Chesapeake Business Practices

[MikeOKC]

This is an all-in-one potpourri of AubreyNews......some will make you laugh. Some will make you cry.


As for AKM being on Mad Money (again)...Cramer is laughed at for his constant love for Aubrey McClendon. Man crush in the extreme.

Seeking Alpha opened a recent article with, "Aubrey McClendon, Chesapeake Energy's (CHK) flamboyant (some say reckless) CEO..."

Blangtang: The 78% approval was a black-eye for Aubrey. Most are re-elected by 98-99%. That was his wake-up call. Time will tell if he heeds the warning.

CHK has had to make some fairly big changes due to the legal settlement:
http://online.wsj.com/article/SB1000...040781488.html

Pennsylvania: don't speak his name without boxing gloves on. Several states it's the same story.

This article today from the Fort Worth Weekly:

The biggest turkey in Fort Worth flew the coop in 2011, his tail feathers still singed from our frequent rounds of birdshot. Yep, Mayor Mike Moncrief resigned after eight years of running Fort Worth like his own personal fiefdom. We don’t have him to kick around anymore. More importantly, he doesn’t have us to kick around. However, one of his favorite allies in steamrolling residents and neighborhoods is still alive and clucking. Chesapeake Energy enjoyed a banner year for bullying.

Chesapeake is a mighty power in the Barnett Shale. The Oklahoma City-based company bills itself as the country’s most active driller of new wells. Those who try to stand in its way quickly find themselves staring at a battery of attorneys willing to litigate to the death. There’s nothing wrong, in principle, with drilling for natural gas. The industry creates jobs, infuses money into the economy, and provides an important energy source. Plus, many residents own their mineral rights and want to be able to earn royalties.

The problem is that Chesapeake, like so many other drillers, doesn’t care about the needs and wishes of the folks whose territory Chesapeake is moving into, nor the long-term environmental messes it creates (and will leave behind). The Weekly has written a litany of articles in the past several years about Chesapeake’s willingness to manipulate laws and politicians, exploit eminent domain laws for its own private gain, and turn neighborhoods into industrial armpits.

Much more: http://www.fwweekly.com/index.php?op...ory&Itemid=375

I saved the best for last. In a new interview in the print edition of The Economist, Aubrey said,

"There’s a little too much emphasis on wind here for my taste,” said Aubrey McClendon, the CEO of Chesapeake."

Oh....right. We put so much emphasis on wind around here. Wind. Is. Bad. Aubrey can't make billions from the wind.
http://www.economist.com/node/21538772

Meanwhile, Aubrey Kerr McClendon continues constructing the City of Chesapeake in NW OKC and is beloved by many. But fewer each day.

[RadicalModerate]

Were Bernie Madoff or Bob Nardelli ever guest speakers at a Heritage Hall or Duke University advanced studies seminar?
Dave Del Dotto?
Nah . . . That's impossible . . . Nevermind . . .

[ou48A]

This is a great idea. As somebody who has spent a lot of time around major compressor stations I always wondered why something like this wasn’t done before. The exhaust temperatures were often over 1000 degrees with the heat vented to the atmosphere.
There will be a good number of places were this could be done and transferred to other industries.

…………………………………………………………………………………………………………………………………… ………….

A Chesapeake Energy Corp. subsidiary has inked a deal with an Illinois company that will develop a system to convert waste heat into electricity at a natural gas compression facility in Pennsylvania.


KGRA Energy and subsidiary Liberty WHR Partners LLC will build and install a customized 2-megawatt waste heat-to-power system at an Appalachian Midstream Services LLC facility in Bradford County, Pa.

“KGRA is pleased to have been selected by Chesapeake, a company that views waste heat recovery as a realistic way to increase efficiencies utilizing an emissions-free power source,” CEO Jason Gold said.

The system will convert waste heat from a series of compressor engines into retail-grade electricity. That power can be used on site or sold back into the electrical grid by KGRA.

Two megawatts is enough electricity to power more than 1,600 homes in Bradford County.

Gold said the project is expected to create and sustain numerous jobs.

“We look forward to breaking ground early next year and building a long-term partnership with Chesapeake,” he said.

Chesapeake officials were interested in the potential applications of KGRA Energy's heat-recovery technology.

“We view this as a trailblazing opportunity for not only Chesapeake, but for the midstream industry, to convert a heat byproduct into emissions-free electric power,” said Mike Stice, the company's senior vice president for natural gas projects. “Chesapeake is known to develop and champion new technology, and likewise supports novel technology applications such as KGRA's that can create a visible, sustainable impact in our business and in our community.”

KGRA will begin installation of the power generation project as early as the first quarter of 2012.

The project is expected to produce more than 16.6 million kilowatt-hours per year of emissions-free electricity, while displacing about 16,000 metric tons of carbon dioxide emissions per year that might otherwise be produced by a typical coal-fired power plant.

KGRA's power generation project at the Chesapeake site will feature a custom-designed waste heat recovery unit that harvests exhaust from five reciprocating engines using interposing oil loops, which have been designed with various levels of redundancy to meet the safety and back-pressure demands of lean-burn gas engines.

The system is closed-loop, requires no water and uses a non-ozone depleting refrigerant approved by the U.S. Environmental Protection Agency.



Read more: http://newsok.com/chesapeake-looks-t...#ixzz1fuRuJefE

[MikeOKC]

I know, I know....leave it to me to point to this story. But no Oklahoma City media outlet will touch it, so....

If you ever had any questions about the ethics of Aubrey Kerr McClendon, I point you to this Reuters Special Report which lays out what a fine man this corporate rogue is. And this is one of our city's "leaders." To think our arena has the name of Chesapeake Energy attached to it - a company that is despised by more people across the country with each passing year. Aubrey McClendon is clearly one of the most hated CEOs in all of America...and here's another reason why....

Reuters Special Report: 'Energy giant hid behind shells in "land grab"

Business Insider: US Energy Giant Allegedly Screws Over Hundreds Of Michigan Farmers

USA Today: Energy giant's shell firm cancels 800 Mich. leases

Most people would call this fraud. But, apparently it's possibly technically legal - though McClendon's defense on lawsuits against Chesapeake regarding this is that CHK isn't responsible because the leases were signed with the paper-only, shell company, "Northern Michigan Exploration." Stand-up guy, that Aubrey McClendon.

Now, we can say that The New York Times was absolutely right to use the name of 'Enron' in their story about Chesapeake. Aubrey/CHK - like Ken Lay - is not only playing the 'shale' game - but the 'shell' game, too. That's not uncommon, but they both have now used the shell companies as a legal defense. That's the 'Enron Way.' Now, it's also Aubrey's Way.

Disgusting.

I know, I know. He puts up pretty Christmas lights and brought Whole Foods to Oklahoma City. Well, I'm embarrassed to darken the doors of Classen Curve and the old 'Ford Center' -- now sullied with the name of the Chesapeake Energy Corporation.

And...never forget this cover about this corporate rogue:

[Bellaboo]

Mike,

If you are that embarrassed about Classen Curve or the old Ford Center, now the Peake, then you should do yourself a favor and stay away......I don't think anyone will miss you.

[dankrutka]

Mike,

If you are that embarrassed about Classen Curve or the old Ford Center, now the Peake, then you should do yourself a favor and stay away......I don't think anyone will miss you.

Classic example of someone putting their fingers in their ears and screaming "la la la." Criticism like this is important because people clearly need to hold Aubrey (and others) accountable so he doesn't go down like Enron. There is mounting evidence that he might have some ethical issues. If that evidence is wrong then great, but this larger discussion can also serve to force Aubrey to clean up the way he does things. Classen Curve and Chesapeake Arena do not absolve one of moral responsibility. What did the Astro's baseball stadium used to be called? That's right, Enron Field. Criticizing Mike for bringing this up is classic misdirection because you don't like what you hear. No one will miss your inability to consider multiple perspectives, Bellaboo. Feel free to stay away. No one will miss you.

[Bellaboo]

Classic example of someone putting their fingers in their ears and screaming "la la la." Criticism like this is important because people clearly need to hold Aubrey (and others) accountable so he doesn't go down like Enron. There is mounting evidence that he might have some ethical issues. If that evidence is wrong then great, but this larger discussion can also serve to force Aubrey to clean up the way he does things. Classen Curve and Chesapeake Arena do not absolve one of moral responsibility. What did the Astro's baseball stadium used to be called? That's right, Enron Field. Criticizing Mike for bringing this up is classic misdirection because you don't like what you hear. No one will miss your inability to consider multiple perspectives, Bellaboo. Feel free to stay away. No one will miss you.

Trout,

Maybe you are the one with ZERO clue on how a lot of businesses operate....take a close look at all the unethical crap that George Sorros puts out.
Now if you want to examine an individual with no conscience. Even in the articles, did you read them by the way ?, they state that tons of American companies setup shell corporations for many reasons. No I don't like how some of these shells sell their product at a lower price just to short the royalty owners (i'm in that boat by the way), then sell to another subsidary at higher value. We've covered this before, and what i'm saying is stop being a jealuos crybaby. If you don't like the rules.....take the appropiate measures to change them.....some folks on this board have no real life experience, other than to just whine and complain.

Now the Michigan farmers are taking them to court, like they should if they feel they've been cheated. They are doing something about it the way it should be done.

[Bellaboo]

Maybe I've been a little harsh here, and maybe too closed in the thought process. Sorry to all if offended.

[dankrutka]

No worries. I appreciate your apology. Your original post just seemed to disregard any push back against possible wrongdoings or at least unethical behavior. You're right that the farmers should sue, but I disagree that dialogue is pointless whining. I have no work experience in this area and it is not practical that I'm personally going to change everything... It doesn't mean I shouldn't be concerned as a citizen. (BTW, notice that I've not once said Aubrey or CHK are guilty, but that it seems something we should be paying attention to...).

[Bellaboo]

No worries. I appreciate your apology. Your original post just seemed to disregard any push back against possible wrongdoings or at least unethical behavior. You're right that the farmers should sue, but I disagree that dialogue is pointless whining. I have no work experience in this area and it is not practical that I'm personally going to change everything... It doesn't mean I shouldn't be concerned as a citizen. (BTW, notice that I've not once said Aubrey or CHK are guilty, but that it seems something we should be paying attention to...).

I've actually read the Forbes article and the other 3 also.....he has recanted and bought the maps back from the Forbes article.... and the board has done some manipulation with the bonuses, but it is all public record and can be challenged. I worked for a major company for 23 years, and OMG do they cross the line, back then and still today....example, they refuse to pay their bills the last month of each quarter just to show a cash flow...

My point is that it is not just CHK....and I won't go to bat for them....but again some people take pleasure trying to find fault, and questioning practices that are prevalent throughout business.....General Electric pays ZERO taxes...huge profits but they use every implied loophole for their benefit......GE is the company that needs to be exposed down to the core. Are their practices just as wrong as CHK ?

[dankrutka]

So, your philosophy is that if Company A is doing something unethical and Company B is doing something more unethical that you should deride posters on a message board that question the unethical practices of Company A because they are not concurrently criticizing company B. I'm sorry. I don't understand your logic.

[Bellaboo]

So, your philosophy is that if Company A is doing something unethical and Company B is doing something more unethical that you should deride posters on a message board that question the unethical practices of Company A because they are not concurrently criticizing company B. I'm sorry. I don't understand your logic.

Didn't say that, I'm saying until the rules are redefined, then so what, change the business rules if they are allowing unethical practices. If they are breaking the rules, then expose and go after them. Most companies walk a fine line and what most complain about CHK is AKM's board collusion. Those articles above are really not that bad for a major corporation. There are reasons they retained multiple attourneys. Anyways, lets move on.

[Pete]

I think it's fair to say that CHK operates on the edge and that is scary to many because OKC has so much on the line with them.

If their gambling nature was ever to backfire and they came crashing down, it would be devastating to the community in lots of different ways.


Simply put, the way they operate makes many understandably nervous.

[G22]

Sometimes great companies push the envelope in order to be great and many times they are criticized. Steve Jobs didn't make numerous friends and at one point he was kick out of Apple but he build a great company. CHK pays employees great and gives them numerous incentives. I could think of a lot more CEOs to talk about how they are reckless or bad for their respective communities. I'm thankful for all that AM has done and hopefully he will make great business choices in the future.

[ou48A]

Argus Research took a dim view of the outlook for Chesapeake Energy , specifically, based on the weak natural gas pricing environment. As TheStreet noted earlier this year, Chesapeake sold off all of its natural gas hedges at the end of 2011, and said it believed nat gas pricing had reached a bottom. Chesapeake left itself exposed to the whims of the spot market, and the direction has been straight down in spot market prices since it removed all of its nat gas hedges.

Argus Research analyst Phil Weiss, who has a sell rating on Chesapeake, lowered his earnings outlook for 2012 to $1.81 from $2.50 a share based on natural gas market pricing. While natural gas pricing has continued to fall this year -- it was a dog in 2011 -- the real red flag in the Argus report was a warning that Chesapeake may have to write-off natural gas assets in its fourth-quarter 2011 report.

"Given that natural gas prices fell about 9% year-over-year in 2011, we also think it is possible that CHK will announce impairment charges against some of its natural gas assets when it reports 4Q11 earnings in February," Argus said.
http://finance.yahoo.com/news/wall-s...162653805.html

[MikeOKC]

Aubrey's stock predictions look now to have been nothing but hyperbole. In fact, most everyone knew that except Jim Cramer at CNBC and those who respect his advice (fewer & fewer). So many people don't realize that a lot of informed people believe CHK is in a position that one analyst has called "perilous." Aubrey has put everything into one or two buckets and praying. He puts everything else that's not producing on the company credit card. Debt is CHK's problem and Aubrey McClendon is having a hard time trying to do everything he wants to do with what he really has.

Another warning sign within the past week or so was a move that raised more than a few eyebrows - Chesapeake had to "partner" with TOTAL to help fund its huge Ohio adventure. Read: they were bailed out, as TOTAL bought 25% of CHK's Ohio leases. CHK simply didn't have the money - again.

From The Cleveland Plain-Dealer: (emphasis is mine)

CLEVELAND, Ohio -- Chesapeake Energy Corp. has received a crucial cash transfusion from a global French oil company to enable the development of Ohio shale gas.

Total S.A., a multinational company with operations in 130 countries, is buying a 25 percent stake in Chesapeake's oil and gas leases in Ohio for more than $2 billion.

Announced Tuesday, the joint venture will give cash-short Chesapeake the funds to drill for gas and oil in 10 eastern Ohio counties.

Chesapeake has lease rights to more than 1.5 million Ohio acres and has permits to drill 99 wells. But it has drilled less than 30 and has three producing wells, according to state records.

These are the same leases that Chesapeake or its agent land companies paid a fraction to acquire as long ago as five years ago, talking unsuspecting landowners into signing lease rights for a few hundred to a few thousand dollars.

The rest of the article is here.

Warning people in Oklahoma City about Chesapeake has to be done here, and the national financial press, because no local news outlet will dare touch anything negative about this company. It's the same old story: Power. Influence. Money. Make no mistake, I do not want CHK to fail. Period. That would be catastrophic for this city. It is because of my love for our city that I bother posting here about Aubrey Kerr McClendon. All the good he's done (and he's done some) will come unraveled in a heartbeat if CHK - the public corporation - hits rough times with a merger/acquisition...or worse. This is about Aubrey's mismanagement of Chesapeake, his unethical (if not illegal) behavior, hubris and arrogance. CHK needs new leadership and Aubrey can go play with his shopping centers, basketball team, and other (sometimes) personal business. It's about the good of the company - and Oklahoma City.

[Questor]

Interesting story over at Forbes....

"Most of the plaintiffs are landowners in Texas and Michigan who agreed to lease their land to Chesapeake (often at prices more than $5,000 an acre) for oil and gas exploration. They signed contracts with Chesapeake, or one of its agents and received orders for payment in amounts totaling millions of dollars. So imagine their surprise when a few weeks later instead of getting cash the landowners instead got letters from Chesapeake claiming to void the leases and stating “we will not be funding the order of payment.” Try doing that with your landlord sometime and see what happens."

http://www.forbes.com/sites/christop...hese-lawsuits/

[ou48A]

It’s always wise to hire an experienced (oil & gas) attorney to read over any contract like this before you sign.

[MikeOKC]

It’s always wise to hire an experienced (oil & gas) attorney to read over any contract like this before you sign.

Especially with dealing with CHK - the king of fine print and shell companies. Many use shell companies, but they don't use them as legal defense which Chesapeake is doing. Who got brought down by their lies and deceptions partly in regards to their shell companies? Enron. There was a reason the NYT lumped the two companies together.

The article posted above has a message - that many have been warning about for years:

Attorneys say they are set to file “hundreds” of suits against Chesapeake. Though most of them appear to be brought by individual landowners, there are also some other oil and gas companies unhappy with Chesapeake. I think this story is only just beginning, and as we learn more about these lawsuits we’ll bring you the juicy details.

Doesn't it make you feel proud that the old Ford Center now has the name of this company, headed by a rogue CEO, emblazoned in lights for all the country to see?

[Easy180]

My guess is this sort of practice is not limited to Cheapeake...Likely standard business with all oil and gas company land grabs

[ou48A]

Especially with dealing with CHK - the king of fine print and shell companies. Many use shell companies, but they don't use them as legal defense which Chesapeake is doing. Who got brought down by their lies and deceptions partly in regards to their shell companies? Enron. There was a reason the NYT lumped the two companies together.

The article posted above has a message - that many have been warning about for years:

Attorneys say they are set to file “hundreds” of suits against Chesapeake. Though most of them appear to be brought by individual landowners, there are also some other oil and gas companies unhappy with Chesapeake. I think this story is only just beginning, and as we learn more about these lawsuits we’ll bring you the juicy details.

Doesn't it make you feel proud that the old Ford Center now has the name of this company, headed by a rogue CEO, emblazoned in lights for all the country to see?

The need to hire an attorney to review a contract of significance before signing should be considered standard business practice regardless of the company or industry. It’s just being smart.

[dankrutka]

My guess is this sort of practice is not limited to Cheapeake...Likely standard business with all oil and gas company land grabs

Do you know this or are you just assuming everything is okay? I'm honestly asking because I don't have enough business acumen to know whether CHK is being reckless tom itself and thus OKC, but I'd like for people to have this conversation so pressure could be put on them to right the ship (if need be)... What do others think? Shoud we be worried?

[Midtowner]

Especially with dealing with CHK - the king of fine print and shell companies. Many use shell companies, but they don't use them as legal defense which Chesapeake is doing. Who got brought down by their lies and deceptions partly in regards to their shell companies? Enron. There was a reason the NYT lumped the two companies together.

The article posted above has a message - that many have been warning about for years:

Attorneys say they are set to file “hundreds” of suits against Chesapeake. Though most of them appear to be brought by individual landowners, there are also some other oil and gas companies unhappy with Chesapeake. I think this story is only just beginning, and as we learn more about these lawsuits we’ll bring you the juicy details.

Doesn't it make you feel proud that the old Ford Center now has the name of this company, headed by a rogue CEO, emblazoned in lights for all the country to see?

Hundreds of individuals, you say? Perhaps this is why McClendon, a few years ago stormed into Gov. Henry's office and yelled at and threatened him after his veto of a tort reform measure which would have disallowed class actions to be filed over oil and gas royalties?

[Easy180]

Do you know this or are you just assuming everything is okay? I'm honestly asking because I don't have enough business acumen to know whether CHK is being reckless tom itself and thus OKC, but I'd like for people to have this conversation so pressure could be put on them to right the ship (if need be)... What do others think? Shoud we be worried?

I have just a limited knowledge of the practice but I do know land grabs are extremely competitive and the oil companies aren't exactly looking out for the land owners...Wouldnt surprise me at all that Chesapeake would be one of the worst just fairly certain they are not alone is all

[MikeOKC]

I love it - people are now sending me links to post. I admit, I did miss this, so it's a few days old.

From Foreign Policy (Oil & Gas): When You Are Betting on Shale Gas, Watch the Dealer's Eyes.

This was right after CHK's bailout by TOTAL in Ohio.

When someone invites you to a party but leaves before dessert, it might be time to locate your own coat and hat. Such are the suspicions generated by Chesapeake Energy, which after selling numerous billion-dollar pieces of its vast shale gas holdings to the world's largest energy companies has abruptly announced that it is drawing down.

<->

"...we have found McClendon temperamental and ideologically self-destructive to a degree that risked the entire shale-gas bonanza, but that's just us."


<->

But last week, Chesapeake announced that the risk is too high. The shale-gas rush had resulted in the historical boom-bust bane of the oil patch -- massive over-production, and a price collapse -- and McClendon was moving on; oil, for example, was looking pretty good, the company said. In an amusing piece at the Financial Times, John Dizard, a long-time shale gas skeptic, quotes from Catch-22, and goes on to describe Chesapeake's announcement: "The Wall Street maxim is that they never ring a bell at the top. However, on Jan. 23, Chesapeake Energy did ring a bell at the bottom. The undoubted leader of the shale gas revolution announced that it would reduce drilling expenditures this year by more than 70 per cent, curtail its gas production by 8 per cent, cut land buying by $2 billion, and allow uneconomic gas leases to expire."

<->

One only notes that McClendon was not signaling his new religion as recently as a month ago, when he was helping himself to Total's billions. According to calculations by Bloomberg's Joe Carroll and Jim Polson (who relied on numbers provided by the consultants IHS Inc.), Total paid $15,000 an acre for the Chesapeake property, or "more than four times the average per-acre price from seven Utica shale transactions tracked by IHS from March 2011 to September 2011." This seemed like a bubble. The Jan. 18 Bloomberg piece quotes IHS analyst Sven Del Pozzo: "I don't feel confident that the prices being paid now are justified. I'm wary."

AubreyNews Part Two...

And finally, this from The State Journal, West Virginia's Business Journal. Whether you agree, disagree, have no opinion, whatever, it seems to always come back to not what Aubrey is necessarily doing - but how he's doing it. This guy is just more of an embarrasment with every passing week.

Coal industry wants answers from Chesapeake on anti-coal funding

The link above is worth the read. Such hypocrites at CHK - and they do it so well. Also, on the same subject: http://dailycaller.com/2012/02/04/si...coal-industry/

When will the people of Oklahoma City wake-up and realize that we have corporate Masters of Deception operating over at 63rd & Western? It's so embarrassing. God, how I wish their name wasn't attached to the old Ford Center. People see that emblazoned in lights, and those who follow business must cringe to see that sordid name of Chesapeake Energy Corporation. Yet, people around here? We rarely hear any of this news. I'm hoping the new owners of The Oklahoman will open up and allow a little of the truth about these outlaws to be heard in their hometown.

In the end, it's our city they are sullying and putting at risk.