Chesapeake Business Practices

[knightrider]

Looks like AKM is out as Chairman. This is good news from shareholder standpoint. He'll still be "very involved" with the board I'm sure.

http://dealbook.nytimes.com/2012/05/...r=yahoofinance

[Urban Pioneer]

Per KOSU Aubrey is out.

[Pete]

Out only as chairman of the board; he's still the CEO.

This is a move in the right direction. It will be interesting to see if he can hang onto the CEO role, especially with a new chairman who is likely to be hired from the outside.

[Easy180]

Out only as chairman of the board; he's still the CEO.

This is a move in the right direction. It will be interesting to see if he can hang onto the CEO role, especially with a new chairman who is likely to be hired from the outside.

Yep. If their dealings continue to get hammered he will be out as CEO as well...Little bit of hoping for the best with this move but we all know that rarely turns out well

[BoulderSooner]

he 100% had his choice of which roll to take ... he could have stayed as chairmen ... and given the CEO job to someone else ..

[HewenttoJared]

http://www.reuters.com/article/2012/...8400RI20120501

[OUGrad05]

large yes blighted no ...

I'll be in Denver tonight (noticing your name )
If the buildings were abandoned that would qualify as blighted in my book...but that's not likely to happen...

Yeah, I don't want the city trying to determine who is doing "good business" and who is not because frankly they would suck at it. If the city is to deny a company to expand it should only be because it doesn't help the city in becoming more urban.

Even if Cheaspeake failed they still are indirectly the cause for a lot of other businesses and development coming into town.

Which it is doubtful they would fail. Takeover on the other hand......

CHK has plenty of operating margins to service debt if they'd just scale back their absurd capex budgets to a more normal and sustainable level. I don't see CHK going anywhere and there's no reason for them to go belly up or get taken over unless there's some skeleton in a closet we don't know about it. That seems unlikely...

[Maynard]

Chesapeake Energy Corporation Reports Financial and Operational Results for the 2012 First Quarter -- Q1 loss 11c a share vs 32c a share loss

Company Reports 2012 First Quarter Net Loss to Common Stockholders of $71 Million, or $0.11 per Fully Diluted Common Share, on Revenue of $2.4 Billion; Company Reports Adjusted Net Income Available to Common Stockholders of $94 Million, or $0.18 per Fully Diluted Common Share, Adjusted Ebitda of $838 Million and Operating Cash Flow of $910 Million

05/01 03:07 PM


*2012 First Quarter Average Daily Total Production of 3.658 Bcfe per Day -- Increases 18% Year over Year and 2% sequentially, despite voluntary net natural gas curtailments of 30 Bcf (54 Bcf Gross) during February and March; 2012 First Quarter Daily Liquids Production Increases 69% YOY and 7% sequentially to 113,600 Bbls per Day; liquids production reaches 19% of total production and 61% of unhedged natural gas and liquids revenue.

Company adds new net proved reserves of approximately 1.8 Tcfe, or 300 Mmboe, through the drillbit in the 2012 first quarter at a drilling and completion cost of only $1.19 per Mcfe, or $7.14 per Boe.

Company has completed $2.6 billion of asset monetizations YTD and is on track to complete an expected $11.5-14.0 billion of total asset monetizations in 2012; proceeds expected to fully fund 2012 capital expenditure budget and reduce long-term debt to the 25/25 plan goal of $9.5 billion by year-end 2012.

Company plans to significantly reduce capital expenditures for drilling, completion and leasehold from 1Q 2012 levels during remainder of 2012 and in 2013.

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OKLAHOMA CITY--(BUSINESS WIRE)-- Chesapeake Energy Corporation (CHK:$19.60,00$1.16,006.29%) today announced financial and operational results for the 2012 first quarter. For the 2012 first quarter, Chesapeake reported a net loss to common stockholders of $71 million ($0.11 per fully diluted common share), ebitda of $597 million (defined as net income (loss) before income taxes, interest expense, and depreciation, depletion and amortization) and operating cash flow of $910 million (defined as cash flow from operating activities before changes in assets and liabilities) on revenue of $2.419 billion and production of 333 billion cubic feet of natural gas equivalent (bcfe).

The company’s 2012 first quarter results include various items that are typically not included in published estimates of the company’s financial results by certain securities analysts. Excluding such items for the 2012 first quarter, Chesapeake reported adjusted net income to common stockholders of $94 million ($0.18 per fully diluted common share) and adjusted ebitda of $838 million. The primary excluded item from the 2012 first quarter reported results is a net unrealized noncash after-tax mark-to-market loss of $167 million resulting from the company’s natural gas, liquids and interest rate hedging programs.

Management Comments

Aubrey K. McClendon, Chesapeake’s Chairman and Chief Executive Officer, said, “We are focused on executing our transformation to a more balanced asset base between liquids and natural gas and believe our business has strong momentum despite a challenging environment with natural gas prices at 10-year lows. This quarter continued to see strong liquids production growth as we accelerate our ongoing shift to liquids, continuing success in keeping finding costs low, and the addition of a substantial amount of new proved reserves. This year’s capital expenditures will be front-end loaded, and for the remainder of the year we expect a significant decrease from the first quarter’s peak capital expenditure levels as we further reduce drilling activity in dry natural gas plays and reduce spending on new leasehold. We will continue to implement our 25/25 Plan, including reducing overall debt to $9.5 billion by year-end 2012, monetizing the portions of our asset base where we are not a #1 or #2 producer, and continuing to increase our exposure to liquids. We believe Chesapeake has built the nation’s best collection of resource-rich E&P assets, and we remain focused on realizing their growth and value for our shareholders.”

2012 First Quarter Average Daily Total Production of 3.658 Bcfe per Day Increases 18% Year over Year and 2% Sequentially, Despite Voluntary Net Natural Gas Curtailments of 30 Bcf (54 Bcf Gross) during February and March; 2012 First Quarter Daily Liquids Production Increases 69% Year over Year and Reaches 19% of Total Production and 61% of Unhedged Natural Gas and Liquids Revenue

Chesapeake’s daily production for the 2012 first quarter averaged 3.658 bcfe, an increase of 2% from the average 3.596 bcfe produced per day in the 2011 fourth quarter and an increase of 18% from the average 3.107 bcfe produced per day in the 2011 first quarter. Chesapeake’s average daily production of 3.658 bcfe for the 2012 first quarter consisted of approximately 2.976 billion cubic feet of natural gas (bcf) (81% on a natural gas equivalent basis) and approximately 113,600 barrels (bbls) of oil and natural gas liquids (collectively “liquids”) (19% on a natural gas equivalent basis). During February and March, the company voluntarily curtailed 54 bcf of gross natural gas production, or an average of approximately 900 million cubic feet (mmcf) per day, resulting in net curtailments to Chesapeake of 30 bcf, or approximately 330 mmcf per day of natural gas production spread across the entire quarter. For the 2012 first quarter, the company’s year-over-year growth rate of natural gas production was 10%, or approximately 272 mmcf per day, and its year-over-year growth rate of liquids production was 69%, or approximately 46,400 bbls per day. The company’s percentage of revenue from liquids in the 2012 first quarter was 61% of total unhedged natural gas and liquids revenue, compared to 47% in the 2011 fourth quarter and 34% in the 2011 first quarter.

As a result of reduced drilling activity in 2012 and 2013 on its dry natural gas plays, Chesapeake is projecting a decline in its natural gas productive capacity in 2013 of approximately 12% after adjusting for estimated net voluntary production curtailments of approximately 80 bcf in 2012.

Average Realized Prices and Hedging Results Detailed

Average prices realized during the 2012 first quarter (including realized gains or losses from natural gas and oil derivatives, but excluding unrealized gains or losses on such derivatives) were $2.35 per thousand cubic feet of natural gas (mcf) and $67.92 per bbl, for a realized natural gas equivalent price of $4.02 per thousand cubic feet of natural gas equivalent (mcfe). Realized gains from natural gas and liquids hedging activities during the 2012 first quarter generated a $0.58 gain per mcf and a $3.99 loss per bbl, respectively, for a 2012 first quarter realized hedging gain of $117 million, or $0.35 per mcfe.

By comparison, average prices realized during the 2011 first quarter (including realized gains or losses from natural gas and oil derivatives, but excluding unrealized gains or losses on such derivatives) were $5.31 per mcf and $63.20 per bbl, for a realized natural gas equivalent price of $5.99 per mcfe. Realized gains from natural gas and liquids hedging activities during the 2011 first quarter generated a $2.07 gain per mcf and a $2.88 loss per bbl, respectively, for a 2011 first quarter realized hedging gain of $488 million, or $1.74 per mcfe.

The company’s realized cash hedging gains since January 1, 2006 have been $8.5 billion, or $1.52 per mcfe.

Chesapeake’s Leasehold and 3-D Seismic Inventories Total 15.6 Million Net Acres and 31.8 Million Acres, Respectively; Risked Unproved Resources in the Company’s Inventory Total 112 Tcfe; Unrisked Unproved Resources Total 348 Tcfe

Since 2000, Chesapeake has built the largest combined inventories of onshore leasehold (15.6 million net acres) and 3-D seismic (31.8 million acres) in the U.S. The company has also accumulated the largest inventory of U.S. natural gas shale play leasehold (2.2 million net acres) and owns a leading position in 11 of what Chesapeake believes are the Top 15 unconventional liquids-rich plays in the U.S. – the Eagle Ford Shale in South Texas; the Utica Shale in the Appalachian Basin; the Granite Wash, Cleveland, Tonkawa and Mississippi Lime plays in the Anadarko Basin; the Avalon, Bone Spring, Wolfcamp and Wolfberry plays in the Permian Basin; and the Niobrara Shale in the Powder River Basin. In addition, Chesapeake also owns a #1 position in three of the best unconventional natural gas plays in the U.S. – the Marcellus, Haynesville and Bossier shales – and a #2 position in the Barnett Shale.

On its leasehold inventory, Chesapeake has identified an estimated 20.9 trillion cubic feet of natural gas equivalent (tcfe) of proved reserves (using volume estimates based on the 10-year average NYMEX strip prices as of March 31, 2012 as compared to 19.8 tcfe using SEC pricing), 112 tcfe of risked unproved resources and 348 tcfe of unrisked unproved resources. The company is currently using 154 operated drilling rigs to further develop its inventory of approximately 39,400 net risked drillsites. Of Chesapeake’s 154 operated rigs, 131 are drilling wells primarily focused on developing unconventional liquids-rich plays and 23 are drilling wells primarily focused on unconventional natural gas plays. To reduce capital expenditures during the remainder of 2012 and in 2013 by a combined $750 million at the midpoint, the company is reducing its drilling activity from a peak in the 2011 fourth quarter of 172 operated rigs to less than 125 operated rigs by the third quarter of 2012 and plans to average approximately 130 operated rigs in 2013 assuming natural gas prices remain at depressed levels.


In recognition of the value gap between liquids and natural gas prices, Chesapeake has directed a significant portion of its technological and leasehold acquisition expertise during the past three years to identify, secure and commercialize new unconventional liquids-rich plays. To date, Chesapeake has built leasehold positions and established production in multiple unconventional liquids-rich plays on approximately 6.8 million net leasehold acres with 1.0 billion bbls of oil equivalent (bboe) (or 6 tcfe) of proved reserves, 8.1 bboe (or 49 tcfe) of risked unproved resources and 30.8 bboe (or 185 tcfe) of unrisked unproved resources based on the company’s internal estimates.

Company Has Completed $2.6 Billion of Asset Monetizations Year to Date and is on Track to Complete an Expected $11.5-14.0 Billion of Total Asset Monetizations in 2012; Proceeds Expected to Fully Fund 2012 Capital Expenditure Budget and Reduce Long-Term Debt to the 25/25 Plan Goal of $9.5 Billion by Year-End 2012

Chesapeake has completed $2.6 billion of asset monetizations in the first four months of 2012. In March 2012, the company completed the sale of preferred shares of a newly formed unrestricted, non-guarantor consolidated subsidiary, CHK Cleveland Tonkawa, L.L.C. (CHK C-T), and a 3.75% overriding royalty interest in the first 1,000 new net wells to be drilled on CHK C-T leasehold and certain wells contributed at closing, for gross proceeds of $1.25 billion. Also in March 2012, Chesapeake completed the sale of a 10-year volumetric production payment (VPP) for proceeds of approximately $745 million, or approximately $4.68 per mcfe, for certain producing assets in its Anadarko Basin Granite Wash play. The transaction included approximately 160 bcfe of proved reserves and current net production of an estimated 125 million cubic feet of natural gas equivalent (mmcfe) per day. Including this transaction, the company has completed 10 VPP transactions since December 2007 and, in doing so, has sold approximately 1.37 tcfe of proved reserves for combined proceeds of approximately $6.4 billion, or approximately $4.65 per mcfe, which is nearly 300% more than the company’s current drilling and completion cost per mcfe. In addition, in April 2012, Chesapeake closed the sale of approximately 58,400 net acres of leasehold and current daily production of approximately 25 mmcfe per day in the Texoma Woodford play to XTO Energy Inc., a subsidiary of Exxon Mobil Corporation (XOM:$87.04,00$0.70,000.81%) , for approximately $572 million after certain deductions and closing costs.

The company remains on track to complete additional asset monetizations of $9-11.5 billion during 2012. The planned asset monetizations include the sale of the company’s Permian Basin assets, a joint venture in the Mississippi Lime, a VPP in the Eagle Ford Shale and the sale of various non-core oil and gas assets, as well as partial monetizations of the company’s oilfield services, midstream and/or other assets. The company’s monetization program is designed to fully fund the company’s 2012 capital expenditure program and reduce the company’s long-term debt to the 25/25 Plan goal of $9.5 billion by year-end 2012.

Operational Update

In response to stronger U.S. oil prices than natural gas prices, during the past four years Chesapeake has substantially shifted its drilling and completion activity to liquids-rich plays. During 2012 and 2013, the company projects that only approximately 16% and 8%, respectively, of its total drilling and completion capital expenditures will be invested in dry natural gas plays. The company continues to achieve strong operational results in its liquids-rich plays, particularly in the key plays highlighted below.

Eagle Ford Shale (South Texas):Chesapeake’s activities in the Eagle Ford Shale continue to generate strong results as the company further delineates its 475,000 net acre leasehold position. Approximately 30% and 40% of the company’s 2012 and 2013 drilling budgets, respectively, have been allocated to the Eagle Ford Shale. The company’s production from the play is growing steadily and substantially. Production for the 2012 first quarter averaged approximately 23,000 barrels of oil equivalent (boe) per day, up 35% sequentially compared to the 2011 fourth quarter. Approximately 55% of total Eagle Ford production during the 2012 first quarter was oil, 20% was natural gas liquids (NGL) and 25% was natural gas. Year to date, Chesapeake’s gross operated oil production in the Eagle Ford Shale has more than doubled from 25,000 bbls per day at the beginning of 2012 to approximately 55,000 bbls per day at the end of April 2012. The growth has been achieved as a result of increased infrastructure and takeaway capacity as well as improved lateral steering, enhanced stimulation optimization and increased operational efficiencies. During the 2012 first quarter, the company brought on line more than 60 wells, including eight wells with peak rates of more than 1,000 bbls per day of oil. The company has secured pipeline transportation capacity for all of its projected Eagle Ford shale oil production with pipeline projects scheduled to become operational between May 2012 and January 2013 which will enable significant transportation cost savings relative to truck transportation alternatives. During the 2012 first quarter, approximately $150 million of Chesapeake’s drilling costs in the Eagle Ford were paid for by its JV partner, CNOOC. Chesapeake is currently operating 35 rigs in the play and plans to average 30 rigs in 2012.

Three notable recent wells completed by Chesapeake in the Eagle Ford during the quarter are as follows:

The McKenzie D 3H in McMullen County, TX achieved a peak rate of 1,390 bbls of oil, 60 bbls of NGL and 0.6 mmcf of natural gas per day, or approximately 1,540 boe per day;
Blakeway Unit B Dim 1H in Dimmit County, TX achieved a peak rate of 1,200 bbls of oil, 90 bbls of NGL and 0.8 mmcf of natural gas per day, or approximately 1,420 boe per day; and
The Lazy A Cotulla M 3H in Dimmit County, TX achieved a peak rate of 1,020 bbls of oil, 35 bbls of NGL and 0.3 mmcf of natural gas per day, or approximately 1,115 boe per day.
Mississippi Lime (northern Oklahoma, southern Kansas):Chesapeake’s approximate 2.0 million net acres of leasehold is the largest position in the Mississippi Lime play. Production for the 2012 first quarter averaged 12,800 boe per day, up 22% sequentially compared to the 2011 fourth quarter. Approximately 40% of total Mississippi Lime production during the 2012 first quarter was oil, 15% was NGL and 45% was natural gas. The company has drilled 130 horizontal producing wells since 2009 with results that have been attractive and consistent. Well costs in the Mississippi Lime play are more than 50% less than typical wells in the Bakken play, resulting in very strong rates of return for the Mississippi Lime Play. The company is currently operating 22 rigs in the play and will maintain that level throughout the remainder of 2012. Chesapeake is currently pursuing a joint venture transaction on its leasehold and expects to announce a transaction in the next few months.

Three notable recent wells completed by Chesapeake in the Mississippi Lime during the quarter are as follows:

The Rudy 20-26-13 1H in Woods County, OK achieved a peak rate of 325 bbls of oil, 150 bbls of NGL and 2.8 mmcf of natural gas per day, or approximately 950 boe per day;
The Leeper Trust9-25-12 1H in Alfalfa County, OK achieved a peak rate of 525 bbls of oil, 70 bbls of NGL and 2.0 mmcf of natural gas per day, or approximately 930 boe per day; and
H J Davis 24-29-10 1H in Alfalfa County, OK achieved a peak rate of 640 bbls of oil, 40 bbls of NGL and 1.2 mmcf of natural gas per day, or approximately 880 boe per day.
Utica Shale (eastern Ohio, western Pennsylvania and northwestern West Virginia):Chesapeake’s activity level is expected to continue rising as the company develops its most recent large-scale liquids-rich play discovery. The company has approximately 1.3 million acres of leasehold in the play, is currently operating 10 rigs and plans to average 13 rigs in 2012 and 22 rigs in 2013. The company’s initial development focus in the play has been in the wet gas window. Chesapeake has drilled a total of 59 wells in the play, of which nine are currently producing, 15 are currently being completed, 15 are waiting on completion and 20 are waiting on pipeline infrastructure. Of the nine producing wells, eight are in the wet gas window of the play. On a post-processing basis, peak rates from the wet gas window of the play have averaged approximately 415 bbls of oil, 260 bbls of NGL and 3.9 mmcf of natural gas per day, or approximately 1,325 boe per day. The company’s best Utica well, the Buell 8H in Harrison County, OH had an initial peak rate of more than 3,000 boe per day in September 2011, with roughly half the production from liquids. The Buell well is currently producing at a rate of 1,040 boe per day, and the company believes the well will have an estimated ultimate recovery (EUR) of at least 575,000 bbls of liquids and 13 bcf of natural gas.

Three notable recent wells completed by Chesapeake in the Utica are as follows:

The Shaw 5H in Carroll County, OH achieved a peak rate of 770 bbls of oil, 180 bbls of NGL and 2.9 mmcf of natural gas per day, or approximately 1,440 boe per day;
The Burgett 8H in Carroll County, OH achieved a peak rate of 720 bbls of oil, 140 bbls of NGL and 2.1 mmcf of natural gas per day, or approximately 1,210 boe per day; and
The Coniglio 6H in Carroll County, OH in a limited flow test before being shut-in to wait on a pipeline connection achieved a peak rate of 290 bbls of oil and 5.0 mmcf of wet natural gas per day, or approximately 1,125 boe per day at the end of the test.
The company has a significant number of wells planned for the Utica oil window during the remainder of 2012 and is confident that it will have strong results based on its successful results in the oilier portion of the wet gas window, preliminary results from oil window testing and the results of certain of its competitors in the oil window.

Cleveland and Tonkawa Tight Sand (western Oklahoma, Texas Panhandle):Chesapeake owns approximately 520,000 net acres of leasehold in the Cleveland play and 285,000 net acres in the Tonkawa play. Production for the 2012 first quarter averaged 18,500 boe per day, up 17% sequentially compared to 2011 fourth quarter. Approximately 50% of total Cleveland and Tonkawa production during the quarter was oil, 15% was NGL and 35% was natural gas. The company is currently operating 15 rigs in the area and plans to reduce its activity to 13 rigs in the second half of 2012.

Three notable recent wells completed by Chesapeake in the Cleveland Sand during the quarter are as follows:

The Lohr 701H in Hemphill County, TX achieved a peak rate of 580 bbls of oil, 850 bbls of NGL and 8.3 mmcf of natural gas per day, or approximately 2,811 boe per day;
The Letha 10-19-25 1H in Ellis County, OK achieved a peak rate of 1,460 bbls of oil, 145 bbls of NGL and 1.6 mmcf of natural gas per day, or approximately 1,870 boe per day; and
The Shill 3-18-25 1H in Ellis County, OK achieved a peak rate of 1,070 bbls of oil, 130 bbls of NGL and 1.3 mmcf of natural gas per day, or approximately 1,415 boe per day.
Three notable recent wells completed by Chesapeake in the Tonkawa Sand during the quarter are as follows:

The Roberts 32-16-22 1H in Roger Mills County, OK achieved a peak rate of 1,070 bbls of oil, 130 bbls of NGL and 1.3 mmcf of natural gas per day, or approximately 1,415 boe per day;
The Thomas 20-16-23 1H in Ellis County, TX achieved a peak rate of 655 bbls of oil, 80 bbls of NGL and 0.9 mmcf of natural gas per day, or approximately 880 boe per day; and
The Wa****a River USA 15-15-26 1H in Roger Mills County, OK achieved a peak rate of 600 bbls of oil, 21 bbls of NGL and 0.2 mmcf of natural gas per day, or approximately 650 boe per day.
Drilling, Completion and Leasehold Capital Expenditures Peak in the 2012 First Quarter, Will Significantly Decline in Remaining Three Quarters of 2012

Chesapeake’s 2012 first quarter capital expenditures on proved and unproved drilling and completion activities for operated and non-operated wells totaled $2.5 billion, an increase of approximately $350 million from the 2011 fourth quarter. The 2012 first quarter’s capital expenditures were front-end loaded and were primarily attributable to increased and more expensive liquids-rich drilling, the timing lag of oilfield service cost reductions, higher than expected expenditures on non-operated wells and costs associated with ramping down in dry gas plays.

The company believes that its drilling and completion expenditures have peaked and projects substantially lower quarterly capital expenditures for the remainder of 2012 and 2013, primarily as a result of the following factors:

Substantial reduction of its drilling activity in dry natural gas plays from 50 operated rigs at the beginning of 2012 to an average of 38 rigs in the 2012 first quarter to an average 12 dry natural gas rigs in the second half of 2012, including approximately only two rigs each in the Barnett and Haynesville Shale plays.
More aggressively electing out of (nonconsenting) non-operated wells in dry gas plays;
Modest reduction of its drilling activity in liquids-rich plays from an average of 123 operated rigs in the 2012 first quarter to an average of approximately 115 rigs in the second half of 2012;
Further optimizing drilling programs to achieve more efficient use of drilling capital and fewer wells waiting on completion and pipelines;
Completing a joint venture in the Mississippi Lime play in the 2012 third quarter, which will reduce the company’s net capital expenditures as a result of an anticipated drilling carry;
Selling the company’s Permian Basin assets in the 2012 third quarter, which will result in future capital expenditure savings; and
Working more aggressively to lower oilfield service costs.
As a result of the changes above, the company has revised its capital expenditure budget for drilling and completion costs from $7.0-7.5 billion to $7.5-8.0 billion in 2012 and from $7.5-8.5 billion to $6.5-7.0 billion in 2013, for two-year total drilling capital expenditure savings of $750 million at the midpoint. Of these 2012-2013 capital expenditures, approximately 90% will be directed to liquids-rich plays.

During the 2012 first quarter, the company invested approximately $900 million in net leasehold and unproved properties, primarily in the Utica Shale and Mississippi Lime plays. The company has now largely completed its leasing objectives in those two areas and anticipates substantially reduced leasehold investment going forward. The company projects investing approximately $700 million in net leasehold and unproved properties for the balance of 2012 and approximately $500 million in 2013, for two-year total leasehold capital expenditure savings of approximately $425 million at the midpoint. Combined drilling and leasehold capital expenditure savings for 2012-2013 should therefore be approximately $1.175 billion relative to the company’s previous Outlook dated February 21, 2012.

2012 First Quarter Financial and Operational Results Conference Call Information

A conference call to discuss this release has been scheduled for Wednesday, May 2, 2012 at 9:00 am EDT. The telephone number to access the conference call is 913-312-0640 or toll-free 888-278-8476. The passcode for the call is 4138928. We encourage those who would like to participate in the call to place calls between 8:50 and 9:00 am EDT. For those unable to participate in the conference call, a replay will be available for audio playback at 1:00 pm EDT on Wednesday, May 2, 2012 and will run through midnight Wednesday, May 16, 2012. The number to access the conference call replay is 719-457-0820 or toll-free 888-203-1112. The passcode for the replay is 4138928. The conference call will also be webcast live on Chesapeake’s website at www.chk.com in the “Events” subsection of the “Investors” section of the website. The webcast of the conference call will be available on Chesapeake’s website for one year.

[blangtang]

Nobody has tracked this better than yours truly. I have a comprehensive database of all their purchases and how they contrast with the last sale and/or market value. I also track all their building permits.

It's only a matter of time before these issues get the focus of a media increasingly anxious to add more fuel to the fire.

Frankly, it's amazing to me that a $12 million map collection becomes part of a shareholder lawsuit and no one has bothered to notice they've spent about a billion dollars on real estate, a good portion of which being completely outside the scope of their core business. And what about things like the sponsorship of the OKC Arena? For a company that doesn't sell to end consumers, I can't imagine how they can make a business case for spending $3 million for each of the next 12 years (it actually escalates 3% each year, meaning by the end of the contract they will be paying $4.2 mil).


I'm sure the reason no one has made an issue of the real estate is because 1) it involves thousands of separate pieces of information; and 2) the company itself never talks about it.

Hey Pete,I have a question about your stash of info...

Let's say that when the new Chair comes in, they look into the non-core assets and decide to sell some of the real estate acquisitions, do you have any idea how much cash could be raised if they sold some real estate? like $100 Million, or $1Billion? and do you think they would get back half or what they paid or close to or more than they paid?

Just curious how much they may have overpaid, or not...and how much cash they could raise...thanks!

[Pete]

On average, CHK has paid 3 to 4 times market value for all their properties. This is based on hard data I have been collecting for years.

In terms of what they could get for buildings/land not used to house employees, I bet they could only raise about $100 million for things like NH Plaza, Classen Curve and others.

They have about a billion invested thus far with about another $300 million of more proposed buildings for their campus.

[jn1780]

I'll be in Denver tonight (noticing your name )
If the buildings were abandoned that would qualify as blighted in my book...but that's not likely to happen...


CHK has plenty of operating margins to service debt if they'd just scale back their absurd capex budgets to a more normal and sustainable level. I don't see CHK going anywhere and there's no reason for them to go belly up or get taken over unless there's some skeleton in a closet we don't know about it. That seems unlikely...

There's all sorts of reasons for other companies to take over Cheaspeake. They often look for companies that are not to unhealthy financially, but also not too financially sound

[Snowman]

There's all sorts of reasons for other companies to take over Cheaspeake. They often look for companies that are not to unhealthy financially, but also not too financially sound

The thing is with Chesapeake books not being the most transparent and the dept they have, it may make companies wary of a takeover.

[Pete]

Yet another McClendon controversy... He ran a $200 million hedge fund with Tom Ward from 2004 to 2008:

http://www.reuters.com/article/2012/...8410GG20120502

[Maynard]

I knew I should have bought in last week! =)

Chesapeake Energy shares tumble 05/02 08:00 AM

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Chesapeake Energy Corp shares fell nearly 11 percent in trading before the bell on Wednesday after the company reported earnings that disappointed investors.

Wall Street analysts pointed to the company's higher-than-expected natural gas output, which increased quarter on quarter, even as the company sought to cut production. Chesapeake reported its results on Tuesday after the market had closed.

Reuters also reported that Chesapeake Chief Executive Officer Aubrey McClendon ran a $200 million hedged fund that traded the same commodities that the company produces.

Shares of Chesapeake were trading at $17.45, down sharply from Tuesday's New York Stock Exchange close of $19.60.

[onthestrip]

Man, when it rains it pours. Every morning it seems like there is another article about some dodgy business practices by Aubrey.

[Pete]

BTW, I am aware of at least one and possibly two articles delving into Chesapeake real estate practices.

We all know they've been wildly spending in this area and I believe the article(s) are going to delve into that further, and I expect more backlash as a result.

[onthestrip]

Hey Pete, since Chesapeake Land Co is a subsidiary of the public company that is Chesapeake, would leases that theyve entered into be public info? Leases such as Whole Foods, Anthro, and Classen Curve tenants?

[Pete]

No. They are publicly-held but a private enterprise.

All publicly traded companies are required to disclosure material financial information, but at their scale retail leases would not be in that ballpark.

However, the sum total of their real estate dealings may fit that category and if and when details come out in the press, it may spark requests for further investigation by shareholders. In that case, specific details may be disclosed.

[dankrutka]

Is it not time for Aubrey to step away from CHK completely? How many more disparaging articles have to come out before, regardless of his impact on the company, the bad press just hurts CHK too much?

[OKCTalker]

If the hedge fund operated from 2004-2008 and wasn't known until 2012, can you imagine what else could be going on and not disclosed?

And I don't want to hear Henry Hood saying that the board was fully-informed about this.

[Maynard]

Chesapeake Bonds Tumble, CDS [credit-default swaps] Protection Costs Spike 05/02

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NEW YORK (Dow Jones)--Chesapeake Energy Corp. (CHK:$16.95,00$-2.65,00-13.52%) bonds are taking a hit Wednesday after co-founder and chief executive Aubrey McClendon was stripped of his chairman title late Tuesday.

The Oklahoma City natural-gas producer announced McClendon would step down following recent scrutiny from regulators and shareholder outcries over some personal financial dealings perceived as being in conflict of interest with his role as chairman.

The company also posted disappointing first-quarter earnings and revealed heavy exposure to weakening natural-gas prices.

Chesapeake bonds maturing between 2015 and 2021 are the four most actively traded "junk"-rated bonds in Wednesday's market, according to MarketAxess. The price of its 9.5% coupon bonds due 2015 dropped $2.94 per $100 of face-value to $106.375. Before the story of McClendon's financial dealings broke on April 18, the bonds traded at $113.500.

The extra yield the 2015 bonds offer over Treasurys widened 1.12 percentage points Wednesday to 6.59 points, MarketAxess shows. The debt is rated Ba3 by Moody's Investors Service and BB by Standard & Poor's and Fitch Ratings.

According to Markit, the upfront cost of credit-default-swap protection on Chesapeake spiked to 7 points Wednesday, from 4.13 late Tuesday. The jump indicates that CDS sellers are demanding $700,000 upfront, plus a running annual payment of $500,000, to protect a $10 million notional trade.

CDS is traded in points upfront when protection-sellers are concerned about a jump in default risk.

Chesapeake CDS prices actually fell half a point after Chesapeake's disappointing earnings release late Tuesday, as traders responded favorably to the idea that corporate governance was improving, according to Otis Casey, director of credit research at Markit.

But with shares of the company falling 13% and bond spreads widening early Wednesday, CDS prices are now playing catch-up.

Short-selling of Chesapeake shares is at a record high with 8.4% of total shares on loan, versus 7% a month ago, as of Tuesday, according to Data Explorers, a Markit company.

[soonerguru]

Drip, drip, drip. McClendon should be gone. This is a mess and I'm guessing there's a lot more damaging stuff we don't know yet.

[BoulderSooner]

and nothing illegal ..

[Swake2]

Aubrey looks to be going to jail. This is really shocking. And much worse than the shocking $1.1 billion in personal loans from board members.

http://www.reuters.com/article/2012/...8410GG20120502

[SoonerBoy18]

Off topic but does this mean he and his wife wont be sitting next to Clay Bennet at the Thunder games?