Oklahoma City News, Entertainment & Occasional Humor • Established 2007

Is Chesapeake Energy about to go bankrupt?

There are certain rules you have to follow if you want to work in the Oklahoma City media. One of the most important is to never produce a story that criticizes or questions one of our local energy companies. News stories like that are simply not allowed. Instead, you have to write an article that highlights the wonders of CNG, how awesome fracking is, and all the good things corporations like Chesapeake do for our rowing community.

Fortunately for us, Forbes energy reporter Christopher Helman does not live in Oklahoma. That means the local media rules don’t apply to him. He gets to be an actual reporter and report on news we may want to know about, including the real scary stuff like how Chesapeake Energy is running out of cash and flirting with bankruptcy.

From a story on Forbes.com:

This morning Chesapeake Energy announced a new financial plan that it hopes will allow it to raise the billions in cash it needs to get through the next year or so without going bankrupt.

The company says it aims to raise $2 billion by spinning off assets from its service company and pipeline division. It expects another $2 billion from upfront sales of future flows from gas fields. And it earmarks another $6 billion or so from the sale of its largely undeveloped acreage in the oil-rich Permian basin. And for good measure, it will raise another $1 billion by issuing more senior debt. The $10-12 billion it hopes to raise is “substantially in excess of the difference between the company’s expected cash flow from operations and its planned capital expenditures.” Gosh I should hope so. Analyst Arun Jayaram at Credit Suisse pegs Chesapeake’s 2012 cash hole at $6 billion.

But with natural gas prices already at decade-long lows and set to go even lower in the months ahead, there’s no telling whether even Aubrey McClendon‘s legendary financial finagling will be able to save the day.

First, it should be noted that Helman doesn’t seem to be a big fan of Chesapeake. Most of his columns about the energy behemoth are a bit negative and cynical. But is there anything wrong with that?

Call me old-fashioned, but I’d kind of like to know if one of our city’s corporate stewards and largest employers is in a financial bind and flirting with bankruptcy. Even though I enjoy midgets and clowns, I would assume that I’m not the only one who feels that way. I bet our civic leaders, politicians, Chesapeake employees, royalty holders, landmen and just about everyone else who lives in this state would feel like to know, too.

Maybe this Forbe’s article will inspire a change in our local media’s rule on allowing only propaganda-style coverage of our local energy companies? Maybe the Oklahoman will investigate this story further, talk to sources within the company, and let us know how close Chesapeake really is to disaster. Maybe Channel 9 will do an I-Team report and let us know how a Chesepeake collapse would impact the economy. And maybe, just maybe, someone will find fresh milk inside the Milk Bottle building on Classen. I’m sure all that will happen.

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Comments

    • Indeed. I hope everyone remembers how they got through it the first time around (the ones that didn’t lose their ass completely in the oil bust).

      • I remember two things from those days

        “Last one out, turn out the lights” and all those “house for sale” signs that never seemed to come down on my block in Edgemere Park.

        It would suck to go back to those days again!

  1. Thank you for reporting on this rather nebulous issue. It’s something local folks don’t like to discuss. I’ve been chastised for criticizing or questioning what’s going on over there and constantly reminded about Whole Foods, NBA, jobs, etc.

    But if this thing collapses…man, oh man. I wonder how many people he could take down with him. Enough with the cheerleading already, I want to see some local objective reporting on CHK.

    • If you look at the press release, they’re essentially selling a lot of assets for pennies on the dollar in order to keep the lights on. It’s the worst kind of corporate triaging. If the solution sounds familiar, it was what AIG tried to do before they ran out of time and required a bailout.

      They’re also issuing a secondary offering, so good luck on keeping a high stock price for the next few years. Sell.

  2. Thanks for sharing this. So very true, all reporting in OK about this company is positive. People specially the ones that work for CHK need to know this. Wouldnt want to and glad I don’t work there.

    • Yes, everyone feels that way until they get a job there. And most people who share your feelings have tried and failed to.

      • Oh, “Yes, everyone feels that way until they get a job there. And most people who share your feelings have tried and failed to,” … Paul?

        Not so fast. I know people who started to work there and pretty much immediately recognized their terrible mistake and set out to find something else and were miserable until they did … but they all did, thankfully.

  3. There are numerous national articles over the past few years about the peake’s dangerous highly leveraged position. I wouldn’t be surprised if it turns out to be a complete Enron fraud. Or he assumed the govt would allow market manipulation of natural prices like crude oil.

  4. In every petroleum boom there is a high flying company that thinks they’re going to be the next Standard Oil. You can spot them by the huge amounts of cash that they throw around and the ridiculously risky business moves they make. Greed trumps good business and they end up in Chapter 11. For Oklahoma’s sake let’s hope its not CHK.

    • I agree that I hope it isn’t CHK. I don’t understand how anyone could get any pleasure in wanting CHK to fail. I think everyone should be interested in knowing what’s going on with CHK, but instead of whining that the news isn’t hand delivering the “desired” spin, why don’t you just do a little research. It is a publicly traded company, and while you may not be able to access all of the confidential inner workings, you can get an idea of where they’re headed.

      • Cool Paul, you be sure and do your due dilligence and go over CHK’s annual shareholder report. Once you have gone over it with a fine tooth comb, let us know what the problem is. I am sure that the answer will be clear once you have done this. Corporations love providing clear and concise information to their shareholders.

    • And those “analysts” also had buy recommendations and rosey outlooks for their stocks they followed in 2008, for Enron before their collapse……. Research shows that more often than not, their sell recommendations outperform their buy recommendations. They don’t know a damn thing anyone else doesn’t.

          • Yes, but I hope for your sake Kaycie is an alias, and further hope that you username isn’t tied to your husband’s work email account in any way! (friendly advice only…..ignore at will)

  5. I don’t work there, and I’m no cheerleader for CHK (and certainly not their industry), but CHK has done A LOT to improve the standard of living in OKC. They have had a big hand in so many of the things that have made my civic pride in OKC continue to swell. If they were to crater, it would be a bad, bad, bad thing for the home team… We’d better all hope they stay afloat.

  6. My father and uncle have worked in energy exploration in OKC for my entire life. It is fairly common knowledge among people in the city, within the industry, that CHK is not a strong healthy company.

    My father and uncle have both said that CHK would be the Enron of OKC. The day the Cheasapeake Arena was named I laughed because it looked like the dominos were being put in place.

  7. Didn’t Aubrey lose about 2 billion of his own money back in 08 having to sell his stock at $16 a share to pay off some debt? Is it time to auction off the 2 million wine collection again?

    • Happened in 08, Aubrey had to sell off all his stock on a margin call, but he never broke a sweat because the Board of Directors made up of such friends like Burns Hargis, Jeri Askins etal, gave Aubrey a 72million dollar bonus and bought his wine collection and map collection for several million more. A judge just found wrongdoing in that deal and ordered Aubrey to buy back his map collection. So if they are heading down again, at least Aubry can sell those maps again!

  8. Rodney Bivens, CEO of the Regional Food Bank, told me once that Devon will never be bought out because they have too much value while Chesapeake will never be bought out because (per Aubrey) they have too much debt.

  9. An independent landman I know said of Chesapeake, “I’m sure that idyllic little community over there will make lovely condos.”

    • Of course the are going bankrupt, they put their name on the arena formally known as the Ford Center. Look at all the companies that have gone bankrupt after putting their name on an arena. Enron in Houston, TWA Dome in St. Louis, just to name two. Add American Airlines Arena and American Airlines Center in Dallas and Miami as the most recent casualties.

      These companies HAVE to put their name on an arena to show they are a solid company so they can sell more stock, and the founder cleans up, as he can sell his stock to bigger fools. Mr. Ponzi would be so proud.

      CHK took a big gamble, much like what a lot of people did in the 80′s did here before the crash. Problem is CHK didn’t seem to look at that history, and there is a good chance they will suffer the same fate.

      When I look at their building project it brings back memories of Penn Square Bank and Bill Jennings, but I’m sure everything will be fine this time.

  10. That’s because the only thing bigger than the pocket books OK Energy CEOs is their egos. Tom Ward is a great example. His company is broke but that’s not stopping him from trying to keep up with McClendon with stupid commercials and putting his family’s name everywhere. Guy even moved his church into his corporate headquarters and of course all the sandies joined up and drank the coolaid.

    • Maybe you guys can tell me, why do oil/gas companies advertise on TV? It makes no sense to me. What does it accomplish for them?

      • Because we want to allow you the opportunity to take a moment to reflect on how awesome we are. You should feel fortunate.

      • Full disclosure: I work in PR for an energy company in Tulsa.

        Also, I’m not defending CHK, or advocating one way or another, but there are reasons why an O&G company would advertise locally, nationally or otherwise.

        In a general sense, it’s what we would call “branding.” You may not have operations or customers in your HQ city, but you do have two very important stakeholder groups: current and prospective employees. Everybody wants to hire and keep the best employees. One way of doing that is branding yourself in a positive light in the areas in which you recruit talent. There are lots of O&G companies in Oklahoma and all of them want to hire the best talent. I’m sure that’s the main reason that CHK advertises in OKC.

        Now, you could make the argument that they (and a few others) go over the top with it, but that’s a different argument. :)

        • Also correct me if I’m wrong Jeff but doesn’t the advertising and branding of the company as a good corporate citizen help with oil and gas leasing activities? The theory being if chesapeake/sandridge whomever is trying to lease some mineral acres and their competition is also trying to lease the same acreage, the mineral owner might choose to lease with them if they believe they are helping a company who has helped their state/community?

          • tk -

            Yes that’s certainly another reason why O&G companies would advertise. Especially E&P companies that are either trying to aggressively sign leases or brand themselves as good corporate citizens in the areas where they operate.

            Of course, the behavior of the company is always going to be the #1 thing that affects your brand. Doing things the right way will always trump whatever ad spend you’re willing to make…. that’s our philosophy. I’m not saying we’re perfect, but I really do believe that behavior/actions trump branding every time. That is to say, if your actions aren’t consistent with your branding efforts, then said efforts are pointless.

        • Jeff – Really not wanting to be rude in saying this but with the way E&P companies hire and lay off, the notion that advertising is directed hiring and retaining talent is somewhat laughable. But as you pointed out, it’s a PR campaign (though some of us who are share holders would prefer they spent the money on removing debt or increasing income rather than making people feel good about them).

          • Well keep in mind that I’m not speaking to any specific situation, CHK or otherwise. Just trying to shed some light on why O&G companies would advertise… particularly E&P companies.

            As for spending shareholder dollars – yes that is always something to consider. You should always keep business goals in mind with advertising/PR. Different companies have different philosophies about how they calculate the value generated from those activities. Some companies are very aggressive (CHK for instance), others (like my company) are not.

            • Does the energy industry having higher employee turnover than other industries or was that used to try and make a point?

    • I figure another batch of them had palm crystals blink red and they simply went to Carousel for “renewal.”

  11. Doe anyone know anything about the huge lawsuit in federal court in Texas against CHK and others? Case # 2:11-CV-210

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