Cleveland reporter offers his take on Oklahoma City
A while back, I spent some time with John Funk, an energy and utilities reporter for The Plain Dealer in Cleveland. He was visiting Oklahoma City to get a look at how the energy industry has shaped the state.
His stories ran over the weekend. One looked at the state and its energy sector, while the other focused on Chesapeake Energy Corp., which has been a major player in Ohio’s emerging Utica Shale formation.
“Oil has been a leading industry in this state for at least three generations. It is so ingrained into the culture that it’s a way of life for people who live and work there. And now the industry is drawing a couple of thousands of new residents each month to Oklahoma City,” Funk wrote.
Questions still loom about how the discovery of new reserves of oil and natural gas will impact Ohio, where many people are concerned about the environmental impact of fossil fuel exploration and development.
Funk did not find evidence of such issues in Oklahoma.
“Wellheads and pump jacks are everywhere. So many they appear to outnumber the trees. Oklahomans seem unfazed by their existence. The oil and gas producing equipment is in shopping center parking lots, along city streets and interstate highways, at the Will Rogers Airport, even on the grounds of the state capitol building.”
Seems to me that John did a pretty good job of capturing our city during his visit. What do you think?
TPG-Axon CEO: SandRidge board ‘has no shame’
The founder of TPG-Axon Capital said Sunday he was not surprised by a Delaware court’s ruling that barred SandRidge Energy Inc.’s board from soliciting votes in an ongoing proxy fight.
“This is just the latest in a pattern of this board of putting their own interests ahead of shareholders – this board simply has no shame,” TPG-Axon CEO Dinakar Singh said. “This is the second time during our solicitation that this board has chosen to waste the company’s resources in a useless court battle in a desperate attempt to entrench themselves.
However, this is hardly surprising, given their record of presiding over a truly singular degree of value destruction and mistreatment of shareholders.”
The New York-based hedge fund is asking SandRidge shareholders to oust the current board in favor of its own nominees. It blames CEO Tom Ward and other SandRidge leaders for the poor performance of the company’s stock, which has lost 80 percent of its value since its initial public offering in 2007.
The SandRidge board has refused to approve the TPG-Axon nominees to prevent a change in control at the company from potentially costing billions of dollars.
A Delaware chancery judge on Friday blocked the company from fighting TPG-Axon’s takeover bid until it acknowledges the hedge fund’s board nominees are qualified to lead a public company.
SandRidge has said its current board is best suited to run the company, urging shareholders to reject TPG-Axon’s efforts. It has not commented on Friday’s court ruling.
The board, led by Ward, has said a change in control like the one sought by TPG-Axon would trigger a default in its credit agreement, forcing SandRidge to offer to buy back all of its outstanding senior notes. It initially put the price tag for such a development at about $4.3 billion, but later backed off that figure.
SandRidge shareholders have until Friday to decide if they want to stick with the current board or let Singh and TPG-Axon’s other nominees take over.
Chesapeake investors target Dell
Carl Icahn
Two activist Chesapeake Energy Corp. investors have teamed up again, this time targeting computer maker Dell Inc.
Southeastern Asset Management and billionaire investor Carl Icahn led the effort last year to unseat a majority of the Chesapeake board and force changes that have led to CEO Aubrey McClendon agreeing to leave the company at the end of the month.
Shortly after winning its battle with Chesapeake, Southeastern moved its focus to Dell, which has fallen behind other computer makers.
Southeastern — which owns 8.4 percent of Dell — has challenged an effort by founder Michael Dell to buy up the company at a price the shareholder says is too low.
The Dell board has endorsed the takeover plan in a move Southeastern has said places “the interests of management above those of public shareholders.
“The board of directors appears to have dismissed better alternatives for public owners and selected a transaction, which has been public derided by shareholders as opportunistic and grossly undervalued, that favors management,” Southeastern wrote in a letter filed with the U.S. Securities and Exchange Commission.
Southeastern also has asked the directors to borrow money to pay shareholders a large one-time dividend.
As with its fight against Chesapeake’s directors, Southeastern has found itself with a powerful ally.
CNBC reported Wednesday that Icahn has bought up about 6 percent of Dell over the past few weeks.
Aubrey McClendon falls off Forbes billionaire list
Outgoing Chesapeake Energy Corp. CEO Aubrey McClendon is no longer a billionaire, according to the latest Forbes list of the wealthiest people on the planet.
The magazine points out that McClendon was forced to sell nearly all his Chesapeake shares in a 2008 margin call.
Chesapeake announced last month that McClendon will leave the company he founded on April 1 with a severance package worth about $47 million.
McClendon is falling off the list as it has been revealed that he’s leveraged against his personally held oil and gas interests in the same way he did with Chesapeake leading up to 2008. Put another way, the guy has mounds of debt,” Forbes reported.
Five Oklahoma families remain on the list this year, led by Continental Resources Inc. CEO Harold Hamm, who ranked No. 90 overall with a net worth of $11.3 billion.
Hamm was followed by Tulsa oilman and Bank of Oklahoma Chairman George Kaiser at $10 billion and ranked No. 109 overall.
Hobby Lobby founder David Green is listed at No. 276 with an estimated net worth of $4.5 billion.
Oklahoma retailers Tom and Judy Love tied with Lynn Schusterman — widow of Samson Resources’ Charles Schusterman — to round out the state’s presence on the list at No. 384 with a net worth of $3.5 billion.
Report: Chesapeake selling Bakken Shale acreage
Chesapeake Energy Corp. prides itself on having a leading acreage position in most of the United States’ most productive oil and natural gas plays.
But the Oklahoma City-based company is apparently throwing in the towel in the oil-rich Bakken Shale in North Dakota and Montana.
Upstream, an international oil and gas newspaper, reports Chesapeake is selling its entire 427,000-acre position in the Bakken, acknowledging it used flawed geological concepts when it amassed its position there in 2010 and 2011. The article is available only to subscribers, but free two-week trials are available.
Chesapeake, which does not list its Bakken holdings on its website, did not respond to a request for comment from The Oklahoman on Friday.
Chesapeake’s acreage is concentrated in two counties along what is believed to be the southern edge of the Bakken and Three Forks plays, according to Upstream, but the company’s drilling in that area was not fruitful.
Chesapeake’s inability to find oil there has been called the biggest drilling failure in North Dakota since the 1980s, KXNews reported in January.
Chesapeake now acknowledges it does not have the time or money to continue drilling in its Bakken acreage, Upstream reported, citing its review of sales documents.
Chesapeake has been selling assets since last year to overcome a cash crunch. The company, raised more than $11 billion last year, this week announced a joint venture with China’s Sinopec that will bring in another $1 billion for a stake in acreage in northern Oklahoma’s Mississippi Lime play.
SandRidge executives discuss possible future Mississippian joint venture
SandRidge Energy Inc. CEO Tom Ward on Friday discussed the possibility of a joint venture in the Mississippi Lime in 2014 or 2015.
During a conference call with analysts, Ward said the Oklahoma City energy company is fully funded through 2014, but that the executives already are working to secure financing to support its drilling budget for 2015 and beyond.
The booming Mississippi Lime oil and natural gas field covers much of northern Oklahoma and western Kansas.
Without naming names, Ward said he expected SandRidge to claim a higher price for its joint venture than other parties in the play.
Ward’s former company, Chesapeake Energy Corp., was widely criticized on Wall Street this week when it announced a $1.02 billion Mississippi Lime joint venture that translates into $2,400 an acre, far less than the $7,000 to $8,000 an acre Chesapeake previously said it expected to receive.
Ward did not address Chesapeake specifically, but he said SandRidge is positioned to command one of the highest rates in the Mississippi Lime.
Ward pointed out that SandRidge has spent more than $450 million on pipeline, electrical and saltwater disposal infrastructure in the area over the past two years.
It requires you to have infrastructure, so if other parties don’t have the infrastructure that we have, obviously, that’s worth something,” he said.
Drilling costs also are a factor, Ward said.
We average about $1.1 million per well less than the average of our peers,” Ward said. “We will save over $300 million this year net to SandRidge just from the average of our peers in drilling wells.”
Ultimately, land — and even the oil and natural gas beneath it — is only one small part of the price operators can command for their producing acreage, Ward said.
When you’re selling acreage, you’re really not selling acreage, you’re selling an enterprise,” he said. “You’re selling the ability for a joint venture partner to come and work with us for decades.”
SEC upgrades Chesapeake inquiry, company reports
Chesapeake Energy Corp. on Friday revealed the U.S. Securities and Exchange Commission has upgraded its informal inquiry of the company into a formal investigation.
Chesapeake caught the eye of the SEC’s Fort Worth office last year after Reuters reported CEO Aubrey McClendon took more than $1 billion in shrouded personal loans to fund his stake in the company’s wells. It confirmed the SEC’s informal inquiry in May.
The company’s board, revamped last year amid shareholder unrest, announced last week its review of McClendon’s finances revealed no sign of intentional misconduct.
On Friday, Chesapeake filed its annual report, showing received notice Dec. 21 the SEC would continue its inquiry as an investigation.
“The company, including Mr. McClendon, is providing information to the SEC in connection with this matter. The company is also responding to related inquiries from other governmental and regulatory agencies and self- regulatory organizations,” according to Friday’s filing.
Chesapeake’s board still faces more than a dozen breach of fiduciary duty lawsuits filed by shareholders after news of McClendon’s loan deals emerged last year.
McClendon is leaving the company by April 1, but the board said its review had nothing to do with his departure.
The company also is being investigated by the U.S. Department of Justice for possible antitrust violations in Michigan, where Chesapeake and rival Encana Corp. have admitted to sharing information before lease auctions in 2010. Both companies have denied any wrongdoing.
Chesapeake strikes $1B deal with China’s Sinopec
Chesapeake Energy Corp. announced Monday that it is selling half of its acreage in northern Oklahoma’s oil-rich Mississippi Lime play to China’s Sinopec International Petroleum Exploration and Production Corp. for more than $1 billion.
Sinopec already has an interest in the area, thanks to last year’s $2.5 billion deal with another Oklahoma City oil and natural gas company, Devon Energy Corp.
Chesapeake will sell Sinopec half of its 850,000 acres in the play for $1.02 billion, the company announced Monday.
The two companies will split future exploration and development costs for that acreage, with Chesapeake serving as operator.
“We are excited to announce the execution of our Mississippi Lime joint venture with Sinopec, which moves us further along in achieving our asset sales goals and secures an excellent partner to share the capital costs required to actively develop this very large, liquids-rich resource play,” said Steven C. Dixon, Chesapeake’s chief operating officer.
Chesapeake has been selling assets since last year to close a funding gap between its income and operating costs.
The company, which is facing life without iconic founder Aubrey McClendon, sold more than $11 billion worth of assets to avert a cash crunch last year, with plans to raise as much as $7 billion that way in 2013.
Outgoing CEO Aubrey McClendon not part of Chesapeake’s earnings call
It appears we’ve heard the last of Chesapeake Energy Corp. co-founder Aubrey McClendon before he leaves the company on April 1.
McClendon, the only chief executive Chesapeake has ever had, was not part of the company’s fourth quarter earnings call on Thursday.
The conference call with analysts was led by Steve Dixon and Nick Dell’Osso, the two executives Chesapeake chairman Archie Dunham said last month would lead the company through its transition as McClendon departs the company.
Chesapeake announced Jan. 29 that McClendon had agreed to leave the company.
McClendon has not spoken publicly about his impending departure from the company he founded in 1989 with former partner Tom Ward.
Jeff Mobley, Chesapeake’s senior vice president of investor relations and research, addressed McClendon’s looming separation from the company at the outset of Thursday’s earnings call.
“As you know, Aubrey McClendon, the company’s co-founder and CEO, will retire from the company on April 1, 2013. And after leading the company during our first 80 conference calls, he is now steeping aside for Steve and Nick to lead this call. In addition, a search is currently underway for a new CEO, and the board plans to complete this search by that time.
Aubrey has had a remarkable career founding and leading Chesapeake and has created one of the most valuable and innovative companies in the global energy industry. Two of Aubrey’s most important accomplishments are the tremendous asset base that has been amassed by the company and the talented and dedicated organization he built to develop these assets.
The culture and capabilities of the company Aubrey created and the standards of excellence he championed had been distinctive and inspiring, resulting in a company with extraordinary potential. But his legacy will ultimately be the realization of that potential through the success and value that we all helped deliver after his tenure as CEO concludes. With those thoughts in mind and in behalf of nearly 12,000 employees at Chesapeake, we want to sincerely thank Aubrey for his visionary leadership and for his 24 years of tireless service to the company, to shareholders, to employees, and to the industry.”
Chesapeake expects to have a new CEO in place before April 1, McClendon’s last day at the company.
OERB launches new ad campaign on energy independence
The Oklahoma Energy Resources Board on Monday launched its latest advertising campaign to highlight how the state can help the United States achieve energy independence, a goal espoused by every president since Richard Nixon.
“Energy independence is finally possible in North America, and it is due in large part to the contributions of Oklahoma’s oil and natural gas industry,” said Pete Brown, chairman of OERB’s public education committee. “New technologies and discoveries made by Oklahoma companies have made it easier for the United States to access domestic oil and natural gas, and it is our job to share that with the public.”
The United States is now the fastest growing source of oil and natural gas supplies in the world, according to the U.S. Energy Information Agency.
Oklahoma’s oil and natural gas industry directly employs more than 83,000 jobs in the state, an increase of 17 percent from 2009, according to OERB. Another 280,000 Oklahoma jobs are indirectly supported by the industry.
Together, that’s one out of every six Oklahoma jobs, with an estimated 10 percent increase by 2015.
OERB’s new ad campaign will include television, print, radio and Internet spots with messages that focus on the many facets of North American energy independence, including the far-reaching positive impact achieving independence would have on the economy, jobs and national security.
More energy independence could mean 3.6 million new jobs, enough to cut unemployment by two percentage points, according to a Citigroup report.
“The positive impacts of energy independence can not be ignored,” Brown said. “It makes sense for Oklahoma to take the lead in helping the United States achieve energy security, and this campaign will help in those efforts and get the public involved in the conversation.”
Additional information about the new OERB campaign can be found at OERB.com/independence.
