By Shasha Dai
Aubrey McClendon has never owned a drilling field outside of the
U.S. The Chesapeake Energy Corp. co-founder and former chief
executive has remained staunchly focused on acquiring domestic oil
and gas lands, even as his rivals have searched further afield for
opportunities.
That could be about to change. Mr. McClendon's American Energy
Partners LP, which has been on a buying spree across major U.S.
energy basins, is seeking capital for a new entity that would
purchase about 16 million acres of shale in the McArthur Basin in
northern Australia, said people with knowledge of the matter.
The move would mark a big departure for Mr. McClendon. While at
Chesapeake, he regularly dismissed questions about pursuing oil and
gas plays in Canada and elsewhere abroad by saying the company's
strategy of identifying new exploration opportunities and
stealthily leasing drilling rights with private landowners wouldn't
work outside the U.S. In Canada and most other countries, mineral
rights are owned by governments and drilling licenses are awarded
in public auctions.
The McArthur Basin, which contains a vast swath of undeveloped
acreage, has proved attractive to Mr. McClendon, a wildcatter known
for his free spending ways and high-stakes bets. The basin is rich
in lead, zinc, silver, diamonds and iron ore, while large parts of
the northern area of the basin are "effectively unexplored,"
according to the website for Australia's Northern Territory
government.
Morgan Stanley & Co. is advising American Energy on the
effort and has pitched the venture to prospective investors, the
people said.
Among the likely investors is private-equity firm Energy &
Minerals Group, a big backer of American Energy, one person with
knowledge of the matter said.
Energy & Minerals Group has an agreement with Mr. McClendon
that gives it the option but not the obligation to participate in
any of his business ventures.
Mr. McClendon helped build Chesapeake into one of the country's
largest energy producers before a high-profile showdown with
Chesapeake's largest shareholders eventually led to his ouster as
CEO in 2013.
That same year, Mr. McClendon set up American Energy in Oklahoma
City, the hometown of his former employer, Chesapeake, and won
backing from Energy & Minerals Group for his new endeavor. By
last fall, American Energy had raised $14 billion in total equity
and debt to buy oil and gas properties in such places as the
Permian Basin, and the Utica and Marcellus Shale formations. The
properties are now being held across seven affiliates that all bear
the American Energy name.
The establishment of American Energy hasn't been entirely smooth
sailing, however, with the slump in oil and gas prices that began
last summer and the heavy debt load American Energy took on for
acquisition, exploration and production squeezing the liquidity of
some of its affiliates.
Its American Energy-Woodford LLC affiliate, which operates in
the natural gas-rich Woodford shale in southeastern Oklahoma, saw
its corporate credit rating lowered to CCC+ from B- on May 5 by
Standard & Poor's Ratings Services, which had lowered the
corporate credit rating of another affiliate, Permian Basin LLC, to
B- from B a day earlier.
"These entities were capitalized in the middle of last year with
a combination of debt and equity, with the expectation that they
would grow into that capital structure," said Carin Dehne-Kiley, a
director of S&P who covers U.S. oil and gas. The slide in oil
and gas prices has forced the affiliates to cut capital
expenditures, which in turn reduced their cash flow, she added.
This latest endeavor comes on the heels of the April settlement
of a lawsuit American Energy Partners faced, which alleged that Mr.
McClendon misappropriated certain Chesapeake trade secrets upon his
departure from the company in 2013. Mr. McClendon, who contended
that his severance agreement with Chesapeake allowed him to use
certain well-related data, said in an April statement he didn't
approve the settlement, and would continue to have the dispute with
Chesapeake arbitrated as per their agreement.
Meanwhile, Mr. McClendon has ceded his day-to-day operational
responsibilities at the Utica and Marcellus affiliates, according
to company releases. In January, the two affiliates combined to
form a holding company, American Energy Appalachia Holdings LLC.
About a week later, Jeffrey Fisher was named CEO of American Energy
Appalachia, while Mr. McClendon retained his position as chairman
of the holding company.
John Raymond, co-founder and chief executive of the Energy &
Minerals Group, has said that his firm's arrangement with Mr.
McClendon calls for others to be installed as top executives at the
American Energy companies to relieve Mr. McClendon of the
day-to-day management duties while freeing him to focus on
developing new businesses.
Ryan Dezember contributed to the article.
Write to Shasha Dai at shash.dai@wsj.com
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