Chesapeake, Encana shares fall on report of land price plot
By Brian Grow and Anna Driver
(Reuters) - Shares of Chesapeake Energy Corp (CHK.N: Quote) and Encana Corp (ECA.TO: Quote) tumbled Monday after a Reuters investigation showed that top executives of the two rivals plotted in 2010 to avoid bidding against each other in a state auction and in at least nine prospective deals with private land owners.
Following the report, the state of Michigan pledged to determine whether the two energy giants acted two years ago to suppress land prices there.
Top company officials discussed ways to divide counties in Michigan so that neither company would bid against the other for what they then considered prime oil- and gas-acreage, emails show. Some of the emails were between now-embattled Chesapeake CEO Aubrey McClendon and Encana USA president Jeff Wojahn.
Ed Golder, a spokesman for the Michigan Department of Natural Resources, which oversees state land auctions, said officials were "reviewing the allegations" in the Reuters report and had asked for assistance from the Michigan attorney general. "Our commitment is to ensure the integrity of the auction process, and to receiving fair market value for public land," Golder said. A spokesman for the attorney general's office declined to comment.
Encana's chairman also pledged quick action. "In accordance with Encana's policies, an investigation of this matter was immediately initiated," David O'Brien, chairman of Encana's board of directors, said in a statement. "Encana therefore will not provide any further information at this time."
Both Chesapeake and Encana acknowledged they had discussed forming a joint venture in Michigan in 2010 but said they ultimately decided against it. Chesapeake declined further comment on Monday.
News of the discussions to suppress land prices helped push Chesapeake shares down 8.5 percent to close at $17.03 on the New York Stock Exchange, making the company the worst performer in the Standard & Poor's 500 on Monday. Encana's stock closed down 3.7 percent, to C$19.61 in Toronto.
Analysts said inquiries by Michigan authorities could hamper efforts by both companies to sell or develop their holdings in the state. Continued...