Chesapeake Energy

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    McClendon Accuses Chesapeake of Holding LA Minerals “Hostage”

    This is interesting, although it doesn’t have a direct bearing on the Marcellus or Utica. It does, however, involve one of our favorite Utica Shale characters–Aubrey McClendon. Aubrey was tossed out of Chesapeake Energy, the company he founded, last year by corporate raider Carl Icahn (see McClendon Exits Chesapeake, Well-Bonused “Friends” Replace Him). Since the divorce, all has been pretty quiet on the home front between McClendon and his former company. However, McClendon and Chessy have now had their first public fight since his exit.

    Aubrey wants Chessy to drill more wells in the Haynesville Shale, because he personally gets a share of the proceeds. Chessy is squeezing their drilling budget so hard they’re making the proverbial buffalo nickel poop. They don’t want to drill another dozen wells in the Haynesville. So Aubrey has gone to the regulators at Louisiana’s Office of Conservation, asking them to force Chessy to follow his drilling plan instead of their own, accusing Chessy of holding Louisiana’s minerals “hostage.” Who doesn’t love a good hostage story?…
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    Guest Viewpoint – Solar Guy Knocks Chesapeake Energy

    Last week MDN was contacted by Robert Magyar, Managing Director at Navitus Strategies, to offer a guest viewpoint to run on MDN. We occasionally post guest articles and agreed to post Bob’s article (below). His article takes a look at Chesapeake Energy and offers the view that although Chesapeake has laid off more than a thousand people and sold off (and continues to sell off) key assets, the company is still financially unhealthy. Bob offers his reasons why (mostly from hedging agreements). He also highlights the recent and ongoing problems Chessy has with royalty payments in Pennsylvania.

    In our email correspondence Bob says, “we need natural gas” and that he is not anti-drilling by any stretch. However, we would note for the record that his company, Navitus, works on alternative energy projects–primarily solar–and so it seems in his own best interests to knock the shale industry (and one of it’s most prominent players) around just a bit. With that as a preface, here is Bob’s article on Chessy “continuing to grind down,” which first appeared on the freelance article website Examiner.com:
    Read More “Guest Viewpoint – Solar Guy Knocks Chesapeake Energy”

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    Chesapeake 2013 & Beyond: Lack of Pipelines Still a Big Problem

    Yesterday Chesapeake Energy issued their fourth quarter and full year 2013 operational and financial results. Chessy’s CEO, Doug “the ax” Lawler is all proud of himself for having fired over 1,200 employees, saving the company all that money (money that goes into Carl Icahn’s bank account). Whatever. For all of our disgust with what Chesapeake has become because of Icahn and his corporate raiding practices, it’s still a very important driller in the Marcellus and Utica (as well as other plays), and will continue to be so. When they issue an update, we need to pay attention, because as Chessy goes, so goes the Marcellus and Utica, in some senses.

    What does yesterday’s update show? Chessy has drilled a lot of wells in the Utica–425 so far, more than half of the 747 Utica wells drilled to date in Ohio. Of those 425, 230 are online and producing, but a huge 195 wells are still waiting to be hooked up to pipelines. Lack of infrastructure is still a big issue in the Utica and in the Marcellus. In the northern Marcellus area (northeast PA) Chesapeake has 112 wells waiting to be connected to pipelines. They’ve scaled back their drilling in NEPA somewhat over the past year. In the southern Marcellus (SWPA and WV) Chesapeake has 47 wells waiting to be connected to pipelines or otherwise completed. Here’s the operations update for both the Utica and Marcellus from Chessy’s announcement yesterday:
    Read More “Chesapeake 2013 & Beyond: Lack of Pipelines Still a Big Problem”

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    Chesapeake Energy Looks to Dump Oilfield Services Division

    Doug “the ax” Lawler, CEO of Chesapeake, continues to swing his ax to get rid of assets the company worked so hard to create. The latest asset Lawler (and his boss corporate raider Carl Icahn) want the company to get rid of is Chesapeake Oilfield Services, or COS. Chessy issued a press release yesterday stating they want to either spin COS off into it’s own company, or sell it outright. Not in the cards: keeping it and expanding it.

    Here’s the latest from “the ax”…
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    Landowner Discovers Chesapeake has $500M Lien on His Property

    This one has to go in the “read your contract carefully before you sign, and never, ever sign without a lawyer” category. A Greene County, PA landowner leased his property to Chesapeake Energy a few years ago. His land hasn’t yet been added to a drilling unit. He recently wanted to refinance his mortgage, but the credit union phoned him up with a “small” problem: Chesapeake has put a $500 MILLION lien against the lease his property. Normally the lien is against the oil and gas rights, but in the case of this landowner, it’s not specified in the contract, meaning the lien is against the property itself. And he’s not able to refinance.

    Notice the landowner’s advice to other landowners in the last sentence of this story (and TAKE HEED)…
    Read More “Landowner Discovers Chesapeake has $500M Lien on His Property”

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    PA Gas Production #s Released: Top 10 Wells, Top 5 Counties & More!

    Top 10Pennsylvania released their second half 2013 production numbers yesterday and man oh man is it another sizzling hot report. Another 700 horizontal (mostly Marcellus) shale wells were brought online in the second half of 2013 in PA which brings the number of horizontal wells with reported production to 5,074. And, in what we believe is a first, Susquehanna County has displaced Bradford County as having the most production during a 6-month reporting period.

    Not surprisingly Cabot Oil & Gas and their prolific wells in Susquehanna County top the list as most productive. Get this, when you look at average daily production by wells, Cabot has the top 13 most productive wells in the state for 2H13–all top 13 spots. When you expand it out, they have 17 of the top 20 spots, and 34 of the top 50 spots. Truly astonishing.

    Below we have a few lists for you: Top 10 All Time Producing Wells in PA, Top 10 Wells by Production per Day, and the amount of gas produced by the top 5 counties in PA…
    Read More “PA Gas Production #s Released: Top 10 Wells, Top 5 Counties & More!”

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    Do PA Drillers have Law on Their Side in Royalty Debate?

    A sharp MDN reader, John S., emailed MDN to remind us of how PA landowners ended up in the quagmire they are now in with regard to royalties with drillers (like Chesapeake) deducting post-production expenses from what they pay to landowners. We had forgotten about the Kilmer v ElexCo Land Services case from March 2010 in which the PA Supreme Court ruled that drillers could indeed deduct certain post-production expenses without violating the law that says landowners must be paid a 12.5% minimum royalty (see Breaking News: PA Supreme Court Rules Against Landowner Seeking to Invalidate Lease).

    PA Gov. Tom Corbett wrote a letter to Doug “the ax” Lawler at Chesapeake telling him the company’s royalty calculations were unfair at best, and perhaps illegal. Doug just has to point to the 2010 PA Supreme Court case. Here’s more information about the 2010 case and what the decision means, and doesn’t mean:
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    Bradford PA Landowner Rally over Chesapeake Royalty Shenanigans

    fox in henhouseLandowners in Bradford County, PA feel like they’re getting screwed by Chesapeake Energy on royalty payments, a complaint they’ve been making for some time now (see Bradford County, PA Landowners Sue Chesapeake over Royalties). PA state law guarantees a minimum 12.5% royalty to landowners, but because Chesapeake keeps deducting post-production expenses (like pipeline costs, processing costs, perhaps marketing costs), landowners end up getting squat–in some cases a 1.5% royalty. The landowners have some righteous anger over the issue. More than 100 landowners and officials gathered at the Bradford County Courthouse in Towanda on Friday in a rally to raise awareness of the issue and to support passage of PA House Bill 1648, which would protect landowners from large deductions from their royalty checks for post-production costs.

    We applaud these landowners and their elected representatives for seeking justice in this situation. The problem is, they’ve invited a fox into the hen house to help them out. State Senator Gene Yaw, whose district includes Bradford County, along with PA Gov. Tom Corbett, has asked PA’s anti-drilling Attorney General, Kathleen Kane, to investigate Chesapeake and this matter of landowners getting shorted on royalty payments. She’s only too glad to “help out.” Normally that would be a good thing, except Kane is just as likely to turn around and bite the people she’s supposed to be helping. She hasn’t met a driller yet she wouldn’t rather see behind bars (see PA AG Abuses Her Authority, Files Criminal Charges Against XTO). If it were up to Kathleen Kane, there would be no Marcellus drilling at all and consequently no royalties for landowners to argue about. We think it’s an ill-advised move to involve Kane, but that’s just our humble opinion…
    Read More “Bradford PA Landowner Rally over Chesapeake Royalty Shenanigans”

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    Benesch Shale Report: Chesapeake Sale Rumors Swirling

    The Ohio law firm of Benesch, Friedlander, Coplan & Aronoff are one of the northeast’s top energy law firms. Each quarter they publish a Shale Industry Report, largely focused on what’s been happening in the Ohio Utica Shale (most recent report covering fourth quarter 2013 is embedded below). It’s a great update–one that we like to read and enjoy being able to bring it to you. The top issue listed in the opening of the report is the rumor that, unsurprisingly, corporate raider Carl Icahn (Chesapeake Energy’s second largest shareholder) is shopping Chesapeake for sale to other companies. We’ve warned you about this from the beginning, when Icahn first started flexing his raider muscles and bullying the company into submission.

    Everyone yells at MDN, “Chesapeake needed fiscal discipline…Aubrey McClendon was reckless and almost bankrupted the company…a strict hand was needed at the helm and Icahn came along at the right time…etc.” We say bunk. This has always been about adding more zeros to Icahn’s bank account–from firing more than 1,200 people to selling off assets right and left in the equivalent of fire sales. There’s nothing disciplined or wholesome or good about it. It’s about fat cats getting fatter (i.e. richer). Yes it’s a free country (maybe, we need to check how many more illegal executive orders have been issued in the past 24 hours by Obama)–and in a free country this kind of thing can happen. But we don’t need to like it, and we sure as heck don’t. Icahn and his toady Doug Lawler need to go. End rant. So who’s rumored to be interested in buying Chessy?…
    Read More “Benesch Shale Report: Chesapeake Sale Rumors Swirling”

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    Chesapeake, Atlas Try Forced Pooling in Columbiana County, OH

    Forced pooling, or as it’s called in Ohio, “unitization”–it’s something we understand, but we don’t like it. Chesapeake Energy and Atlas Noble have filed petitions seeking forced pooling for property owned by a number of landowners in Columbiana County, OH. Some of those petitions have been approved by the Ohio Dept. of Natural Resources (ODNR). Some are still pending.

    The industry and landowners who have leased will argue it’s not fair that one or two hold-outs who won’t lease can scuttle a deal to drill and therefore should be forced to lease if they can’t come to reasonable terms. Landowners who don’t want to lease say it’s their land and drillers can figure out how to drill around them–I don’t say you can’t drill, and you don’t say I have to drill under my land. We favor the later position, to the consternation of our friends in the shale drilling industry. We say, make it worth their while–give them an offer they can’t refuse. Here’s some of the details on the forced pooling being sought by Chessy and Atlas in eastern OH:
    Read More “Chesapeake, Atlas Try Forced Pooling in Columbiana County, OH”

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    Chesapeake’s Lawler Says Utica is a “Huge Liquid Lever” for Them

    Last week Chesapeake Energy, a big driller in the Marcellus and the biggest driller in the Utica Shale, released their 2014 Outlook (see Chesapeake: My Rig’s Better than Your Rig, Cuts Capex Another 20%). They tried to spin spending 20% less on drilling as a good thing for the company–enforcing fiscal responsibility. But it means they’ll be drilling 20% less–cold, hard fact. We learned from the release of their 2014 outlook that Chesapeake will cut the number of drilling rigs in the Utica Shale from the typical 17 they operated in 2013 down to 7-9 rigs, making the Mark Twain-like claim that 7-9 of their rigs are like 20 of someone else’s rigs. Whatever.

    Chesapeake’s still new CEO Doug “the ax” Lawler was on an earnings call last week with his lieutenants (we’re sure boss man and corporate raider Carl Icahn was listening in too). Doug hasn’t met a Chessy employee he wouldn’t be willing to fire. But we digress. Woven throughout the call was references to the Marcellus and Utica and the important role they will play in the company in 2014 and beyond. Lawler’s comment on the Utica Shale is that it’s “a huge liquid lever for us.” Below is a transcript of last week’s call…
    Read More “Chesapeake’s Lawler Says Utica is a “Huge Liquid Lever” for Them”

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    Chesapeake: My Rig’s Better than Your Rig, Cuts Capex Another 20%

    My Dog's Bigger than Your DogThe executives at Chesapeake are channeling the boastful ghost of Aubrey McClendon. Yesterday Chesapeake released its 2014 Outlook and capital program. The big news is they will spend 20% less on drilling and related activities this year. The Utica Shale remains one of the most important plays in their portfolio. Apparently in an attempt to dress up the 20% decrease in spending as a good thing, unnamed Chesapeake executives made this boast: “Chesapeake said it expects to operate seven to nine drilling rigs in its Utica shale properties this year, saying that is the equivalent of a 20-rig operation by competitors.” Which made us laugh out loud. “Hey, our 7-9 rigs are worth 20 of anybody else’s.” OK. Must be nice to have an inside track on how to repeal the laws of physics over at Chessy HQ. Maybe they should patent it! Anywho…

    Below is the Chesapeake announcement from yesterday with some fairly detailed information about where they plan to drill in 2014, and how much they think they’ll produce. Liquids (NGLs in the Utica, oil in other plays) are a big focus for Chessy this year. There’s a lot more money in liquids–and boss man Carl Icahn likes that. Below the Chesapeake announcement is a bit of analysis from the Akron Beacon Journal, from which we took the “our rigs are better than your rigs” quote…
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    Can a Single Canceled Airline Route Affect Utica Shale Development?

    Could a single canceled airline route have an impact on the development of one of the hottest shale plays in the U.S. (the Utica)? Maybe, is the surprising answer. United Airlines has announced they will discontinue their non-stop daily flights to and from Cleveland and Oklahoma City. OKC is the headquarters for Chesapeake Energy, and Chessy is the #1 driller (for now) in the Utica Shale. It’s also HQ for Gulfport Energy, one of the most prominent and prolific drillers in the Utica next to Chesapeake. By cutting out that direct route it will mean much longer flights with layovers “at best” according to the Oklahoma Independent Petroleum Association. They leave us to think about the “at worst” possibilities.

    “No problem!” you say. Pittsburgh is probably closer to the oil and gas fields of eastern Ohio than Cleveland anyway. Or Columbus. Ahhh, but there’s the rub. Neither of those airports go direct to OKC either. Cleveland was the only one in the entire region to do so. And so this spring when United cuts the direct routes, it will mean a major disruption for the flow of “foreigners” (as Gov. John Kasich refers to them) coming into Ohio to work in Ohio’s oil and gas fields…
    Read More “Can a Single Canceled Airline Route Affect Utica Shale Development?”

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    Big News! Chesapeakes Hires One New Employee – a Lawyer

    Stop Press! This is really big news… After laying off some 1,200 people last year (see The Great Chesapeake Massacre: Lawler Fires 800 People in One Day), Chesapeake Energy’s CEO Doug Lawler has hired one new employee–a lawyer. And not just any lawyer, but the former Secretary of the Environment for the state of Oklahoma. In unrelated news, the handful of people who still work at Chesapeake have once again voted their company onto the Fortune 100 Best Companies to Work For list–for a seventh straight year. Right. We wonder whose hands were greased for that one? Anyone notice big full page ads for Chessy now appearing in Fortune?

    Below are a pair of recent press releases from Chesapeake, announcing the appointment of Miles Tolbert to lead the environmental health and safety group at Chessy’s HQ in Oklahoma City (rumor is he has an entire empty floor of offices to himself), and the announcement about the faux Fortune 100 list…
    Read More “Big News! Chesapeakes Hires One New Employee – a Lawyer”

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    OH Judge Says Filing Paperwork is Enough to Extend Lease

    Ohio landowners should be aware of an important court case just decided that says, in essence, filing paperwork is enough proof of a driller’s intent that a lease can be extended beyond the initial signing period. Several landowners in Jefferson County, OH signed a lease with Fortuna Energy in 2006 that was later sold to Chesapeake Energy (in 2010). The lease was for a 5-year period. Three days before the end of the lease Chesapeake filed a Declaration of Pooled Unit (DPU) with the Ohio Department of Natural Resources. That is, they told ODNR in essence “here’s a group of properties we intend to drill on soon” requesting permission to “pool” them together into a drilling unit. That simple act was enough proof, according to a U.S. District Court judge, to allow Chesapeake to extend the original lease beyond the original 5 years.

    And so now the landowners are stuck waiting for Chesapeake to actually do something other than file paperwork. Good luck with that…
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    Surprise Move: ODNR Releases 3Q13 Utica Shale Production Report

    surpriseJust as MDN went into hiatus for a few days for the holidays, on New Year’s Eve the Ohio Dept. of Natural Resources (ODNR) issued a major announcement: they published their first-ever quarterly production report for the Utica Shale. As MDN previously reported, the Ohio legislature passed a law that requires quarterly reporting (see Ohio Moves One Step Closer to Quarterly O&G Production Reports). However, last word we had was that the reporting would not be required by drillers until “starting” January 2014 (see Ohio Moves to Quarterly Production Reports Starting Jan 2014). Obviously our (and everyone else’s) understanding was wrong. The ODNR has been quietly requiring drillers to start reporting quarterly in 2013, not 2014, and the first such report–for the third quarter of 2013–was released on New Year’s Eve.

    We’re certainly not complaining! Just surprised. What does the report show? It shows that the OH Utica produced 33.6 billion cubic feet (Bcf) of natural gas in just 3Q13. For context, the OH Utica produced just 12.8 Bcf of natural gas for all of 2012. It means that 2013 will shape up to be an extraordinary production year in the Utica Shale, proving the naysayers wrong and validating the Utica Shale as one of the most important shale plays in the country. We provide the ODNR announcement below, which crowns two Gulfport wells as most productive (one for oil and one for gas) for 3Q13. We also include analysis of the numbers by our friends at the Akron Beacon Journal. Finally, below is a full copy of the report, in handy PDF format (7 pages long) for you to download or print for your own use.
    Read More “Surprise Move: ODNR Releases 3Q13 Utica Shale Production Report”