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Jennifer Dauble



Following is the unofficial transcript of a CNBC interview with Chesapeake Energy CEO Aubrey McClendon, who fires back at The New York Times’ article, tonight on CNBC’s “Mad Money w/Jim Cramer.” All references must be sourced to CNBC.

JIM CRAMER, host: Well, you watch us, so you know I'm a huge fan of natural gas, the cheap, cleaner, abundant bridge fuel that could bring our nation much closer to energy independence. That's why I've been on a crusade to get our leaders to embrace the stuff for ages. However, the last year I've made it very clear that natural gas is not as good a place to invest as oil because it's in glut. We have too much supply because new discoveries as well as more advanced drilling and production methods. So I saw The New York Times articles this weekend, like, the one that was headlined "Insiders Sound an Alarm Amid a Natural Gas Rush," which pegged the industry as a Ponzi scheme, claiming that companies have been overstating the reserves in the shale plates that are at the heart of the current boom. I was perplexed, and not because the Times' Ian Urbina wrote still one more negative story about the industry--this, by the way, is the seventh hit piece on natural gas in the last five months—but because if anything the industry may be understating how much nat gas there is in this country. If we're being duped by the nat gas industry, as this article suggests, then how come Exxon Mobil spent 31 billion to buy nat gas giant XTO? Were they fooled, too? How about the Chinese national oil company, CNOOC? How about Mitsui, Japan's second-largest trading company? Total, the massive French oil company? BHP Billiton, the Australian resource giant? All sophisticated companies which have bought acreage in the US shale plates. Were they all duped? I--every one of them? Could they all be useful idiots for a couple of nat gas charlatans? As an investor, you need to be able to distinguish real information from pure sensationalism. That's why tonight I'm thrilled to have Aubrey McClendon, CEO of Cramer fave Chesapeake Energy, on the show to help us get to the bottom of this issue, maybe explain some of the misconceptions for us. Mr. McClendon, welcome back to MAD MONEY.

Mr. AUBREY McCLENDON: Thank you, Jim, great to be with you this afternoon.

CRAMER: All right, Aubrey, let's cut to the chase here. Attack number seven, New York Times, not to mention some other publications. You guys, given the fact that you're cleaner than other fuels, domestic, help get toward energy independence, you don't seem to catch a break. So just give me, from your perspective, why this industry is so targeted by the media.

Mr. McCLENDON: It's not entirely clear to me, but I think this particular reporter and this particular paper has probably been captured by environmental extremists. There were some e-mails yesterday by the--or on Sunday, rather, by some environmental groups claiming credit for having coached this particular reporter, who apparently doesn't have an editor anymore, into saying something that's completely not true. How in this world, when gas prices are at a seven-year low in the US, where we have passed Russia to be the largest producer of natural gas, when gas supply and demand are at all-time highs in our country, and you come out now and say that, `Wait a minute, there's not as much gas as we think.' It's ludicrous. Every part of the market, every bit of science is out there that says that we're at the very beginning of the shale gas revolution, and, in fact, as you said in your intro, we think we are absolutely understating the amount of gas because all we can really talk about publicly is the amount of proved reserves that we have, and they are dwarfed by the unproven reserves, the reserves that we'll be developing for decades to come, so.

CRAMER: I want to take it one step further. If it is an anti-industry bias, a sophisticated observer like me who spoke with the Southern, big, big, biggest...utility in the country yesterday, it's very clear from someone like Southern, or any of the big, big utilities out there that if there's an anti-industry bias, all it's going to do is send people toward coal, which is dirtier than natural gas. It's not going to send people to windmills. We're not going to be able to feed our baseline with windmills.

Mr. McCLENDON: That's what makes it all so incredibly ludicrous. Natural gas is the one fuel that we have that's affordable, it's scaleable, it can replace coal over time, it can replace imported oil, can create American jobs. And remember, right now the price of natural gas is less than half what it was in 2008. We're providing a daily stimulus to the US economy of $250 million a day. We are creating hundreds of thousands of jobs. We are cleaning the environment because when you burn more gas, you're burning less coal, and we think in time we can burn less imported oil. So why The New York Times or any group of environmentalists would think it was somehow in their best interest to bash the natural gas industry is a real mystery of life. And if you could consider what The New York Times could've written about, and, in fact, other reporters for The New York Times have written about some of these things, is what can we do in this abundance of gas? What can this abundance of natural gas do? It can clean the economy, we can power our transportation system, we can reduce foreign oil imports, we can teach China and India and other countries around the world to burn less coal and burn more natural gas. And this is the one real bright spot of the American economy today, that the US is the leader in technology and in energy discoveries. And this paper, this one reporter, it seems like, has chosen to ignore all of the evidence.

And also, to say that he, a handful of unnamed critics of the industry, and a goat cheese farmer from Fort Worth, and a third-tier geologist who considers himself a reservoir engineer, that somehow they know more about the shale gas revolution in America than companies that have combined market caps of almost $2 trillion and have spent hundreds of billions of dollars to develop these new resources, I mean, it's ludicrous. We're not debating the origin of the universe, when no one really knows what happens. We're debating whether or not the US has as many gas reserves as is evident and are being produced every day. And the reality is, we're understating because we don't even get to count all of the unproven resource potential that our company and other companies have.

CRAMER: All right, let me take his side for a second. I've been a print journalist.


CRAMER: I can go there. I get it. Let's say I get an e-mail, a March 17th e-mail from an unnamed--in this article--Chesapeake, your company, geologist saying, `Our engine is to'--this is an actual e-mail, we believe--`Our engineers here'-meaning Chesapeake--`project these wells out to 20 or 30 years of production, and in my mind, that has yet to be proven as viable.' The geologist then goes on, again, March 17th, saying, `In fact, I'm quite skeptical of it myself when you see the percentage decline in the first year of production.' Isn't this the smoking gun I would want if I wanted to win the Pulitzer?

Mr. McCLENDON: If--you know, if you wanted to win the Pulitzer for fiction, I guess you probably could.

CRAMER: But it's an e-mail, right?

Mr. McCLENDON: Well, it's--I mean, look, the young man is less than one year out of school, he's one of almost 200 geologists that we have, he's not worked here very long. Yes, we've all...

CRAMER: Does he still work there?

Mr. McCLENDON: Yeah, sure he works here. And, you know, at--we pitch a big tent in the company. But, you know, this is--if you go on to read the full context of the e-mail, his comments are basically in the context of, `In low gas prices, it's tough to make money drilling natural gas.' Well, that's...

CRAMER: Right. But you agree with that. All that...

Mr. McCLENDON: That's certainly true. We've not been bashful about that.

CRAMER: Well, but...

Mr. McCLENDON: That's why we've been moving more towards a liquid space, and waiting for natural gas demand, a revolution in natural gas demand as something that will underpin an American industrial renaissance for demand to pick up and gas prices to pick up a little bit. Not much, but I'm thinking not $4, but maybe five or $6.

CRAMER: The reporter came on our "Squawk Box" earlier this week, yeah, yesterday, and Carl Quintanilla asked him a very interesting question, which is, `Look, do you think that these companies are inflating in order to be able to move their stock prices up?' Now, why would a CNOOC want to inflate? Why would a government company want to inflate? I mean, who do they report to? Where does the cause--stock of a government trade?

Mr. McCLENDON: You know, that's a crazy comment. For starters, if we were to overstate reserves, obviously we have--we have, ourselves have half a million shareholders, we have 34 analysts who cover us. We have peer companies that look at what we do. We have the US government through the SEC that looks at what we do. And remember, our engine--our reserves are really calculated by third party engineering experts.

CRAMER: Right, they're not you.

Mr. McCLENDON: They're not us, they're third party. Plus, I mean, do you really think that Exxon and Chevron and Shell and the--all these companies are clueless and that a handful of people over here really know what they're doing? And, by the way, to create the fantasy that there's more gas than is actually out there actually depresses our stock prices...

CRAMER: Right!

Mr. McCLENDON: ...because we do better if gas prices were higher. So if The New York Times article was true, then our stock should skyrocket because it means that the gas prices are certainly going to move up. So any way you approach that article, it's completely illogical, it's ludicrous. And honestly, I've been reading The New York Times for 30 years, it is an incredibly sad commentary about a once-venerable newspaper...

CRAMER: Well, I don't think you can say that.

Mr. McCLENDON: ...who just...

CRAMER: I think that, you know, this a great paper, and, you know, you—there are things that happen within a paper, but I think it is a great paper. I think that's the wrong way to play it.

Mr. McCLENDON: Well, I--OK, fine. Well, I read it today, but it—what it--it is a reminder of that--is that somehow, you know, they have missed the opportunity to tell the real story here, which is to be able to use the new discoveries of natural gas that we have made that can be transformative for our country on an economic and on an environmental basis...

CRAMER: Right.

Mr. McCLENDON: ...and, honestly, Jim, can spread, you know, around the world.

CRAMER: Right.

Mr. McCLENDON: How do we--how in the future do we make room for China's demand for 20 million barrels a day? How do we make room for all of these countries to aspire to the transportation systems that we have? There's not enough oil in the world. But there is enough natural gas in the world, and that's why we need to have honest assessments of what we have going on and to recognize that we have this incredible national treasure that's been found in the last five to seven years in the US, and it's shale gas. And I'm very proud to have been part of it. And the good news here is the truth is on our side, and you can't ignore the market reality, and the market reality today is we have plenty of gas, and there'll be more to come for decades to come.

CRAMER: All right. Aubrey McClendon, thank you so much for coming on MAD MONEY.

Mr. McCLENDON: Jim, thank you.

CRAMER: Appreciate it. That's Aubrey McClendon, chairman, CEO of Chesapeake, CHK. I don't know. Maybe you think that all of them are useful idiots. To me, he makes a pretty good case.

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