Chesapeake CEO Uses Wells To Borrow Money

Reuters reports Chesapeake CEO Aubrey McClendon is using his stake in the company’s natural gas wells to borrow money:

Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells – a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest.
The loans, which haven’t been previously detailed to shareholders, are used to fund McClendon’s operating costs for an unusual corporate perk that offers him a chance to invest in a 2.5 percent interest in every well the company drills. McClendon in turn is using the 2.5 percent stakes as collateral on those same loans, documents filed in five states show.
The size and nature of the loans raise questions about whether McClendon’s personal financial deals could compromise his fiduciary duty to Chesapeake investors, experts who reviewed the documents told Reuters.

Chesapeake operates 191 producing Marcellus Shale wells in Pennsylvania, but is shifting its attention to Ohio’s Utica Shale.
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