An unconventional and controversial perk for the head of a fracking giant will come to an end. Aubrey McClendon, the eccentric CEO of Chesapeake Energy, which fracks for natural gas in the Barnett Shale of Texas and other parts of the country, will no longer get a stake of every well the natural gas giant drills. He used that partial ownership to secure more than a billion dollars in personal loans. The company announced it will not extend the arrangement (currently set to expire in 2015) and is negotiating with McClendon to reach an early termination.
The perk and the loans McClendon made with it was first disclosed by Reuters in a piece earlier this month. In a program called the “Founder Well Participation Program,” McClendon was allowed to purchase an interest in each well the company owned, up to 2.5 percent. McClendon then went and borrowed against those future potential profits, which totaled more than a billion dollars of loans. (Chesapeake’s stock has gone down nearly a quarter since the loans were revealed.)
Our friends to the north at StateImpact Oklahoma have more details on why the perk is coming to an end. And Reuters is reporting that an informal Securities and Exchange Commission probe of the deals is under way, run out of their Fort Worth office.
The company also says that when it earlier stated that it was completely in the know about McClendon’s loans, it may have overstated how informed it really was. As in, it didn’t really know about them at all until that first Reuters report.
Chesapeake said in a statement today that “the Board of Directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions.” That’s in stark contrast to an earlier statement in response to the revelations about McClendon’s loans. At that time, Chespeake said that “the Board of Directors is fully aware of the existence of Mr. McClendon’s financing transactions.”
We’ll have more on what today’s news means soon.