Chesapeake empire marches on

[Pete]

In the last 30-40 years, I've never seen a company in any industry be able to maintain the growth and capricious spending being exhibited by Chesapeake.

They usually go great guns for about a decade, then fall -- often hard.

I've worked for a couple of them at pretty high levels. Both were a lot like CHK is now, spending money and hiring like crazy and at both places there was an air that we were just smarter than everyone else.

In the end, both companies came crashing down, mainly due to being way too aggressive in expansion and spending. Both still survive, but in very different forms and only a small fraction of the same employees.

I can think of hundreds of other examples, including the last energy boom in OK & Texas in the 70's and 80's.

Irresponsible spending (like millions for gas stations worth a small fraction of that) is the surest sign of corporate hubris and I just hope that CHK will start putting some things back before they end up in a downturn and leave one of the nicest areas of town with a big scar.

[SouthsideSooner]

I don't know, so I'm asking.

Other than these real estate purchases, are there other examples of lavish, wasteful spending by CHK? Although the millions spent on these land purchases are a lot of money, they're not that much for a company the size of CHK.

If there is a grand vision for this part of town, you also have to consider what the property will be worth when the vision is realized.

[jbrown84]

Kind of sounds like Kerr-McGee.

But I think they are smart to slow down their expansion and acquisition in the energy sector. All this spending lately is on real estate, and Aubrey must be pretty convinced that what he's going to do on that land is going to make the prices he paid worth it.

[Pete]

Wasteful is a matter of opinion but I can give several examples of lavish: 3 private corporate dining rooms, an elaborate private health club complete with a pool, highly compensated (above the norm) employees, huge payouts to executives, full-page ads in the Oklahoman almost every week, millions spent on the boathouse and other philanthropies, etc.

Don't get me wrong, for the most part I think this stuff is great. But all that and more is in addition to absurd prices paid for hundreds (if not thousands) of parcels around town.

And my point is when things to tighten up, the first thing to stop will almost certainly be real estate development.

[sdsooners]

Wasteful is a matter of opinion but I can give several examples of lavish: 3 private corporate dining rooms, an elaborate private health club complete with a pool, highly compensated (above the norm) employees, huge payouts to executives, full-page ads in the Oklahoman almost every week, millions spent on the boathouse and other philanthropies, etc.
.

I hope you are not a shareholder of any major corporations if you consider these things to be "lavish" spending. Do you realize that CHK is a $24 BILLION dollar company that made $8 BILLION in revenue just last year? The items you listed above are nickels to them. "Lavish" spending is buying airplanes and paying a CEO hundreds of millions in bonuses. CHK may spend a lot of money, but at least their money is an investment in their people and the communities in which they operate. I've never heard of a company who regrets or fails because they made reasonable investments in their employees.

[Dustbowl]

Natural gas. Natural gas. Nothing to do with gasoline prices.

I beg to differ. Look at Natgas charts during recessions.

During the last recession, the oil complexes including Nat gas fell 55% form its peak. This was during the mildest recession on record. Declines like this have happened in EVERY national recession. Oh, but it's going to be different this time. Yeah right. Faith-based economic decisions are foolish. History tells you the truth.

I love OKC and I'm happy for the CHK success, just don't piss on my leg and tell me it's raining.

If you really knew what goes on inside these publicly traded companies and what the insiders game really is, you wouldn't touch them with a ten foot pole. Can you say bagholders?

[Pete]

I was a senior executive at company with $5 billion in revenues last year, so I understand the scale quite well.

My point is that these types of extravagances are part of a much larger business approach commonly found in companies that get on a roll, especially for the first time.

It's certainly not nickels when you add it all up -- especially when you can no longer just grow yourself out of your spending habits.

[BG918]

Anyone know of a timetable for CHK will announce their plans? Are they waiting until they secure all of the property, or do you think architects are working as we speak to come up with a proposal? I just found this quote by Aubrey McClendon very interesting:

"This was the last piece to the Nichols Hills puzzle,” he said Thursday evening. Asked to elaborate, he said, "I am sorry. It's just not time yet. Too many moving pieces still.”

[onthestrip]

All this spending lately is on real estate, and Aubrey must be pretty convinced that what he's going to do on that land is going to make the prices he paid worth it.

Do you really think the outrageous money spent on these real estate purchases along with current construction costs that he can make it worth it in the OKC market. I highly doubt it. It sounds more of just something he wants done no matter how little financial sense it makes.

Seriously, just ask yourself if it makes sense to pay 3 mil for something appraised at 300k.

[dismayed]

My greatest fear is another Urban Renewal / I.M. Pei disaster, e.g. they buy up everything and bulldoze the entire block, with plans to put a bunch of stuff there in its place, but then go belly up before that happens... leaving us with nothing.

[gmwise]

Enron all over again

[Pete]

Just spoke to a friend that operates the Regal Room, the event center on Grand near Robinson -- I think it used to be called the Homebuilder's Center.

I knew that property had been purchased by Chesapeake a while ago and he confirmed they will soon be forced out and that the Regal Room will cease to exist.

So, yet another viable local business/location will soon bite the dust. For those of you that haven't seen it, it's a very nice facility that has always stayed quite booked.

[soonerfan21]

I'm sorry for them, but wasn't it the decision of the Homebuilder's group to sell? I mean, we are not talking eminent domain here where Chesapeake comes in and literally forces these people out.

In other parts of this thread it has been mentioned that the business owners who have been bought out by Chesapeake have done so at a very nice profit to them. So why can't this be considered a "win-win" situation?

[Pete]

Just pointing out that yet another viable business in that area is going out.

It's getting to be a long list.

[tuck]

Just pointing out that yet another viable business in that area is going out.

It's getting to be a long list.

You should say "another viable business was just given an amazing opportunity to upgrade their facilities." The Regal Room folks have known about the move for almost 2 years now. Moving is always an inconvenience, but I'm sure this one will eventually increase their business.

[Pete]

Tuck, as far as I know they won't be reopening at another location.

Have you heard differently?

[traxx]

I'm not seeing what the big deal is. Chesapeak has built a very nice looking campus so far and keeps their area looking good and landscaped and decorates nicely for Christmas. I have no problem with them buying up that area because, for the most part it's an improvement.

I'm not real sorry to see that ugly strip mall at 63rd and Western gone. That mexican restaurant wasn't anything to write home about. And Wendy's...if you miss that, then drive 5 minutes in any direction and find another one. As far as I see, we're not losing any history or great architecture here.

Unless the homebuilders building has been seriously remodeled, then that's no big loss either. I worked for a company in the mid to late 90s that provided multi-media support for the ballroom and it was in sad shape then. That business is something that could relocate to any square box and not miss a beat. In fact it'd probably improve it.

If Apple wanted to move it's campus from Cupertino to NW OKC and bulldoze some 80s suburban glut, I'm sure no one on here would complain. So why should it be different with one of our own.

As far as whoever made the Enron statement, just because a company works in natural gas and the energy sector doesn't mean cooking the books like Enron. If you're gonna use that reasoning then I guess that means since Sony got in trouble for the rootkit fiasco with their CDs, then any company that sells music on CD must be trying to secretly trying to install a rootkit on your computer.

[OKCTalker]

There's a huge difference between "The Smartest Guys In The Room" and the smart guys at 63rd & Western, not the least of which is skin in the game. What did Ken Lay do for Houston's economy compared to the philanthropy & investment in central Oklahoma by CHK's top guys? People here don't even know about CHK philanthropy in the Third World, so be careful when making comparisons to Ken Lay, Jeff Skilling & Andrew Fastow. Unless you're ready to cite specifics.

[BG918]

With Devon's big announcement that they are not only building a new tower for their OKC HQ but a new tallest for the city in downtown do you think a Chesapeake announcement is coming soon? One project greatly enhances downtown (Devon) while the other could greatly enhance the Nichols Hills area.

[tuck]

Tuck, as far as I know they won't be reopening at another location.

Have you heard differently?

They wil be opening somewhere else. Ned is a good friend of mine; he always has a back-up plan. Plus, his current customer base wouldn't let that happen.

[kevinpate]

Has Chesapeake ever indicated a why for the preference to spread out, and out, and apparently out still more, instead of up? I don't get that way often but when I have, it is not unattractive. I just don't really get the mega campus approach over a mega tower approach. the latter seems more economical, permitting even greater opportunities for giving to the community, and elsewhere, and that's part of their culture as well.

[metro]

With Devon's big announcement that they are not only building a new tower for their OKC HQ but a new tallest for the city in downtown do you think a Chesapeake announcement is coming soon? One project greatly enhances downtown (Devon) while the other could greatly enhance the Nichols Hills area.

BG, I've been thinking the same thing. I wonder if this ramps up the expectations for Chesapeake as well as the rivalry to do something big for the community as Devon has announced. As they say great minds think alike.

[jbrown84]

Yeah I don't understand why their newest buildings can't be 5 or 6 or 7 stories instead of 4, like all the others. That would add a little aesthetic diversity and they wouldn't run out of room as fast.

[Pete]

I don't know if it's still the case, but the building codes in OKC used to stipulate that anything over 6 floors was required to have full sprinkler systems and some other safety measures that add significant expense.

It's also the the reason why you see so many 4- to 6-story buildings in Oklahoma City.

[Pete]

They wil be opening somewhere else. Ned is a good friend of mine; he always has a back-up plan. Plus, his current customer base wouldn't let that happen.

Tuck, I talked to him today and he said they absolutely will not be operating another room. They'll continue to cater, but only at remote locations -- they will no longer operate a facility.