Aubrey McClendon launches new gas company
Aubrey McClendon is back. The founder and former CEO of Chesapeake Energy is about to close on $1.8 billion in equity and debt financing for a new exploration and production company, according to investors in the company, which is named American Energy Utica.
As its name implies, the company will be buying and developing land in the southern Utica Shale area that's rich in natural gas and natural gas liquids. McClendon's new company will be closing on the purchase of 80,000 acres in the Utica Shale in three separate transactions. With $1.35 billion in equity, along with $450 million in debt, having been raised, it's expected to move quickly to start the process of production with hopes of having 12 rigs operating within two to three years, according to investors in the company.
The new efforts marks the return of McClendon, one of the fathers of the natural gas revolution in the U.S., to the E and P business after he was eased out of his job as CEO of Chesapeake earlier this year.
(Read more: Chesapeake board called on to fire CEO McClendon)
Chesapeake, which suffered in part from the falling natural gas prices brought on by the innovations of its founder, nonetheless offered monumental returns to its long term shareholders. Investors in McClendon's latest company are hoping for more of the same and seem little concerned about the side deals McClendon struck at Chesapeake that helped lead to his ouster.
The largest single investor in American Energy Utica, with roughly 70 percent of the equity contributed to the deal is the Energy and Minerals Group, a $6.7 billion private equity fund led by John Raymond with investments across the energy complex. Raymond tells me McClendon's track record of execution, coupled with the capital raised and what he described as the best rocks around in the acreage being acquired, should produce long term success.
Other investors, including First Reserve, are giving McClendon incentives for a big payday. The bigger the internal rate of return, the more his take from the company rises. McClendon, who declined comment, remains of the belief that we are at the beginning of a demand revolution for natural gas that will span generations.
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