Hard work, luck make billions for Oklahoma executive

Journal Record, The (Oklahoma City), Aug 13, 2007 by Jerry Shottenkirk

Aubrey McClendon isn't so concerned with labels.

But he is a billionaire. Forbes magazine knows it, Wall Street knows it and Oklahomans know it.

That figure and title are for others to ponder, said the 48-year- old co-founder, chairman and chief executive officer of Chesapeake Energy.

"I just plug away, hope for the best and let everybody else keep score," McClendon said.

"Billionaire is a word that probably has more meaning to other people than it does to me," McClendon said. "Most people look at me today, and look at (Chesapeake co-founder and current SandRidge Energy CEO) Tom Ward, and see that sure, we are successful now. But you've got to understand that for 75 percent of my business career, I probably haven't been particularly successful. This has been a tough industry for 20 years."

Since 1989, when Chesapeake was incorporated, McClendon has expanded the company's campus, acquired natural gas companies large and small, purchased significant amounts of real estate in the metro area, and just for kicks, bought into part of an NBA team and a WNBA club.

Riding the success of the industry, McClendon has turned Chesapeake into what company officials call the nation's largest independent producer of natural gas.

It wasn't always so smooth for the Oklahoma City native.

"Chesapeake had a couple of difficult years as we've built it," he said. "I kind of take it in stride knowing I work in a volatile industry and have had a lot of luck along the way. At the same time, I know circumstances can change."

McClendon went to Belle Isle Elementary and then Heritage Hall in his formative years and upon high school graduation, he was off to Durham, N.C., and Duke University.

He learned the value of a buck when he had a lawn-mowing service. Each week during the summer, he'd ride his bike to deposit his money in Penn Square Bank at a time when the country's economy took a downturn. But life around here was quite good, thanks to an expanding energy industry.

"The eight years I was in high school and college, the price of oil went from $3 a barrel to $39 a barrel," McClendon said. "When I graduated from college, the country was in a recession. Interest rates were 15 to 16 percent and unemployment rate was close to 10 percent. Oklahoma and Texas, however, were in prosperity."

Penn Square Bank, which had its mighty fall in the early 1980s, was a financial center.

"The development of that bank from a little strip shopping center bank to a national financial institution in many ways mirrored what happened to Oklahoma City during those eight years," he said. "Oklahoma City went from a relatively sleepy backwater to a town on a lot of national radar screens."

Oil in his blood, name

The son of Joe and Carole McClendon graduated from Duke with a degree in history in 1981, but he knew his future was in something else.

"I had a fair number of accounting hours so I was going to go to Texas and work for Arthur Andersen as an accountant," he said. "The last minute, my uncle, Aubrey Kerr, who had a small oil and gas company in a town called Jaytex, offered me a job as a staff accountant. He offered me $3,000 more than Arthur Andersen, so I thought it'd be fun to come back to Oklahoma City."

So he brought his wife, Katie, a Michigan native who graduated a year ahead of him at Duke, back to his hometown.

"I never really grew up thinking I wanted to be in the oil and gas business, but by the time I graduated, that's where the best jobs were," he said.

The oil and gas business is in his name and in his blood.

His middle name is Kerr. He was named after his grandfather, Aubrey, the brother of Kerr-McGee co-founder, U.S. Sen. and Oklahoma Gov. Robert S. Kerr. His mother is the daughter of Aubrey Kerr and sister of his namesake.

Joe McClendon worked 35 years on marketing Kerr-McGee, which sold many products and had its own line of filling stations.

It was a much different side of the industry, Aubrey McClendon said.

"He was on the refining and marketing side, so as a kid, with him, I didn't spend time on oil and gas rigs, I spent time looking at dirty bathrooms in gas stations," he said. "I didn't want to be on the marketing side, I wanted to be on the drilling side."

After nine months in the accounting department, he went into the land business.

"That's when I fell in love with the oil and gas business because the land business, in my opinion, combined my love of history with my love of the precision of numbers," he said. "When you figure out who owns what and the minerals underneath the surface, there's a lot of math involved, and I like that. History, accounting, put together equals land, and that's what I did."

The euphoric feeling of a really good job didn't last that long.

"Within a year and a half of joining this industry, the bottom fell out in late 1982," he said. "I got the feeling Jaytex, like other oil and gas companies, was going to have its work cut out of it."

The handshake that started it all

In 1983, McClendon met Tom Ward, a fellow land man who, like McClendon, was still fresh out of college.