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Chesapeake Blames Media in Message that Disappears
YOUNGSTOWN, Ohio – Chesapeake Energy Corp. blamed “an unprecedented negative media campaign” for the “tough five weeks” the energy giant has endured with the press, shareholders and ratings agencies on the first page of its May 2012 Investor Presentation posted Tuesday morning.
But as the day progressed, the critical page disappeared from the presentation and investors were instead greeted by a slide promising the company will “[escape the] gravitational pull of weak natural gas prices” by shifting nearly all of its resources to exploration and production of wet gasses, such as those found in the Utica Shale play in eastern Ohio.
Chesapeake posts monthly updates for investors at its website.
In the last five weeks the company's CEO, Aubrey K. McClendon, and board of directors have been the subject of a series of reports detailing shortfalls in corporate governance, potential conflicts of interests, insider dealings and convoluted, barely decipherable accounting methods. The Securities and Exchange Commission has initiated “an informal inquiry,” in the regulatory agency’s words, and the value of Chesapeake’s stock has fallen 23%.
Said Chesapeake in the slide that disappeared (but not before it was downloaded): “During this time, an incredible 1.2 billion shares of stock have been traded, equal to 180% of our outstanding shares. While damaging in the short run to our reputation, these attacks have failed, and will continue to fail, to reduce the value of the company’s assets and our long-term attractiveness to investors. At the end of the day, asset value and quality will win and today’s shareholders should be well rewarded.”
Chesapeake said it's gearing 85% of its capital expenditures this year towards natural gas liquids, and 90% in 2013. The company “owns [an] industry-leading liquids-rich play portfolio,” it said, “which gives us [a] strong foundation and optionality.”
In the oil and gas play in the Utica Shale, Chesapeake is the largest leasehold owner with 1.3 million net acres, and has paid landowners in Eastern Ohio more than $2 billion in bonuses.
Chesapeake said 57% of its revenue will come from liquids in 2012.
The company faces a cash-flow shortfall this year of more than $10 billion, according to analysts. "Successful asset sales, ongoing transition to liquids and moving to an assetharvest strategy from an asset caputre strategy will carry the day," Chesapeake told investors.
The Wall Street Journal quotes a Chesapeake spokesman as saying the blame-the-media slide was mistakenly included in the May Investor Presentation, and removed when the mistake was realized.
Chesapeake currently operates 10 drilling rigs operating in eastern Ohio; 13 will be operating by year-end, the company says, and 22 rigs through the course of next year.
As of today, Chesapeake has drilled 59 Utica wells. Nine wells are producing, 15 are being completed, 15 await completion and 20 await pipeline infrastructure.
CLICK HERE, scroll to end of story to find download Chesapeake’s original May 2012 Investor Presentation.
Published by The Business Journal, Youngstown, Ohio.