GO
Loading...

Chesapeake’s Controversial CEO Reveals Next Big Bet

Thursday, 18 Oct 2012 | 6:21 PM ET

Chesapeake CEO Aubrey McClendon is no stranger to controversy.

And his next big bet is largely controversial - he's convinced the future of his company as well as the nation lies with the nat gas in the Utica Shale.

If he's right, it could change – well, everything.

The Utica shale is a rock formation which stretches deep underground, across parts of New York, Pennsylvania, Ohio, and West Virginia. According to some estimates the Utica Shale may contain 38 trillion cubic feet of undiscovered gas.

Chesapeake Energy is the largest stakeholder in the Utica shale, with the company and its CEO Aubrey McClendon betting the proverbial farm that nat gas is about to become the nation's preferred source of energy.

Not only is nat gas abundant in the United States but it's also the cleanest burning of all the fossil fuels.

As a result, McClendon and may others believe that nat gas has the potential to be transformative because it can lower the price of energy for all Americans as well as break America's dependence on foreign oil.

"This is the best treasure of American energy," McClendon said on Mad Money.

And the benefits, McClendon says, are wide ranging:

Chesapeake CEO: Oil Consumption Lowest in 5 Years
Chesapeake Energy co-founder, president and CEO Aubrey McClendon, weighs in on the Utica Shale, saying "we have an opportunity, if we make good decisions, to lower the price of energy for all Americans."

Lower Prices at the Pump

In years to come, McClendon sees nat gas powering a wide range of things that are currently powered by oil. In turn he sees oil trading down to $24 - $36 a barrel – which he thinks would translate to $2/gallon at the pump.

More Jobs

With the company drilling in and around Canton, Ohio Chesapeake is creating new and high paying jobs. "Most positions pay between $75,000 - $150,000," said McClendon. And the ripple has been good for the local economy too, with the nat gas find generating sales for airlines, hotels, restaurants and more.

"During the Industrial Revolution, Ohio had more millionaires than any other state – we can, once again, generate that kind of wealth creation," said McClendon.

Invigorate Manufacturing

Not only does McClendon expect nat gas to drive the cost of manufacturing lower, he thinks
it will also make manufacturing more efficient. For the first time in decades, companies from around the world may come to the US for their manufacturing needs.

Share Price

In addition, McClendon sees his stock benefiting too. Currently Chesapeake has a high degree of short interest.

That's due in part to the price of nat gas, which is at multi-year lows. But also shares tumbled earlier in the year, as the company struggled with an SEC inquiry and corporate governance issues.

However, McClendon assured Jim Cramer that was all in the past. "We have a new board and a separate Chairman – it's been all around positive changes."

Going forward his focus, he said will be operations and harvesting energy. "We intend to sell $18 billion in assets (to repay debt) – that's more than our market cap – yet I expect we grow 20%."

"I think all (the catalysts mentioned above) are about to come together to unlock the huge value in the stock," said McClendon.

For what it's worth, McClendon is putting his money where his mouth is. He tells Cramer than 85% of his compensation is in stock.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.