Consumer Spending Drops: IsDan RitterGoogle+Twitter More Articles February 27, 2014 4/4.740 Chesapeake Energy Corp. (NYSE: CHK) Chief Executive Doug Lawler is doing the yeoman’s job. Lawler became the successful boss June 17 filling shoes left by Aubrey McClendon, co-founder and former CEO. McClendon led the company through a time of enormous growth, purchasing thousands of acres of shale assets in North America that drilled vigorously and racked up around $14 billion in the process. He was expelled in the midst of a governance crisis at the beginning of 2013, and his unwinding of McClendon has characterized Lawler’s tenure to date. Lawler has actively sold assets that cut costs and has driven the company away from the shotgun approach of McClendon towards a more rifled operation. McClendon was one of those entrepreneurs who early recognised the tremendous value of shale gas, and ended up outbidding field rivals due to his willingness to take on debt. As natural gas boomed and Chesapeake and McClendon both prospered tremendously though prices remained high. He had a net worth of more than $1bn at one point. However, after the shale gas boom came into second gear and skyrocketing prices in supply dropped. So did the valuation of Chesapeake’s assets and equity alongside them. The company which borrowed billions to finance its aggressive campaign of exploration and drilling soon found itself crushed by debt and forced to sell $12 billion in oil and gas fields to relieve some pressure. The shock marked the start of the end for McClendon as chief executive of Chesapeake. But McClendon’s involvement with the firm is far from over he remains one of the largest shareholders and has stakes of interest in most wells in Chesapeake. This is a legacy from him being the company’s co-founder. His involvement in the Founders Well Involvement Scheme is at the root of the controversy surrounding McClendon, a system that allowed him to buy up to 2.5 percent stakes in every well Chesapeake drilled. Using the capital he built at Chesapeake McClendon, Larchmont Resources LLC formed a company that recently took Chesapeake to court for drilling new wells in Haynesville Shale, Louisiana. The story is that McClendon wants to drill the wells saying it would be reckless not to do so. Chesapeake currently has only four wells there, but McClendon’s lawyers argued that to recover the maximum possible amount, as many as 12 more would be required. Chesapeake’s lawyers claim that McClendon has no legal justification for making his case, and that Chesapeake’s money will be better used elsewhere. Chesapeake works in Eagle Ford, Texas Mississippi Lime Niobrara Shale in Wyoming, Ohio’s Utica Shale and the Pennsylvania’s Marcellus Shale. Regulators in Louisiana are expected to rule on the matter within about a month. Fourth-quarter average daily production of oil increased 15 percent year-on-year but decreased 7 percent sequentially average daily production of natural gas liquids (NGL) increased 26 percent year-on-year but just 9 percent sequentially and the production of natural gas decreased 3 percent year-on-year and 1 per cent sequentially. Some if not most of the slowdown was due to expected production cuts but a difficult winter took its toll on the business. Operational problems and delays in infrastructure development had a negative impact on the Utica shale output ramp according to Chesapeake. Based on infrastructure and operational issues, according to a company survey, the vast majority of Chesapeake’s wells linked to sales lines are on restricted choke and have not been operating at full capacity.
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