Is Chesapeake the New Enron? Or Unfairly Targeted?

house of cardsTake a few days off, and the news comes fast and furious. Big, complex stories are not what blog sites like MDN are usually geared for, but we have a big, complex story to deal with: Chesapeake Energy. In case you’ve missed it in the business pages, a new “controversy” has erupted over Chesapeake’s financial situation. They carry a heavy debt load, and with the commodity price of natural gas at 10-year lows, Chesapeake CEO Aubrey McClendon is doing new deals (it seems) almost weekly in a bid to keep the money coming in to the company to fund continuing exploration and production.

Some of the Chesapeake deals are of the joint venture nature as in “give us money and you’ll get part of the profits from this set of wells in this particular shale play,” and other deals sell off company assets outright, like the announcement on Monday that Chesapeake is spinning off its Oilfield Services, Inc. division into a separate company and will float an initial public offering (IPO) hoping to raise more than $850 million in cash (see this Chesapeake press release).

The Oilfield Services IPO seemed to be the straw that broke the financial analyst camel’s back. A very intense scrutiny began. Leading industry publication NGI’s Shale Daily (an advertiser on MDN) ran a story looking at the deal. Part of that story contains an analysis that shows Chesapeake’s long-term debt load is more than Exxon Mobil’s long-term debt, and Exxon is 32 times bigger in market capitalization than Chesapeake:

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EPA Issues New Air Pollution Standards for Fracking

In response to a court order, the federal Environmental Protection agency has issued a set of new rules (i.e. laws) that will govern air pollution standards at oil and gas drilling sites throughout the country, in particular at wells sites that use hydraulic fracturing. A copy of the 588 pages of new rules is embedded below. A five-page summary of which new rules will apply to gas drillers is also embedded below.

The EPA is trying to sell this as a cost savings for drillers—that they will capture more of the natural gas that currently escapes into the atmosphere—meaning they can sell that gas and profit from it, making the cost to implement the new rules revenue neutral. Of course the opposite is true—as with all things government, the new rules will cost drillers, and by extension landowners, more money to implement. And it gives EPA more control over fracking—something they’ve lusted after for years. Fracking comes under the purview of the individual states. The states alone have the right to regulate oil and gas drilling within their borders. But the federal government, like moths drawn to a flame, can’t help themselves. They want to regulate it.

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