Chesapeake Headed to Arbitration

Chesapeake Energy to Arbitrate with Aubrey McClendon.
Chesapeake Energy to Arbitrate with Aubrey McClendon.

A district court judge in Oklahoma has ordered Chesapeake Energy to enter arbitration in an attempt to settle its dispute with American Energy Partners.

In a lawsuit filed in February, Chesapeake accused its former CEO, Aubrey McClendon, of stealing important trade secrets before leaving the company in 2013 and then using the confidential information to build American Energy Partners. 

Read more: Chesapeake Sues American Energy Partners

Attorneys for American Energy accused Chesapeake of using gimmicks to stay out of arbitration and Judge Thomas Prince agreed. Prince granted the request for arbitration, though it is unclear when it will begin.

Chesapeake cannot escape its contractual commitment to arbitrate through the procedural gimmick of leaving Mr. McClendon’s name off.
— American Energy

Last week, Chesapeake Energy reported 2015 first quarter loss of$3.8 billion. In spite of huge losses, CEO Yet Doug Lawler remained upbeat and focused on Chesapeake’s innovations.

Chesapeake is active all across the Eagle Ford including Atascosa County, Dimmit County, Duval County, Frio County, Goliad County, LaSalle County, McMullen County, Washington County, Webb County and Zavala County.

Chesapeake Energy Reveals Huge Q1 Loss

Chesapeake Released 2015 Q1
Chesapeake Released 2015 Q1

Chesapeake Energy released first quarter financial and operational results this week, reporting a net loss of $3.8 billion and boasting of new technological innovations.

Related: Chesapeake to Reduce Spending by $500 Million

Chesapeake's loss is even more staggering when compared to the company's net income of $374 million one year ago. The company plans to slash drilling and completions over the rest of the year. They expects to complete fewer than 50 wells in the fourth quarter of 2015 and will drop their rig count from 40 down to about 15.

Optimism

In spite of huge losses, CEO Yet Doug Lawler remained upbeat during the earning call last Wednesday and stayed focused Chesapeake's innovation.

We are making it public about some of this technology and improvements that we see in our assets adding 600 to 700 locations in the Eagle Ford, adding locations in other areas because of our capital efficiency, seeing the improvements in the Powder River. These are dynamite things, guys. Dynamite things.
— Doug Lawler

Eagle Ford Update

For the first quarter of 2015, Eagle Ford net production averaged approximately 113 thousand barrels of oil equivalent (mboe) per day, an increase of 7%. Other highlights include:

  • Well cost-reductions: the company anticipates completed well costs of $5.5 million by year-end 2015
  • Successfully drilled five wells with laterals in excess of 10,000 feet
  • Successfully completed down spacing tests in various sections of its acreage, adding 600 700 incremental locations to its undrilled inventory
  • Plans to test its first Upper Eagle Ford well in the 2015 fourth quarter
  •  The drilling team broke several records including drilling their deepest well with a total measured depth of just under 21,000 feet, fastest spud-to-rig-release time of 7.8 days, and lowest drilling cost well at $1.1 million
Due to market conditions, we continue to ramp down activity in the area. We reduced our rig count from 20 rigs in January to a current count of seven with the expectation to get to just three rigs by July. Strategically, we are going to take advantage of this ramp down in activity to further enhance our development planning.
— Mikell J. Pigott, Executive Vice President-Operations

Chesapeake made other Eagle Ford news this year when Dimmett County property owner James Birkner filed a lawsuit against the company claiming that a Chesapeake employee hunted, killed and removed the white-tailed deer that roamed his property. 

Read more: Chesapeake Lawsuit Adds to Legal Trouble

Read the full press release at chk.com and seekingalpha.com

photo: © Larryhw |  Quarterly Financial Report Photo

Chesapeake Before Texas Supreme Court

Chesapeake Before Texas High Court
Chesapeake Before Texas High Court

Chesapeake Energy is back in the news again for continued disputes over royalty payments. This time, the company stood before the Texas Supreme Court to challenge a 2014 Appeals Court ruling that would cost them at least $1million.

Related: Chesapeake Lawsuit Adds to Legal Trouble

At the heart of the case is the property owners (Hyders) allegations that Chesapeake improperly deducted money from their royalty checks to cover post-production costs. They say that the problems began after Chesapeake bought their lease from another company in 2006 and have since continued to alter their interpretation of their obligations outlined in the lease.

In 2010, the Hyders finally sued Chesapeake for improperly subtracting postproduction costs from their royalty checks for gas taken from their own property. In 2012, state District Judge Melody Wilkinson awarded the family nearly $1 million and the decision was upheld last year by the 4th Court of Appeals in San Antonio.

The case is being watched closely by property owners and by the oil and gas industry, many who believe this decision can fundamentally change change in Texas oil and gas law.

In Texas, mineral owner have a four-year stature of limitations in which to file a lawsuit to dispute royalty payments and many are racing to the lawyers.

Related: Mineral Owners Race the Clock in Texas

this is one of a long line of cases in which Chesapeake has sought to profit at the expense of royalty owners.
— National Association of Royalty Owners-Texas

Attorneys George Parker Young and Dan McDonald are just two who are getting ready to come after Chesapeake. The attorneys  expect to file up to 400 lawsuits by the end of the year that could name as many as 40,000 plaintiffs.

Chesapeake to Reduce Spending by $500 Million

Chesapeake Cuts Budget for 2015
Chesapeake Cuts Budget for 2015

Chesapeake Energy announced on Monday it plans further cuts to its 2015 capital spending. The company will reduce spending, cut rigs and slow production in order to navigate the current low crude pricing environment.

For 2015, Chesapeake will spend $3.5 billion to $4 billion, a $500 million reduction from its last update in February.

Other important spending updates include:

  • Plans to spud and connect to sales approximately 520 and 650 gross operated wells, respectively, in 2015 (a decrease from 1,175 and 1,150 wells in 2014)
  • Connect to sales approximately 650 gross operated wells, respectively, in 2015 (a decrease from 1,175 and 1,150 wells in 2014).
  • Lowering its targeted 2015 production to 231 236 million barrels of oil equivalent, or average daily production of 635 645 thousand barrels of oil equivalent, which represents 1 3% production growth over the prior year after adjusting for 2014 asset sales.
We entered 2015 with a strong liquidity position and we intend to manage it prudently. In response to continued weak commodity prices, we are further reducing capital expenditures and associated drilling activity. As a result, we now forecast ending 2015 with approximately $6 billion in combined cash and borrowing capacity under our credit facility. With this budget revision we anticipate being free cash flow neutral by the end of 2015.
— Doug Lawler, Chesapeake’s Chief Executive Officer

Legal trouble continues to plague Chesapeake. In January, the company agreed to pay $119 million to settle a class action suite from 2013 that included thousands of royalty owners involving possibly 10,000 wells. And, most recently, a group of landowners in  Bradford County, PA filed a suit alleging that Chesapeake and Williams Partners violated antitrust laws by conspired to restrain trade in the market for gas gathering services. Read more here.

Chesapeake Energy is active all across the Eagle Ford including Atascosa County, Dimmit County, Duval County, Frio County, Goliad County, LaSalle County, McMullen County, Washington County, Webb County and Zavala County.

Photo: © Larryhw | Budget Cuts / Inflation Photo

Chesapeake Lawsuit Adds to Legal Trouble

White Tail Deer at Center of Lawsuit
White Tail Deer at Center of Lawsuit

Legal trouble continues to haunt Chesapeake Energy as mineral owners dispute royalty payments and contracts. This week, white tailed deer are at the center of another lawsuit that is now in a San Antonio court.

A recent lawsuit filed in January, claims that a Chesapeake employee hunted, killed and removed the white-tailed deer that roamed the Dimmett County property of James Birkner. Birkner’s lease with Chesapeake dates from 2010 and does not authorize hunting by Chesapeake employees on this land. Once the allegations were made, the company abruptly ended negotiations to renew its lease and vanished from the property. The claims against Chesapeake include negligence, trespass and breach of contract.

The company has other legal trouble. In January, the company agreed to pay $119 million to settle a class action suite from 2013 that included thousands of royalty owners involving possibly 10,000 wells. And, most recently, a group of landowners in  Bradford County, PA filed a suit alleging that Chesapeake and Williams Partners violated antitrust laws by conspired to restrain trade in the market for gas gathering services.

In February, Chesapeake filed a lawsuit against American Energy Partners alleging that ex CEO Aubrey McClendon stole confidential documents including maps of oil and gas prospects before leaving the company in 2013. Read more here

With more and more Texas lease holders scrutinizing their royalty statements the company may have more to worry about. 

Read more:  Mineral Owners Race the Clock in Texas

Chesapeake is active all across the Eagle Ford including Atascosa County, Dimmit County, Duval County, Frio County, Goliad County, LaSalle County, McMullen County, Washington County, Webb County and Zavala County.

© Nicolaselowe | Dreamstime.com - White-tailed Deer Photo