
Oilman Magazine / September-October 2016 / OilmanMagazine.com
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OKLAHOMA NEWS AT A GLANCE...
Board Members Leave Williams after
Vote to Keep CEO
By Tim McNally
The lack of approval for a merger between
Williams and Energy Transfer Equity (ETE)
has caused a string of problems for Williams
after the announced failure. The merger
failed because ETE pulled out of the plans,
and now there is an apparent division on
the Williams board, which seems to have
been a fracture that needed a nal tremor to
completely separate the board.
Those that did not fully support the merger
include the CEO Alan Armstrong, which
caused much outrage from certain board
members, who questioned Armstrong’s
ability to lead. Six directors on the board
for Williams consequently resigned from
their posts after the board voted not to
remove the current CEO. Among those who
resigned were Frank MacInnis, chairman
of Williams’ board, and two hedge fund
activists, Eric Mandelblatt and Keith Meister.
Seven remaining members on the board
have been outspoken about their support for
Armstrong.
“Since Alan was appointed CEO in 2011,
Williams has become a best-in-class operator
that is extremely well-positioned to meet the
rapidly growing demand for natural gas and
experience signicant fee-based growth,” the
board stated.
This positive message is in opposition to
comments from Eric Mandelblatt, who said:
“It has unfortunately become evident that
the CEO of the company, Alan Armstrong,
is incapable of maximizing shareholder
value and, instead, is primarily focused on
maintaining his role as CEO.” He also said
that Armstrong has “an abysmal operational
and nancial track record” and “lacks the
necessary judgment and character to lead the
company forward.”
The failed merger was a disappointment for
many of the board members for Williams,
but certain organizations within Oklahoma
viewed it as a sort of blessing. Tulsa Mayor
Dewey Bartlett said: “today’s events give
Williams, its shareholders, the city of Tulsa
and the state of Oklahoma the greatest
chance for success, both now and in the
years to come.” In addition, the Tulsa
Regional Chamber believed that the State of
Oklahoma would likely lose many jobs if the
merger succeeded.
Both the mayor and the chairman of the
Tulsa Regional Chamber, Jeff Dunn, said
that they have supported, and will continue
to support, Williams. The mayor said that
“Williams had Tulsa’s back all those years
ago, and the city has Williams’ back today,”
while Dunn said that “the chamber and the
city stand rmly in support of Williams
CEO Alan Armstrong and his management
team, and we pledge our ongoing support in
the days and weeks ahead.”
Oklahoma Regulators Expand Area of
Interest on Seismic Activity, Again
By Tim McNally
The increasing frequency and intensity of
earthquakes in Oklahoma have caused some
to look to the oil and gas industry to blame.
The Oklahoma Corporation Commission
(OCC) has been looking into this issue for
a number of years and has come to nd
that certain oil drilling practices have led to
induced seismicity. Numerous studies have
been conducted to get to the bottom of this
issue.
One particular released by Stanford in June
of 2015 identied a correlation between
the amount of wastewater that was
injected underground and the number of
earthquakes. Most of the issues were thought
to be coming from the Arbuckle formation,
a popular sedimentary underground
wastewater disposal site for producers.
Regulators, therefore, began by focusing
on individual wells that were disposing of
wastewater in the Arbuckle formation.
In March 2016, the OCC implemented new
guidelines for oil and gas companies in the
concerned regions. The commission also
decided to expand its so-called “Area of
Interest,” which seems to be expanding with
time. The guidelines implemented in March
included a 40% reduction in underground-
injected wastewater from the 2014 peak.
In mid-July, the OCC stated that it would
begin taking a look at all wells within the
Blanchard area, as there were 9 recent
earthquakes there. The OCC had earlier
declared an Area of Interest for a 15,000
square mile zone in the state, but the most
recent activity at Blanchard was outside of
this area. It was also noted that none of the
wells in the Blanchard area were within 20
miles of the Arbuckle formation, which
forced the commission to examine all wells
within the area.
These ever-broadening measures are going
to be continually implemented until the
number and intensity of earthquakes in
Oklahoma begin to decrease. In time, a
permanent solution might be identied to
create a safe environment for Oklahomans
without ceasing drilling operations.
Chesapeake Energy on the Rise Once
Again
By Tim McNally
Oklahoma City-based Chesapeake Energy
on Aug. 17 announced that it secured a
$1 billion loan for buying back a portion
of the company’s outstanding debt. The
move is part of Chesapeakes continuing
transformation to improve its nancial
standing as it attempts to streamline
operations and eliminate unnecessary costs.
It’s no secret that Chesapeake Energy, and
the oil industry as a whole, have been in a
rut these past two years. The continually
unfolding damage that has accompanied
the steep cut in the oil price, coupled
with rumors of a potential Chesapeake
bankruptcy, have made for a rough ride for
the stock price. February seemed to be the
lowest point for the stock, as it eventually
reached $1.50 a share. The stock has
since progressed upwards as Chesapeake
shut down the bankruptcy rumors and
successfully maintained access to a vital $4
billion credit line in April.
Chesapeake still has a considerable amount
of debt, but there has been a signicant
reduction in that debt as the company’s goals
have shifted in recent years.
“Our main focus is reduction of total
debt and the improvement in our liquidity,
specically debt maturing in the next six to
24 months,” Chesapeake CFO Domenic J.
Dell’Osso told analysts in a call. “Financial
discipline across our entire business remains
the priority at Chesapeake.”
The company has cut $3 billion in debt since
last year and its current outstanding debt
amounts to $8.7 billion, according to data
from Bloomberg.
That strategy has been successful so far, as
the stock seems to have been on the rise and
Moody’s changed its outlook on Chesapeake
to positive.