Chesapeake Business Practices

[ljbab728]

OKC, is just too diversified now for the loss of one business to be a disaster. It would certainly cause problems but there are now enough other similar companies that would be willing to take up much of the slack. Although not as significant, we got through the closing of the GM plant with hardly a notice in the overall economy.

With that said, I don't think we are going to be in that situation so I'm not particularly concerned about it.

As for Penn Square, there were numerous other businesses that were directly affected by that. There is no comparison at all.

[PhiAlpha]

Mike, shut up and take a breath. Jesus. You've shown too much bias to warrant credibility.

[blangtang]

I wonder if the DOK will help us all gain insight into this situation

[soonerguru]

OKC, is just too diversified now for the loss of one business to be a disaster. It would certainly cause problems but there are now enough other similar companies that would be willing to take up much of the slack. Although not as significant, we got through the closing of the GM plant with hardly a notice in the overall economy.

With that said, I don't think we are going to be in that situation so I'm not particularly concerned about it.

As for Penn Square, there were numerous other businesses that were directly affected by that. There is no comparison at all.

Too diversified? We've focused more on oil and gas now than at any time. We're an oil and gas town, and besides Devon, Chesapeake is the biggest player. How many employees do they have now, and how much do they earn? What is the value of their real estate holdings?

This isn't an abstract discussion. What are their real assets right now in OKC? Do you think their faux-Georgian Mental Hospital University campus would just fill up with new tenants if they were bought or went under? I'm not trying to be an asshat about this, but you seem to be seriously minimizing the impact they have on OKC's economy.

We will always have the Whole Foods, though, so that is good.

[ljbab728]

Too diversified? We've focused more on oil and gas now than at any time. We're an oil and gas town, and besides Devon, Chesapeake is the biggest player. How many employees do they have now, and how much do they earn? What is the value of their real estate holdings?

This isn't an abstract discussion. What are their real assets right now in OKC? Do you think their faux-Georgian Mental Hospital University campus would just fill up with new tenants if they were bought or went under? I'm not trying to be an asshat about this, but you seem to be seriously minimizing the impact they have on OKC's economy.

We will always have the Whole Foods, though, so that is good.

I'm not going to get into a long detailed conversation with you about this and I'm not minimzing anything. When I said diversified I was referring more to multiple other oil and and gas related businesses that would help take up any slack. And yes, I think their buildings would fill up within a year if they went under.

As for being an abstract discussion, unless it happens it is abstract and I firmly believe it won't happen.

It would be a blow but it would be one that would in no way devastate OKC. We are hardly a one company town.

[soonerguru]

I'm not going to get into a long detailed conversation with you about this and I'm not minimzing anything. When I said diversified I was referring more to multiple other oil and and gas related businesses that would help take up any slack. And yes, I think their buildings would fill up within a year if they went under.

As for being an abstract discussion, unless it happens it is abstract and I firmly believe it won't happen.

It would be a blow but it would be one that would in no way devastate OKC. We are hardly a one company town.

I hope you're right about this, and mostly that you're right that CHK won't be bought or go under. That said, the most estimable postulation you make is that CHK's real estate holdings would magically be taken over by other interests. I ask, who? This isn't garden-variety corporate real estate, this is a bizarre campus setting that includes a failing retail development. Have you actually tallied the amount of real estate holdings they have and what impact this would have on the commercial real estate community? It would be an unmitigated disaster.

[progressiveboy]

OKC, is just too diversified now for the loss of one business to be a disaster. It would certainly cause problems but there are now enough other similar companies that would be willing to take up much of the slack. Although not as significant, we got through the closing of the GM plant with hardly a notice in the overall economy.

With that said, I don't think we are going to be in that situation so I'm not particularly concerned about it.

As for Penn Square, there were numerous other businesses that were directly affected by that. There is no comparison at all.

Can you give us examples of how OKC is so diversified? I have to disagree with this statement. Besides CHK, Devon, SR and CR, which are all oil and gas companies and "some " of the top employers in OKC it appears that the city still has the appearance of relying on one industry. I believe that if CHK did fail, it would have much more ramifications on the community than what you think. Diversification is the key to a economy and i feel that OKC has not learned from the oil bust of the early 80"s. Many people have a false sense of security that OKC will become the next Houston, however I feel "denial" can be a very dangerous, complacent attitude. OKC is a one trick pony town and still has the same mentality it had in the 80's. Has OKC truly evolved like a big league city?

[BoulderSooner]

This is one of my favorite bits from the Reuters story:

"McClendon continues to treat his employees well. In recent years, he built a 50-acre red-brick campus in Oklahoma City as Chesapeake headquarters. It boasts a 72,000 square-foot state-of-the art gym, visiting doctors who provide lunchtime Botox treatments for employees, and dentists to whiten teeth."

What a bizarre fantasy world he's building. He's like the oil and gas version of Willy Wonca. Seriously, though, the article makes clear the company is $10 billion in debt, and scrambling to sell assets. Can some accounting whiz please explain to us simpletons how this is really nothing to worry about?

i would not say "scrambling" ... they have 65+ bil in assets ... and they have already raised 3 bil of that 10 in the first Q

[metro]

For the record, CHK Is TWICE the workforce of Devon locally. The only bigger employer would be The state government and perhaps Tinker. Let's not forget CHK is mostly high paid, white collar jobs too. Sandridge and Continental are a fraction the size of CHK or DVN.

[okcpulse]

I really cringe when people compare Chesapeake to Enron. Enron was an energy TRADING company. Chesapeake is an Exploration and Production company. The fact that Enron had no assets is exactly what lead to the company's demise.

With Chesapeake, they are over-extended with assets. What will likely happen is they will continue downsizing by selling off assets to raise company cash to pay down debt and/or use the cash raised to go after more valuable liquids. Make no mistake, the Rueters report is damning news, and Aubrey has a lot of damage control to do. I don't doubt at all that Chesapeake's ultimate goal was to become the olive branch that would switch America's gasoline-dependent infrastructure to natural gas, from power plants down to every day automobiles. Only no one expected natural gas prices to tumble this low. CHK was hoping prices would recover, but they have not.

Like I said, this is not good news, but this is no Enron. Enron's assets were as good as toilet paper. At least Chesapeake holds valuable assets. But now the company has to come up with a new game plan.

[Just the facts]

What is the absolute worst that can happen at CHK - bankruptcy? So what. They go bankrupt, reset their books, and keep on trucking. They produce enough revenue they could live on cash-flow if they got rid of the debt. Maybe going bankrupt would be the best option for the company.

[BoulderSooner]

Its not a hedge fund.. its a bank.. Giving out loans now lol. $CHK

I guess if natgas never recovers, $CHK can always pawn whatever McClendon is buying. So there's that...

If investors are pissed about $CHK loaning money to Aubrey I wonder how they would feel knowing it basically underwrites his OKC Thunder?

i don't know what everyone is so worked up about. it's totally normal for a CEO to borrow a billion bucks from his own company #sarcasm

http://stocktwits.com/symbol/CHK

i would say a good price is about 13 bucks, it would be around the 2008 low during the big selloff and it would be about 25% lower which would correspond to the $1.50 price target for nat gas which is about 25% lower than the current $2 bucks or so.

those employees in Oklahoma get some compensation in stock don't they? U would think they aren't might be concerned when stuff like this keeps happening

you know that CHK did NOT loan him the money right??

[MikeOKC]

The lady[sic] doth protest too much, methinks.

Whatever that means. I follow this stuff. I've known that CHK's corporate governance practices would cause one crisis after another. I've been warning here when not a single other person was discussing this in the Oklahoma City media and certainly on this forum. You follow, post and run a forum about basketball. I post about how this rogue CEO is a threat to our city. I don't see what makes mine protesting too much. Nothing I've written about hasn't shown to be true - unfortunately.

Mike, shut up and take a breath. Jesus. You've shown too much bias to warrant credibility.

So, passion about something I see right in front of my face when nobody else was willing to talk about this shows I lack "credibility?" If anything, when my warnings were falling on deaf ears, I think I have been vindicated. You can't say I wasn't warning people. What you call "bias" I see as passion and sounding a bugle cry. There's too much to lose.

[betts]

The problem is, Mike, that you come across as one of those breathless hyperexcited reporters for a 24 hours news channel, all the while proclaiming that you wish you didn't have to do it. It is clear you have more of an agenda than reporting the news that's fit to print. Nothing said here is going to change the business practices of Chesapeake. We're a message board. I rarely read this thread for the same reason I don't watch 24 hour news channels.

[MikeOKC]

The problem is, Mike, that you come across as one of those breathless hyperexcited reporters for a 24 hours news channel, all the while proclaiming that you wish you didn't have to do it. It is clear you have more of an agenda than reporting the news that's fit to print. Nothing said here is going to change the business practices of Chesapeake. We're a message board. I rarely read this thread for the same reason I don't watch 24 hour news channels.

A little personal, yes? I expected it.

Tell me what my agenda could possibly be. You would be surprised at the power of a message board. Sometimes it's the only place people can find certain information, especially when there's a local media blackout of news concerning anything bad regarding CHK (NewsOK even held off on reporting this story until late yesterday afternoon and into the evening). Yes, the posts came fast and furious yesterday as I was posting as certain things were happening. Do I always do that? Of course not. But, I'm all of a sudden a breathless, hyperexcited reporter for a 24 hour news channel? This is a clear case of KILL THE MESSENGER. If anyone has an agenda regarding this issue, wouldn't it be you? Aubrey is an owner of the basketball team for which you run a fan forum! But, I have the agenda?


OKCPulse, I think you don't understand why there are comparisions to Enron. It's not because of the business CHK is in and their similarity (or lack thereof). Here are the things that make them similar to Enron:

1. Corporate governance is a joke as the board is packed with yes men.
2. Accounting practices are constantly called into question.
3. The use of shell companies to provide legal protection and God only knows what else.
4. Flamboyant leadership that is arrogant in the face of adversity. No humility, never wrong.
5. Creation of a work culture that is akin to a "business cult" by going overboard on pay & benefits to keep an army of people who do not question.
And, frankly, there's a lot more. But it doesn't matter if Enron was an energy trading company or if CHK sold frosted mudpies. It's the malgovernance and in-your-face blatant self-interest for the management. All of that makes people think "Enron."

I knew the "Kill The Messenger" posts would begin, but that's okay. I know where I stand and why. I feel confident to speak to the issues which, don't kid yourself, are serious.

Oh....it should be said that 90% of what I post is information from other sources. Like this from Forbes this morning:
Why Chesapeake Shareholders Should Worry About McClendon's Big Borrowing
That's a good "in-a-nutshell" piece.

[Larry OKC]

I really cringe when people compare Chesapeake to Enron. Enron was an energy TRADING company. Chesapeake is an Exploration and Production company. The fact that Enron had no assets is exactly what lead to the company's demise.

With Chesapeake, they are over-extended with assets. What will likely happen is they will continue downsizing by selling off assets to raise company cash to pay down debt and/or use the cash raised to go after more valuable liquids. Make no mistake, the Rueters report is damning news, and Aubrey has a lot of damage control to do. I don't doubt at all that Chesapeake's ultimate goal was to become the olive branch that would switch America's gasoline-dependent infrastructure to natural gas, from power plants down to every day automobiles. Only no one expected natural gas prices to tumble this low. CHK was hoping prices would recover, but they have not.

Like I said, this is not good news, but this is no Enron. Enron's assets were as good as toilet paper. At least Chesapeake holds valuable assets. But now the company has to come up with a new game plan.

I can't speak to what Enron's primary business role was, but one of my former employers routinely sold Enron properties at auction (as we did for all of the major oil & gas companies). They also bought properties at auction. So to say they had "no assets" might be misleading.

[Larry OKC]

What is the absolute worst that can happen at CHK - bankruptcy? So what. They go bankrupt, reset their books, and keep on trucking. They produce enough revenue they could live on cash-flow if they got rid of the debt. Maybe going bankrupt would be the best option for the company.

What would the ramifications be for the newly named Chesapeake Energy Arena? When others have gone bankrupt, naming rights to various venues vanished as well. Enron Field and the Kodak Theater come to mind.

[Larry OKC]

For the record, CHK Is TWICE the workforce of Devon locally. The only bigger employer would be The state government and perhaps Tinker. Let's not forget CHK is mostly high paid, white collar jobs too. Sandridge and Continental are a fraction the size of CHK or DVN.

http://www.greateroklahomacity.com/i...view=employers
According to the Chamber (3/2012), CHK is almost twice the size of Devon, with SandRidge & Continental not even making the list (that may change with Continental's expansion plans). There are several entities ahead of CHK. Not sure if I would include Norman but that is just me. As pointed out the State & Tinker are at the top of the list...

1. 42.1K State of Oklahoma
2. 27.0K Tinker
3. 11.7K OU Norman Campus
4. 7.5K FAA
5. 6.0K Integris
6. 5.0K City of OKC
7. 4.2K OU Health Sciences
8. 4.0K Chesapeake
13. 2.6K Devon

[BoulderSooner]

CHK is closer to 6k than 4k

[Snowman]

What would the ramifications be for the newly named Chesapeake Energy Arena? When others have gone bankrupt, naming rights to various venues vanished as well. Enron Field and the Kodak Theater come to mind.

It depends on if the company is bought out or exists after bankruptcy, profitability coming out of bankruptcy and if it sees value in continuing to pay the city. Enron did not exist after it's bankruptcy and Kodak without some major change will only survive a couple more years.

[MikeOKC]

I suppose if anybody should know about Enron, it's the business reporters at the Houston Chronicle. Loren Steffy sees an eerie resemblance:
Chesapeake Energy: Are the 'e's' tilting?

[Pete]

In a report to the city, CHK had almost 5,000 employees in OKC as of 1/31/12.

They are also adding about 1,000 jobs per year.

[Larry OKC]

A little personal, yes? I expected it.

Tell me what my agenda could possibly be. You would be surprised at the power of a message board. Sometimes it's the only place people can find certain information, especially when there's a local media blackout of news concerning anything bad regarding CHK (NewsOK even held off on reporting this story until late yesterday afternoon and into the evening). ...

I'm not saying you are incorrect on anything else in your post and the Oklahoman has killed at least one story in the past when it came to CHK a while back, but this statement isn't entirely true. I noticed a NewsOK story on it right after lunch time. it was the 2nd highest "feature" story on the main page (the ones on the left hand side with a pic attached), just under the story. Just as right now they have another story about this in 2nd place on that page. They seem to have a few stories today on it... breaking news sort of thing.

[OKCTalker]

Two troubling points:

1) Insolvency. Today's Wall Street Journal on CHK's debt, which makes a case for the company being technically insolvent: "The company continues to outspend its cash flow at a rapid pace. It is filling the gap with asset sales and financing that has, to date, built up off-balance sheet obligations of $6 billion, according to estimates from Credit Suisse analyst Arun Jayaram. This on top of existing net debt of $10.3 billion. Chesapeake's market capitalization is $12.7 billion." With a market cap of $12.7 billion and debt of $16.3 billion, the company is under water by $3.6 billion.

2) Refusal to answer questions. In this morning's paper edition of the Daily Oklahoman were two questions posed by Reuters, and CHK's responses. The first question raised the potential for conflict of interest, to which CHK responded by deeming the question to be "improper on a number of levels." The second question asked about lien rights on the loans, to which CHK responded that an explanation "is too complicated to fully explain here." People are seeking answers to their questions, and CHK is responding that the questions are improper and the answers are too complicated for them to understand.

[Larry OKC]

CHK is closer to 6k than 4k

In a report to the city, CHK had almost 5,000 employees in OKC as of 1/31/12.

They are also adding about 1,000 jobs per year.

I realize numbers are in a constant state of flux, but someone needs to let the Chamber know...LOL