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CERAWEEK 2014© 2014 Bloomberg Finance LP
Doug Lawler, for five years already in his quest to reduce and rebuild Chesapeake Energy, surprised investors Tuesday with the unexpected acquisition of WildHorse Resource Development for $ 4 billion. Speaking at the Deloitte Oil & Gas conference in Houston, he called the agreement a "pivot point" for the company.
The price here is 420,000 net acres of unconventional oil and gas deposits, already producing 47,000 barrels a day, mostly from the Eagle Ford shale deposit in southeastern Texas, as well as Additional commissioning in the Terryville deposit, north of Louisiana. This equates to approximately $ 7,000 per undeveloped acre and $ 900,000 per undrilled location.
Chesapeake buys WildHorse, which has a lean public float, mainly from a group of private equity lenders led by Natural Gas Partners and Carlyle Group, KKR holding a small piece. Capital holds approximately 70%, Carlyle Group 24% and KKR approximately 5%, according to documents filed by the SEC. No surprise, Chesapeake shares lost 15% on the day. When the agreement is finalized, Wildhorse investors will hold a 45% stake in Chesapeake.
Just minutes after he left the phone with analysts, Lawler gave a presentation in front of a packed hall in the Mariott Marquis Ballroom, in which he explained with precision, in his Oklahoma appeal, why he was doing so. Was an asset that deserved to be abandoned by almost half of society.
WildHorse Eagle Ford's position is largely contiguous, it has only 20% growth, and it is located in the Eagle Ford oilfield, with 80% of its oil revenues. This asset will allow Chesapeake to more than double its oil production by 2020, reaching 165,000 barrels a day. "It's absolutely a turning point," Lawler says. Since it buys primarily Wildhorse with equities, the transaction will further deleverage Chesapeake's balance sheet, while immediately increasing cash flow.
"We have gone through a lot of difficult times and we still want to move this company forward. We want this opportunity. We were made for that. "
The geology of the acreage acquired is very similar to that of Chesapeake's current position in Eagle Ford, where she drilled 2,400 wells, generally constructing horizontal completions 10,000 feet long. "It's similar to what we did, a tight fit," he said. WildHorse bought part of its position at Eagle Ford from Anadarko Petroleum, its former employer, in 2017, for $ 600 million. Jason Pigott, one of his senior lieutenants in Chesapeake, ran Anadarko's Eagle Ford division.
Since taking over five years ago, Lawler has cut and pushed Chesapeake into a much healthier operation financially. It reduced debt and long-term liabilities by $ 12 billion, cleared $ 10 billion in intermediate and downstream commitments, and eliminated $ 1 billion in annual cash costs. Lawler takes care of spreading the credit. He says he is very proud of the employees, especially those who held out: "We went through hell."
This operation is no longer a cult of personality dedicated to executing the whims of Aubrey McClendon, co-founder of the legend. Heroic figure of the rise of the shale fracking boom in America, McClendon has launched an army of "earthlings" to spend tens of billions of dollars to capture gigantic expanses of ranches and empty pastures in Texas, Louisiana. Oklahoma, Ohio and Pennsylvania in the hope of assembling the "preferred areas" of a new generation of oil and gas fields. McClendon built an in-house drilling business rather than relying on outside contractors like so many other companies. At the height, they used 180 rigs across the country. When Carl Icahn and other activist investors chased McClendon in 2013, Chesapeake had a debt and long-term bond of about $ 23 billion. The company was so accustomed to generating cash through endless series of debt financings and land sales that it had not generated free cash flow in 10 years.
In a brief interview with Forbes On the sidelines of the Deloitte conference, Lawler insisted that despite all this brilliant new Eagle Ford acreage to play with, his enthusiasm had not cooled to drill the 250,000 acre Chesapeake in the Powder River Basin in Wyoming. "What we like is the southern part, the hot spot. It has petrotechnical qualities for good hydrocarbon recovery. We own the majority of the area in this area. He says this will generate "a significant cash flow".
It is odd to see Chesapeake again on the path to acquisition, after so many years of asset losses of more than $ 10 billion and 25 operating companies, including its pipeline and drilling business. Regrets he having to sell assets? "No, they were decisions made at specific times that were necessary for our activity." Admittedly, it would be nice to keep all that acreage in the Permian, he says, but he's not really interested in relying on the ancient history of Chesapeake. "We will focus on what we have accomplished, what we intend to do," he says, and not on a decision made "15 or 20 years ago with which we might not be okay and do not know why. . "
Does he ever doubt that he may not be making the right decision with this agreement with Wildhorse? "No doubt," he said. "We know we are doing the right things." It is worthwhile that Lawler's efforts have at least achieved the due diligence of NGP and Carlyle. The company remains on a fragile financial footing, with long-term debt of $ 10 billion against total assets of $ 12.7 billion, operating income of $ 600 million and net income of nearly $ 300 million. millions of dollars for the nine-month period ending in September. Credit Suisse analyst William Featherstone notes that, while WildHorse is improving Chesapeake, the pro forma company will still be expensive and overleveraged relative to its peers.
Since Lawler took the reins in June 2013, Chesapeake's shares have risen from $ 20 to a peak of about $ 30 in July 2014, before their sharp fall with the price of oil at $ 2.70 in 2016 (death of McClendon). Today, they are $ 3.50, a reduction of 25% since the beginning of October. "I'm not at all concerned about that," says Lawler. He relied on the vast experience and know-how of Chesapeake, who drilled more than 20,000 horizontal wells, and the dedication of his team. "We have gone through a lot of difficult times and we still want to move this company forward. We want this opportunity. We were made for that. "
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CERAWEEK 2014© 2014 Bloomberg Finance LP
Doug Lawler, for five years already in his quest to reduce and rebuild Chesapeake Energy, surprised investors Tuesday with the unexpected acquisition of WildHorse Resource Development for $ 4 billion. Speaking at the Deloitte Oil & Gas conference in Houston, he called the agreement a "pivot point" for the company.
The price here is 420,000 net acres of unconventional oil and gas deposits, already producing 47,000 barrels a day, mostly from the Eagle Ford shale deposit in southeastern Texas, as well as Additional commissioning in the Terryville deposit, north of Louisiana. This equates to approximately $ 7,000 per undeveloped acre and $ 900,000 per undrilled location.
Chesapeake buys WildHorse, which has a lean public float, mainly from a group of private equity lenders led by Natural Gas Partners and Carlyle Group, KKR holding a small piece. Capital holds approximately 70%, Carlyle Group 24% and KKR approximately 5%, according to documents filed by the SEC. No surprise, Chesapeake shares lost 15% on the day. When the agreement is finalized, Wildhorse investors will hold a 45% stake in Chesapeake.
Just minutes after he left the phone with analysts, Lawler gave a presentation in front of a packed hall in the Mariott Marquis Ballroom, in which he explained with precision, in his Oklahoma appeal, why he was doing so. Was an asset that deserved to be abandoned by almost half of society.
WildHorse Eagle Ford's position is largely contiguous, it has only 20% growth, and it is located in the Eagle Ford oilfield, with 80% of its oil revenues. This asset will allow Chesapeake to more than double its oil production by 2020, reaching 165,000 barrels a day. "It's absolutely a turning point," Lawler says. Since it buys primarily Wildhorse with equities, the transaction will further deleverage Chesapeake's balance sheet, while immediately increasing cash flow.
"We have gone through a lot of difficult times and we still want to move this company forward. We want this opportunity. We were made for that. "
The geology of the acreage acquired is very similar to that of Chesapeake's current position in Eagle Ford, where she drilled 2,400 wells, generally constructing horizontal completions 10,000 feet long. "It's similar to what we did, a tight fit," he said. WildHorse bought part of its position at Eagle Ford from Anadarko Petroleum, its former employer, in 2017, for $ 600 million. Jason Pigott, one of his senior lieutenants in Chesapeake, ran Anadarko's Eagle Ford division.
Since taking over five years ago, Lawler has cut and pushed Chesapeake into a much healthier operation financially. It reduced debt and long-term liabilities by $ 12 billion, cleared $ 10 billion in intermediate and downstream commitments, and eliminated $ 1 billion in annual cash costs. Lawler takes care of spreading the credit. He says he is very proud of the employees, especially those who held out: "We went through hell."
This operation is no longer a cult of personality dedicated to executing the whims of Aubrey McClendon, co-founder of the legend. Heroic figure of the rise of the shale fracking boom in America, McClendon has launched an army of "earthlings" to spend tens of billions of dollars to capture gigantic expanses of ranches and empty pastures in Texas, Louisiana. Oklahoma, Ohio and Pennsylvania in the hope of assembling the "preferred areas" of a new generation of oil and gas fields. McClendon built an in-house drilling business rather than relying on outside contractors like so many other companies. At the height, they used 180 rigs across the country. When Carl Icahn and other activist investors chased McClendon in 2013, Chesapeake had a debt and long-term bond of about $ 23 billion. The company was so accustomed to generating cash through endless series of debt financings and land sales that it had not generated free cash flow in 10 years.
In a brief interview with Forbes On the sidelines of the Deloitte conference, Lawler insisted that despite all this brilliant new Eagle Ford acreage to play with, his enthusiasm had not cooled to drill the 250,000 acre Chesapeake in the Powder River Basin in Wyoming. "What we like is the southern part, the hot spot. It has petrotechnical qualities for good hydrocarbon recovery. We own the majority of the area in this area. He says this will generate "a significant cash flow".
It is odd to see Chesapeake again on the path to acquisition, after so many years of asset losses of more than $ 10 billion and 25 operating companies, including its pipeline and drilling business. Regrets he having to sell assets? "No, they were decisions made at specific times that were necessary for our activity." Admittedly, it would be nice to keep all that acreage in the Permian, he says, but he's not really interested in relying on the ancient history of Chesapeake. "We will focus on what we have accomplished, what we intend to do," he says, and not on a decision made "15 or 20 years ago with which we might not be okay and do not know why. . "
Does he ever doubt that he may not be making the right decision with this agreement with Wildhorse? "No doubt," he said. "We know we are doing the right things." It is worthwhile that Lawler's efforts have at least achieved the due diligence of NGP and Carlyle. The company remains on a fragile financial footing, with long-term debt of $ 10 billion against total assets of $ 12.7 billion, operating income of $ 600 million and net income of nearly $ 300 million. millions of dollars for the nine-month period ending in September. Credit Suisse analyst William Featherstone notes that, while WildHorse is improving Chesapeake, the pro forma company will still be expensive and overleveraged relative to its peers.
Since Lawler took the reins in June 2013, Chesapeake's shares have risen from $ 20 to a peak of about $ 30 in July 2014, before their sharp fall with the price of oil at $ 2.70 in 2016 (death of McClendon). Today, they are $ 3.50, a reduction of 25% since the beginning of October. "I'm not at all concerned about that," says Lawler. He relied on the vast experience and know-how of Chesapeake, who drilled more than 20,000 horizontal wells, and the dedication of his team. "We have gone through a lot of difficult times and we still want to move this company forward. We want this opportunity. We were made for that. "
