Ascent Resources has come roaring from the middle of the pack to challenge Gulfport Energy Corp. as the most productive gas driller in Ohio's Utica Shale and announced a $1.5 billion investment in the play, moves big enough that one might think Ascent had some special knowledge.
The same people who "discovered" the Utica Shale for Chesapeake Energy Corp. populate the executive suite at Ascent; 12 of Ascent's top 14 managers have Chesapeake on their resumes.
Ascent will maintain Chesapeake's history of skilled drilling and leave behind its financial drama, CEO Jeff Fisher said in a June 29 interview. "Here at Ascent, we brought over the operational excellence, the technology, the innovation and the entrepreneurship from Chesapeake, but what we've added to that is a focus and a discipline from a financial standpoint in what we're doing."
Ascent had just announced that it would use a nearly $1 billion infusion from its private equity backers to buy out the Utica joint venture of Hess Corp. and CNX Resources Corp. and cash out some early investors.
The joint venture's acreage in the top dry gas counties along the Ohio River, Belmont and Monroe, along with acreage in the more liquids-rich window in Harrison and Guernsey counties to the west, fits nicely with Ascent's core holdings, Fisher said.
"As you go south in the play [from its Carroll County starting point], the play gets more overpressured and has good frack seals, both a top seal and a bottom seal such that the rock stimulates better," Fisher said. "We consider Belmont County, Guernsey, Harrison and southern Jefferson as the best parts of the play. That is exactly where our acreage is concentrated."
After more than doubling its Utica gas and liquids production to 1.004 billion cubic feet equivalent per day year over year in the first quarter, Ascent is essentially tied with Gulfport as the Utica's top producer. While Gulfport has slowed its activity in the Utica's southern Ohio dry gas counties to focus on a shale play closer to its Oklahoma City home, Ascent plans to drill about 135 wells in Ohio this year.
"The existing acreage that we had before these transactions was strategically targeted because we understood the rock, we understood the quality and the attributes of the reservoir, and bought in the right parts of the Utica Shale," Fisher said. "I think being part of the team that discovered the play gave many [Ascent executives] ... insights into the quality of the Utica. It was really the first idea we had when we were starting up this company as a play to focus on."
After corporate raider Carl Icahn engineered Chesapeake Energy founder Aubrey McClendon's 2013 ouster from power as the freewheeling, free-spending days of the shale gas gold rush ran out, McClendon rented offices just down the road from Chesapeake's Oklahoma City headquarters, hoisted a help-wanted billboard and started hiring.
Led by Fisher, who had been Chesapeake's executive vice president for production, several executives with more than a decade of experience in shale gas drilling from the early Barnett Shale around Fort Worth, Texas, through Louisiana's Haynesville Shale to Ohio's Utica packed up their desks and moved. Backed by an initial $1.35 billion investment by private equity firms Energy & Minerals Group and First Reserve Corp, the Chesapeake veterans got back to work on what would eventually become Ascent Resources.
EMG and First Reserve will be cashing out some of their original investment as Ascent is also buying their Utica Minerals Development LLC, which owned acreage that Ascent operated for the two firms, Fisher said.
"What we really like to do is find high quality, strategic private equity investors that understand what we're doing and understand our business," Fisher said, noting that the latest round is anchored by three new investors whose identities will be disclosed when the deal closes later in 2018. "They were investors that knew our company and know the Utica very well. We had a couple of new investors come in very strong."
The latest round of investment gives Ascent the cash it needs to fulfill its development plan and achieve cash flow neutrality in 2019 without going to the public markets, Fisher said. "We have sufficient capital and liquidity to fund our business plan, so from that standpoint, there's not a need to go public," he added. "IPO is an opportunity; it's not a necessity." Ascent reported that it lost $42.4 million in the first quarter as activity accelerated, compared to a $7.9 million loss in the first quarter of 2017.
Fisher was quick to point out that Chesapeake and the Utica are not the first rodeo for Ascent's executive team. He said he worked on ARCO teams in the 1980s that produced a slew of current exploration and production chiefs. "We all have broader histories than just Chesapeake. I grew up in the business with some peers of mine: [Chairman and CEO] Ryan Lance at [ConocoPhillips], [Chairman and CEO] Dave Stover at [Noble Energy Inc.], [CEO] John Christmann at [Apache Corp.]"