Chat wrap: Layoff rumors flying at Chesapeake

by Jay F. Marks and Adam Wilmoth and Paul Monies Modified: September 10, 2013 at 2:16 pm •  Published: September 10, 2013
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Our NewsOK Energy team chatted with readers Tuesday about changes at Chesapeake Energy Corp. 

You can join our energy Q&A’s on the second Tuesday of every month at 10 a.m. and submit your questions about energy companies and developments across the state. Below is an unedited transcript of Tuesday's chat.

Paul Monies 9:54 a.m. Hello, everyone. We'll be firing up this chat in about 10 minutes.
John Helsley 9:55 a.m. Send us your questions on oil, gas, wind, utilities, and we'll get you some answers.
Paul Monies 9:57 a.m. Got some snags in the login name. To be clear, Paul Monies is your moderator. Helsley's over on Sports running a chat right now on Sports Illustrated's OSU story.
Paul Monies 9:59 a.m. Thanks, getting some questions in the queue. We'll be starting shortly. With me is Energy Editor Adam Wilmoth and Business Writer Jay F. Marks.
Paul Monies 10:02 a.m. OK, let's get started. Our first question is from Brent.
Brent 10:02 a.m. What is the status of Aubrey's new company, American Energy Partners? Is it investing in new oil plays, actively drilling at all or just looking for more investors?
Guest 10:04 a.m. That is an interesting question, since Aubrey is uncharacteristically playing things close to the vest since he left Chesapeake.
Guest 10:04 a.m. He has declined to talk to us about his new ventures, headlined by the formation of American Energy Partners, but we have seen a copy of a letter he sent out seeking investors.
Jay F. Marks 10:05 a.m. McClendon reportedly has raised about $1.2 billion, with his focus on buying into the Utica Shale in Ohio
Jay F. Marks 10:06 a.m. Chesapeake touted its discovery in the Utica in 2011, but the company hasn't been able to capitalize on its acreage there.
Jay F. Marks 10:07 a.m. It even put some of its holdings on the market last year as the company continued trying to raise money to cover its capital costs.
Jay F. Marks 10:07 a.m. So the clearest answer to your question at this point is we don't know.
Jay F. Marks 10:08 a.m. Sources "familiar" with McClendon's dealings have told the Wall Street Journal and others that he is looking to buy acreage, but I haven't seen any record of it yet.
Guest 10:08 a.m. What is the newest word on Chesapeake? I know several senior level officials have been let go, but I have heard rumors about layoffs. Any idea of size or scale?
Paul Monies 10:09 a.m. [Got several questions in the queue, please be patient as we work through them.]
Jay F. Marks 10:10 a.m. CHK's new management is being pretty cagey on that front.
Paul Monies 10:11 a.m. We've heard many, many rumors, but nothing concrete that we can report yet.
Adam Wilmoth 10:11 a.m. We know for sure that four executives have been let go, and two have been replaced by former Anadarko executives. The new positions are senior vice presidents, replacing former executive vice presidents.
Jay F. Marks 10:12 a.m. Chesapeake has not commented on any layoffs, but we know some people (a mi of employees and contractors) have been let go.
Jay F. Marks 10:13 a.m. New CEO Doug Lawler talked during CHK's earnings call about streamlining operations at the company, but officials have not offered any specifics since then
Adam Wilmoth 10:13 a.m. We know there have been scattered layoffs and contractors have been let go. But the company has not provided details.
Jay F. Marks 10:15 a.m. Lawler said Chesapeake is undergoing a comprehensive review of its operations, which could result in the company shedding some of its affiliates
Adam Wilmoth 10:15 a.m. For a company the size of Chesapeake, it must report if layoffs total 500 in Oklahoma City. No such notice has been given.
Jay F. Marks 10:15 a.m. That could lead to some job losses/transfers as assets are sold.
Jay F. Marks 10:16 a.m. Chairman Archie Dunham also hinted at job reductions when he came onto Chesapeake's board last summer.
Paul Monies 10:17 a.m. Also, people who have been let go are bound by the terms of their severance agreements. Many companies put specific clauses in there that they can't talk to the media or they risk forfeiting the severance package.
Guest 10:17 a.m. Thanks for the insight, I have been hearing similar reports. From the employees who I have spoken to, they are worried about the number of layoffs growing.
Jay F. Marks 10:17 a.m. He said CHK would be staff comparably to similar-sized companies.
Jay F. Marks 10:18 a.m. He mentioned Anadarko and Devon. Both companies had about half as many employees as Chesapeake at that time, despite a much larger market cap.
Paul Monies 10:18 a.m. Got a couple of questions here on Tom Ward and his old company, SandRidge.
Jessica 10:18 a.m. How is Sandridge faring? Is Tom Ward gone?
Brent 10:18 a.m. What are Tom Ward's plans since leaving SandRidge? I had heard he was looking for downtown office space. Has he created any new company at this point as Aubrey has done?
Jay F. Marks 10:19 a.m. SandRidge has been quiet since replacing Ward with former CFO James Bennett.
Jay F. Marks 10:19 a.m. SD has said it will narrow its focus in the Mississippian oil play to key areas where it already has developed expensive infrastructure.
Jessica 10:20 a.m. Can we expect the same level of community support from Sandridge going forward?
Jay F. Marks 10:21 a.m. Its stock is up about 40 cents a share since Ward was ousted in June.
Adam Wilmoth 10:21 a.m. SandRidge has spoken highly of its production in the Mississippian in northern Oklahoma. It will be interesting to see what production levels are like in the area over the next few quarters.
Jay F. Marks 10:22 a.m. SD allowed its sponsorship of the Oklahoma City Thunder to expire, but new CEO James Bennett said the company will remain active in the community.
Adam Wilmoth 10:22 a.m. SandRidge and Chesapeake both have said they plan to continue supporting the community financially and otherwise. But it is also clear that both companies are focusing much more on reducing costs.
Jay F. Marks 10:23 a.m. You probably won't see their name as much (without the commercials during Thunder games) but the company likely will continue to do its share in the community.
Jay F. Marks 10:23 a.m. As for Ward, he has been quiet since leaving SandRidge, but I don't think we've heard the last of him.
Brent 10:24 a.m. Have there been any updates on the success of Continental's SCOOP oil play recently? Is it doing as well as they hoped when it was announced?
Brent 10:24 a.m. Has Continental filled the old Devon building at this point or do they still have more room to grow before they may start looking for more office space downtown (or to build a new building perhaps)?
Jay F. Marks 10:25 a.m. CLR touched on the SCOOP in last month's earnings release:
Jay F. Marks 10:25 a.m. Continental continues to experience excellent repeatable results from its drilling activity in the SCOOP. The play, discovered by Continental and disclosed in October 2012, currently extends approximately 80 miles across Grady, Stephens, McClain and Carter counties in Oklahoma and contains an oil and condensate-rich window. To date, more than 90 gross wells in the area have de-risked the productive footprint for more than 40 miles. Continental is the largest producer, most active operator and largest leaseholder with approximately 277,000 net acres in the play. In second quarter 2013, SCOOP net production averaged approximately 17,550 Boe per day, an increase of 23% sequentially and 435% above second quarter 2012. The recent growth was driven by the addition of eight net (14 gross) operated and non-operated wells in the play during the second quarter 2013.
Adam Wilmoth 10:25 a.m. Continental has scheduled a conference call for this afternoon to provide guidance for 2014 production and finances. We might know more about SCOOP then.
Jay F. Marks 10:26 a.m. I haven't heard that Continental is looking for additional space yet, but that company is growing constantly so anything is possible.
James 10:27 a.m. Is Devon going to make an aquisition soon?
Jay F. Marks 10:27 a.m. You can't rule that out, given their history, but I haven't heard any indication of any acquisitions soon.
Jay F. Marks 10:27 a.m. Devon seems pleased with the properties it has at this point.
Brent 10:28 a.m. Any thoughts you can share on when Enable Midstream will announce the location of its headquarters? Sounds like OKC will likely be the place, is the Stage Center tower location likely the site?
Adam Wilmoth 10:29 a.m. Devon was created through many acquisitions. But at its size, there are fewer options that would make sense financially. Devon has cash on hand, but the company has given no indication that it is planning a purchase deal.
Jay F. Marks 10:29 a.m. Officials have said Enable's executives will be in Oklahoma City, with other operations remaining in Houston.
Jay F. Marks 10:30 a.m. The company also inherits Enogex's lease at Leadership Square, so becoming the lead tenant at the new tower seems unlikely.
Chris 10:30 a.m. With hundreds or thousands of acres of land that American Indians own here in Oklahomaa, how can the Tribes streamline exploration and drilling instead of having to jump through obstacles put up by the Bureau of Indian Affairs?
Jay F. Marks 10:31 a.m. The only place that is an issue in Oklahoma is Osage County.
Adam Wilmoth 10:32 a.m. Jurisdiction and regulation is interesting in Oklahoma. The Oklahoma Corporation Commission has jurisdiction over most land issues other than in Osage County. There, the mineral rights are controlled by the Osage nation and are under federal jurisdiction.
Brent 10:32 a.m. It appears that Oklahoma has a wind energy transmission bottleneck at this point. Any idea when any new transmission projects may be coming on line? Or alternatively, any new big wind projects on the horizon?
Paul Monies 10:34 a.m. Clean Line Energy is hoping its Plains and Eastern Clean Line will be operational in 2017 or 2018. It's a high-voltage, direct-current line that will take electricity directly from Panhandle wind farms under development to utilities in Tennessee and the Southeast.
Paul Monies 10:35 a.m. Other wind projects under active development include Apex's Kingfisher Wind Farm in southern Kingfisher County and northern Canadian County. That's the project that's run into some opposition from a few Piedmont residents.
Jay F. Marks 10:36 a.m. There also are a couple of wind farms planned for southern Oklahoma. Both will provide power for utilities in other states.
Paul Monies 10:37 a.m. Hooking those wind farms up to the grid won't be a problem, because they've already gotten approval for the connections from the Southwest Power Pool.
Jennifer 10:37 a.m. What do you think will happen with state drilling tax incentives next legislative session?
Jay F. Marks 10:38 a.m. That will be an interesting debate next year, since one state official already has called for higher gross production taxes, but it's hard to imagine Gov. Mary Fallin being in favor of that.
Jay F. Marks 10:39 a.m. She often talks about making Oklahoma "business friendly," which doesn't quite jibe with higher taxes on the state's top industry.
Adam Wilmoth 10:39 a.m. Drilling tax incentives is an interesting topic. All sides want resolution to the issue. Companies need to know what they will pay for drilling and producing wells. The legislature wants to know how much money will be available.
Adam Wilmoth 10:41 a.m. The current system expires at the end of next year. Something has to happen by then.
Paul Monies 10:41 a.m. This is an issue that hits the smaller operators much more than the larger operators.
Paul Monies 10:41 a.m. The Oklahoma Independent Petroleum Association has been a big advocate of keeping the rates where they are.
Paul Monies 10:42 a.m. Critics of the tax incentives, including the Oklahoma Policy Institute, say they're no longer needed because the type of horizontal drilling they support is now the norm for many producers.
Garen Ewbank 10:44 a.m. One the local consumer side of energy, has the Oklahoman ran a story on the impact of the Western Farmers Electric Coop, in Anadarko, starting a "Thermal Services Agreement" for its member distribution electric coops and its members? This will greatly benefit their electrical consumers as it builds out through demand and usage reductions.
Jason 10:44 a.m. Just heard that the next round of layoffs have commenced at CHK, several managers/VPs in Land, Land Administration, and multiple engineering departments.
Jay F. Marks 10:45 a.m. We'll check with CHK, but they've declined to comment on layoffs rumors to date.
Jay F. Marks 10:46 a.m. Thanks for the tip, Garen.
Paul Monies 10:47 a.m. As always, we're here if anyone affected wants to talk about what's going on outside of the official company channels. We understand it's a tough situation to be in.
Paul Monies 10:48 a.m. Many thanks, Garen.
Guest 10:48 a.m. Is Hiland Partners moving to OKC?
Garen Ewbank 10:49 a.m. The higher first cost of an Oklahoma technology, ground source HVAC/R, may become tamed
Jay F. Marks 10:49 a.m. The private company, owned by Continental Resources CEO Harold Hamm, indicated it is opening an office here in an ad in Sunday's paper.
Paul Monies 10:49 a.m. Sorry, Skip. We're not usually privy to many private equity deals. It's not something they share much before deals are announced.
Adam Wilmoth 10:51 a.m. It sounds like they're using this office to hire scientists and other positions that are harder to fill in Enid.
Paul Monies 10:51 a.m. Thanks for joining us this morning. Got about 10 minutes left if you have any more questions.
Guest 10:53 a.m. Hi, just wondering what activity is out in Dewey co?
Jay F. Marks 10:55 a.m. That is part of the Cana Woodford Shale, which is an active liquids play for Devon and others
Guest 10:55 a.m. What's the latest on Devon's MLP? Wasn't that supposed to be ramping up?
Jay F. Marks 10:56 a.m. That is on track, but Devon is waiting for ideal market conditions before moving forward with a public offering.
Jennifer 10:56 a.m. what is the update on the Keystone pipeline project?
Guest 10:56 a.m. What are "ideal market conditions" for Devon?
Adam Wilmoth 10:57 a.m. Higher natural gas prices.
Jay F. Marks 10:57 a.m. Keystone's southern leg - from Cushing to the Gulf - is nearing completion. Your guess is as good as mine on the rest of the project.
Jay F. Marks 10:57 a.m. Devon probably also is looking for indications investors are ready to buy into an infrastructure venture like its midstream offering.
Jay F. Marks 10:58 a.m. It'll be interesting to see what kind of reception it gets given the current concerns about pipelines raised by the debate over Keystone XL
Adam Wilmoth 10:58 a.m. We're still waiting for an indication from the Obama Administration about whether the northern leg of Keystone will be approved. Obama said his decision would be based in part on carbon emissions.
Guest 10:58 a.m. Interesting. What's the advantage of a MLP?
Jay F. Marks 10:59 a.m. Such arrangements bring together the best parts of partnerships and corporations, with tax advantages that can benefit investors. Master limited partnerships don't pay corporate income tax, so there is more cash available to pay those who hold partnership units.
Adam Wilmoth 10:59 a.m. State department reports have indicated relatively low carbon affect. The Sierra Club and other environmental groups have said the pipe would significantly increase carbon emissions.
Paul Monies 11:00 a.m. We're going to stop it there. Thanks again, everyone, for your questions and for following along. We'll be doing this again next month, so stay tuned for Tuesday, Oct. 1.

by Jay F. Marks
Energy Reporter
Jay F. Marks has been covering Oklahoma news since graduating from Oklahoma State University in 1996. He worked in Sulphur and Enid before joining The Oklahoman in 2005. Marks has been covering the energy industry since 2009.
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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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