RPT-Chesapeake faces enduring entanglements with departing CEO

Thu Jan 31, 2013 6:59am EST
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By Brian Grow and Anna Driver and Joshua Schneyer

Jan 30 (Reuters) - Aubrey McClendon will no longer be running Chesapeake Energy Corp come April 1. But he is likely to remain deeply entangled with the company he founded 24 years ago.

America's second-largest natural-gas producer said on Tuesday that McClendon is stepping down as chief executive and a board member. He is leaving behind legal predicaments and intertwined personal and corporate interests that analysts say could linger for years.

Among the trickiest to unwind is his signature perk. McClendon controls interests of up to 2.5 percent in thousands of Chesapeake wells, according to an analysis of Chesapeake filings with the Securities and Exchange Commission. The company owns interests in 45,700 producing oil and gas wells, according to its most recent annual report.

McClendon's stakes are part of a controversial benefit, known as the Founder Well Participation Plan, which awarded him a stake in every well Chesapeake drilled since 1993, provided that he pay an equivalent share of the costs. He has participated in the plan every year since, with the exception of five quarters in 1999 and 2000, the SEC filings show.

McClendon began losing his grip on the company after Reuters reported last year that he had borrowed more than $1 billion against his well stakes from a firm that also invested in Chesapeake itself. That and other Reuters reports of potential conflicts of interest, coupled with a cash crunch amid weak gas prices and bloated spending, sparked an investor revolt and a board shakeup. Analysts said that while the unusual arrangements were part of his undoing, they will not be easy to unwind.

"I see his continued involvement as a negative. These things that he created, you can argue that they hurt the stock price," said Phil Weiss, oil and gas analyst at Argus Research in New York. "And they are not going away just because he is. That part of his legacy remains."