Thought ya'll might be interested in this item.
Exclusive: Chesapeake CEO took out $1.1 billion in unreported loans
Anna Driver and Brian Grow
April 18 2012, 6:45 AM CDT
HOUSTON (Reuters) - Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells - a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest.
The complete article can be viewed at:
You should change the title of your post to accuratley reflect the truth. Chesapeake did not loan Audrey McClendon any money.
Thank you. Title changed as suggested.
I would be less concerned if he had borrowed the money from the company as long as it was backed by collateral that wasn't tied to the company.
Reuters' Anna Driver and Brian Grow: "CEO turns Chesapeake Energy into an ATM Machine"
And... Mr. Hoodwink says CHK Stockholders don't have any right to know about AM's $1.1 Billion "deal."
Go ahead Mr. CHK, Mr. Hoodwink, CHK BOD... Just keep thumbing your nose at CHK Stockholders...
CHK's Annual Shareholder/Stockholders' Meeting should be a hoot!
DrWAVeSport Cd1 4/19/2012
CHK stock price: $17.96...
GOOD JOB GUYS! Maybe with a little more effort...You Guys can get it down to $15.
I listened to hours of chatter on CNBC yesterday (my daily "racket") and one guest went so far as to call CHK a hedge fund instead of an energy company. That was offered as a warning for anyone thinking of buying a few shares.
Its my understanding that he takes (carves out) a 2.5% personal override in all of the leases that CHK takes. I read that some time ago somewhere. This gives him a personal position in any wells that are drilled and thus has value. He can borrow against, sell, swap, etc. these royalty interests. They are not the company's. As I understand it most lease brokers and landmen have a similar deal on properties that they lease for a company.
I understand how his carve out works and I was surprised to hear what was being said yesterday. There was that one pretty harsh segment in the morning early and it came up a few more times before lunch.
I'm going now to read the links posted below. Hopefully, the will shed some light.
I really don't understand the attitude that some people have toward him. The HA would be far different if CHK was not involved. As for the venting and rants here on GHS about him: Those people should have done their due diligence before they leased or they should have hired an attorney to get a better lease.
A CHK shareholder should be asking whether or no the sorry state of Aubrey's personal investment in these wells puts his personal financial interests at odds with those of the CHK shareholder. Given that all this can mean over $1B in income to Aubrey, it is not chump change. I have no idea if it influences the actions he takes as CEO, but it just doesn't look good, and appearances matter.
There are two natural gas-related investments that are too risky for me -- UNG and CHK. That's not to say someone else shouldn't do it; but both are too risky for me.
The $1B is not income. Its a loan from someone on his personal carved out royalty interests. It is a way to raise money to try to hold the company together while the price of NG is low. At least that's my understanding. I would hope that any CEO would try to do the same for a company that I was involved in. As far as I understand it he is not taking the money out and leaving the company high and dry.
You may be right. But my understanding is that Aubrey is trying to borrow money from the same company that is loaning CHK money. Given that neither Aubrey nor CHK seems to be a great credit risk right now, it may be that he is hurting CHK's chance of getting money at the best possible interest rate. Maybe, maybe not. Who knows. But, it is appearances that matter. If this had occured in another company, with a strong board, and a CEO with a better reputation, maybe the stock price would not have tanked this week. But Aubrey has a history of $12M maps and the huge forced margin call a few years ago where his massive selling tanked the price of CHK's stock. It seems that over the last week, CHK's stockholders voted on this behavior -- the stock fell 10%.
Finally, Aubrey does not own much CHK stock these days. His financial interest in CHK is all tied up in this Well Performance scheme. It is not obvious that being successful in this, is the same as being successful with the price of the stock. If I own stock, I want my CEO to have a personal interest in seeing the stock price stay up.
Again, I'm not saying anything done was wrong. I'm just saying that when your CEO has a reputation for less-than-stellar personal financial dealings, a company should go out of its way to fix that, and not reinforce it.
The stock tanked because of the implied impropriety of Aubrey by these and other writers. Why would there be a problem with borrowing on your personal assets from someone that your company is also borrowing from. Especially when the Man is trying to save the company. This group seems to know and understand what Aubrey is doing. If Aubrey is replaced, CHK will be in the same position as Apple was when they fired Steve Jobs. The shareholders better hope the board of directors does not make a stupid mistake and replace him.