Jerry Winchester heads up Oklahoma’s newest publicly traded company.
He leads Seventy Seven Energy Inc., which spun out of Chesapeake Energy Corp. on July 1. It is now a standalone oil-field services company with only business ties to its former parent.
Winchester said it may be the first publicly traded service company to be based in Oklahoma City.
Winchester, a Dickson native, returned to Oklahoma in 2012 to lead the Chesapeake subsidiary destined to stand on its own. It took longer than expected because of Chesapeake’s transition, with new leadership, to a more focused oil and natural gas producer.
He said Seventy Seven Energy, which offers drilling, hydraulic fracturing, oil-field rentals, rig relocation, and fluid handling and disposal, includes a number of other executives who have returned to their Oklahoma roots.
“You’ve got a bunch of small-town Oklahoma guys who’ve got a $2 billion annual revenue, public, service company in their home state,” Winchester said. “Does it get any better than that?
Winchester discussed the start of Seventy Seven Energy with The Oklahoman this week. Below is an edited transcript of that conversation.
Q: How do you describe Seventy Seven Energy to people?
A: Usually, it’s like “the biggest service company you’ve never heard of,” because we were parked out in the middle of Chesapeake. For a lot of years, that was our only customer. Then as they began to really pull back from the height of their drilling program, we started to have some excess capacity. Like service guys are used to doing, we just couldn’t stand around and watch that sitting there, so we’re out hustling up work and getting rigs working for people.
Q: How much of your business doesn’t involve Chesapeake at this point?
A: By the time (Chesapeake CEO) Doug (Lawler) gets here (in June 2013), 26-28 percent of our drilling work is outside Chesapeake. I think it was a real surprise to him. A lot of people thought we only got work because we’re like the boss’ daughter. ... It was far from the truth. I think he found that out. He looked at the quality of the folks that we were working for. We were out working for EOG. We’re working for Continental. We’re working for SandRidge and Noble and these groups. People that he holds in high regard.
Q: How did Seventy Seven benefit from being part of Chesapeake?
A: Their investment thesis was either things they couldn’t get their hands on or things they thought they were paying too much for, so other than the rigs that we got rid of, everything else we have is new. The rental equipment that we have at Great Plains is new. It’s not like the typical rental yard where you have this toolbox of stuff that you’ve accumulated over the years, much of which you’ll never use. It was stuff that they needed right then. It was newer technology.
Thanks to Chesapeake, we have some of the best facilities in the world for a company our size. That gives us some scale. That gives us the ability to grow into those so we can operate more crews than we have. On the rental side, we can handle more. The rental story really is about utilization. We’ve got a lot of stuff that needs to find a home. Business development finds that for us.
When you look at those pieces now we’re kind of a hybrid. There’s not a lot of companies that have the pieces we have and the rigs. We’ve used the rigs, I think, strategically to help us get an in with customers ... the opportunity for our entire team to come in and talk about the company.
Q: Have those Chesapeake ties hampered the new company at all?
A: We had lots of saying, “We’ll work with you, but not while you’re still at Chesapeake,” so we had a little pent up demand. ... That’s on performance. Those people are not gonna run a rig if they don’t think they’re getting value out of it.
We’ve worked for the most active driller on the planet. I think the most unique thing that we have is perspective. I mean, we grew up inside of an E&P company so you really get to see what they value and what they’re looking for as far as performance. That perspective allowed us to offer options or to understand where they were at and how we needed to move our business or sort it out so it was a better fit for them.
Q: What about the other segments of Seventy Seven?
A: We’ve done our first frac work outside Chesapeake. The segment that got hardest hit was our rental tool side because they had really one customer. It was Chesapeake. When you chunk 100 rigs, you cut over half of their work off. It really affected them. They’ve been able to go from zero outside work to I think they were 2 (percent), then they were 10. We finished this month with roughly 20 percent.