{"id":7188,"date":"2012-06-07T16:43:23","date_gmt":"2012-06-07T21:43:23","guid":{"rendered":"http:\/\/stateimpact.npr.org\/oklahoma\/?p=7188"},"modified":"2012-12-19T14:59:21","modified_gmt":"2012-12-19T20:59:21","slug":"five-questions-we-hope-chesapeakes-shareholder-meeting-will-answer","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/oklahoma\/2012\/06\/07\/five-questions-we-hope-chesapeakes-shareholder-meeting-will-answer\/","title":{"rendered":"Five Questions We Hope Chesapeake\u2019s Shareholder Meeting Will Answer"},"content":{"rendered":"
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bjmccray \/ flickr<\/p>\n

\n<\/div>

Chesapeake\u00a0Energy has suffered<\/a> weeks of damaging reports, investigations and revelations over its intertwined financial relationship with CEO Aubrey McClendon.<\/p>

The company’s annual shareholder meeting is tomorrow. (Follow StateImpact’s live-blog of the event here<\/a>.) Investors, analysts, activists \u2014 and Oklahomans \u2014 will be looking for answers.<\/p>

There are a lot of questions. Here are five big ones we hope will be clarified:<\/p>

<\/p>\n

1. Who Are the New Directors?<\/h3>

Four new members of Chesapeake\u2019s nine-person corporate board wil soon be named.<\/p>

Chesapeake has agreed to let its two largest shareholders name four new, independent board members. Southeastern Asset Management, which holds a 13.6 percent stake, will name three; billionaire activist investor Carl Icahn, whose 7.6 percent stake surfaced in late May, will select one.<\/p>

One member will retire, and a replacement for McClendon’s chairmanship has yet to be named, but it\u2019s unclear which board members are leaving.<\/p>

Oklahoma State University President Burns Hargis and Richard K. Davidson, a former Union Pacific executive, are the only directors up for re-election at Friday\u2019s meeting, so they\u2019re considered the most vulnerable.<\/p>\n

The board’s lead independent director, Merrill A. \u201cPete\u201d Miller, has faced some criticism as well since his company, National Oilwell Varco, an international oil field service company based in Houston, has some business ties to Chesapeake.<\/p>

Two other board members could be at risk because of their perceived ties to McClendon: former Oklahoma politicians Frank Keating and Don Nickles, writes<\/a> Oklahoman<\/em> energy reporter Jay Marks.<\/p><\/blockquote>

Lou Simpson is considered safe because he was added last year at the urging of Southeastern.<\/p>

Chesapeake says the new board will be introduced by June 22, but revelations on who might step down \u2014 and who might step in \u2014 could be revealed at Friday\u2019s shareholder meeting.<\/p>\n

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cosmicautumn \/ Flickr<\/p>\n

Chesapeake's real estate operation includes Classen Curve, a high-end shopping center near the company's corporate campus in downtown Oklahoma City.<\/p>\n<\/div>\n

2. Which Assets Will be Sold?<\/h3>

Chesapeake holds more than $13 billion in debt, faces a $22 billion cash-flow shortfall, and is looking for ways to raise money.<\/p>

Just two months after boasting about its Ohio land portfolio, Chesapeake has decided to sell a quarter of its Utica Shale leases, our partners at StateImpact Pennsylvania\u00a0report<\/a>.<\/p>

And the company is in \u201cadvanced talks\u201d to sell its pipeline interests to Global Infrastructure Partners for more than $4 billion, Bloomberg\u00a0reported<\/a>\u00a0this week.<\/p>\n

Shedding pipelines would be a retreat from Chesapeake Energy’s vision of so-called vertical integration, which involves owning oil and gas fields as well as ancillary assets.<\/p><\/blockquote>

Shares of Chesapeake\u00a0soared<\/a>\u00a0on news of the potential pipeline sell-off, which was among the proposals Icahn said he\u2019d push for.<\/p>

Chesapeake has other \u201cnon-core assets\u201d \u2014 like\u00a0a massive real estate operation<\/a>\u00a0\u2014 which some shareholders would like corralled.<\/p>

\u201cThey should not be involved in real estate development,\u201d Brian Gibbons, an analyst at Creditsights Inc. in New York who rates Chesapeake bonds a buy, tells Bloomberg.<\/p>\n

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Michael Heiman \/ Getty Images<\/p>\n

Kevin Durant celebrates with the trophy as Serge Ibaka looks on the Oklahoma City Thunder's defeating the San Antonio Spurs to win the Western Conference Finals. Chesapeake gives millions to the team, which is partially owned by CEO Aubrey McClendon.<\/p>\n<\/div>\n

3. What About the Oklahoma City Thunder?<\/h3>

Chesapeake has a $36 million sponsorship deal with the Oklahoma City Thunder. It pays up to $4 million each year to have the court branded as the Chesapeake Energy Arena, and the company is buying $3 million worth of tickets, many of which Retuers says were distributed to employees and business contacts.<\/p>

McClendon has a 19 percent stake in the team, and Chesapeake\u2019s spending on the franchise has almost doubled over the last four years.<\/p>

This \u201cunderscores how the company\u2019s board hasn\u2019t always erred on the side of caution while overseeing McClendon\u2019s potential conflicts of interest,\u201d Bloomberg reports<\/a>.<\/p>

And shareholders have noticed. From Bloomberg:<\/p>\n

New York City pension funds, which own 1.9 million Chesapeake shares, complained this month about the company\u2019s spending on the National Basketball Association squad.<\/p>

\u201c\u2026 we have a real problem with a board that allows the use of the corporate treasury to support personal investments,\u201d New York City Comptroller John C. Liu, who oversees the pension fund investments, told the news service.<\/p><\/blockquote>

The Thunder, of course, is headed to the NBA Finals, which increases the value of Chesapeake\u2019s sponsorship and arena-naming agreement. But shareholders and analysts are calling for the company to focus on oil and gas.<\/p>\n

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Paul J. Richards \/ AFP\/Getty Images<\/p>\n

Analysts say Chesapeake's low stock price and vast natural gas portfolio could attract a buyout from larger energy company, like Exxon Mobil.<\/p>\n<\/div>\n

4. Will a Buyout be Brought Up?<\/h3>

Icahn and many others think Chesapeake is undervalued. Natural gas prices are sure to rebound, the thinking goes, and Chesapeake has the country\u2019s largest portfolio of onshore drilling.<\/p>\n

“For any of the major integrated oil companies that want to pick up reserves on the cheap, this would be a good one,” Peter Sorrentino, who helps oversee $14.7 billion at Huntington in Cincinnati, tells Bloomberg<\/a>.<\/p><\/blockquote>

So who might buy<\/a> Chesapeake? Exxon Mobil, Chevron and Shell might all be interested, analysts tell the news service.<\/p>

And Icahn says<\/a> the company\u2019s board and management should be open to \u201cwould-be acquirers.\u201d<\/p>\n

\"\"<\/a><\/p>\n

Scott Detrow \/ StateImapct Pennsylvania<\/p>\n

\n<\/div>\n

5. What Will McClendon Do?<\/h3>

McClendon has been battered for weeks with investigations into his personal finances. He’s been forced to hand over<\/a> the board’s chairmanship, his compensation has been cut<\/a>, and his controversial CEO perk has been severed.<\/p>

But McClendon has survived<\/a> corporate\u00a0controversy<\/a>\u00a0before.<\/p>\n

“We’re in the middle of a pretty unprecedented media firestorm today,” McClendon told reporters in mid-May, according to a recording Reuters obtained. “I don’t exactly know the origins of it and I don’t exactly know when it ends, but I know that it will end, and we will emerge stronger. We will emerge more focused, and we will change in some ways that we probably need to change in.”<\/p><\/blockquote>

What else can McClendon do to\u00a0assuage shareholders?<\/p>\n","protected":false},"excerpt":{"rendered":"

Chesapeake\u00a0Energy has suffered weeks of damaging reports, investigations and revelations over its intertwined financial relationship with CEO Aubrey McClendon.The company’s annual shareholder meeting is tomorrow. (Follow StateImpact’s live-blog of the event here.) Investors, analysts, activists \u2014 and Oklahomans \u2014 will be looking for answers.There are a lot of questions. Here are five big ones we […]<\/p>\n","protected":false},"author":36,"featured_media":6890,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[490,301,300],"tags":[360,275],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts\/7188"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/comments?post=7188"}],"version-history":[{"count":2,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts\/7188\/revisions"}],"predecessor-version":[{"id":7205,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts\/7188\/revisions\/7205"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/media\/6890"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/media?parent=7188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/categories?post=7188"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/tags?post=7188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}