Former Chesapeake Energy CEO Aubrey McClendon Buys Fracking Wells In Ohio's Utica Shale

Fri, 2013-12-13 07:00Steve Horn
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Former Chesapeake Energy CEO Aubrey McClendon Buys Fracking Wells In Ohio's Utica Shale

Former Chesapeake Energy CEO and Founder Aubrey McClendon is back in the hydraulic fracturing (“fracking”) game in Ohio's Utica Shale in a big way, receiving a permit to frack five wells from the Ohio Department of Natural Resources on November 26. 

“The Ohio Department of Natural Resources awarded McClendon's new company, American Energy Utica LLC, five horizontal well permits Nov. 26 that allows oil and gas exploration on the Jones property in Nottingham Township, Harrison County,” a December 6 article appearing in The Business Journal explained. “In October, American Energy Utica announced it has raised $1.7 billion in capital to secure new leases in the Utica shale play.”

McClendon is the former CEO of fracking giant Chesapeake Energy and now the owner of American Energy Partners, whose office is located less than a mile away from Chesapeake's corporate headquarters.

The $1.7 billion McClendon has received in capital investments for the purchase of 110,000 acres worth of Utica Shale land came from the Energy & Minerals GroupFirst Reserve Corporation, BlackRock Inc. and Magnetar Capital.

McClendon — a central figure in Gregory Zuckerman's recent book “The Frackers” — is currently under investigation by the U.S. Securities and Exchange CommissionHe left Chesapeake in January 2013 following a shareholder revolt over his controversial business practices.

In departing, he was given a $35 million severance package, access to the company's private jets through 2016 and a 2.5% stake in every well Chesapeake fracks through June 2014 as part of the Founder's Well Participation Program.

Little discussed beyond the business press, McClendon has teamed up with a prominent business partner for his new start-up: former ExxonMobil CEO Lee Raymond.

Power Mapping McClendon's New Venture

“[Lee] Raymond has emerged as a director alongside Mr. McClendon in American Energy Ohio Holdings LLC… according to [an SEC] regulatory filing,” The Wall Street Journal reported in October

The former Exxon CEO's son John Raymond is the Managing Partner, Chief Financial Officer, and Chief Executive Officer of Minerals & Energy Group, currently the largest capital investor in McClendon's start-up venture. He is also a partner McClendon's new venture. Ryan Turner, Chesapeake's Stock Plan Manager has also joined the team as a partner.

“Jefferies Group LLC gave financial advice to American Energy” for the deal, according to Bloomberg — and is listed as such on American Energy Ohio Holdings LLC's SEC Form D.

Ralph Eads IIIMcClendon's fraternity brother at Duke University — serves as Global Head of Energy Investment Banking at Jefferies Group, Inc.

Photo Credit: YouTube Screenshot

“Mr. Eads…is a prince of this world,” the New York Times reported in October 2012. “His financial innovations helped feed the gas drilling boom, and he has participated in $159 billion worth of oil and gas deals since 2007.”

Eads maintained tight financial ties with McClendon when he was at the helm of Chesapeake Energy. The flow chart below depicts the financial and career ties binding Eads and McClendon.

Flowchart Credit: Dory Hippauf, Raging Chicken Press

High Stakes Game

In teaming up with Lee Raymond, the former CEO of ExxonMobil — notorious for its role in funding climate change denial — and his brother John, McClendon has shown he is back in Ohio ready to play ball.

But a recent Environmental Integrity Project report indicates the life-cycle climate change impacts of fracking are more severe than previously thought.

With the U.S. Navy predicting an ice-free Arctic summer by 2016 due to climate change, it's a ball game with undeniably high stakes.  

Photo Credit: Cleveland Museum of Natural History

Comments

Good stuff. Here's another interesting source on Ohio Utica, with a stated unbiased bent. This of course assumes environmentalists are the enemy of freedom(tm) and man's god given right to exploit subsurface hydrocarbons. Unbiased means blog posts are safe for job creators to read, without pesky environmental issues to burden their soul.

http://the-daily-digger.blogspot.com/

Anyway, the Utica play is oil and oil equivalent over gas. The situation could be another Bakken (probably smaller). And given the price of gas these days, the preferred method of dealing with gas at the wellhead could be flaring a big chunk of it. Bakken has about 300 miles of a whole lot of nothing between wells and people. Utica wells have NYC, Philly and DC metros downwind. Oh, I almost forgot the Whites of West Virginia are also downwind.

http://www.wildandwonderfulwhites.com/

Chesepeake is the biggest player. BP is moving on a reported planned 2,000 well effort. As are other developers. 

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Flying beneath the public radar, though, is another TransCanada-proposed pipeline with a similar function as Keystone XL. But rather than for carrying tar sands bitumen to the Gulf Coast, this pipeline would bring to market shale gas...

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