Chesapeake stock price improves; analysts question program

Chesapeake Energy Corp.’s stock price improved Monday even as more analysts voiced opinions against the company’s longstanding program that allows CEO Aubrey McClendon to participate personally in company wells.

The stock price added 56 cents a share, or 3.2 percent, to $18 on the New York Stock Exchange. The price is still 5.9 percent below last Tuesday’s closing price of $19.12 before news broke that McClendon has used his personal stake in Chesapeake wells as collateral for personal loans of up to $1.1 billion.

Reuters reported Monday that McClendon at least twice has sold some of his personal stake in Chesapeake wells along with Chesapeake sales.

In March 2011, Chesapeake sold producing wells and lease acreage in Arkansas to BHP Billiton for $4.75 billion. Chesapeake said at the time that McClendon and two companies he owns personally were “parties to the purchase agreement.”

The filing said McClendon received the same terms as Chesapeake in the sale, but did not record how much McClendon received personally. Chesapeake mentioned the sale again in its 2011 proxy statement, noting that McClendon reimbursed the company for transaction costs associated with the sale.

Reuters also reported that Chesapeake did not disclose McClendon’s personal participation in a July 2008 sale of land and producing wells in Oklahoma to BP Plc for $1.75 billion.

Analyst Scott Sprinzen with Standard & Poor’s released a report Friday calling Chesapeake’s corporate governance practices “controversial.”

…that Mr. McClendon has entered borrowing agreements with third parties who have other substantial business dealings with Chesapeake heightens the potential for problematic conflicts of interest, or perception thereof.”

Sprinzen elaborated on his comments in an interview with The Oklahoman on Monday.

There are shortcomings in the Founder Well Participation Program. That benefit to the CEO lends itself to potential conflicts of interest. This type of transaction where the CEO can and does sell assets in conjunction with the company’s transactions underscores that point.”

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