Chesapeake Founder Tom Ward Says $30 Oil `A Good Time to Get In'by
Former executive of Chesapeake, SandRidge bullish on gas
Ward's Tapstone Energy drilling in Texas, Kansas, Oklahoma
With oil hovering around $30 a barrel and natural gas mired in a six-year slump, Tom Ward, a former executive for two Oklahoma City shale pioneers, thinks about what went wrong.
It’s unavoidable in this town. The state legislative session opened Feb. 1, and top of its agenda is dealing with a $900 million budget hole, a byproduct of falling oil and gas revenue. Chesapeake Energy Corp., which Ward co-founded with Aubrey McClendon, has seen its stock fall 85 percent in the past year. SandRidge Energy Inc., which he ran from 2006 until shareholders forced him out in 2013, has been delisted from the New York Stock Exchange and recently hired advisers to consider "alternatives," a move some view as a prelude to bankruptcy.
"The world is upside-down," Ward said. "The world doesn’t make sense at $30 oil or $40 oil or even $50 oil. Our industry is bankrupt at $30 oil."
Nonetheless, Ward is buying back in. His latest venture, Tapstone Energy LLC, has four rigs drilling in Oklahoma, Texas and Kansas. The company has very little debt, is private and staying that way, Ward said. Asked to approximate its enterprise value compared with some of Oklahoma City’s other independent producers such as Devon Energy Corp., he answers only, "Less than theirs."
He’s particularly bullish on natural gas, figuring that one of the warmest winters on record has masked a sharp increase in demand.
Asked what he’d have done differently at SandRidge, Ward said he’d have raised more money issuing equity before the Great Recession made it nearly impossible.
"We were a very high-growth stock in 2006, and by 2008 we were highly leveraged," Ward said. "After that we were just trying to dig out. You can argue in hindsight that we shouldn’t have been that leveraged."
These days remind him of 1981, when he and McClendon were fresh out of college and just getting started. By 1982, Penn Square Bank, an Oklahoma City energy lender, went under, triggering a wave of bank losses. A few years later, oil prices fell below $10 a barrel.
"It was a good time to get in," he said. "Just like now is a good time to get in."