Chesapeake shares tumble on CEO loan worries
By Ernest Scheyder and Matt Daily
NEW YORK (Reuters) - Shares of Chesapeake Energy Corp (CHK.N: Quote) dropped more than 5 percent on Wednesday and one investor called for the company to "clean up" its leadership after a Reuters report that Chief Executive Aubrey McClendon borrowed as much as $1.1 billion against his stake in thousands of company wells.
Those loans, taken out over the past three years, were previously undisclosed to shareholders, analysts and academics said, and raised worries about the potential for conflict of interest. McClendon and the company insist there is no conflict.
Jittery investors pushed the company's shares down more than 10 percent to a low of $17.17, the lowest level since July 2009, before they rebounded to close down 5.5 percent at $18.06.
Trading in the company, the nation's second-largest natural gas producer behind Exxon Mobil Corp (XOM.N: Quote), was heavy, with 93.2 million shares changing hands. That was the highest level since October 10, 2008, the end of a week when McClendon was forced by margin calls to sell more than 31 million shares in the company.
"Chesapeake is one of the leaders in this (sector), but his business ethics are out of the Wild West," said David Dreman, chairman of Dreman Value Management LLP, which owns about 1 million shares of the company.
Dreman said the report of the new loans rekindled fears that had surfaced in 2008 around McClendon's stock sales.
"I think the company has to be more professional," Dreman said. "I think that the whole management and the board of directors has to be cleaned up. We're obviously very unhappy with the situation as it is now."
Chesapeake said the program that granted McClendon a 2.5 percent stake in its oil and gas wells had long been public. Continued...