When energy investor and Tulsa billionaire George Kaiser stepped up to the plate and slammed nearly $500 million into cash-strapped producers Chesapeake Energy Corp. and SandRidge Energy Inc. this past week in two separate transactions, his home-run confidence may have defined the turning point for the energy industry in the ongoing financial maelstrom. Kaiser's private-equity fund Argonaut Private Equity, with more than $3.5 billion under management, first bought South Texas production from Chesapeake in a volumetric production payment for $412 million. It followed with a $50-million private transaction with SandRidge CEO Tom Ward for some of his personal stock in SandRidge. The Wall Street Journal reporter Ben Casselman spoke to Argonaut managing director Steve Mitchell, who said, "Mr. Kaiser believes many energy stocks are trading at prices about as low as they're going to get. The anchor is dragging bottom; he feels there are some good buying opportunities." Carl Tricoli with private-equity firm Denham Capital, as quoted by The Wall Street Journal, says, "Seeing someone like George Kaiser involved would reinforce the notion that this is the time to be looking at opportunities." The Chesapeake deal, which closed on Dec. 31, helped CEO Aubrey McClendon live up to his promise to investors to get the deal done by year end, although a few dollars short of his targeted $450 million. During the heady days of the commodity price run-up, Chesapeake spent money like a drunken sailor, according to JPMorgan analyst Joe Allman, but during 2008 was able to raise some $12 billion in asset sales and credit lines to pull out of the nose dive to avert catastrophe. A few days following, Kaiser, also the chairman of private Kaiser-Francis Oil, bought a 5% stake in SandRidge representing a 23% chunk from Ward's personal stock, who had to sell for "debt service and tax-planning needs." Of note, in October Ward also sold his personal working interests in SandRidge-operated wells back to SandRidge for $60 million. Ward, too, was a co-founder of Chesapeake with McClendon in 1989. Tudor, Pickering, Holt & Co. analysts like the combo, calling it a "vote of confidence" that Chesapeake and SandRidge assets are "pretty solid." Kaiser is "a well-regarded energy money maker" and historically has "knocked the ball out of the park in both commodities and E&P business. We've got a savvy local buyer stepping up." The end of the downturn is near, if you believe a half a billion dollar swing by an experienced slugger. Maybe his move will be a catalyst to get money flowing back into the upstream energy sector void. Steve Toon, Editor, A&D Watch; The A&D Center, www.A-Dcenter.com; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com
Recommended Reading
BPX Looks to Ramp US Production Over 60% by 2030
2024-05-16 - BPX Energy is looking to boost its U.S. production over 60% by 2030 as it considers bringing online a fourth processing facility in the Permian by mid-year 2025, Clark Edwards, the company’s vice president of development, said during SUPER DUG in Fort Worth.
Equinor to Invest $1B in Troll West Gas Project
2024-05-27 - Equinor awarded contracts to OneSubsea and SLB in the Troll Field as part of efforts the further develop gas infrastructure offshore Norway.
Devon Energy Expands Williston Footprint With $5B Grayson Mill Deal
2024-07-08 - Oklahoma City-based Devon Energy is growing its Williston Basin footprint with a $5 billion cash-and-stock acquisition from Grayson Mill Energy, an EnCap portfolio company.
Chevron, Total’s Anchor Up and (Almost) Running
2024-05-07 - During the Offshore Technology Conference 2024, project managers for Chevron’s Anchor Deepwater Project discussed the progress the project has made on its journey to reach first oil by mid-2024.
Blankenship, Regens: More Demand, More M&A, More Regs
2024-05-23 - In 2024, the oil and gas industry is dealing with higher interest rates, armed conflicts in Europe and the Middle East, rising material costs, a decrease in Tier 1 acreage and new policies and laws.