The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (17 page)

But on February 12, 1993, a state court jury awarded Plotner $2.2 million, including interest and attorney expenses. Equally surprising was that the judgment was against one of Chesapeake’s units, in addition to McClendon and Ward.

“The jury liked Plotner and they didn’t like Ward and McClendon,” Watts recalls. “The jury thought they were lying.”

McClendon and Ward say they simply decided not to back Plotner, as was their right.

“He thought I lied to him but I didn’t,” Ward says.

McClendon adds: “Tom and I were the innocent guys on the sidelines.”

“We didn’t do what they claimed but it wasn’t seen that way,” is how Ward explains the verdict.

The legal decision sent Chesapeake shares reeling; it wasn’t clear how the young company would come up with the money. McClendon and Ward volunteered to pay the entire legal bill themselves, even as they appealed the decision, a move some said they didn’t need to make. Chesapeake shares kept falling, though, as shareholders launched a lawsuit claiming the company’s IPO prospectus hadn’t provided adequate warning about the ongoing litigation, a suit that eventually was settled.

By the end of the year, Chesapeake was trading for under four dollars a share and the company had the dubious distinction of being the worst-performing IPO of the year.

A few years later, Plotner received more vindication. Whitehurst, the FBI agent, became a whistleblower and leveled serious complaints about the work of the FBI Crime Lab that had been involved in Plotner’s rape case. A subsequent Justice Department investigation produced a scathing report about the lab’s shoddy work and about contaminated evidence in a number of other cases.

A lawsuit brought by Plotner against the FBI was dismissed by an Oklahoma City federal judge, however. Soon his bad luck returned. One night in the summer of 1997, while Plotner was at home with his young wife, Margarita, he turned distant and despondent. She didn’t realize it, but it was Plotner’s late son’s birthday and he was having a tough time dealing with the memories flooding back. Plotner hadn’t shared his loss with his new wife, preferring to suffer in silence. Margarita kept asking him to talk to her about why he was so down in the dumps, but he resisted. Eventually, he began yelling at her. Soon their neighbor, a cop, called the police to report a disturbance.

When the policemen arrived, they didn’t find evidence of violence, according to both Margarita Plotner and Plotner’s attorney. The officers did discover a safe containing a collection of hunting guns handed down for generations in the Plotner family. Plotner was arrested for gun possession, a violation of his parole.

Days before he entered a minimum-security prison in Dallas, Plotner’s mother died, adding to his sad plight. During his two years in prison, he gave power of attorney for his oil business to an aunt. She soon clashed with Margarita. Eventually, Margarita grew so unhappy that she divorced Plotner, though they remained close. In 2013, after Plotner suffered a stroke, Margarita nursed him back to health.

“He’s a really nice guy who’s been through so much,” she says.

Plotner’s attorney, Charles Watts, experienced his own unexpected postscript to the Chesapeake lawsuit. As the company appealed the award, Watts joined a new church in Oklahoma City. With reluctance, he agreed to join a church feet-washing service. It was a religious rite tied to the day before Easter and shared by some Christian denominations, but one that Watts was dreading.

During the rite, Watts, already uncomfortable having his feet washed by a stranger, looked up to see Tom Ward standing over him. Watts had just ripped into Ward and McClendon in court, calling them all kinds of insulting names as he defeated their effort to overturn the award to Plotner.

Ward didn’t seem to hold a grudge, though. “May I wash your feet?” he asked. He put out a hand to Watts and said, “Welcome to the church.”

Watts still believed Ward and McClendon had committed fraud against Plotner. But the warm welcome was a surprise, and Ward and Watts soon became friends. Later, Watts wrote a letter to McClendon thanking him for his work in helping Oklahoma City grow and apologizing for his role in the case.

•   •   •

C
hesapeake was on the ropes once again, due to the Plotner award, and the company’s shares were nearly worthless. McClendon and Ward had reason for some optimism, though.

For one thing, they had done a good job of acquiring acreage, such as in the Sholem Alechem oil field in southern Oklahoma, a productive field with an odd name and a colorful history. Some locals believed it was named after a Native American expression. It’s more likely that it was a tribute to Bill Krohn, a popular and outgoing reporter for the
Daily Ardmoreite
in the city of Ardmore.

Krohn had been an indefatigable journalist who traveled to oil fields to visit workers, breaking news on new oil discoveries and chronicling the 1920s oil rush. When he saw a roughneck, he’d call out the traditional Jewish greeting of “shalom aleichem,” or “peace be unto you.” Krohn became a well-liked figure, and his greeting caught on. He even popularized the traditional Jewish response to this greeting: “aleichem shalom,” or “unto you, peace.”

When a newcomer heard the odd phrase and gave Krohn a look of confusion, the reporter would buy the fellow a raspberry soda at a nearby confectionery store and explain it all to him. Krohn even started a Sholem Alechem society in the lobby of an Ardmore hotel, which was nothing more than an excuse for oilmen to get together, drink liquor, and smoke cigars. Legend has it that Krohn was with a group of men at a new well one day when oil suddenly shot to the sky. They named the field Sholem Alechem in tribute to their unusual friend, who later in life turned in his pen and became a wildcatter.
⁵

The Chesapeake team wasn’t really sure how the Sholem Alechem field acquired its name. All they knew was that it was churning out oil, helping the company regain its footing.

Chesapeake became aware of the progress companies like Oryx Energy were making drilling sideways through bedrock to extract oil from tired old fields in Texas. McClendon and Ward were young and open to new technology, and they instantly recognized that horizontal drilling could revolutionize production. They also embraced an improved mapping technique called three-dimensional seismic imaging.

Soon, McClendon and Ward saw promising results in the underdeveloped limestone formation straddling the border between Texas and Louisiana, the Austin Chalk. At first, Ward’s team drilled at sixty-five-degree angles. Eventually they figured out how to properly turn their drill bit horizontally, scoring success in areas including the First Shot field in the formation.

Major oil and gas companies ignored the area, leaving it to a group of upstarts. Union Pacific Resources, an offshoot of the Union Pacific Railroad, was the first to seize on using horizontal drilling in the Giddings field in the Austin Chalk area. Over the next few years, the company produced more natural gas in the United States than giants like Exxon, Conoco, or Shell.

The limestone in the Austin Chalk region was naturally fractured. As a result, oil and gas came up quickly when it was drilled in a horizontal fashion. It didn’t need to be hydraulically fractured, unlike the Barnett Shale elsewhere in the state, where Mitchell Energy was drilling around the same time.

“Back then we had twenty-seven rigs drilling, and if an oil well didn’t come in at one thousand barrels per day, we didn’t think it was worth much,” according to Darrell Chmelar, who was a production supervisor at the time for UPR.
⁶

McClendon and Ward locked up some acreage ahead of Union Pacific, scoring instant winners with its early Austin Chalk wells. Chesapeake’s Navasota River field would go down as the most lucrative in the company’s history, producing six hundred billion cubic feet of gas from just one hundred wells.

Most other companies were reeling amid the industry’s continuing struggles. Many were firing experienced drilling engineers. Ward hired some of the best of them to help push farther into the Austin Chalk region. New members of the team found ways to improve Chesapeake’s horizontal drilling, allowing the company to capture more oil and gas. As they bought more acreage in Texas, moving closer to the Louisiana border, Ward was like a general sweeping across enemy territory, picking up defectors along the way.

By early 1994, Chesapeake’s wells were showing huge production and Chesapeake shares were soaring. They reached nearly seventy dollars a share in November 1996, up from less than five dollars at the beginning of 1994. Chesapeake was the best-performing stock in that period and the company had a market value of more than $1 billion.

These achievements weren’t enough for McClendon and Ward. Looking across the state’s border into Louisiana, they spied hundreds of miles of fresh land that seemed fit for drilling. They were well aware that rock can change in quality every few miles, making the new push no sure thing. But Chesapeake had met early success drilling just over the border in South Louisiana, so it made sense to keep going under the assumption that nearby fields would be just as productive.

Their growing interest in the Austin Chalk began to leak out. Industry veterans, such as Morris Creighton, reached out to lend a hand. Creighton had worked as a landman for the Hunt brothers, who had famously tried to corner the silver market in the 1970s and also held oil interests. In the past, Creighton, a Texan, had purchased mineral rights around the country, from Michigan, North Dakota, and Montana to Wyoming, Texas, and Louisiana. But he was struggling to find work amid the industry’s tough times when he heard about Chesapeake’s ambitious drilling plans in the Austin Chalk region.

When they met, Creighton, well over six feet tall, towered over Ward, who was not quite five foot seven inches, wore round glasses, and bore a resemblance to Jason Alexander, the actor who played George Costanza in the television comedy
Seinfeld
. It was Creighton who felt intimidated, though. Ward spoke quickly, had more energy than anyone Creighton had ever met, and grilled him for information about the fields he had worked on and how horizontal drilling was evolving.

“I’m from a part of the country where you speak slowly, I was just wishing he would slow down,” Creighton recalls. “Tom was a fireplug, he looked right at me and got right to the point and you could feel the excitement in his voice.”

There were no newspapers or Web sites tracking new drilling techniques, and operators like Oryx were trying to keep their advances quiet. Ward knew the best information came from field workers, so he sent Creighton to do some reconnaissance work. Creighton chatted with rig hands, roughnecks, truck drivers, and the like at local bars and other spots. He asked which companies had made progress with new ways to drill horizontally and who was leasing new acreage, reporting it all back to Ward.

“He wanted to know everything and anything I knew and everything I could find out about the newfangled technology of horizontal drilling,” Creighton recalls.

Late one afternoon, Creighton received a phone call from Ward. In an urgent tone, Ward said he had heard that Occidental Petroleum was leasing land in the Austin Chalk region in Louisiana, the same area Chesapeake was eyeing for new wells.

“We need you to go to Rapides Parish to see horizontal drilling there” and potentially lease some land, Ward told Creighton. Ward was worried that Occidental might be locking up choice acreage before Chesapeake had a chance to do much leasing.

“Sure, I’ll be there in the next few days.”

“You don’t understand,” Ward told Creighton. “I want you to go
now
.”

Creighton got into his pickup truck and drove nearly eight hours, arriving in Louisiana at close to midnight. The area was nearly deserted and he didn’t know how to find his rival’s wells. He located a sheriff’s substation and asked the sheriff if he had any idea where the new wells might be located. The sheriff took pity on the lost Texan and led Creighton to a well site deep in the pitch-dark woods.

Soon, Creighton saw a trailer. He knocked on the door but didn’t get an answer. No one seemed to be around. Through a big window, though, Creighton saw a large computer monitor that had been left on. On the screen were full production details of the well. Creighton grabbed a pen and wrote it all down. Then he found a nearby pay phone and placed a collect call to Ward, who was waiting with some colleagues by the phone, in the middle of the night.

After Creighton read the well’s results, Ward relayed a quick new order: “Get thirty men there!”

Creighton’s mission was to buy up as many leases as possible, as quickly as he could, as Chesapeake pushed farther into Louisiana. McClendon and Ward ordered the purchase of over a million acres, as they prepared to establish hundreds of well-site locations.

“I thought we could march across Texas and Louisiana,” Ward says.

Ward spent so much time at the office, quarterbacking the push, that he built a Murphy bed to pull out of the wall. That way he could work until 1 or 2 a.m., crawl into bed for a few hours of sleep, shower, and start work anew by 5 a.m.

After a well blowout forced a crew to evacuate, Ward flew to the site to hand out toothpaste, deodorant, and other toiletries to displaced field hands, a gesture that inspired them to work even harder.

By late 1996, Chesapeake’s shares were soaring. Investors were so excited they were willing to overlook the fact that the majority of the company’s reserves were “proved but undeveloped,” an industry term for reserves, like those in Louisiana, that the company was confident would produce oil even though they weren’t yet producing anything.
⁷

Once production from the Louisiana wells began, though, a curious thing happened. The wells began with a burst but quickly saw sharp production declines. Soon, Chesapeake’s Louisiana crew wasn’t getting its paychecks. Tempers rose and some of the workers in the fields accused Creighton of gambling away their money.

“It was an ugly time,” Creighton said. “I had sixty-five guys in the field all starving to death.”