Shale Wildcatter McClendon Plans Post-Chesapeake Share Sales

Sep 05, 2014 12:55 pm ET

(Updates with analyst comment in seventh paragraph.)

Sept. 5 (Bloomberg) -- Aubrey McClendon, the U.S. shale gas pioneer ousted from Chesapeake Energy Corp. last year, plans to take public the exploration companies he has formed since.

McClendon told a conference in Dallas yesterday that his collection of companies will each specialize in individual U.S. shale regions. He has amassed about $13 billion in the past 16 months from investors including KKR & Co., according to his presentation.

McClendon’s American Energy Partners LP already has created subsidiaries focused on shale formations and pipeline networks from Appalachia to the Great Plains. He’s also the guiding hand behind two so-called blind pool investment vehicles that plan to gather drilling rights across the U.S.

“They’ll go public,” McClendon said during a presentation during Hart Energy’s A&D Strategies and Opportunities event. “They’ll have their own management” and he will “stand behind them.”

In an about-face from the transcontinental strategy he pursued during a quarter-century tenure at Chesapeake, McClendon is now sticking to an approach known as pure play, where each entity zeroes in on a single shale region.

McClendon said his private equity backers prefer that focused approach over companies that are active in multiple formations. Investors in publicly traded companies share that enthusiasm for pure plays, he said.

“When a company focuses on one area that they know really well, they can drive efficiencies better than large caps that are spread all over the place,” Gabriele Sorbara, an analyst at Topeka Capital Markets Inc. in New York, said in a telephone interview today.

Offerings Flurry

Exploring multiple shale regions also raises costs because more time must be spent analyzing varying geological characteristics and shifting drilling rigs over a larger geographic area, Sorbara said.

A flurry of pure-play shale offerings in the past two years have been well received by investors. Diamondback Energy Inc., a Midland, Texas-based explorer of the Permian Basin in the U.S. Southwest, has surged more than fourfold in New York trading since its October 2012 debut.

Athlon Energy Inc., another Permian explorer, has more than doubled since it first sold shares to the public 14 months ago. RSP Permian Inc. of Dallas has climbed 34 percent since it was launched in January.

McClendon, 55, was in the vanguard of the shale revolution that upended U.S. gas markets and paved the way for the renaissance in American crude oil production. At Chesapeake, he amassed a shale empire that rivaled Exxon Mobil Corp.’s before he was dismissed last year amid conflict-of-interest probes and a shareholder revolt led by billionaire Carl Icahn.

More Shale

Financial backers of his American Energy creations include First Reserve Corp. and John Raymond, son of retired Exxon CEO Lee Raymond.

McClendon said he wants to buy more shale, particularly in the Permian basin, and has been hiring about 30 people each month to the company that currently employs about 500.

“Our motto is: hard work works here! Join us! (or, sell to us please!),” one slide said.

--With assistance from Bradley Olson in Houston.