Chesapeake Energy Corp. is selling more of its acreage in Oklahoma because the cash-strapped company cannot afford to develop it.
A listing for about 28,000 net acres held by Chesapeake in three western Oklahoma counties was listed Thursday on the website of broker Meagher Energy Advisors. The acreage is part of the Granite Wash and Hogshooter horizontal plays.
“Chesapeake is offering this unique exploration and development opportunity because its current drilling budget is not sufficient to fully develop its leasehold in this area,” according to the listing.
The acreage includes 113 producing wells, with net sales of 765 barrels of oil, 684 barrels of natural gas liquids and 9,935 thousand cubic feet of natural gas a day over the past year.
Chesapeake trumpeted its holdings in the Hogshooter play in June as a new discovery expected to provide a significant boost to the company, which is shifting its focus from land acquisition to asset harvest. Officials said that acreage is not the same as the holdings now listed for sale.
“The West Turkey Creek Granite Wash and Hogshooter Wash acreage that is for sale is a small non-core package of acreage and not connected to our significant Hogshooter discovery in Texas that was announced earlier this year,” spokesman Michael Kehs said.
The company has spent much of the year looking to sell assets to overcome a looming cash shortage.
Chesapeake has raised about $11.6 billion this year, but the company is looking to raise as much as $14 billion this year to offset an anticipated budget shortfall.
Chesapeake also is selling acreage in southern Oklahoma, Michigan, Ohio, Colorado and Wyoming through Meagher. Officials have said the company also is looking to find a joint venture partner for its acreage in the Mississippi Lime in northern Oklahoma and southern Kansas.
Devon Energy Corp. is consolidating its operations in Oklahoma City and shutting down its offices in Houston.
“Consolidating our U.S. operations will improve our ability to quickly shift the focus of our workforce between project areas as economic conditions dictate,” said Dave Hager, Devon’s executive vice president of exploration and production. “In addition, this move will improve the sharing of best practices and enhance overall operational efficiency.”
Devon intends to relocate employees who oversee operations in south Texas, east Texas and Louisiana from Houston to Oklahoma City by early next year.
The move is expected to save the company about $80 million a year in lower administrative expenses and personnel costs.
Devon estimates the reorganization will cost about $125 million, with most of those costs being incurred this year.
The Oklahoma City-based oil and natural gas company recently completed a new 50-story headquarters building downtown. It has room for the employees who had been in Houston, but company officials declined to say how many of Devon’s 500 Houston employees would move to Oklahoma City.
Continental Resources Inc. founder and CEO Harold Hamm is expected to testify Thursday morning before a House subcommittee in Washington, D.C.
Hamm plans to talk about the potential for North American energy independence, opening up federal lands to oil and gas drilling and the importance of tax credits for the oil and gas industry, according to his prepared testimony.
I am excited about our energy future and therefore our economic future. But I am equally concerned about federal policies that could cost us that future.
Just a few years ago, America was importing 60 percent of its oil. But with technological advances in horizontal drilling over the last 15 years, we now import less than 45 percent of our oil. Just a few years ago we estimated our nation’s natural gas reserves at seven years. We now have natural gas reserves of over a century. With this extraordinary advance in technology we can now access the immobile oil and natural gas of the world. Previously to this point we were only able to produce the world’s mobile oil and natural gas. There is about 1/3 more immobile oil and natural gas than the mobile oil and gas we have produced for over a century. The technology that allows us to drill two miles down, turn right, go another two miles and hit a target the size of a lapel pin has unlocked the resources that make energy independence a reality.
This paradigm shift in American oil and gas exploration brings with it high-paying jobs, increased tax revenues and economic growth, while lessening our dependence on foreign oil.
Hamm also serves as the head of energy advisory committee for GOP presidential candidate Mitt Romney, whose energy plan touches on similar subjects as Hamm’s prepared remarks. But Hamm emphasizes in his testimony he’s there as a private citizen:
But I am not here representing Continental Resources, any political campaign or political party. I am here as an American patriot that loves my country and a person that is grateful for the opportunities I have been given by being an American. Only in America can the thirteenth child of a sharecropper turn a one-man, one-pump-truck operation into one of the nation’s largest oil companies.
Meanwhile, the folks at the Think Progress environmental blog have several hypothetical questions for Hamm ahead of his testimony. They are skeptical of the claims of energy independence and want more details on which federal lands might be opened for oil and gas exploration.
In his hearing testimony, Hamm supports opening federal lands and offshore areas for drilling, but claims it “would impact my company very little” because “we mainly work on private lands.” But Hamm holds a number of permits to drill on public lands, including recent permits for Montana and North Dakota. Romney’s plan would likely boost Hamm’s profits, but potentially at the risk of Americans’ national parks.
Chesapeake Energy Corp. moved closer to its 2012 fundraising goal on Wednesday as it announced asset sales totaling about $6.9 billion.
The Oklahoma City-based oil and natural gas company has been looking to shed some assets to help overcome a budget shortfall estimated to be as high as $22 billion.
CEO Aubrey McClendon said the deals announced Wednesday put Chesapeake close to its goal of raising $13 billion to $14 billion this year.
“These transactions are significant steps in the transformation of our company’s asset base to a more balanced portfolio among oil, natural gas liquids and natural gas resources and production by focusing on developing and harvesting the value embedded in the 10 core plays in which Chesapeake has built a No. 1 or No. 2 position,” he said in a news release.
Chesapeake will use a portion of the proceeds from the asset sales to pay off a $4 billion loan it took out in May.
Chesapeake is selling the bulk of its acreage in west Texas’ oil-rich Permian Basin for about $3.3 billion. The company also will generate an additional $3 billion by selling most of its midstream holdings in a series of transactions.
The sale of assets in Ohio’s Utica Shale and other noncore areas will bring in another $600 million.
The Permian Basin assets have been viewed as the prize of Chesapeake’s portfolio of holdings for sale.
A subsidiary of Royal Dutch Shell has agreed to buy Chesapeake’s holdings in the lower Delaware Basin, while Chevron USA Inc. is buying acreage in the northern part of the basin.
Houston-based EnerVest is acquiring Chesapeake assets in the Midland Basin in a previously announced deal.
Those holdings produced about 21,000 barrels of liquids and 90 million cubic feet of natural gas per day during the 2012 second quarter. That accouned for only 5.7 percent of Chesapeake’s production during the quarter.
Chesapeake is retaining about 470,000 acres in Midland Basin for future sale or development.
McClendon reiterated that the Oklahoma City oil and natural gas company plans to sell $17 billion to $19 billion in assets — about one and a half times Chesapeake’s equity market capitalization — by the end of 2013 while continuing to increase its total production.
McClendon said Chesapeake is now the country’s No. 11 liquids producer and is still the No. 2 natural gas producer even though it has shifted its focus away from dry gas.
While 85 percent of Chesapeake’s 2012 drilling budget is dedicated to oil and natural gas liquids-rich areas, McClendon said he expects natural gas prices to soon rise. He said he disagrees with models that show natural gas production continuing to rise over the next few months.
Given that Chesapeake produces 10 percent of the natural gas in the U.S. and has been responsible for 35 percent of the gas production growth over the past few years, we find it hard to model natural gas production growth when we’re going to decline 7 percent,” McClendon said.
Chesapeake and other natural gas producers have stopped production as quickly as they ramped it up, McClendon said.
The buildup was unprecedented, and the runoff was equally unprecedented,” McClendon said.
If the country experiences a normal winter, natural gas prices will soon climb, he said.
At that point, many natural gas producers will rush back into the market, but Chesapeake will not, McClendon said.
The question isn’t: Can you make money drilling a gas well in the Barnett or Haynesville at $4?” he said. “The question is: What else can you do with that money? I think we can make more with oil.”
While the oil and natural gas liquids market likely will remain Chesapeake’s focus, McClendon said natural gas is still a valuable commodity.
I think the days of $2 to $3 gas are going to be over. I don’t think the days of $7 or $8 gas are quick to return. But there is a lot of money to be made in the middle,” McClendon said.
Canadian natural gas giant Encana Corp. has concluded company officials did not collude with rival Chesapeake Energy Corp. to lower the cost of land acquisitions in Michigan in 2010, Reuters reports.
The news agency reported in June that the companies plotted to keep land prices under control in the Collingwood Shale, a promising oil and natural gas play. That raised the specter of antitrust violations that have sparked investigations by the U.S. Department of Justice and authorities in Michigan.
A subsequent report cited emails indicating Chesapeake CEO Aubrey McClendon directed company officials to renegotiate or delay closing on deals with major Michigan lease holders after learning Encana was paring back its leasing efforts there.
A Chesapeake spokesman declined to comment Wednesday on the latest Reuters report.
The company has denied any wrongdoing in Michigan, where officials said it had considered a possible joint venture with Encana that was never consumated.
Encana’s board of directors, which led the investigation launched on June 25 with the assistance of outside attorneys, did not provide Reuters with a report on the scope of the inquiry, nor explain how it reached its conclusion.
“We can’t offer more detail than what we’ve released as the issue is still under investigation by the Antitrust Division of the Department of Justice and the Michigan Attorney General,” Encana spokesman Jay Averill said in an email to Reuters.
Chesapeake also is facing inquiries from the IRS and U.S. Securities and Exchange Commission, as well as an internal review by its board of McClendon’s personal finances.
McClendon is scheduled to speak Thursday morning at an industry conference in New York, his first such appearance since April.
Southeastern Asset Management, Chesapeake’s largest shareholder, has advised McClendon to focus on running the company rather than acting as an industry advocate.
Crews from Oklahoma Gas and Electric Co. are traveling to Louisiana today to help with power restoration in the wake of Hurricane Isaac.
Latest estimates from the storm put more than 500,000 people without power.
OG&E Electric Services said 71 employees will help Cleco Power. They will stage at Cleco’s headquarters in Pineville, La., and be dispatched to surrounding areas in need of help.
OG&E is a member of the Southeast Electric Exchange, which organizes mutual assistance teams from utilities across the south after storms.
“Our crews are always ready and willing to help others in a time of need during outages like this,” said Mike Mathews, OG&E’s vice president of power delivery operations, in a statement. “They’re working safely to get power back to the citizens of Louisiana, or wherever they’re needed, and they’ll continue until the job is done.”
In March, OG&E won the “Emergency Assistance Award” from the Edison Electric Institute for its efforts to restore service following several regional weather emergencies in 2011. The award recognizes utilities that help neighboring or regional utilities that have been disrupted by severe weather outages. Among the service restoration events OG&E helped with were severe thunderstorms, flooding and tornado damage in Texas, Arkansas, Missouri and Alabama.
When GOP delegates or others at this week’s Republican National Convention stop for a cup of coffee this week in Tampa, Fla., there’s a pretty good chance they’ll also end up with a lesson on compressed natural gas.
CNGnow.com, an advocacy organization supported by the natural gas industry, has a booth near the media area in the Tampa Convention Center. It is next door to the Tampa Bay Times Forum, where former Massachussetts Gov. Mitt Romney is expected to be nominated as the Republican candidate for president later this week.
Norman Herrera, director of market development at Chesapeake Energy Corp., said the convention is a good forum for CNG advocates, who are reaching out to delegates who aren’t familiar with the alternative fuel.
He said advocates are spotlighting Oklahoma Gov. Mary Fallin’s work with other governors to increase demand for natural gas vehicles, as well as the fueling stations being built by state companies like OnCue Express and Love’s Country Stores and Travel Stops.
Oklahoma is home to more than 70 existing or planned fueling stations, but Herrera said Florida — which is the nation’s second largest user of natural gas — has only five.
He said Florida derives 62 percent of its electricity from natural gas so it is a “vibrant market” for CNG.
Herrera said CNG advocates are talking about fleet conversions, vehicle choices and fueling stations with delegates seeking a caffeine fix at the conference. Water is available at the CNGnow booth also.
Delegates also are being ferried to and from the airport on CNG-fueled shuttles, courtesy of America’s Natural Gas Alliance.
The CNGnow booth, which opened Monday, will be in Tampa until Thursday.
CNGnow is a combined effort of Chesapeake, the Pickens Plan, American Clean Skies Foundation, NGVAmerica, America’s Natural Gas Alliance and American Gas Association.
There isn’t a for-sale sign at NW 63 and Western, despite Chesapeake Energy Corp.’s ongoing quest to raise cash, but the company’s largest shareholder has urged officials not to rule out the possibility of a sale.
The Wall Street Journal on Monday identified a potential buyer: oil major Chevron Corp.
Chevron has amassed $21 billion in cash, according to the report, spurring observers to wonder when the company may be mulling a potential acquisition.
Chesapeake’s market capitalization is about $12.39 billion, based on Tuesday afternoon’s stock price of $19.34 a share, although officials have maintained its oil and natural gas assets are more valuable than that.
Chevron, which is reportedly carrying more cash on its balance sheet than any other publicly traded energy company, maintains it is hoarding money to finance several multi-billion projects, but that hasn’t stopped analysts from speculating about a possible acquisition.
“That’s the only thing I can think of,” Oppenheimer analyst Fadel Gheit told WSJ.
Chesapeake declined to comment for the WSJ report.
Analysts have dismissed the possibility of a Chesapeake sale in the past because of the company’s complex financing structure, which includes venture partners and volumetric production payment plans.
Devon Energy Corp. CEO John Richels spoke Tuesday with CNBC’s Mad Money host Jim Cramer about how the company’s stock price is trading down on lower-than-expected earnings in the second quarter.
Richels blamed much of the drop on lower prices for natural gas, natural gas liquids and Canadian oil. The temporary price drop should not significantly affect the company’s long-term growth, he said.
This business is cyclical. Prices are cyclical. We’re sticking with our focus on investing in high-return projects. We’re maintaining our capital discipline, and we’re continuing to build this big asset base on the oil side, which we’re really excited about,” Richels said.
Like most oil and natural gas companies, Devon is working hard to refocus its attention on oil instead of natural gas.
We grew our oil production 26 percent year-over-year. That’s not off of a small base. By the end of this year, we’ll be over 40 percent oil and liquids production. We’re spending every cent in our company today on oil and natural gas liquids growth, and about three-quarters of it on oil,” Richels said.