Chesapeake Business Practices

[Maynard]

burn baby burn....o wait, i mean drill baby drill...i get confused sometimes.

From this past January in Sweetwater, Oklahoma. Just sayin'.

[Pete]

CHK and it's Board are in a tough spot because they are getting heat over these CEO perks, which is hurting their stock, but by discontinuing the well participation program it's almost an admission that it was in fact inappropriate.


I can tell you that if McClendon is ousted or demoted, that will radically change how their campus and surrounding area will be developed. All this real estate stuff has been his baby and let's face it, a very big chunk of their activity has had very little to do with their core business. So, if he is no longer the decision maker, what happens to Nichols Hills Plaza and the hundreds of other properties they own all over town? My guess is that over time they would all go back on the market.

But of course, the most important thing to OKC is that CHK survives without major reductions in staff or worse. And they may be to the point where they need to move McClendon aside to aide their overall prospects.

[Maynard]

At the very least, there should be a separation of the CEO/Chairman role for Aubrey.

[Boomer3791]

CHK and it's Board are in a tough spot because they are getting heat over these CEO perks, which is hurting their stock, but by discontinuing the well participation program it's almost an admission that it was in fact inappropriate.


I can tell you that if McClendon is ousted or demoted, that will radically change how their campus and surround area will be developed. All this real estate stuff has been his baby and let's face it, a very big chunk of their activity has had very little to do with their core business. So, if he is no longer the decision maker, what happens to Nichols Hills Plaza and the hundreds of other properties they own all over town? My guess is that over time they would all go back on the market.

But of course, the most important thing to OKC is that CHK survives without major reductions in staff or worse. And they may be to the point where they need to move McClendon aside to aide their overall prospects.

If I worked for CHK, I can tell you'd I'd much rather have a job at the end of the day than a redeveloped NHP to enjoy on my lunch break, or a bunch of fancy buildings scattered all over town with my company's logo on them. If CHK is going to survive at all, they've got to turn the stock price around in a hurry and generate as much cash through asset sales as they can. Focus on the "saving the mothership" and forget about all the Nichols Hills real estate development, Rt. 66 convenience stores, boathouses, pet projects for Rand Elliott, and all the other silly sidelines to their core business. When you're riding high you can be the hero and play city planner all you want. But all of those "community enhancements" will only become monuments to failure if CHK goes belly-up. Ask anyone who lived in Houston when ENRON imploded.

It may mean that a few hundred non-essential employees go looking for work in the short term, but it may save thousands of jobs in the years ahead. And I can tell you from personal experience, when it comes down to brass tacks, AKM will kill dozens of projects and jobs in a heartbeat if thats what it takes to keep the company afloat.

[Boomer3791]

http://www.marketwatch.com/story/cra...ank-2012-04-26

[Pete]

My biggest fear -- besides the company completely going away -- was that they would never get to the point of putting back anything in place of much of which they had bought and demolished.

But at least now Classen Curve is up, The Triangle properties are largely complete and they haven't messed up NH Plaza in any serious way, unless you want to count running out Crescent and the soda fountain (and you certainly could).

I wish they hadn't rushed to pull down Glenbrook Centre East, the Kensington Apartments and Kings Court Condos. But if they never did any more development in OKC it wouldn't be the end of the world.


What's most important is that they don't implode and strand 5,000 well-paid employees in OKC alone.

[soonerguru]

The Oklahoman still has nothing about the SEC inquiry. Didn't they just bring on two energy reporters? How hard is it to relay to the public what has already been reported?

Of course, they run Chesapeake's press release verbatim. Quality work there.

[betts]

Chesapeake Energy Corp. CEO Aubrey McClendon has agreed to give up his right to invest in every well the company drills, the company announced Thursday.


Read more: http://newsok.com/chesapeake-to-end-...#ixzz1tBqUYNVZ

[soonerguru]

Betts,

We saw that piece. The commentary about the Oklahoman was about the fact they haven't mentioned the pending SEC inquiry, which was reported elsewhere. Here's a link to a piece in the International Business Times:

SEC Starts Probe of Chesapeake CEO's Well Stakes

http://www.ibtimes.com/articles/3337...ell-stakes.htm

[ou48A]

If CHK failed……

Many if not most corporate employees…… many of which have skills that are in very high demand……. would be able to find other good jobs… particularly if they were willing to move.

I suppose that some of CHK’s building could be converted to Apartments, condos, retail and office space.

Somebody will be there to pick up the pieces and they would likely maintain at least some corporate presents.
Let’s hope for higher NG prices.

[soonerguru]

I think at this point what we should be hoping for is McClendon's ouster -- and a complete realignment of CHK's overpaid board. Investor confidence must be restored ASAP and the best way to do it is to cut the head off the snake. If confidence isn't restored CHK's stock is going to tank.

[Questor]

Chesapeake now in discussions to end founders well program early:

http://www.smartmoney.com/news/on/?s...=TheMotleyFool

[ljbab728]

Betts,

We saw that piece. The commentary about the Oklahoman was about the fact they haven't mentioned the pending SEC inquiry, which was reported elsewhere. Here's a link to a piece in the International Business Times:

SEC Starts Probe of Chesapeake CEO's Well Stakes

http://www.ibtimes.com/articles/3337...ell-stakes.htm

It looks like it's covered a little more in depth here.

Reuters also reported the U.S. Securities and Exchange Commission has opened an informal inquiry into the Chesapeake's well program, citing an unidentified source in the SEC's regional Fort Worth, Texas, office.

The SEC doesn't confirm or deny the existence of informal inquiries or investigations.

Danne Johnson, a law professor at Oklahoma City University, said investors shouldn't read too much into the SEC news. Johnson is a former staff attorney and branch chief for the SEC's Enforcement Division in New York City.

Johnson said informal inquiries are used to gather information by staff attorneys and aren't an indication that wrongdoing has occurred. The next step, a formal investigation, involves issuing subpoenas and compelling witnesses to testify.

“As a staff attorney, if the things you're able to collect look like you might need to spend a little more time, then you have to get permission from someone higher up in the enforcement division to open up a formal inquiry,” Johnson said.

Bruce Day, a director at the Crowe & Dunlevy law firm in Oklahoma City, said informal inquiries by the SEC happen frequently and could cover any number of subjects. Day, chair of the firm's securities group, is a former SEC attorney and administrator of the Oklahoma Securities Department.

“It would be a private, confidential inquiry,” Day said. “I don't think it is newsworthy. The only thing that counts is if you're the subject of a formal SEC proceeding. All the rest of it is just gossip.”



Read more: http://newsok.com/chesapeake-stock-d...#ixzz1tDPVogkS

And there is this. It doesn't look like the Oklahoman is exactly avoiding any issues.

http://newsok.com/chesapeake-energy-...rticle/3670103

http://newsok.com/third-lawsuit-is-f...rticle/3670102

http://newsok.com/founder-difference...rticle/3670097

It looks like your concern about a lack of stories from two new energy reporters is being answered.

[blangtang]

Boomer 3791 wrote:

"If I worked for CHK, I can tell you'd I'd much rather have a job at the end of the day than a redeveloped NHP to enjoy on my lunch break, or a bunch of fancy buildings scattered all over town with my company's logo on them. If CHK is going to survive at all, they've got to turn the stock price around in a hurry and generate as much cash through asset sales as they can. Focus on the "saving the mothership" and forget about all the Nichols Hills real estate development, Rt. 66 convenience stores, boathouses, pet projects for Rand Elliott, and all the other silly sidelines to their core business. When you're riding high you can be the hero and play city planner all you want. But all of those "community enhancements" will only become monuments to failure if CHK goes belly-up. Ask anyone who lived in Houston when ENRON imploded."

Blangtang writes:

Aubrey believes the assets are worth $100 Billion. So the $10B debt load is insignificant in his mind. I believe thats why he went to asia and the middle east to shop the assets, since he can't get a good deal on short term financing in the US. He just has to get from here to there. this new insider dealing scandal just makes the getting from here to there all that more of a challenge.

I wonder if Icahn has made any statements on this whole ordeal. Guys like that are usually an early indicator that something might be amiss, but alas, he flipped in and out and got his profit...

We need to come up with a list, something like, if everything goes to sh*t...at least...

I'll add, If everything goes to sh*t, at least we got a Whole Foods.

Here's another, If everything goes to sh*t, at least another Hobby Lobby sponsored "college" has a campus ready and waiting

[betts]

Betts,

We saw that piece. The commentary about the Oklahoman was about the fact they haven't mentioned the pending SEC inquiry, which was reported elsewhere. Here's a link to a piece in the International Business Times:

SEC Starts Probe of Chesapeake CEO's Well Stakes

http://www.ibtimes.com/articles/3337...ell-stakes.htm

I wasn't trying to indicate the DOK had covered everything well. I was just posting a new story that I hadn't noticed in this thread. It looked like it was news, that's all. But, I rarely read this forum so I might have missed it.

[OKCTalker]

Wall Street Journal reporting that the board disagrees with CHK attorney Henry Hood's statement that they knew everything. From 4/27/2012 WSJ:

Just last week, Chesapeake Energy Corp.'s CHK -1.87%general counsel, Henry Hood, said the company's board of directors was "fully aware of the existence" of Chief Executive Aubrey McClendon's financing transactions.

Thursday, the company backtracked, saying that it wished "to clarify" that statement.

While the board was "generally aware" that Mr. McClendon used his personal stakes in Chesapeake oil and gas wells as collateral for loans, the company said in a statement, it didn't know about specific transactions.

The shift signals that the board is trying to back away from Mr. McClendon's financial activities, corporate-governance experts said. Some of them also said it was unusual for a board to take issue with the company's lawyer in such a public fashion.

The board is "seeking to distance itself from the sweeping endorsement suggested by the general counsel's earlier statement," said Harvard Law School professor Lucian Bebchuk, adding that the board now seems to appreciate "the necessity of a more careful and detailed review of the transactions than has been undertaken in the past."

Neither the board nor Mr. Hood responded to requests for comment.

[Boomer3791]

For those of you who haven't seen it, OKC made the front page of the NY Times today, thanks to AKM: http://www.nytimes.com/2012/04/27/bu...1&ref=business

Also, here's another article worth reading: http://seekingalpha.com/article/5359...sapeake-energy

[wsucougz]

This can't be legal:

http://finance.yahoo.com/news/exclus...195836453.html

Spotlight is on, now. Gotta figure the real estate dealings are going to come to light. $50 million on Classen Curve alone, I bet.

[Easy180]

Think it is safe to say that the writing is on the wall for ole Aubrey to downsize to a position within the company that doesn't have 1000 spotlights shining on it

[Pete]

Spotlight is on, now. Gotta figure the real estate dealings are going to come to light. $50 million on Classen Curve alone, I bet.

Nobody has tracked this better than yours truly. I have a comprehensive database of all their purchases and how they contrast with the last sale and/or market value. I also track all their building permits.

It's only a matter of time before these issues get the focus of a media increasingly anxious to add more fuel to the fire.

Frankly, it's amazing to me that a $12 million map collection becomes part of a shareholder lawsuit and no one has bothered to notice they've spent about a billion dollars on real estate, a good portion of which being completely outside the scope of their core business. And what about things like the sponsorship of the OKC Arena? For a company that doesn't sell to end consumers, I can't imagine how they can make a business case for spending $3 million for each of the next 12 years (it actually escalates 3% each year, meaning by the end of the contract they will be paying $4.2 mil).


I'm sure the reason no one has made an issue of the real estate is because 1) it involves thousands of separate pieces of information; and 2) the company itself never talks about it.

[ljbab728]

An attempt at damage control?

http://newsok.com/aubrey-mcclendon-i...rticle/3670438

I wonder if this would have happened without the current controversies.

[OUGrad05]

I think at this point what we should be hoping for is McClendon's ouster -- and a complete realignment of CHK's overpaid board. Investor confidence must be restored ASAP and the best way to do it is to cut the head off the snake. If confidence isn't restored CHK's stock is going to tank.

McClendon definitely needs to go, I agree you've gotta restore investor confidence and put the company on a path of sustainability that doesn't require billions from investors outside the country...

Boomer 3791 wrote:

"If I worked for CHK, I can tell you'd I'd much rather have a job at the end of the day than a redeveloped NHP to enjoy on my lunch break, or a bunch of fancy buildings scattered all over town with my company's logo on them. If CHK is going to survive at all, they've got to turn the stock price around in a hurry and generate as much cash through asset sales as they can. Focus on the "saving the mothership" and forget about all the Nichols Hills real estate development, Rt. 66 convenience stores, boathouses, pet projects for Rand Elliott, and all the other silly sidelines to their core business. When you're riding high you can be the hero and play city planner all you want. But all of those "community enhancements" will only become monuments to failure if CHK goes belly-up. Ask anyone who lived in Houston when ENRON imploded."

Blangtang writes:

Aubrey believes the assets are worth $100 Billion. So the $10B debt load is insignificant in his mind. I believe thats why he went to asia and the middle east to shop the assets, since he can't get a good deal on short term financing in the US. He just has to get from here to there. this new insider dealing scandal just makes the getting from here to there all that more of a challenge.

I wonder if Icahn has made any statements on this whole ordeal. Guys like that are usually an early indicator that something might be amiss, but alas, he flipped in and out and got his profit...

We need to come up with a list, something like, if everything goes to sh*t...at least...

I'll add, If everything goes to sh*t, at least we got a Whole Foods.

Here's another, If everything goes to sh*t, at least another Hobby Lobby sponsored "college" has a campus ready and waiting

In Aubrey's mind it may be insignificant...but reports from just a few weeks ago was the company was going to be 3.5B short on cashflow this year. That's a big hole to plug. His assets may ultimately be worth 100B but given current pricing and medium term industry dynamics with a glut of gas and hundreds of rigs just waiting to jump in if prices rebound...seeing long term $10, $12 or $15/mcf is not realistic. $5 to 7 is far more realistic once the current glut is worked off....

Nobody has tracked this better than yours truly. I have a comprehensive database of all their purchases and how they contrast with the last sale and/or market value. I also track all their building permits.

It's only a matter of time before these issues get the focus of a media increasingly anxious to add more fuel to the fire.

Frankly, it's amazing to me that a $12 million map collection becomes part of a shareholder lawsuit and no one has bothered to notice they've spent about a billion dollars on real estate, a good portion of which being completely outside the scope of their core business. And what about things like the sponsorship of the OKC Arena? For a company that doesn't sell to end consumers, I can't imagine how they can make a business case for spending $3 million for each of the next 12 years (it actually escalates 3% each year, meaning by the end of the contract they will be paying $4.2 mil).


I'm sure the reason no one has made an issue of the real estate is because 1) it involves thousands of separate pieces of information; and 2) the company itself never talks about it.

They've long had operations outside their core business. This isn't necessarily bad if it's done responsibly. CHK going belly up and laying off 4,500 workers in OKC would be devastating to the city. I do not think CHK will go bankrupt...they may be forced to firesale some assets but BK seems unlikely at this point unless there's something big we haven't seen yet.

I'm more surprised the city has let them continue development over such a large and spread out area. The city council should have stopped this long ago...IF CHK were to go belly up and pack it up it would leave a LARGE blighted area in a very nice area of the metro.

[BoulderSooner]

large yes blighted no ...

[jn1780]

I'm more surprised the city has let them continue development over such a large and spread out area. .

Yeah, I don't want the city trying to determine who is doing "good business" and who is not because frankly they would suck at it. If the city is to deny a company to expand it should only be because it doesn't help the city in becoming more urban.

Even if Cheaspeake failed they still are indirectly the cause for a lot of other businesses and development coming into town.

Which it is doubtful they would fail. Takeover on the other hand......

[Maynard]

At the very least, there should be a separation of the CEO/Chairman role for Aubrey.

Chesapeake's McClendon To Relinquish Chairman Role 05/01

--------------------------------------------------------------------------------

--Chesapeake board moves to separate chairman, CEO roles amid investor criticism

--McClendon agreed with the move, board says

--Chesapeake shares soar

(Updates with new details, analyst and shareholder comment and fresh share price)

By Angel Gonzalez and Ben Lefebvre

Of DOW JONES NEWSWIRES

Relenting to investor pressure, Chesapeake Energy Corp.'s (CHK:$19.79,00$1.35,007.32%) board and Chief Executive Aubrey McClendon agreed to separate the roles of CEO and chairman, and announced an early termination of a controversial participation program that gave McClendon stakes in thousands of oil and gas wells.

McClendon will remain as CEO, but he will relinquish his role as chairman to a yet-unnamed non-executive chairman.

The board intends to consider candidates "with no previous substantive relationship with Chesapeake," adding it will be soliciting input from major shareholders.

Shares soared more than 10% after the announcement and were trading up 6.51% at $19.64 in mid-morning trading.

The move comes after news reports revealed that McClendon used stakes acquired in the well participation program to borrow up to $1.4 billion, some of that amount from financial institutions that had done business with Chesapeake.

The news cost Chesapeake billions in market capitalization and gave fresh fuel to long-standing criticism that the board was giving McClendon too much power. Some analysts for a long time have warned that the company's financial structure and liquidity concerns could present a risk for shareholders; after the information about the loans came out, they heightened their calls for a reform of the board or even McClendon's ouster.

"Without the chairmanship, my guess is (McClendon's) influence over that board would be diminished," said Morningstar analyst Mark Hanson in a recent interview.

The well participation program had provided McCLendon with the right to participate and invest as a working interest owner of up to 2.5% in new wells. Chesapeake said Tuesday that McClendon will receive no compensation of any kind in connection with the contract's early termination.

"The board appreciates Aubrey's cooperation in these measures and has confidence in Chesapeake's future," said Merrill A. Miller Jr., Chesapeake's lead independent director.

The nine-member board includes a former Oklahoma senator, a former Oklahoma governor and the current president of Oklahoma State University. The only board members below the age of 60 are McClendon, the scion of a prestigious Oklahoma family, and Kathleen Eisbrenner, the board's first and only woman. All but two of the directors receive more than $550,000 a year from Chesapeake.

O. Mason Hawkins, head of Southeastern Asset Management, the largest holder of Chesapeake shares, said in the Chesapeake release that his firm is "pleased that the Board has listened to our input."

"Aubrey was right to recognize that these actions are in the best interests of the Company and its shareholders," Hawkins said.

Chesapeake's aggressive push to develop gas and oil from shale rocks has helped create a U.S. energy boom. It and other companies have been so successful at finding natural gas that the price of the fuel recently hit a 10-year low. But low natural-gas prices have pushed Chesapeake's share price down 45% over the past year, as have concerns about corporate governance, debt and financial complexity.