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Chesapeake Stock Rises On Pipeline News As Lawsuits, Loose Ends Linger

Chesapeake Energy's Oklahoma City campus
Joe Wertz
/
StateImpact Oklahoma

It's been an interesting year for Chesapeake Energy.

The Oklahoma City-based energy giant is involved in a lawsuit with the company's founder, Aubrey McClendon, over some hazy corporate law issues involving his new company - American Energy Partners.

Just a few weeks ago they announced major financial changes to stock dividends designed to save hundreds of millions of dollars.

On Tuesday, the company delivered good news to its investors - a deal with Williams Companies to move natural gas through pipelines owned by the Tulsa-based company.

"Chesapeake's stock, which has been in a lot of trouble this year, rose to nearly $8 that day," said The Journal Record's managing editor Adam Brooks. "It closed a little lower, but it had been as low as nearly $6 in late August. And it's mostly stayed higher this week than last week."

Oppenheimer & Co. Senior Oil and Gas Analyst Fadel Gheit told The Journal Record's Sarah Terry-Cobo any news is good news during a bad market:

The move is expected to add about $200 million per year to Chesapeake’s earnings before interest, taxes, depreciation and amortization, CEO Doug Lawler said. The agreement could boost expected EBITDA by $700 million over three years, Lawler said at a Barclays investor conference Tuesday. . . . Gheit said the savings and amount Chesapeake could add to annual EBITDA depends on natural gas commodity prices and how much the company drills, among other factors. It is difficult to quantify in detail how much it will benefit the driller because there are so many unknowns, he said.

It hasn't been all positive news for Chesapeake this week. Subsidiary Chesapeake Operating LLC is suing AEP subsidiary American Energy - NonOp LLC over an unpaid $1 million bill that deals with a well in Washita County that they shared along with Samson Resources, according to The Journal Record's Dale Denwalt:

Sales from the oil well began Sept. 28, 2014. A month later, AENO owed more than $1.2 million in joint interest billings. According to the lawsuit, a contract between Chesapeake Operating LLC and Samson mandates that unpaid monthly balances will bear the Bank One of Oklahoma prime rate plus at least 2 percent. Chesapeake’s lawsuit did not list the total amount owed, and spokesman Gordon Pennoyer declined to comment. AENO has earned some credit against the past-due bill, according to the petition filed in Oklahoma County District Court.

"I get the sense that a lot of this was Chesapeake tying up loose ends, like settling these lawsuits so they can focus on producing efficiently and simplifying the company," Brooks said. "That's what Doug Lawler, the CEO, has said that he wanted to do since he got in. So I think they're just kind of tightening things up."

The Business Intelligence Report is a collaborative news project between KGOU and The Journal Record.

As a community-supported news organization, KGOU relies on contributions from readers and listeners to fulfill its mission of public service to Oklahoma and beyond. Donate online, or by contacting our Membership department.

The Journal Record is a multi-faceted media company specializing in business, legislative and legal news. Print and online content is available via subscription.

Brian Hardzinski is from Flower Mound, Texas and a graduate of the University of Oklahoma. He began his career at KGOU as a student intern, joining KGOU full time in 2009 as Operations and Public Service Announcement Director. He began regularly hosting Morning Edition in 2014, and became the station's first Digital News Editor in 2015-16. Brian’s work at KGOU has been honored by Public Radio News Directors Incorporated (PRNDI), the Oklahoma Association of Broadcasters, the Oklahoma Associated Press Broadcasters, and local and regional chapters of the Society of Professional Journalists. Brian enjoys competing in triathlons, distance running, playing tennis, and entertaining his rambunctious Boston Terrier, Bucky.
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