Chesapeake Business Practices

[PhiAlpha]

Given BP's issues right now and how much of their US assets they've been selling off, I don't see it happening. She'll is a little more intriguing and I suppose it could be viewed one of two ways. They just announced that they are abandoning the Mississippi play in Kansas and haven't had a ton of success with their US assets did to lack of experience here (at least recently): so you could either think it isn't going to happen because they haven't had success here and are extremely gassy as a company or they are interested and, like Exxon with XTO, want to buy them as a subsidiary for their experience and position in the US. The market hasn't been greatly kind to Exxon regarding the XTO acquisition though (Exxon is big enough not to care, but it suppressed their stock price for awhile and shareholders have complained), and because of that, the same business analysts that have said CHK could be an acquisition target have said that acquisitions and mergers have been suppressed because of the results of the Exxon/XTO deal, recent spree of shareholder activism, and the industry trend of disintegrating and spinning off separate units of their companies (ex. The Conoco Upstream, Phillips 66 downstream split). CHK owns several operations subsidiaries so when buying CHK, you're not just getting a ton of properties but a drilling company, a frac tech company, several other subsidiaries, and a ton of debt. Will be interesting to see if CHK spins those off, and if someone buys them out at that point or they continue on as an independent.

[ou48A]

One of the things that is making CHK more desirable is that they are becoming more oily and less gassy.
Slashing unneeded cost should also mean improving profit margins for CHK.

Of all the majors I would hate it most if BP bought CHK.....

[HangryHippo]

What might be expected by okc if chk is bought by one of these majors?

[warreng88]

One of the things that is making CHK more desirable is that they are becoming more oily and less gassy.

Too many ten year old fart jokes could be made over this statement...

[PhiAlpha]

What might be expected by okc if chk is bought by one of these majors?

Depends on a lot of factors, but as a possible good outcome, look at XTO in Fort Worth. It actually worked out pretty well for those guys (though like I said, the market didn't like it for Exxon for awhile). XTO was strapped for cash after the natural gas price cratered a few years ago and were more or less looking for a white knight to pull them out of it. Exxon bought them, runs them as their domestic operations subsidiary based out of Ft. Worth, has moved a lot of their domestic exploration employees (at least in land) to Ft. Worth to manager those assets, and it now has the richest oil company in the US funding their operations. People don't seem to enjoy working there as much as when they were an independent, much more red tape to deal with, but it's still good employer in FTW and is still adding employees.

[lasomeday]

I am fairly anti Chesapeake and I feel their stock is only going to go up. Theses layoffs were needed and the changes have been justified.

[HangryHippo]

Depends on a lot of factors, but as a possible good outcome, look at XTO in Fort Worth. It actually worked out pretty well for those guys (though like I said, the market didn't like it for Exxon for awhile). XTO was strapped for cash after the natural gas price cratered a few years ago and were more or less looking for a white knight to pull them out of it. Exxon bought them, runs them as their domestic operations subsidiary based out of Ft. Worth, has moved a lot of their domestic exploration employees (at least in land) to Ft. Worth to manager those assets, and it now has the richest oil company in the US funding their operations. People don't seem to enjoy working there as much as when they were an independent, much more red tape to deal with, but it's still good employer in FTW and is still adding employees.

Thanks for the insight. So what do you see happening? Do you think CHK gets bought out by Shell or BP (or someone else entirely) or do you see it making on its own?

[PWitty]

Thanks for the insight. So what do you see happening? Do you think CHK gets bought out by Shell or BP (or someone else entirely) or do you see it making on its own?

I think PhiAlpha has been spot on with what he said. I will add that a buyout offer would need to be significantly above their current stock price, I would think. Their largest shareholders have been very defendant of CHK in the past and they look at the company as something that is worth multiples of what the stock currently trades at. But, an immediate payday might be tempting enough to get them to sell. It would be interesting. I don't think that would happen while CHK still owns all of its subsidiaries though. Of course I guess Shell or BP could buy them and then sell the subsidiaries themselves if they really really wanted CHK's assets.

[ou48A]

I think PhiAlpha has been spot on with what he said. I will add that a buyout offer would need to be significantly above their current stock price, I would think. Their largest shareholders have been very defendant of CHK in the past and they look at the company as something that is worth multiples of what the stock currently trades at. But, an immediate payday might be tempting enough to get them to sell. It would be interesting. I don't think that would happen while CHK still owns all of its subsidiaries though. Of course I guess Shell or BP could buy them and then sell the subsidiaries themselves if they really really wanted CHK's assets.

That's often the case. They sell off the various subsidairys and keep the core of what they really want.
I once worked for a compnay who was bought out 3 times in about 4 years...
I was 100% invested in company stock. It was nice for the 401 K plan.

[OKCTalker]

The terminations continued. A friend got hers yesterday, although we didn't discuss how many people, which departments, etc. She was hired about six months ago in an administrative capacity, but I don't know which department.

And there apparently won't be the big annual Halloween celebration as there has been since CHK was founded. There is no tent on the sports field on the west side of Western.

[PWitty]

The terminations continued. A friend got hers yesterday, although we didn't discuss how many people, which departments, etc. She was hired about six months ago in an administrative capacity, but I don't know which department.

And there apparently won't be the big annual Halloween celebration as there has been since CHK was founded. There is no tent on the sports field on the west side of Western.

Things could've changed, but I heard that DL said a couple weeks ago that the Halloween party was still on FWIW.

[OKCTalker]

If the party is on, it will be a very different one. Perhaps that's a good thing - CHK is becoming a very different company, and for the better. More mature & responsible, viable for the long-term, respected by its industry peers and others in the community. It used to be too much a "go-go" company like energy companies in the 1980s. It's a different world.

[PWitty]

I very much agree. The last couple years CHK has been more ridiculed by its peers in the industry than respected. With the improvements in the structuring and the budgeting process that DL has made I can't see anything but good things in the company's future.

[Pete]

Pretty dramatic stock price improvement since McClendon announced his resignation...

From $18.97 to $28.02 today.


That's a 48% return in 9 months.

[Richard at Remax]

And to think I was hesitant when I bought plenty of shares at $15

[PhiAlpha]

Sandridge has seen a similar improvement since Tom Ward left. It bottomed out at 4.67 a few days before he was ousted and has been flirting with $7.00 for the last few days. Not as big of improvement so far but it should continue to rise.

[warreng88]

Earlier this week I saw the Chesapeake signs being taken down off the Atrium Tower buildings north of 63rd and west of Hefner parkway. I forget, have these already been sold?

[lasomeday]

Earlier this week I saw the Chesapeake signs being taken down off the Atrium Tower buildings north of 63rd and west of Hefner parkway. I forget, have these already been sold?

I don't know if they have been sold or they are leasing the office space, but a friend of mine that works for an IT firm has an office there now. The other building say Midland on it, so they may have been sold.

[warreng88]

I don't know if they have been sold or they are leasing the office space, but a friend of mine that works for an IT firm has an office there now. The other building say Midland on it, so they may have been sold.

The Midland sign was always up on the north building on side facing the highway and if you were driving south, you could see there was a Chesapeake sign on the north side of that same building. Both of those and the Chesapeake sign on the southern building have been taken down.

[TechArch]

Midlands has moved part of their office to the IBC Bank building on NW Expressway. I also heard that Love's might be moving some people to these buildings as well.

[Pete]

Earlier this week I saw the Chesapeake signs being taken down off the Atrium Tower buildings north of 63rd and west of Hefner parkway. I forget, have these already been sold?

They have not yet been sold but I'm sure they will be once the few remaining buildings on the CHK campus are filled.

Soon to open: Building #1, Data Center, Central Plant, Building #15 (the biggest yet) and Garage #3. That's a ton of space combined with a 25% reduction of workforce. You've got to think all the employees in satellite buildings will be consolidated sometime after the first of the year.

I've also noticed construction has moved pretty quickly on all those remaining structures.

[RedDollar]

Pretty dramatic stock price improvement since McClendon announced his resignation...

From $18.97 to $28.02 today.


That's a 48% return in 9 months.

And McClendon leaving had little to do with the rise in the price of the stock. Its mostly occurred because of increase oil production from the Eagle Ford, Q2 report showed a 41% increase in oil production year on year. Earnings were much improved in Q2 due to top line growth, almost entirely.

New CEO and new company direction, had no impact on Q2 earnings and oil production. That would've happened with McClendon at the company.

Other reasons for PPS increase have been mostly speculative, like rumors of potential takeover, typical Wall Street BS. And the latest layoffs did nothing for the stock price, its risen the past two weeks for what most think , will be a good earnings report released in the morning. For Q3, there's also expected to be a large increase in oil production from the Eagle Ford.

Its all about the price of the underlying commodity(s) , and how quickly CHK can become more oil than NG. Period.

[Teo9969]

Not that I disagree with you, but unless you go poll an adequate sample size of entities that invested in and out of this stock over the past 9 months, you have as much proof of your claims as the people saying just the opposite.

[PWitty]

And McClendon leaving had little to do with the rise in the price of the stock. Its mostly occurred because of increase oil production from the Eagle Ford, Q2 report showed a 41% increase in oil production year on year. Earnings were much improved in Q2 due to top line growth, almost entirely.

New CEO and new company direction, had no impact on Q2 earnings and oil production. That would've happened with McClendon at the company.

Other reasons for PPS increase have been mostly speculative, like rumors of potential takeover, typical Wall Street BS. And the latest layoffs did nothing for the stock price, its risen the past two weeks for what most think , will be a good earnings report released in the morning. For Q3, there's also expected to be a large increase in oil production from the Eagle Ford.

Its all about the price of the underlying commodity(s) , and how quickly CHK can become more oil than NG. Period.

I'm confused by how you can see it that way. The new management has slashed the drilling budget and CHK is running half the rigs it was before AM left the company. Both of those have directly led to CHK's capital expenditures staying within it's income from production. That will lead to better profit margins in the future. People don't invest in a company because of what it has done or what it is currently doing, they invest in it for what they think will happen in the future. The changes in the company's future outlook and profit margins are directly tied to the new management IMO.

People didn't want to invest in CHK because CHK had become so reliant on asset sales to fund operations. Now they will be able to fund everything internally. That is because of the new management, and would not have happened if AM was still there.

[PhiAlpha]

I'm confused by how you can see it that way. The new management has slashed the drilling budget and CHK is running half the rigs it was before AM left the company. Both of those have directly led to CHK's capital expenditures staying within it's income from production. That will lead to better profit margins in the future. People don't invest in a company because of what it has done or what it is currently doing, they invest in it for what they think will happen in the future. The changes in the company's future outlook and profit margins are directly tied to the new management IMO.

People didn't want to invest in CHK because CHK had become so reliant on asset sales to fund operations. Now they will be able to fund everything internally. That is because of the new management, and would not have happened if AM was still there.

It also didn't help that there was a new story in Reuters every other day with new "scandalous" accusations against AKM. While not the sole reason for the depressed stock price, months upon months of that kind of publicity couldn't have helped.