Chesapeake Energy Corp. got some inside information from a rival producer in 2010 that prompted the company to alter its approach in at least 10 Michigan land deals, Reuters reported Wednesday.
CEO Aubrey McClendon directed Chesapeake officials to renegotiate or delay closing on deals with major Michigan lease holders after learning Encana Corp. was paring back its leasing efforts there, according to emails reviewed by the news agency.
The information could provide additional evidence to state and federal officials investigating whether Chesapeake and Encana broke the law by discussing how to suppress land prices in Michigan’s Collingwood Shale.
Reuters first reported last month on possible collusion between Chesapeake and Encana after the companies had been competing for leasehold in Michigan.
One antitrust expert told Reuters the exchanges between McClendon and Encana counterpart Jeff Wojahn, president of the Canadian company’s U.S. operations, were “highly suspect,” while another said they may have simply been an attempt to gather market intelligence.
McClendon has been under fire since Reuters reported in April that he had secured up to $1.1 billion in loans against his personal stake in Chesapeake’s wells.
The controversial perk that allowed him to invest in every well drilled by the company he co-founded is being discontinued, while McClendon has been replaced as Chesapeake chairman by former Conoco executive Archie Dunham.
For the first time in decades, the country’s utilities used as much natural gas-generated electricity as power from coal-fired plants, according to preliminary numbers released by the U.S. Energy Information Administration on Friday.
Each fuel represented 32 percent of the country’s total electric generation in April at about 96 million megawatt hours each.
The EIA pointed out that overall demand for electricity was low in April because of mild spring temperatures and that natural gas was selling at a 10-year low.
Continental Resources Inc. CEO Harold Hamm continues to talk about his vision for North American energy independence.
Hamm appeared Tuesday on CNBC to tout a recent Harris Poll indicating nine out of 10 Americans believe the United States should strive for energy independence.
He said domestic oil production is booming thanks to developments in precision horizontal drilling technology that allows producers to target large reserves of immobile oil.
“We’re talking about North American energy independence in the next 10 years.”
Hamm said continued drilling has allowed producers to boost oil production.
“You have to go out there and poke holes in the ground. We do that every day.”
Hamm said the lack of major U.S. oil plays will prevent producers from creating a glut like the one that has caused natural gas prices to plummet, but he maintained the industry needs continued “tax provisions” favorable to exploration.
“It allows us to go out and fail. And fail again. It was necessary that we did that with the Bakken. Some 18 wells were drilled before it was commercial up there. It’s necessary that we have a tax consequence that will allow us to do that.”
Hamm said the U.S. should work with its neighbors to continue increasing oil production.
He welcomed news that Mexico’s new president may allow private investment in that country’s oil industry for the first time since 1936, while contending the fight over the transcontinental Keystone XL pipeline has not permanently soured the U.S.’s relationship with Canada. which already is a major oil producer.
Activist investor Carl Icahn said he is pleased with the new board at Chesapeake and that he is not interested in selling out just yet.
In an interview on CNBC Monday, he seemed to embrace a long-term view of the Oklahoma City energy company.
I think natural gas prices are going to go quite a bit higher and Chesapeake will be there to take advantage of it. I think — I hope you’re going to see a much higher price on Chesapeake. I would not sell it at all now,” Icahn said.
The billionaire investor repeated his view on the company and CEO Aubrey McClendon.
Chesapeake is in my mind a very undervalued asset,” Icahn said. “I think that Aubrey is a very bright guy. He’s put a lot of great assets together. The problem is they couldn’t afford to buy some of them. They gambled too much in buying them, and therefore you have this cash gap. You have to cut expenses drastically there. I think you can.”
Icahn began the interview by criticizing biotech company Forest Laboratories CEO Howard Soloman over the timing of his stock sales.
The discussion of Chesapeake begins at 7:38.
The U.S. Justice Department is investigating whether Chesapeake Energy Corp. and Encaca Corp. conspired to to drive down lease costs in Michigan, Reuters reported Monday.
The investigation follows Reuters report last week that executives for the two companies — including Chesapeake CEO Aubrey McClendon — repeatedly sent emails to each other in 2010, discussing how to avoid bidding against each other in public land auctions and in negotiations with private land owners in Michigan.
Spokesmen for the Justice Department and Chesapeake declined comment.
Besides the federal inquiry, the antitrust division of the Michigan Attorney Generals office and the Michigan Department of Natural Resources also opened investigations following last week’s article, Reuters said Monday, citing “three sources familiar with the matter.”
In the email exchange published by Reuters, McClendon told a Chesapeake vice president that it was time “to smoke a peace pipe” with Encana “if we are bidding each other up.”
The vice president replied, saying he had contacted Encana “to discuss how they want to handle the entities we are both working to avoid us bidding each other up in the interim.”
The Sherman Antitrust Act prohibits companies from discussion price-fixing and other noncompetitive actions. Companies can be fined up to $100 million and individuals up to $1 million for each offense. Victims of such discussions also can seek triple the amount of damages.