Aubrey McClendon Starts Over in Fracking Business

Aubrey McClendon, one of America's best known wildcatters, is building a new oil and gas exploration company.  Mr. McClendon's new company, Oklahoma City-based American Energy Partners LP, struck a deal earlier this month to buy drilling leases on more than 22,500 acres in southeastern Ohio for $284.3 million from closely held EnerVest Ltd. and its publicly traded unit EV Energy Partners LP. Separately, American Energy has acquired some properties in Ohio from Royal Dutch Shell PLC.

Mr. McClendon was chief executive of Chesapeake Eenrgy Corporation before being ousted from the company he co-founded in 1989 by unhappy investors earlier this year. He has lined up about $1.2 billion in equity and debt financing for deals in Ohio, much of it coming from two energy-focused private-equity firms.

 

Mr. McClendon is close to completing an agreement to get more than $500 million from the Energy & Minerals Group, a Houston firm run by John Raymond, son of former Exxon Mobil Corp. Chief Executive Lee Raymond.  The financing from Energy & Minerals and First Reserve will be limited to activities in the Utica, according to a person familiar with the deals.

He expects to get another $200 million from private-equity group First Reserve, of Greenwich, Conn. Others will invest smaller sums, while Mr. McClendon will contribute some of his own money. The company has raised $400 million in debt. Mr. McClendon is close to completing an agreement to get more than $500 million from the Energy & Minerals Group.

Former Chesapeake CEO Aubrey McClendon

The moves mark Mr. McClendon's return to the Utica Shale, a dense layer of rock that many in the energy industry believe holds immense quantities of oil and natural gas.

Companies have drilled just over 500 Utica shale wells since 2011, according to Ohio records, but a lack of pipelines there has stalled production.

 

Chesapeake has by far the most extensive operations in the Utica, and Mr. McClendon continues to own a small stake in every well the company drills through a perquisite that survived his exit and which gives him access to company information about the wells.

Mr. McClendon built Chesapeake from a tiny Oklahoma City concern into the nation's second-largest producer of natural gas after Exxon Mobil, spending billions of dollars to lease drilling rights to shale fields from Texas to Pennsylvania.  But his spending outpaced earnings from operations, leaving Chesapeake with a cash shortfall last year as natural-gas prices tumbled to the lowest level in more than a decade. The company's swooning stock price, coupled with corporate governance controversies that included his personal stakes in all the company's wells, irked the company's biggest shareholders and hastened his departure.   (WSJ, 8/20/2013, Photo: AP)