Barnett Shale

OKC Thunder drawn into Chesapeake woes

It had to happen. Now even the Oklahoma City Thunder NBA franchise has been dragged into the continuing controversies at Chesapeake Energy over CEO Aubrey McClendon's various personal interests. Seems the team has about $8 million so far this year in Thunder-related spending, including tickets and sponsorships, about twice what it spent last year. Bloomberg News has the story here.

-- Jim Fuquay

Chesapeake to sell 500,000 acres in Wyoming, Colorado

Chesapeake Energy says it plans to sell a half-million acres and interests in a few dozen wells in the DJ Basin in Colorado and Wyoming. CNBC has a version of the story here.

-- Jim Fuquay

Chesapeake shares up on Icahn report, McClendon comments

Chesapeake Energy's shares are up close to 10 percent this morning on a Wall Street Journal report that Carl Icahn is about to disclose a large stake in the Oklahoma City-based producer and on comments from CEO Aubrey McClendon during a morning conference call with financial analysts. McClendon talked about the company's $3 billion loan it announced late Friday and about how planned asset sales are proceeding. Reuters has a report here.

-- Jim Fuquay

Chesapeake lands $3 billion loan from investment banks

Chesapeake Energy said late Friday that it has a $3 billion unsecured loan due 2017 from Goldman Sachs and affiliates of Jefferies Group. The Oklahoma City-based producer said it will use the proceeds to repay borrowers under its existing credit facility. It said it plans to sell $9 billion to $11.5 billion in assets and use a portion of those proceeds to repay the loan. It said it has "strong interest" in its Permian Basin and Mississippi Lime properties and "expects to complete these two transactions in the 2012 third quarter. It has scheduled a Monday conference call with analysts.

-- Jim Fuquay

Chesapeake: Asset sales could be delayed

Bloomberg News, citing a company filing, reported today that Chesapeake Energy may have to delay some of the $14 billion in asset sales planned for this year because low natural gas prices may hurt its ability to comply with credit covenants.

-- Jim Fuquay

Report: McClendon given OK to trade on own behalf

Reuters news service has the latest in the Aubrey McClendon-Chesapeake Energy saga with a report that CEO McClendon's 2009 employment contract specifically allows him to trade commodities, including oil and natural gas, with his own money. But it also forbids him from taking an active role in any hedge fund. Reuters said many petroleum producers prohibit such executives from commodities trading because of the potential for conflicts of interest. The story is here.

-- Jim Fuquay

Chesapeake co-founder describes hedge fund with McClendon

Sandridge Energy Inc. CEO Tom Ward, who together with Aubrey McClendon co-founded Chesapeake Energy in 1989, told investors Friday that a fund he and McClendon ran together was created to manage personal investments. The fund’s day-to-day activities were managed by professionals, while Ward served in an oversight role, Bloomberg News reported today. The fund was closed in 2008, Ward said. Reuters news service reported on the fund earlier this week, and that followed earlier disclosures of large loans taken out by McClendon, now Chesapeake CEO, to fund his investment in company wells. As a result the Oklahoma City-based producer, already struggling to deal with heavy debt and the lowest natural gas prices in a decade, has found itself the focus of frenzied news coverage and speculation.

-- Jim Fuquay

Chesapeake confirms SEC inquiry

Chesapeake Energy on Thursday confirmed that the Securities and Exchange Commission has told it and Chairman Aubrey McClendon that the agency’s Fort Worth regional office has started an informal inquiry and asked both parties to retain “certain documents.” Chesapeake did not detail the nature of the inquiry, but Reuters news service last week, citing an unidentified source, said the agency was looking at a program that allowed McClendon to invest in the Oklahoma City-based producer’s wells. An official of the SEC’s Fort Worth office said the agency does not publicly discuss such inquiries. The SEC uses informal investigations, interviews, record examinations and other methods to gather information about possible violations of securities laws, according to its web site.Chesapeake said the SEC notice, received Wednesday, states that an inquiry “should not be construed as an indication that any violation of the federal securities laws has occurred.” The company said it and McClendon “intend to cooperate with the SEC.” 

McClendon’s well investment program, which dates to 1993 when Chesapeake went public, gained prominence last month when Reuters reported that McClendon took out more than $1 billion in loans to cover his well investments. Some of those loans came from a group that was planning to buy Chesapeake assets. Chesapeake has opened its own investigation into the program, and the Internal Revenue Service is also looking at it. The company’s board last week said it will end the well-investment program in June 2014. 

Also Thursday, Bloomberg News, citing a court filing, reported that McClendon agreed to sell $88 million of his personal oil and gas interests to investment vehicles created by Wachovia Corp. three weeks after his company used the bank in a similar $600 million deal. The same Wachovia bankers worked on both August 2008 transactions, which involve the sale of future oil and gas production in return for an immediate payment, according to documents filed last year by Chesapeake in a Manhattan federal court.The deals came after a separate January 2008 Wachovia transaction, called a volumetric production payment, or VPP, that yielded McClendon $44 million, the documents show.“It’s in the interest of the other parties to give him a break on his transaction if they get a break on larger transactions with the company,” John Coffee, a law professor at Columbia University who’s written on corporate governance, told Bloomberg. “There’s a concern,” especially if the transactions weren’t disclosed to shareholders, he said.McClendon disclosed in an SEC filing on April 26 that he had loans of $846 million outstanding on his personal holdings as of Dec. 31.

“The VPP sales were separate, arms-length transactions that were independently negotiated on market-sensitive terms,” Chesapeake said in a statement. Ron Hutcheson, a spokesman for McClendon, declined to comment.

-- Jim Fuquay

 

Chesapeake cuts land agents, drilling in Barnett Shale

Chesapeake Energy, the No. 2 natural gas producer in the country and in the Barnett Shale, said it will slash leasing and drilling activities in the Barnett and other fields that are mostly natural gas, while modestly trimming drilling in fields that produce oil and natural gas liquids, which demand much better prices than gas. Julie Wilson, vice president of urban development for Chesapeake in Fort Worth, said the company will have just two rigs running in the Barnett Shale this summer, compared to more than a dozen at the start of the year. She said the company just recently cut the number of independent land agents it uses locally to 139 from about 350 two weeks ago. The firm’s Barnett shale employment was not affected by those cuts, but has still fallen from a peak of about 1,200 to about 1,000 currently, Wilson said.

The low natural gas prices that are driving those reductions also have investors worried that the Oklahoma City-based producer will have trouble repaying its $13 billion in long-term debt. Chesapeake’s shares (ticker: CHK) on Wednesday dropped $2.87, or nearly 15 percent, to $16.73. About six times the usual number of shares traded hands.

As investors digested those earnings Wednesday, Reuters reported that for at least four years CEO Aubrey McClendon ran a private hedge fund that traded in contracts for oil and natural gas. The report suggests that running the hedge fund could have influenced McClendon’s decisions at Chesapeake. “If he knows Chesapeake is going to ramp up or curtail production, he could enter into positions in his hedge fund that could benefit from that,” Mark Hanson, a Morningstar analyst, told The New York Times. “It’s going to be part of an ongoing litany of things he is going to face.”

That followed disclosure of personal loans McClendon took out to pay for his investments in the company’s wells, a program the company’s board is ending. Some of those loans came from a group that was also planning to buy Chesapeake assets. McClendon, who was stripped of his chairmanship by the board, apologized Wednesday to shareholders “for all the distractions” caused by the reports, some of which he questioned.  “Your mother told you not to believe everything you read or hear for good reason, and that’s certainly been the case for the past two weeks,” McClendon said in a conference call with analysts.

-- Jim Fuquay

 

Reuters reports former board member loaned McClendon money

The Reuters news service, which recently published an extensive review of the loans Chesapeake Energy CEO Aubrey McClendon used to finance his participation in wells the company drilled, is now reporting that former Chesapeake director Frederick Whittemore loaned McClendon money in the late 1990s while serving on the company's board. The story is here.

-- Jim Fuquay