SandRidge’s future and budget debate were topics of chat
Readers asked questions Tuesday about SandRidge's future and how the ongoing budget debate at the Capitol could impact taxes paid by oil and gas companies and utility consumers in the February edition of the online Energy Chat. This is an abridged transcript of that chat on NewsOK. com with energy writers Adam Wilmoth and Jack Money.
Q: Everyone thinks Midstates is going to take over SandRidge. Will the company stay in Oklahoma City or move to Tulsa?
Wilmoth: SandRidge directors still have not officially responded to Midstates’ merger offer. The effort is led by an investor group that is the largest shareholder at Midstates and the second-largest shareholder at SandRidge. SandRidge is the larger of the two companies, but the Midstates' plan calls for Midstates CEO David Sambrooks to lead the combined company. SandRidge directors fired CEO James Bennett two days after Midstates publicly announced the plan, a move that could pave the way for the proposal to move forward.
So now to your question. Typically the aggressor keeps the headquarters. Since Midstates is based in Tulsa and the Midstates CEO would lead the company, conventional wisdom would say the new company would be based in Tulsa.
But that’s not necessarily the case. Our Steve Lackmeyer had a great column on this issue, pointing out that Midstates moved to Tulsa from Houston in 2015 and that Sambrooks is not from Tulsa. Also, SandRidge owns a large building in a prime location with plenty of space, while Midstates leases.
Q: I noticed Continental Resources' market cap is now larger than Devon's. Why is the public presence of Devon much larger than Continental?
Wilmoth: Most of the industry has returned to profitability as oil prices have recovered and companies have focused on costs, but most energy company stock prices
have not yet recovered. While oil prices are up about 60 percent from June, natural gas prices have barely budged. Wall Street has rewarded companies like Continental that are largely oil producers and has punished companies like Chesapeake that are largely natural gas. Devon has a more even production mix. In terms of employment, Devon still is much larger. The company had about 4,000 employees as of January 2017, while Continental had about 1,100.
Q: Scenario for consideration: (Corporation Commissioner) Dana Murphy wins the Lieutenant Governor's race. Who's the likely appointee to fill her unexpired term?
Money: Lots of variables could affect that issue. If Murphy wins, I could see a quick resignation from the commission so Gov. Mary Fallin could replace her if a Democrat wins the governor's race. But if a Republican wins the governor's race and Murphy wins
as well, there's no rush. I'm thinking her replacement will be a Republican, regardless.
Q: With Chesapeake's continued shed of assets, can we expect to see it move into the crosshairs as an acquisition target?
Wilmoth: Mergers and acquisitions are always possible in the oil and natural gas business, and Chesapeake often finds itself associated with the topic. But I haven't heard any recent, specific rumors that Chesapeake is a target.
Chesapeake management has spent the past few years cleaning up its balance sheet, paying down billions in debt and making operations more efficient. Such actions are designed to make the company more attractive to shareholders, but they also could make the company more attractive to larger companies.
At the same time, the company's stock price has taken a beating, in part because of stubborn natural gas prices. The stock price hit a new 52-week low last week and is near a two-year low, sitting at
$2.77 a share.
Q: Fallin has noted Oklahoma's electric rates are the second lowest in the nation. While that's good for customers, are we doing to our utilities what the Legislature has done to our state's budget? American Electric Power, the parent of PSO, is moving important capital investment dollars out of Oklahoma because of its poor regulatory climate. That doesn't bode well for the system's long-term reliability.
Money: I have heard that argument. But I don't believe PSO actually has moved capital investment dollars out of the state. PSO continues to make requests to recover what it spends to keep service reliable for its customers, and it also proposes spending about $1.3 billion to own part of a huge planned wind farm in the Panhandle and to carry some of its power into parts of the grid it operates. That doesn't sound like a company that's pulling money out of the state to me, although, I don't have a comprehensive view of decisions its parent company might be making to prioritize certain projects over others.