's all prospective?

Hi, Aubrey. And, answer to your previous question, you said you were sustaining the Barnett is at three to four County Play. Can you comment on your certainty about the Fayetteville as to how of the 250,000 acres or 300,000 acres you have there, how consistent that acreage is and how confident you are that it's all prospective?

Well, if you say the Fayetteville, I assuming you meant the Haynesville.

No, I actually meant the Fayetteville.

No, I actually meant the Fayetteville.

No, I actually meant the Fayetteville.

Okay, we have about…

But I could, I could ask because of the Haynesville as well.

But I could, I could ask because of the Haynesville as well.

But I could, I could ask because of the Haynesville as well.

Okay, I wouldn’t answer, but you said you quoted acreage figure that I would like to correct. We have 585,000 acres in the what it's called the box and that’s a box that I mean, Southwestern would probably first put out and we have modified it somewhat. We’re drilling in some of the borders. We had a bunch of acreage in the Eastern part of state that didn’t works, so the Fayetteville in my view has all four corners identified and so I'm very certain that statistically inside that box, we are going to be able to generate the type of well reserves that we've been talking about. On the Northern side it will be less, but cost would be less on the other parts. We do have some 4 bcfe wells in there as well. So, I think Fayetteville is really a proven commodity at this point and we're going to drill and go to our table on page 8, I think gives you all the information you need to know about that really that in that area using 80 acres, we think that we've got another 5400 wells to go and at 2.2 bcfe, we think that’s on risk basis 9.6 tcfe and we have 429 bcf approved. So it’s a 10 tcfe play. I know if that were a standalone company, what it would be valued at because I can read it. I can see how another company is valued and we would just that there is an enormous amount of value in our company that's not given that similar value. And, so how we will get to that values. We'll just continue to drill it up and you will see it through production reserve growth.

Okay, thanks. And, can you update us on your on what's going on in West Texas?

Okay, thanks. And, can you update us on your on what's going on in West Texas?

Okay, thanks. And, can you update us on your on what's going on in West Texas?

Yeah, couple of things there. Some - we continue to account around the corner on the Shale. We have two new wells, we talked about this morning that are best wells today in the play and are very economic, I think, at the flow rates that we have seen. So, is that play for shale aspect to that play compatible with our other shale plays - no not yet, but we are making progress in the commerciality. The other thing probably maybe more important and we talked about this in the beginning is that we knew we somewhere cross some other conventional and conventional plays and we have done that and we have two big plays out there that are not shale plays. That we are in a process of beginning to develop and it may - I don't know, if the shale there will ever rise to the level where it's competitive with other shale play returns, but I know that these other couple of plays could make us kind of forget while we were there in the first place and I appreciate what we were able to find the consequence of just being in a very big basin grossly underdeveloped basin with a pre-large stratographic column of a lot of oil and gas in place. So, we are pretty excited about West Texas at this point.

Does that play right on top of the or coincidental in the same column as the shale plays you're talking about or is that in a different sort of acreage?

Does that play right on top of the or coincidental in the same column as the shale plays you're talking about or is that in a different sort of acreage?

Does that play right on top of the or coincidental in the same column as the shale plays you're talking about or is that in a different sort of acreage?

No, it's on the same acreage as the shale play acreage was bought for.

Okay, thank you.

Okay, thank you.

Okay, thank you.

We'll go next to Scott Hanold with RBC Capital Markets.

Good morning.

Hi, Scott.

Can you ask you about -- I'm going to try to delve a little bit into the Haynesville. I know you are not really saying a whole lot at this point in time and it sounds like later in the year we may get some detail results. But, can you kind of give us a sense on this oil prices. I know you've obviously made it clear the market that you think is could be a very impactful play. And just kind of get a sense regarding, obviously a big capital raised to help to fund the development and acreage purchase. Why not just kind of give us a general sense of some of the initial results you've see on your wells?

Well, Scott I love to, if you promise not to tell anybody else and I know that you can't promise that. And so I -- we've can't share that information. We spend a lot of money to develop information that's proprietary. If there was perfect knowledge of everything that we knew in the marketplace, we might not be able to be as effective in buying leasehold. So, there is a time and a place to talk about that play in more detail. There is a lot of rumors out there and I just want you to do your own independent research on that for now. But, there will be a day when we can be more chatty about it, but today it's not in our shareholders best short-term or long-term interest to talk more about it.

Yeah. I mean just sort of on that point, I mean do you -- is it your opinion that by providing an idea of why you believe the IP rates or EURs or even well cost and what are you're doing out there will give competitors that advantage with leasing out there?

I am sorry. Can you repeat it again?

Yeah, I guess just again to the point of not providing information just so it doesn't get out there, obviously to competitors, is there a -- do you believe it or could you put your competitors in an advantageous position by providing some general information like okay, we have drilled five wells, our IP rates have averaged X or Y and we did this at X cost. Is that something…

I would think that would be pretty widespread information and interest in that kind of information and so I think that's why we would prefer to not discuss it at this point.

Okay. And moving to your hedge position, it looks like you added some. It sounds like you are pretty bullish on the gas market going forward. Can you kind just give us a sense of what you are thinking on adding to your hedge position was, potentially bullish view going ahead?

I would just say -- let turn it over to Mark. I am bullish for a number of reasons. The reason bearish is our own success at finding gas and better than a handful of other companies that I consider peers. We are finding a lot of gas and I am concerned, always concerned about the ability of a country to be able to handle the gas and so I think that we are not hedging at 7 we are hedging at 9.50 or 10 and that would guarantee the highest best financial results for the company ever seen before. So Marc.

This really hasn't changed during the last several years from our tactical way of implementing our strategy and if you go back four years ago when our gas price range was probably 5 to 7 and kind of moving up a dollar per year 6 to 8, 7 to 9. Now we are at 8 to 10. As far as kind of an expected range which I think would be viewed as pretty bullish, its above the streets range on either what people are building in for this year or the next couple of years and we have had in the last month the opportunity hedge a lot of gas sometimes in the winter of '09 for well above a $11 and as you can see the average for 2010, $9.56 and we've said is we're locking it for margin as we get to the higher end of a reasonable range not to say that it couldn’t spike out there on weather events or world political LNG events and it very well may. I think there is probably as much upside of it spiking out at some point as there is of it certainly going down, but we want to ensure the budgets that we've set forward get paid for, and we want to ensure the profitability in the margin per unit that we've been able to report and continue to report and will be able to report. So we are going to continue to layer in on these kind of spikes that take gas above the fair market value range, this is pretty wide and not set in stone and that's what we have done and I think we will continue to do.

Okay. Fair enough, and then may be I ask the question in different way and just kind of put you on the spot, Aubrey to see if you answer my question. Do you think gas prices right now are bit too high considering what you are seeing from your as a growing producer here in the U.S.?

No, I don’t think so. I think given worldwide gas prices where they are, given coal prices where they are, given problems with independent term and I'm not surprised that we have gas prices where they are. So, going in to the summer time certainly I see a scenario where gas prices could be significantly higher but its going to matter a lot on what kind of heat we have and where we have it. The best type of heat for us of course has been Texas and across the South and in the New England. And, I think that there is a high likely here that Texas's weather will be different this year than it was last year. So, anyways we are not, we believe that this is a marketplace that is influenced by a lot of important fundamental practice right now and a lot of them are lining up in the Bush camp, but at the same time I can look at our own production and look at other company's production and see there is a lot more gas getting ready to come in the US market. And, I just think that's a good thing for the American economy, but I am not willing to expose our shareholders to price risk at $7 or $8 in mcf when we can hedge it for $9:50 or $10.

Right and what are the near term implications on rig rates. It doesn’t sound like there has been too much pressure yet, but what do you perceive in 2Q and 3Q and going into early '09?

It's just really a function of gas prices and higher gas prices goal that will be pressure. I wouldn't note those and I saw yesterday that looked at yesterday that the top 20 operators of rigs in the U.S. have increased their rigs at a net rate that means that everybody else in the industry has actually reduced their rig utilization in the last 12 weeks. So, they kind of have, those that have these big acreage plays, those that dominate these shale plays that's where the rigs are coming into, and I want to be clear that the business is not becoming easier for somebody who doesn't have the kind of acreage position that we and a handful of other companies have in these big position, it's big plays. If you're a private company out trying to drill a couple of wells a year, the world is not really a -- I mean, the industry is not really a more favorable place to you. So, I think you'll see more and more consolidation of rig growth and no more than probably 25 companies and wouldn't be surprised to see rig utilization actually fall off among the other 4000-5000 operators that are out there.

Thank you.

Thanks, Scott.

We'll go next to Mike Briard with Hodges Capital.

The sale that you make recently was about 660 mcf. The profit that you disclosed, was that something that was negotiated several months ago before gas prices ran up or is that reflect the current gas price?

That was based on a hedging that we did within the past two weeks and is reflective of the strip. Remember we don't -- there has to be a return to the buyer. So, we can't -- sell gas for what, for 11 years into the future on a present value for what it sell for today on a spot basis?

Hey Michael, just to be clear on how these things work. When we go out and present a package of properties to someone and they look at it, they're bidding a yield over LIBOR cost, and the winner is the lowest LIBOR bid or the lowest spread over LIBOR and then it's up to us to go execute the properties in both locking down LIBOR in the gas hedges. And, so all that was done, as all we said in the last two or three weeks that just reflect what the current prices for both of those items are adding to the curve.

Okay, thank you.

Thank you.

We'll go next to Biju Perincheril with Jefferies & Company. Biju Perincheril - Jefferies & Company: Hi, good morning. Couple of quick questions, I think you mentioned a $120 million cubic feet a day in 2009 from the Woodford properties that you are selling. Can you say if that's a year end '09 or a average…?

That's an average number, Biju. Biju Perincheril - Jefferies & Company: Okay. And can you tell something about the capital that you would have to spend on those properties say in the 2008 and '09?

I don't have that of the top line hedge. Steve is sitting here. Steve, what kind of rate count were we projecting to run? I don’t know that we have the exact capital numbers for that?

Back into 3Q?

Quite a few rigs.

Yeah, it was direct up to 10 rigs next year for '09 and then there have been about 20 non operated rigs running on in our property. Biju Perincheril - Jefferies & Company: Okay.

I think, on that number -- we can get back to you on that. Biju Perincheril - Jefferies & Company: Okay. No it's okay. And then moving over to the Haynesville, are any of the before or I guess the eight vertical and horizontal wells are they producing to a pipeline or you're shutting in after you are testing those wells?

We have production form our horizontal wells and some are actually are, two of our four horizontal wells are former vertical wells and then we also have three wells that are waiting on completion, I think horizontal wells and those start completing, one completes next week. So, it will start to be a program that accelerates overtime and at the end of the day all of our vertical wells either will have been converted in the horizontal wells. And, just to be clear there when you say we are producing into a pipeline we have installed some gathering infrastructure there that takes the gas to a pipeline. So, we are producing into our own gathering system and then selling to a intrastate line or inter state line. Biju Perincheril - Jefferies & Company: And, can you say anything about the decline rates that you have seen on those wells, and how does that compare to say, what you've seeing in other shale players not getting?

We're not ready to go there yet, but I appreciate the reasons for the question and interest in it, but its one of those things you talk to Brian about it, Just would involve competitor information on competitors they we are not ready to divulge yet. Biju Perincheril - Jefferies & Company: Okay, fair enough, and then lastly, if I were to look at your conventional resource plays, it looks like production essentially staying flat, can talk about are those properties candidates for outright divestitures or VPP as you high-grade your portfolio?

I think the answer is yes, on both of those. We've preferred VPPs simply because we like to get the tail back after 10, 11, 15 years whatever it is. So, I don’t know what that tail is going be worth out there but at any time in the past it probably has been worthwhile to hang on to it. You don’t get paid that much for upfront, so that’s why we have preferred to join the VPP. So to the extent that we do other VPPs, more likely than not it would come out of that other conventional category. Biju Perincheril - Jefferies & Company: Okay, thank you.

Thank you.

We go next to Marshall Carver with Capital One Southcoast.

I just had one question on the Marcellus. You used to show vertical wells at [1.5 bs] in your summary tables, now you are showing 2 bcf wells likely horizontal I'm guessing. Would be willing to share your decline assumptions on the type curve that you have for horizontal well, like you have in other place?

There will be time when we are willing to do that we have not drilled the horizontal well in Pennsylvania. We have drilled horizontal Marcellus in West Virginia and again that's the level of detail that we are not willing to disclose at this point in West Virginia and just don't have enough information yet in Pennsylvania. But I mentioned that those tables on page 9 that we showed for the Barnett and Fayetteville and certainly anticipate being able to do that some day for the Fayetteville and Marcellus.

Okay just thought I'll try. Thank you.

Jeff is there anybody else.

Moderator do we have any other questions?

We will go to next Joe Magner with Tristone Capital

Good morning I just had couple of questions of your some of other shale plays that have been talked about in the past the Deep Bossier, the Deep Haley and also the Alabama shale plays and what the status is there and how will those fit in your go forward strategy?

Okay thanks Jo we will finish up on this. Actually only one of those three plays is actually a shale play and the Alabama shale plays, we were targeting both the Conasauga and Chattanooga and we are drilling our second well there in our 50-50 partnership with Energen and in respect and deference to them, I will let you approach them for information about that play. We are the operator but they have home team there and so we'll move on from that. The other two plays you talked about were Bossier and naturally, Bossier Sand. We are very excited about our leasehold position there, our first 3D is coming, I believe this summer and hope to drill some of those high rate well that in Canon, Burlington drill and then you also, I think talked about Deep Haley that’s where most of our assets and we are in a partnership with Anadarko and in that particular area we continue to drill good wells and some bad wells and continually trying and improve performing over there, so that we can increase our rig count. At this point, we've discussed some other plays that are commanding the larger increases in our rig count going forward. So, we'll continue to be excited about all that we have in West Texas and if you like we'll turn the corner on number of plays there. Okay. With that, Joe we appreciate your questions. And moderator we will go over and out here. And I appreciate to everybody's interest in what we are doing in this space. Thank you very much, bye-bye.