Chesapeake Energy CEO Aubrey McClendon has a former Oklahoma governor (Frank Keating) and U.S. senator (Don Nickles) on his Oklahoma City-based company’s board of directors. That seems only fitting. McClendon’s great uncle, Robert S. Kerr, co-founded Kerr-McGee and served as Oklahoma governor and senator.
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These are boom times for Chesapeake, founded by McClendon – whose middle name is Kerr – and Tom Ward in 1989 with an initial investment of $50,000. The company went public in 1993. After some rough going, its stock price has increased fiftyfold since.
Chesapeake is currently the nation’s third largest producer of natural gas, but McClendon predicts it will be No. 1 by the end of the year. He told shareholders at the company’s annual meeting last month that the Haynesville Shale field in Louisiana and Northeast Texas could be the company’s most significant field ever.
“We are really off to the races in that play,” he said.
Last week, the company announced a $3.3 billion joint venture with Plains Exploration & Production Co. that values Chesapeake’s holdings in the Haynesville region at $30,000 an acre, more than six times what it paid.
The company is also the biggest player in the Barnett Shale region around Fort Worth, where it has employed actor Tommy Lee Jones to tout the benefits of natural gas in radio, TV, newspaper and billboard advertising.
“The Barnett Shale is a national treasure that will benefit all Texans for generations,” the actor says in a TV spot.
Star-Telegram columnist Mitch Schnurman points out that McClendon has a “history of funding aggressive public-opinion campaigns.” He supported the Swift Boat campaign against John Kerry, defended the Duke (his alma mater) lacrosse team against rape accusations and fought the construction of coal power plants in Texas.
Coal is a cheaper fuel to use to generate electricity but natural gas is cleaner.
Chesapeake’s main business strategy is to “grow through the drillbit,” meaning exactly what it says. The company claims to have the most active drilling program in the United States.
Like Fort Worth-based XTO Energy, Cheasapeake also actively hedges its future production to provide some price certainty.
As of May 1, according to Chesapeake’s Web site, the company had hedged more than 70% of its natural gas and oil production for the rest of this year, as well as 80% of gas production and 92% of oil production for 2009.
McClendon also hedges his political bets. He has made campaign contributions to many presidential candidates this year, including Barack Obama and John McCain.
At the annual meeting, McClendon said his company will continue to try to convince the U.S. Congress that Chesapeake is one of the energy good guys.
“We are trying to produce more clean-burning, American-produced natural gas,” he said.
Monday, Chesapeake said that Oklahoma State University President Burns Hargis would join the company’s board on Sept. 15. Tuesday, the company said it would issue 25 million additional shares of common stock.