A company tied to Aubrey McClendon is on the prowl for $2 billion from public investors as McClendon’s company bears down on the Utica.

Call it an act of faith in a big name. The investment is a blind offering, meaning investors won’t be able to see what the company owns prior to plunking down a minimum of $5,000. McClendon has been active in the Utica following a $1.7 billion joint venture in October.

On Dec. 13, American Energy Capital Partners (AECP), the partnership linked to Chesapeake Energy’s former CEO, filed an S-1, a document used in the initial registration for new securities.

The partnership’s ultimate goal is to cash out by flipping the business in 5-7 years.

“We are a bit cautious on this strategy since industry focus has shifted from flipping acreage to more efficient operations over the last 12-18 months,” said Hsulin Peng, an analyst with Baird Energy.

The partnership’s units will pay a monthly dividend equaling a 6% yield or $1.20 per unit. The units will not be publicly traded.

McClendon’s management company is entitled to receive a 2% fee of the cost of the contract price for each property acquired, whether it’s producing or non-producing oil and gas properties.

“McClendon's core competency is E&P A&D, so we will be monitoring his progress carefully,” Peng said. “Generally we think increased funding for AECP is a modest positive for Utica names given the partnership's leasing focus in the play to date.”

The partnership will be managed by AECP Management LLC, which was formed in July 2013 by McClendon.

McClendon is the CEO and sole member of the management company since it was formed to oversee existing and future oil and natural gas assets. The company will provide services including:

  • Identifying and evaluating oil and natural gas properties for acquisition, development, integration, sale or monetization.
  • Conducting (or overseeing one of its affiliated companies or third-parties to conduct) drilling, completion, production, marketing and hedging operations as the operator of our oil and natural gas properties.
  • Overseeing drilling, completion, production, marketing and hedging operations.
  • Identifying and evaluating financing alternatives for acquisitions.
  • Managing financial, accounting and other back office support functions.

McClendon is bankable and should attract interest. He co-founded Chesapeake in May 1989 and built it into one of the top drilling companies until his resignation in April. During his leadership, Chesapeake discovered the Haynesville shale, Utica shale, Powder River Niobrara shale, Tonkawa Sand and Mississippi Lime unconventional plays.

AECP Management has a staff of more than 125 oil and gas professionals with extensive oil and natural gas industry experience. The team has expertise in engineering, drilling, operations, geoscience, land, finance, accounting, IT, marketing and administration.

Despite McClendon’s pedigree, the companies involved in the offering go to great lengths to note that they have no prior operating history or established financing sources.

“Investing in our units involves a high degree of risk,” the S-1 says.

In October, McClendon raised $1.7 billion in equity and debt through a joint venture between Red Hill Development, part of the family owned Kimble Cos., and McClendon’s American Energy-Utica LLC (AEU).

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