Still reeling from a press pounding, the Chesapeake Energy board of directors today announced that they and CEO Aubrey McClendon will end the Founders Well Participation Program (FWPP) early—on June 30, 2014 (18 months before it was due to end). The program grants McClendon the right to up to 2.5 percent ownership in each well drilled by the company, but also requires him to kick in his portion of the drilling costs. McClendon was using loans or mortgages to come up with his portion of the cash needed to drill—loans which now total nearly $1.4 billion. So stung by the revelation of just how much McClendon has borrowed, the board and McClendon will end the program.
But also part of today’s announcement is that the board of directors is looking for a non-executive chairperson. Currently, McClendon is the chairman of the board in addition to his role as CEO. When a new non-executive chairperson is found, McClendon will relinquish his role as chairman but stay at the helm as CEO. This is, no doubt, an effort to show the company is being more rigorous and impartial when it comes to the decisions by the board. That is, they want to reassure stockholders that everything is fine in the company, and that no financial funny business is going on behind the scenes.
Al Amrendariz, EPA Region 6 administrator (Texas and surrounding states) has been hoist by his own petard. Yesterday he resigned—in disgrace. It seems nearly everyone (but anti-drillers) were calling for his resignation after a video of Armendariz came to light where he outlined his philosophy of enforcement against energy company “violators” to that of the Romans who used to enter a village, find the first five men, and crucify them—which had the effect of, shall we say, making everyone else behave themselves (see MDN’s previous story on Armendariz to watch the infamous video).
In a Reuters news story about the Energy Information Administration’s (EIA) latest report showing natural gas production fell slightly in February, we get the following graphic which MDN found interesting. It shows the Baker Hughes rig count (number of natural gas drilling rigs) plotted as one line, with the second plotted line representing natural gas futures prices. The natural gas rig count—drilling rigs dedicated to drilling for natural gas in the lower 48 states—is now at a 10-year low. The count as of last Friday was 613, the lowest it’s been since April 2002. Gas prices are also at 10-year lows.
There is no official notice posted on the Susquehanna River Basin Commission’s (SRBC) website, but according to a Reuters news story, the SRBC has lifted its temporary ban on water withdrawals implemented two weeks ago on April 18. Hydraulic fracturing uses a lot of water. Drillers get the water from various sources, most often rivers and streams. If that river or stream happens to be located in the Susquehanna River Basin, withdrawals are overseen by the SRBC, which ensures water levels do not get too low.
A little good news for Chesapeake Energy. Chesapeake’s stock opened at $18.05 yesterday, and closed at $18.44, a 2.2 percent boost. The price remains significantly down from the over $35 per share price it had been trading it within the past year, but still, a movement up is a good thing.
If you’ve been reading MDN for any length of time, you know about the current public relations firestorm Chesapeake finds itself in over it’s Founders Well Participation Program (FWPP), a program in which CEO Aubrey McClendon gets up to a 2.5 percent ownership interest in each well drilled by the company. The controversy surrounds how he finances his portion of the drilling cost. He’s taken out loans (in essence mortgages) against his 2.5 percent interest—to the tune of $1.4 billion. That “revelation” caused the Chesapeake stock price to take a tumble (see below).
Aqua America and Penn Virginia Resource Partners (PVR) issued a press release yesterday to call attention to a recently completed private pipeline project in the Marcellus Shale in north-central PA. What’s new and different about this pipeline is what it carries: water. The newly completed pipeline supplies water to drilling sites without the need for water trucks—and that’s the “angle” Aqua America and PVR are pushing. They tout the fact that already, in less than a month of operation, the pipeline has eliminated more than 2,000 water truck trips.
Opposition from a local township to a landfill outside of Scranton, PA that sought and was granted a permit to accept more shale cuttings has ended. Keystone Sanitary Landfill, a privately owned and operated municipal solid waste landfill located in Dunmore, PA applied to increase the daily volume of shale cuttings (leftover rock waste from drilling) from 600 to 1,000 tons per day. They also requested the Department of Environmental Protection (DEP) change their permit so they could receive the cuttings in an “unprocessed or unsolidified form” (see this MDN story).