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Chat wrap: More changes coming at Chesapeake?

by Adam Wilmoth and Paul Monies Modified: August 13, 2013 at 11:09 am •  Published: August 13, 2013

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 9:59 a.m. Our first question concerns possible layoffs at Chesapeake Energy, who yesterday made some changes to its executive leadership team. You can check out Energy Editor Adam Wilmoth's story here:
Paul Monies 10:00 a.m. Adam, do you want to take the first question?
Adam Wilmoth 10:03 a.m. I asked Chesapeake CEO Doug Lawler yesterday whether there would be further layoffs or changes. He said the company hasn't made any further changes at this point, but that they are still evaluating all parts of the company. He said there may be other changes announced in the future.
Jay F. Marks 10:04 a.m. It seems anything is possible at CHK at this point, given the new leadership in place, but there hasn't been any indication mass layoffs are coming.
Fracking Girl 10:07 a.m. Does fracking cause earthquakes?
Jay F. Marks 10:07 a.m. The short answer is no.
Adam Wilmoth 10:07 a.m. Lawler has only been on the job for two months. I think he and his teams are looking at all parts of the company to find ways to cut costs. So far investors seem pleased as the stock hit a 52-week high last week.
Jay F. Marks 10:08 a.m. But nothing is ever that simple.
Jay F. Marks 10:08 a.m. There have been some studies linking earthquakes to injection of wastewater from fracking in dispoal wells.
Adam Wilmoth 10:09 a.m. It's probably a bad idea to drill a wastewater disposal well across a fault line.
Adam Wilmoth 10:09 a.m. The issue here is with disposal wells, not with fracking itself.
Jay F. Marks 10:09 a.m. The industry and regulators are aware of this risk, so they are paying attention to the geological implications of such wells.
Jay F. Marks 10:10 a.m. Wastewater is a result of fracking, but not the only one.
Jay F. Marks 10:10 a.m. There are disposal wells that have been in operation since well before fracking became a standard process in the industry.
Adam Wilmoth 10:10 a.m. Even with the disposal wells, there are many question. A well or two in Ohio have been more directly tied with earthquakes in the area.
Adam Wilmoth 10:11 a.m. Two studies from the same department at the University of Oklahoma last year found conflicting conclusions about whether the big Oklahoma earthquake a couple of years ago was caused or enhanced by a disposal well.
Jay F. Marks 10:12 a.m. Many questions remain, however. There are researchers here in Oklahoma who are still gathering more data about the links between disposal wells and earthquakes.
Adam Wilmoth 10:13 a.m. Here's a link to my story in March about the dueling earthquake reports:
vajramatt 10:13 a.m. How will yesterday’s VP level shake up change CHK?
Jay F. Marks 10:13 a.m. That remains to be seen.
Jay F. Marks 10:14 a.m. New CEO Doug Lawler has only been on the job a couple of months.
Jay F. Marks 10:15 a.m. He inherited a lot of issues that need to be dealt with at CHK.
Adam Wilmoth 10:15 a.m. Lawler said those executive level positions will not be filled, but others in those departments will take over those responsibilities.
Jay F. Marks 10:16 a.m. CHK has been plagued with cash flow issues and an abundance of natural gas-rich properties.
Jay F. Marks 10:16 a.m. The company maintains those are valuable, but the market does not support that view at the moment.
Jay F. Marks 10:17 a.m. CHK also has been trying to move into what co-founder Aubrey McClendon called "asset harvest" mode after spending years amassing leasehold.
Adam Wilmoth 10:17 a.m. Lawler: "The operations leaders are outstanding. They've done an excellent job. Part of the job they've done is to create excellent teams. There are strong leaders in the groups that I believe will be able to step into growing roles."
Jay F. Marks 10:18 a.m. Sounds like CHK is going to make do with fewer supervisors...
Jay F. Marks 10:19 a.m. But it will be interesting to see if Lawler brings in any former Kerr McGee/Anadarko colleagues to fill the gap.
Paul Monies 10:19 a.m. It seems like SandRidge has been quiet lately. What's the latest there?
Jay F. Marks 10:20 a.m. The honeymoon period continues there as well.
Adam Wilmoth 10:20 a.m. SandRidge is in a similar situation: the new leadership team is evaluating what is working and what is not.
Jay F. Marks 10:20 a.m. CEO James Bennett is just as new to his post as Lawler, although he has the benefit of being at the company for a few years.
Jay F. Marks 10:21 a.m. SD also is hearing from fewer voices than CHK at this point, I think, so Bennett's mission is clearer. The company is focused on cutting costs in key parts of its Mississippian acreage where there are fewer infrastructure problems.
Bbailey 10:22 a.m. Do you think SandRidge is for sale?
Jay F. Marks 10:23 a.m. Bennett has said no.
Jay F. Marks 10:23 a.m. But it's hard to believe it would not be sold to the right buyer given that SD's stock continues to hover around $5 a share.
Adam Wilmoth 10:24 a.m. SandRidge executives think their Mississippian assets in northern Oklahoma and southern and Kansas are worth far more than $5 a share. They think they can raise the stock price by continued development there.
Jay F. Marks 10:25 a.m. Now they've just got to make that happen...
Paul Monies 10:25 a.m. What are some of the infrastructure issues in the Mississippian?
Adam Wilmoth 10:25 a.m. Investors at the company's annual meeting seemed to support what the company is doing, but they were frustrated that the stock price hasn't moved much.
Jay F. Marks 10:26 a.m. Much of the area included in the Mississippian play is rural, without ready access to the kind of power needed to run a drilling operation
Adam Wilmoth 10:26 a.m. There's also a problem with water disposal.
Jay F. Marks 10:27 a.m. Wells in that area produce more water than in other plays
Adam Wilmoth 10:27 a.m. The Mississippian produces far more water than oil, and that water is about 20 times more salty than the ocean.
Adam Wilmoth 10:28 a.m. SandRidge has spent much of the past few years building a saltwater disposal system that can move that water from the produced wells and dump it back underground, hopefully without causing earthquakes.
Jay F. Marks 10:28 a.m. SD has a leg up on other producers in the region because of the work it has done to build infrastructure. That is why the company has chosen to focus in areas where that infrastructure is in place, cutting down on such investments in the near term.
Adam Wilmoth 10:29 a.m. That's also why some other producers have been less excited about the Mississippian in recent months while SandRidge is increasing production in the area while cutting costs.
Jay F. Marks 10:30 a.m. It is very expensive to run diesel-fueled generators in areas where electricity is not available.
Adam Wilmoth 10:31 a.m. Bennett said at the annual meeting that the company had been spending $100,000 per month per well to power well sites with diesel generators.
Adam Wilmoth 10:32 a.m. Because of the improved infrastructure, SandRidge has dropped the number of sites on generators to 11 percent, down from 35 percent.
Adam Wilmoth 10:32 a.m. And most of the remaining sites are now on less expensive natural gas generators instead of diesel generators.
Jay F. Marks 10:33 a.m. I wrote about gas-powered generators recently:
Paul Monies 10:34 a.m. Has Continental said much more about how things are going in the SCOOP in southern Oklahoma?
Jay F. Marks 10:35 a.m. CLR executives are still pleased with the play.
Jay F. Marks 10:35 a.m. "Our SCOOP play is having tremendous success in growth and delineation," CEO Harold Hamm said in last week's earnings release.
Jay F. Marks 10:36 a.m. Also from that release: 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.
Paul Monies 10:37 a.m. Is the southern leg of the Keystone XL pipeline finished yet?
Jay F. Marks 10:37 a.m. It's getting there.
Jay F. Marks 10:37 a.m. Last I heard, it was supposed to be done by the end of the summer, which is rapidly creeping up on us...
Jay F. Marks 10:39 a.m. Developer TransCanada told the Houston Chronicle last month that oil would flow through the 485-mile line this year, but it remains to be seen whether the Canadian company will get clearance to proceed with the rest of the project.
Adam Wilmoth 10:39 a.m. The Houston Chronicle's Fuel Fix blog last month quoted TransCanada executives who said oil will be flowing through the pipe by the end of the year.
Jay F. Marks 10:39 a.m. There still is substantial opposition to the project, especially from environmental groups that question the safety of pipelines.
Paul Monies 10:40 a.m. Have their efforts slowed down the project much?
Jay F. Marks 10:40 a.m. It's hard to tell what is slowing down the project at this point.
Jay F. Marks 10:40 a.m. It has been under review by the federal government for about five years.
Jay F. Marks 10:41 a.m. There is no timeline for the State Department to rule on it, but President Barack Obama recently said it would not be approved if it significantly increases greenhouse gas emissions.
Jay F. Marks 10:42 a.m. People on both sides of the project heralded those remarks, but the administration still has not tipped its hand on whether the project will be approved.
Jay F. Marks 10:42 a.m. It's your turn now, Paul.
Jay F. Marks 10:43 a.m. Will the recent lawsuits filed against OG&E cause the utility to move away from burning coal for power?
Paul Monies 10:44 a.m. Not anytime soon. They've repeatedly said they're committed to fuel diversity, which includes coal, natural gas and wind generation.
Jay F. Marks 10:44 a.m. Groups like the Sierra Club want to stop burning coal altogether. Is that a viable option at this point?
Paul Monies 10:46 a.m. The Sierra Club's Beyond Coal campaign wants an orderly end to coal generation in the United States. They realize it can't be done overnight, but they'd like to see more announcements like Tulsa's Public Service Co., which wants to phase out its last two coal units at its Northeastern Station plant near Oologah by 2026.
Paul Monies 10:48 a.m. Here's a link to a coal story I wrote a couple of weeks ago:
Carol 10:48 a.m. Will Enable Midstream MLP be headquartered in Oklahoma City?
Jay F. Marks 10:48 a.m. It seems likely, although it hasn't been made clear yet.
Jay F. Marks 10:49 a.m. Officials said a couple weeks ago that Enable's executives will be housed in Oklahoma City.
Paul Monies 10:49 a.m. For those who don't know, Enable is the midstream partnership from OG&E's old Enogex division and CenterPoint Energy out of Houston.
Jay F. Marks 10:50 a.m. The new company still does not have a CEO, but it appears that he/she will be based in Oklahoma City.
Jay F. Marks 10:50 a.m. Enogex and CenterPoint have contributed executives to the new company, but no major personnel moves are expected as Enable becomes a new publicly traded company.
Carol 10:51 a.m. How long do you think before Continental Resources will need a new building to accommodate its growth?
Jay F. Marks 10:51 a.m. That is a good question.
Jay F. Marks 10:52 a.m. Continental, which moved into Devon's old downtown tower, is growing quickly but I'm not sure how much of that is here in Oklahoma City.
Adam Wilmoth 10:52 a.m. At the company's investors day last October, Continental executives said they had about 750 employees, up about 77 percent in about three years.
Jay F. Marks 10:52 a.m. The company's major operations are centered in the Bakken Shale in North Dakota and Montana, so most of its added jobs are probably there.
Paul Monies 10:53 a.m. We're going to wrap up this chat at 11 a.m., so let us know if you have any remaining questions.
Carol 10:54 a.m. Do you see a problem with larger energy companies in Oklahoma City like Devon, Chesapeake, and Sandridge being overly competitive and with its social responsibility? I mean that by not letting smaller energy companies like PostRock, Linn Energy, and Blueknight come in the OKC spotlight...
Jay F. Marks 10:55 a.m. Those companies are tough to compete with, but the industry is attracting a lot of folks these days.
Adam Wilmoth 10:55 a.m. Just like with any industry, bigger companies can command better rates from contractors, but there's quite a bit of room in the oil patch for smaller players.
Jay F. Marks 10:55 a.m. Many of them are not looking to work for a large company, just like not everyone chose to attend a large university.
Adam Wilmoth 10:56 a.m. Most of the oil and natural gas companies in Oklahoma are very small, drilling just a few wells each year.
Jay F. Marks 10:56 a.m. The diversity of energy companies in Oklahoma City is good for the industry, the city and the people working here.
Paul Monies 10:56 a.m. Also, having a mix of large and small companies in Oklahoma City allows for workers to have some flexibility in where they want to work while still staying in the area.
Jay F. Marks 10:57 a.m. Large companies also do business with many smaller companies, especially service providers, so their growth benefits all.
Adam Wilmoth 10:57 a.m. The bigger companies are needed to drill large horizontal wells that can cost more than $10 million each. But smaller companies stay busy, either with traditional, vertical wells or by pooling together with each other or with larger companies to drill more expensive wells.
Paul Monies 10:58 a.m. This is your 2-minute warning. Any last questions?
Carol 10:58 a.m. But in respects to local social responsibility, why are there no small energy companies stepping up?
Jay F. Marks 10:59 a.m. What do you mean like that?
Paul Monies 10:59 a.m. Carol, are you talking about philanthropy, sponsorships?
Carol 10:59 a.m. Yes
Jay F. Marks 11:00 a.m. The smaller companies are just as engaged in the community; they just don't have the money to be an Oklahoma City Thunder sponsor or the like.
Carol 11:00 a.m. Sponsorships, events, and charitable contributions...
Adam Wilmoth 11:00 a.m. Small companies participate in programs like the OERB that clean up abandoned well programs.
Jay F. Marks 11:00 a.m. If you look at the lower level sponsors of most community events, you'll see plenty of small energy companies.
Carol 11:01 a.m. Good information, thanks!
Adam Wilmoth 11:01 a.m. Smaller companies and their executives also have sponsored many building projects and scholarship programs at OU, OSU and other local universities.
Paul Monies 11:02 a.m. OK, we're going to close the chat now. Thanks for joining us, everyone.
Paul Monies 11:02 a.m. We'll back next month on Sept. 10 at 10 a.m.
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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