Guest post: Kylah McNabb at the American Wind Energy Association national conference
Note: The following is a guest post by Kylah McNabb, who is in the State Energy Office at the Oklahoma Commerce Department. Among her many duties, Kylah is the resident wind expert at the department. She attended this year’s AWEA conference in Atlanta.
Oklahoma showcases at national wind conference
This week brings the time of year that those of us in the wind industry come together for our annual Windpower conference, hosted by the American Wind Energy Association. We descend upon a major city–this year Atlanta–to discuss industry news, issues and conduct various business transactions. After 10 years in this industry, our wind power show still continues to amaze me each and every year. Walking the over 20 acres of exhibition floor, a variety of languages can be heard in conversations, showcasing the truly international element of the wind industry. Companies — from wind developers to wind turbine manufacturers and environmental consultants to economic developers – all work to secure business in the wind industry. Over 10,000 attendees from all walks of the planet share one goal: grow the wind industry in the United States.
Oklahoma has a lot to showcase this year. As of the 1st quarter in 2012, we have just under 2,200 megawatts of wind power capacity installed across 19 wind farms in the state. By the end of 2012, we should cross 3,000 megawatts of capacity, essentially meeting our Renewable Energy Goal of 15 percent renewable energy by 2015 three years ahead of schedule. Gov. Mary Fallin released the Oklahoma First Energy Plan, which includes wind as a member of Oklahoma’s family, and we continue to spread the message that Oklahoma is a great place to do business.
Still, you can’t help but notice an air of concern around conference attendees this year. It stems from the fact that the federal production tax credit for wind power is set to expire at the end of 2012. An industry that employs over 75,000 people directly and tens of thousands more indirectly feels the strains like so many of a cautious economy. Tuesday morning’s general session first featured executives from the industry, most with over 30 years experience and each speaking to the importance of continued technology advancements and the need for stable national energy policy. Following them, there was a great discussion led by former Oklahoma Corporation Commissioner Denise Bode with Karl Rove and Robert Gibbs. While Rove and Gibbs are on opposite sides of the fence on most topics, ensuring America’s energy security by growing wind power across the nation is one topic that all sides can agree on.
Tuesday afternoon put Oklahoma in the spotlight as Secretary of Energy Michael Ming served on a speakers’ panel and delivered a presentation on “A Natural Partnership for Economic Development: Wind & Gas.” Oklahoma is blessed with an incredible natural gas industry that serves our state in many roles. It is our rich history and experience in energy industry that has enabled wind power to become a national leader in wind development. We look forward to the potential the future holds as we utilize our native energy sources.
Even though the Windpower 2012 show ended on Wednesday, on Thursday work continues as the Department of Energy’s Wind Powering America program hosts its annual All-States Summit. It is an honor to serve as the Oklahoma representative to this event, as we take a deep-dive analysis into the wind market and what each of us can do as states and regions to continue growing our industry. Oklahoma again is seated well. We have a top-notch wind resource; good policies such as our renewable energy goal and the zero emissions tax credit; progressive work in the building of transmission lines; and a strong, supportive business environment. But we have so much more to do. Oklahoma wind power is proving its national prominence in saving consumers’ money. One wind project in Oklahoma is a national example of investment taking place within our state borders and the power being sold to another state. The project involving Alabama Power Company is expected to save its customers money on their electric bills. This is just the first step in how we can add to the $3 billion of wind investment in Oklahoma and, like our energy partners, serve others with Oklahoma-based energy.
Finally, I cannot help but mention how much support comes to our great Thunder team from this part of the nation. Whether it was walking through the Centennial Olympic Park downtown, visiting the amazing Georgia Aquarium, or the World of Coca-Cola here in Atlanta, when you mention you are from Oklahoma, the first response is how excited they are for the Oklahoma City Thunder and how much everyone wants them to win. While we proudly wear our Thunder gear and cheer on our team from afar, we love and proudly welcome all the people who join us in cheering on our team! Go Thunder!
Report: Chesapeake CEO Aubrey McClendon leveraged Thunder stake for loans
Chesapeake Energy Corp. CEO Aubrey McClendon watches the Oklahoma City Thunder against the Los Angeles Lakers on May 14. (Photo by Bryan Terry, The Oklahoman)
Hours after the Oklahoma City Thunder clinched its first-ever berth in the NBA Finals comes a report that one of the team’s co-owners has used his stake in the team for two bank loans.
The Reuters report is another in a line of stories about how Aubrey McClendon has used creative financing to fund his company and personal investments. It indicates McClendon has built a “lavish but leveraged lifestyle” by mixing the two more than most shareholders may realize, according to Reuters’ review of public records and hundreds of pages of internal Chesapeake documents.
The company and McClendon’s spokesman declined to comment in the latest report, according to Reuters.
The Chesapeake Energy Corp. co-founder has been under increasing scrutiny since Reuters reported April 18 that he had used his personal stake in company wells to secure up to $1.1 billion in loans. Some of those funds came from a private equity firm that also had invested in Chesapeake, raising questions about a possible conflict of interest.
A subsequent Reuters report indicated McClendon had run a lucrative hedge fund inside the company with former partner Tom Ward, who is now CEO of SandRidge Energy Inc.
The company has been largely silent about the questions raised by those reports, especially as shareholder lawsuits against its board mounted. The tally has grown to at least 15 since the initial Reuters report.
One of the issues in those lawsuits is how much information Chesapeake should disclose to its shareholders.
Its involvement with the Thunder has been well documented, but McClendon’s 2009 and 2010 loans against future proceeds from his stake in the team have not been disclosed.
Chesapeake has invested in the Thunder as well, as one of the team’s founding sponsors since it arrived in Oklahoma City in 2008.
That relationship had been laid out in a succession of one-year contracts that covered advertising, game tickets and use of a suite at the team’s downtown Oklahoma City arena until last year, when Chesapeake signed a 12-year sponsorship agreement with the team, according to the company’s 2012 proxy statement.
Chesapeake paid about $1.9 million pursuant to that agreement last year, a figure reduced by the lockout, but the deal calls for the company to pay an average annual fee of $3 million a year.
The company paid about $4.6 million for playoff tickets last season and regular season tickets this year. It also has committed to buying playoff tickets and other sponsorship benefits during this year’s playoffs, according to the proxy statement.
Chesapeake also an annual fee over the next dozen years for naming rights to the arena now known as Chesapeake Energy Arena. The company paid $2.9 million for 2011-2012 season, but that figure will escalate to $4.1 million a year by 2023.
The company expects the naming rights deal to “provide Chesapeake with enhanced public awareness through recognition locally, nationally and internationally,” according to the proxy.
McClendon will not benefit from the company’s investment in the team he co-owns because he will donate his share of the proceeds from those deals to Oklahoma schools.
In January, Forbes pegged the Thunder’s value at $348 million, 15th highest in the NBA, That is about about $45 million below the NBA average and well behind the $900 million Los Angeles Lakers, the league’s most valuable team.
McClendon’s 19.2 stake in Thunder is worth nearly $67 million, based on that valuation.
That is only a fraction of what McClendon owes on loans to finance his obligation’s under Chesapeake’s controversial Founder Well Participation Program, which allows him to buy a stake in every well the company drills.
McClendon and his affiliates owed $846 million at the end of 2o11 on loans related to the well program, he disclosed April 26. He estimated his 2.5 percent share of oil and natural gas production from Chesapeake’s wells was worth $852 million at that time.
As details of McClendon’s personal finances have emerged, Chesapeake’s board has begun a search to replace him as chairman. The company also will end McClendon’s well participation program early.
Continued questions from shareholders –including the two largest investors in the company — spurred this week’s announcement that Chesapeake would replace four of its nine-member board later this month.
The new directors will be appointed by the company’s largest shareholders, Southeastern Asset Management and activist billionaire Carl Icahn.
Chesapeake to sell Utica Shale assets
Chesapeake Energy Corp. is putting some of its acreage in the Ohio’s lucrative Utica Shale on the market.
The company is looking to sell more than 330,000 net acres in eastern Ohio, according to a prospectus with Meagher Energy Advisors.
Chesapeake holds more than 1.3 million net acres in the play that officials estimated last year could be worth as much as $20 billion to the company.
”This is part of our previously announced plans,” spokesman Jim Gipson said. “We will focus our development on those counties in Ohio where our land ownership is more concentrated than the land ownership in the counties being offered for sale.”
Chesapeake is looking to raise as much as $11.5 billion this year, so it is selling assets that are outside of its core holdings.
The nation’s No. 2 natural gas producer also is focusing more of its efforts on more lucrative oil and liquids production, although its cash flow issues have caused Chesapeake to scale back some of its drilling plans.
Chesapeake to make changes to board
At the behest of its two largest investors, Chesapeake Energy Corp. is poised to overhaul its board of directors.
The Oklahoma City-based oil and natural gas producer announced Monday it will replace four members of its board.
Three of Chesapeake’s new board members will be selected by Southeastern Asset Management Inc, a Memphis-based money manager that holds more than 13 percent of the company’s stock.
The fourth will be activist investor Carl Icahn, who recently acquired about 7.6 percent of the company’s stock, or his designee.
Four current Chesapeake board members, who were not identifed in Monday’s news release, will resign once their replacements are named.
“We are pleased that Chesapeake is being responsive to issues raised by us and many of the Company’s other shareholders,” said Southeastern CEO O. Mason Hawkins. These steps to reconstitute the board will enhance oversight and provide greater accountability.”
Icahn echoed that reaction in Chesapeake’s announcement.
“We appreciate the board’s willingness to listen to shareholders and to respond appropriately. Under Aubrey’s leadership, Chesapeake has assembled great assets and I am confident I can help the company create significant shareholder value from these assets. We enjoyed a very good relationship when I acquired almost 6 percent of the company’s stock in late 2010 and I look forward to a similarly constructive relationship now.”
A fifth new board member will be appointed in place of retiring director Charles T. Maxwell. He will be replaced by a new independent chairman, who will take the place of embattled Chesapeake co-founder Aubrey McClendon.
McClendon will remain the company’s CEO.
“Today’s announcement is the culmination of a continuing effort by Chesapeake’s board to address shareholder concerns and better position the company for the future. I am fully supportive of these measures and remain focused on executing Chesapeake’s strategy. I have great respect for the talent, commitment and dedication of our current board members, each of whom has played a key role in helping build our successful company. At the same time, I look forward to working with our new directors to continue creating substantial shareholder value from the extraordinary set of assets Chesapeake has acquired and developed in recent years.”
Lead independent director Merrill A. “Pete” Miller Jr. said the changes to Chesapeake’s board will enhance the company’s governance and benefit all of its shareholders.
“We greatly appreciate the substantial contributions of all of our directors, but recognize our shareholders’ desire for change. Following implementation of these initiatives, the Chesapeake board will have been substantially reconstituted with five new independent directors, including a new independent chairman, in addition to Lou Simpson who joined the board last year.”
Several institutional investors in Chesapeake have called for leadership changes at the company’s upcoming annual meeting.
The meeting is scheduled for Friday, but a number of shareholders who have filed lawsuits against the Chesapeake board have asked a federal judge to postpone it until the company discloses additional information about McClendon’s personal finances.
SandRidge sells assets for $130 million
An Oklahoma City energy company that is newly focused on oil and liquids production has completed the sale of some of its west Texas assets.
But it isn’t Chesapeake Energy Corp., which has spent much of this year looking to turn some of its lesser assets into cash to fill a large funding gap.
SandRidge Energy Inc., headed by Chesapeake co-founder Tom Ward, on Monday announced it had sold some of its noncore assets to a private party for $130 million.
The buyer was not identified.
SandRidge did not provide any details about the holdings it sold, other than to indicate they are noncore assets that produce about 1,100 barrels of oil equivalent per day.
SandRidge last year completed its transition from natural gas producer to one focused on oil and more lucrative natural gas liquids. The company’s exploration efforts are centered on the Mississippian oil play in northern Oklahoma and southern Kansas, west Texas’ Permian Basin and the Gulf Coast.
SandRidge is creating a new headquarters in downtown Oklahoma City, with an eye toward tripling its workforce there by the time it reaches its 10th anniversary in 2016.
Chesapeake announces new discovery in western Oklahoma, Texas Panhandle
Chesapeake Energy Corp. has discovered a potentially lucrative new oil play, the company announced Friday.
Chesapeake has completed two horizontal wells in the Hogshooter formation, about 10,000 feet underground with laterals approaching 5,000 feet. Two more wells are under way in the formation, which is part of the Anadarko Basin in western Oklahoma and the Texas Panhandle.
One of the completed wells yielded more than 7,300 barrels of oil equivalent in its first eight days of stabilized production, spurring optimism from CEO Aubrey McClendon.
“We expect this new Hogshooter discovery to provide a significant boost to Chesapeake’s focus on harvesting its existing assets for growth and value creation rather than on pursuing new leasehold. In addition, this new Hogshooter development area should further enhance our growing liquids production, which we expect will have transformational effects on our company’s operational and financial performance in the years ahead.”
McClendon said the Thurman Horn well is one of the best onshore oil wells drilled in the lower 48 states in the past several decades, according to Chesapeake’s research.
“This discovery exemplifies the scale and quality of our world-class asset base and the skill and creativity of our technical teams. Their hard work and determination is continuing to create significant additional value for our shareholders and other stakeholders.”
Chesapeake owns approximately 30,000 net acres in the play, which are more than 90 percent held by production from its legacy deeper Granite Wash operations.
The company expects to drill at least 65 wells in the Hogshooter play over the next several years. Those wells will be part of Chesapeake’s already budgeted Anadarko Basin drilling program, so they will not require any increase to its capital expenditure budget.
Chesapeake had none of the 65 potential future Hogshooter wells classified as proved reserves in the company’s March 31 reserve report.
