Shares of Chesapeake Energy are down more than 13 percent this afternoon after the company released conflicting statements on the timing of its quarterly report. Shares ended the regular trading day at $14.81, down $2.37 from the Thursday closing price. At 85 million shares, trading volume was more than three times the normal average.
Here’s how the market reacted, with the times at the bottom in Eastern Standard Time:
Meanwhile, the filing contained this nugget of information regarding future asset sales, which might also have made some investors uneasy:
We expect that the proceeds from our 2012 closed or planned monetization transactions, which we estimate could be $11.5 – $14 billion, will be sufficient to fund our budgeted capital expenditures, meet our long-term debt reduction plans by year-end 2012 and provide additional liquidity for 2013. We do not have binding agreements for any of these monetization transactions, however, and our ability to consummate each of them is subject to changes in market conditions and other factors. As a result, there can be no assurance that we will complete any of the planned transactions on a timely basis or at all. If we are unable to consummate these transactions or if they do not generate the proceeds we are anticipating, we would be required to reduce capital spending and/or seek funds from other sources, including interim financing that would address near-term liquidity needs. Our ability to obtain capital from asset monetizations is dependent upon many factors, and they may be beyond our control. If our access to alternative asset monetizations were limited, our ability to develop and replace our reserves could be reduced.
Chesapeake Energy Corp. filed a more complete version of its annual proxy statement this morning with regulators. Among the new information is that CEO Aubrey McClendon made $108 million from sales in his stake in the Founder Well Participation Program from January 2011 to late April 2012.
Since January 1, 2011 through April 26, 2012, Mr. McClendon advises that he realized approximately $108.6 million from such sales, and he paid approximately $550,000 of deal costs.
The company earlier had blank placeholders for that information in a preliminary version of the proxy filed last month.
Here’s the relevant passage of the updated proxy:
UPDATE, 12:15 p.m.
The $108.6 million was also disclosed by McClendon in a separate news release on April 26, although his statement said the amount was for just 2011.
Boone Pickens sold his stake in Chesapeake Energy Corp. in the last few months as the price of natural gas continued to slide, the energy trader told CNBC in an interview last night.
Pickens’ investment fund, BP Capital Management, held about $12.7 million worth of shares in Chesapeake at the beginning of the year. The Oklahoma native told CNBC he sold his entire stake in the company in the last few months because of low natural gas prices, which dipped below $2 per thousand cubic feet. Pickens also weighed in on the latest revelations at Chesapeake and its CEO Aubrey McClendon:
Pickens, a longtime friend of McClendon, said in the Las Vegas interview with CNBC that “I don’t like the position he’s in.”On top of the recent headlines, McClendon “is spending more than his cash flow, he’s done that for ten years,” Pickens said.
But Pickens “wouldn’t count Aubrey out,” he added, saying that he thought Chesapeake’s planned asset sales were wise moves and that the company could be headed for better times. McClendon, he said, “is a good friend” and “has done some innovative things.”
UPDATE, 12:45 p.m.
Bloomberg has a few additional comments from Pickens on the sale of Chesapeake stock by BP Capital Management:
Asked whether it was “the politics of the company” that spurred his share sale, Pickens said, “It was not.”
A Virginia shareholder, Gilberta Norris, has filed a lawsuit in Oklahoma County district court accusing Chesapeake Energy Corp.’s executives and directors of not adequately disclosing the amounts spent on corporate jet travel.
At issue is a corporate perk for executives and directors that allows a certain amount of personal travel on the company’s fractional jet ownership with NetJets.
Here’s a copy of the lawsuit, along with a few highlights of some of the claims:
Presumptive GOP presidential nominee Mitt Romney is making a couple of stops today in Oklahoma. He’s scheduled to appear with Gov. Mary Fallin at the state Republican Party headquarters this afternoon before heading to a fundraiser tonight at the $3 million, 12,500 square-foot Nichols Hills home of Harold Hamm. Donors to the private fundraiser will contribute a minimum of $1,000 to Romney’s campaign.
Hamm, founder and CEO of Continental Resources Inc., is the chairman of the Romney campaign’s Energy Policy Advisory Group. According to data from the Center for Responsive Politics, the Hamms have contributed more than $209,000 to federal candidates, parties and political action committees in the 2012 campaign cycle. About 96 percent of those funds have gone to Republican candidates or causes.
Fallin stopped short of endorsing Romney on Tuesday, Capitol bureau reporter Michael McNutt reported: “I’m certainly very supportive of Gov. Romney and his candidacy,” Fallin said. “Our main goal is to replace President (Barack) Obama and to get someone who will get our economy back on track, and I feel Gov. Romney is the right person to do that.”
Reuters reported Tuesday night that Chesapeake CEO Aubrey McClendon has lined up another loan to fund his investment in the Founder Well Participation Program, which is available to him as the company’s co-founder. He can buy a 2.5 percent stake in each well Chesapeake drills if he pays a share of the land acquisition and drilling costs.
The new $450 million loan described to Reuters by a person familiar with the transaction pushes McClendon’s obligations under the well program to more than $1 billion.
McClendon reported last month that he owed $846 million on loans to cover his share of Chesapeake’s drilling costs. Those loans are secured by his stake in the wells’ production, which he estimated to be worth $852 million.
McClendon’s personal loans were not disclosed to shareholders, according to an April 18 Reuters report. That revelation has spurred at least 11 lawsuits against McClendon and other members of Chesapeake’s board.
The board subsequently announced May 1 that it would replace McClendon with an independent chairman. It is not clear if the McClendon agreed to step aside or if the board stripped him of the position.
McClendon and the board also agreed to end the well program next summer, 18 months before it had been due to expire.
McClendon also has been question for his operation of a private equity firm inside Chesapeake with company co-founder Tom Ward from 2004-2008, as detailed in another Reuters report. The news service reported Tuesday that McClendon’s employment contract was changed in 2009 to bar him from taking an active role in any hedge fund.
McClendon has not addressed the reports, other than to describe them as “distractions.” He apologized for them during last week’s first quarter earnings call, but most of his comments focused on plans to maximize Chesapeake’s existing asset base.
The issues surrounding Chesapeake have spurred its largest shareholder — Southeastern Asset Management Inc. of Memphis — to take an active role in the company’s affairs as it seeks to recover the $750 million it has lost from its investment over the past five weeks.
Southeastern on Monday urged Chesapeake’s management to focus on maximizing its cash flow. The money manager also suggested staying open to potential takeover offers.
Chesapeake Energy Corp.’s latest contract with CEO Aubrey McClendon gave him permission to trade commodities, but banned him from taking an active role in a hedge fund, Reuters reported Tuesday.
Reuters reported last week that McClendon and Chesapeake co-founder Tom Ward – now CEO at SandRidge Energy Inc. – ran a $200 million hedge fund that traded in commodities including natural gas from 2004 to 2008.
Some analysts and lawyers have questioned the hedge fund, saying it could have created a conflict of interest for the natural gas company executives to be trading in natural gas, which their companies produce.
The 2009 contract states that McClendon is allowed to trade in commodities in a hedge fund, as long as it “does not actively engage in (exploration and production) activities,” and “for which the Executive does not directly or indirectly provide input, advice or management.”
Pipeline company TransCanada is once again asking the Obama administration to approve its transcontinental Keystone XL project.
The Canadian company on Friday submitted a new application for a presidential permit, which is necessary because the proposed pipeline crosses the border between the United States and Canada.
“The multi-billion dollar Keystone XL pipeline project will reduce the United States’ dependence on foreign oil and support job growth by putting thousands of Americans to work,” TransCanada CEO Russ Girling said. “Keystone XL will transport U.S. crude oil from the very large Bakken supply basin in Montana and North Dakota, along with Canadian oil, to U.S. refineries.”
President Barack Obama declined to grant a permit for the project in January over concerns about the pipeline’s route through Nebraska’s Sandhills. TransCanada subsequently announced plans to proceed with the portion of the project between Cushing’s oil storage hub and refineries on the Gulf Coast.
TransCanada adjusted Keystone XL’s path through Nebraska last month with help from state officials, clearing the way for its new application.
The company hopes to begin construction on the full Keystone XL project early next year. Construction on the southern portion is expected to begin this summer.
SandRidge Energy Inc. CEO Tom Ward on Friday downplayed his involvement in a hedge fund he fronted with his Chesapeake Energy Corp. co-founder, Aubrey McClendon.
Reuters reported earlier this week that the hedge fund, Heritage Management Co. LLC, operated inside Chesapeake for about five years.
Ward told the news service there was nothing wrong with the arrangement, but some experts said it was rife with potential conflicts.
Chesapeake and McClendon’s personal spokesman have declined to comment on the hedge fund report, but Ward touched on it briefly during SandRidge’s first quarter earnings call on Friday.
“The fund that you read about was formed to manage personal investments and focused on a wide range of commodities, not specifically on energy,” Ward said, according to a transcript of the call.
He said the fund’s day-to-day activities were managed by a group of professionals hired to conduct its business.
“I served as an oversight role as I would for any other personal interest of mine. The time I spent dealing with this fund was relatively minor,” Ward said.
He said the fund stopped trading in 2008.
McClendon did not address the hedge fund in Chesapeake’s earnings call Wednesday, the same day as the Reuters report.
The Sierra Club is ready to go “Beyond Gas.”
The environmental group is re-branding its natural gas-reform campaign as a spinoff of its successful “Beyond Coal” campaign, according to a National Journal report.
“As we push to retire coal plants, we’re going to work to make sure we’re not simultaneously switching to natural-gas infrastructure,” Sierra Club Executive Director Michael Brune told National Journal in an interview on Wednesday. “And we’re going to be preventing new gas plants from being built wherever we can.”
The Sierra Club once had a cozy relationship with the natural gas industry, taking more than $25 million in contributions from Chesapeake Energy Corp. and its subsidiaries to fund the fight against coal.
Brune ended that relationship when he took over as the environmental group’s director in March 2010. He said the club originally worked with Chesapeake because staff and volunteers concluded natural gas might be a viable alternative to coal in electricity generation, but some local chapters developed increasing concerns about gas production.
In a February post on his blog, Brune said he believes unregulated gas drilling poses a threat to the country’s health and environment.
“It’s time to stop thinking of natural gas as a “kinder, gentler” energy source. What’s more, we do not have an effective regulatory system in this country to address the risks that gas drilling poses on our health and communities. The scope of the problems from under-regulated drilling, as well as a clearer understanding of the total carbon pollution that results from both drilling and burning gas, have made it plain that, as we phase out coal, we need to leapfrog over gas whenever possible in favor of truly clean energy,” Brune wrote. ”Instead of rushing to see how quickly we can extract natural gas, we should be focusing on how to be sure we are using less — and safeguarding our health and environment in the meantime.”
The Oklahoma chapter of the Sierra Club does not have any information about its stance on natural gas development on its website. Local officials deferred to a national spokesman when The Oklahoman asked about their stance on the “Beyond Gas” campaign.
“National Sierra Club and the Beyond Natural Gas campaign will always support each chapter’s state-specific goals. We will also continue to help the Oklahoma Chapter in their effort to double down on renewable energy sources and energy efficiency,” said Jason Pitt, press secretary for the Sierra Club campaign.