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.
We didn’t have a business development arm because we didn’t need one. They (Chesapeake) vertically integrated, they would just call down the hall and say we need some of that or we need to move this over here and we would do it. Now we’ve had to add the business development piece of that. We all came from normal service companies that had that so we know how that works.
Q: What do you think sets Seventy Seven apart from other service companies?
A: Our story has been we love being in Oklahoma City. If you are going to be in the North America land story, Oklahoma City is North American land. It’s home of the most active operators and drilling programs in the country. Who better to work with than the folks that are our neighbors and friends and colleagues. It’s been really encouraging. We haven’t had any problems recruiting people to Oklahoma City. It’s not the place that I left. Oklahoma City is very different, in a good way. We’ve been able to get people in here. They’ve enjoyed watching the evolution of the city, just the vibrancy of everything that’s gone on.
We’ve got great customers here and we work for the majority of them. For us, that’s a huge priority. If you stand on the roof of our building and you take your iPhone and do the panorama, you look out this side, here’s AEP. You swing to the south, here’s Continental, Devon, SandRidge. XTO’s downtown there. RKI is there. You keep coming around, now here’s Chesapeake. You swing back around behind us, you can see to Linn and Gulfport and everybody that’s on the north side of town. The only time you lose is when you’re in the antenna farm and I think even Chaparral is up there. We’re in the middle of a great group of customers. ... Within 10 minutes, we can be to any place that we need to see.
Q: Where is your company active?
A: Obviously we did so much in the Utica because Chesapeake was first in there. We’ve got the biggest number of rigs running in the Utica today. Our newest rigs are out there, not only working for Chesapeake, but working for Noble. These next six are going out (to Aubrey McClendon’s American Energy Partners LP).
We assemble all those rigs here. ... We buy all the pieces, but we assemble them right here in Oklahoma City. They’re tested then we break them down and load them and haul them to their first well. We’ve 16 of those to build. We turn about one a month out.
We think our story is not that we want to be the biggest rig company, but we want to have the newest fleet. ... All these new ones are A/C electric, they walk. They’ve got every nice thing that you can imagine. And the other thing is they’ve proven their ability to perform in West Virginia and in Ohio. As we build the next 10 out behind that for Chesapeake, we’ll get a chance to work those rigs in south Texas in the Eagle Ford and possibly even in Wyoming. It’s a great rig for us.
Then you talk about the frac business that we have (with) brand new equipment. Now we’ve done some work for some outside operators. Our tenth fleet comes out in the fall so we’ll have roughly three crews that we’ll have out working for people other than Chesapeake.
Q: What is the biggest challenge facing Seventy Seven Energy now?
A: We’ve got to get out and be better known. Right now it’s not going to do much for us on the rig side. Every rig we have is sold out. It’s about an opportunity to grow the company. People don’t think about it, but it was half of Chesapeake, 5,300 people. It’s a big company. We’re just really excited about getting the chance to go do our own thing.
Q: How big do you expect the company to be as you keep adding rigs and stuff?
A: We do need some more people. We had to add some because Chesapeake was doing the back office stuff for us, administratively. We still have a service agreement with them, so we’ve still got people that we’re hiring. We’ll be hiring for rigs. We’re hiring on the frac side, not just service hands. We’re hiring technical people, business development people. We’ve got some jobs to fill, so if you know me, don’t call me. Go to the website.
Q: On the personal side, what did it mean to you to be able to come back to Oklahoma a couple of years ago?
A: It was exciting for my family and myself. I didn’t figure that I’d ever leave, and then the opportunity came up. It was something we needed to do. We had to get from where I was at in my career to where I am now. We had a great time in Houston. It was a good experience, but to get to come home to kind of a remade Oklahoma ... was kind of a lot for the better. ... Our family is up here. It’s good to be home.