Chesapeake's ex-CEO McClendon tries to force new drilling

Tue Feb 25, 2014 8:51am EST
 
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By Anna Driver

HOUSTON (Reuters) - Chesapeake Energy Corp ousted its former chief executive Aubrey McClendon last April after a governance scandal and a liquidity crisis. But the former boss retains financial ties to the second-largest U.S. natural gas company, and he is using them to try to change company plans.

A firm run by McClendon is attempting to force Chesapeake (CHK.N: Quote) to drill 12 multi-million dollar wells in Louisiana's Haynesville Shale at a time when Chesapeake is trying to rein in spending and cut debt to focus on other shales, according to a lawyer for Chesapeake.

As a legacy of his tenure as a Chesapeake founder, McClendon has personal stakes of 2.5 percent in nearly all of the tens of thousands of wells the company developed. He is also entitled to a slice of new ones, and he has asked Louisiana regulators to order Chesapeake to follow his drilling plan, saying more natural gas production on the land would benefit the state and landowners.

The move is a sign that the interests of both sides are diverging, but existing contracts mean the two sides will likely be partners for years to come.

REGULATORY SPAT

McClendon's Larchmont Resources LLC, which holds his Chesapeake well stakes, has petitioned regulators from Louisiana's Office of Conservation to rule a dozen new natural gas wells are needed in two fields where Chesapeake has already drilled four. The Office of Conservation oversees the state's hydrocarbon industry.

At an often heated hearing on Larchmont's application in January, Larchmont's and Chesapeake's lawyers squared off arguing their case before a panel of regulators.

David Ogwyn, a lawyer who represented McClendon's firm, argued at the hearing that more wells were needed on Chesapeake's acreage to recover the maximum amount of natural gas in the reservoir.   Continued...

 
File photo of former Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation Aubrey McClendon in New Orleans, Louisiana March 26, 2012. REUTERS/Sean Gardner