Chesapeake Energy has exonerated co-founder and outgoing CEO Aubrey McClendon for privately borrowing hundreds of millions of dollars from some of the company's biggest financiers.
The review found no intentional misconduct, the Oklahoma City-based oil and natural gas explorer said in a statement Wednesday.The findings were announced three weeks after McClendon agreed to resign from the company, which he led for almost a quarter-century.They are the culmination of a 10-month board inquiry into his use of minority stakes in Chesapeake-owned wells as collateral for private loans.The conclusion of the inquiry clears a distraction for management and investors that weighed on Chesapeake's stock price for most of the past year, said Scott Hanold, an analyst at RBC Capital Markets in Minneapolis. Chesapeake, the No. 2 producer in the Barnett Shale, may signal newfound financial discipline by unveiling a scaled-back 2013 capital budget when fourth-quarter results are announced today, he said."The board has been taking a more assertive approach to fixing the company's free cash flow deficit, so the market is waiting to see if it will continue down that path," Hanold said in a telephone interview.The investigation by the board's audit committee and the Locke Lord Bissell & Liddell law firm involved more than 50 interviews with executives from Chesapeake and other companies, according to the statement.The transactions reviewed included McClendon's borrowings from EIG Global Energy Partners, a private equity firm that bought preferred shares in two Chesapeake subsidiaries in 2011 and 2012."The review of the financing arrangements did not reveal any improper benefit to Mr. McClendon or increased cost to the company as a result of the overlap in the financial relationships," the company said.Separate inquiries are in progress at the Internal Revenue Service and the Securities and Exchange Commission.The internal investigation also found no evidence of antitrust violations during Chesapeake's 2010 acquisitions of drilling rights in a Michigan shale formation, the company said. Chesapeake said it has been cooperating with federal and state investigations of those transactions.The Justice Department and Michigan's attorney general began inquiries last year into emailed communications between Chesapeake and Encana Corp. in the run-up to a 2010 auction of state-owned leases.The emails included discussions of divvying up Michigan counties for bidding by each company.McClendon said in one email that the company needed to "smoke a peace pipe" with Calgary-based Encana to prevent the rivals from "bidding each other up," Reuters said in a June report.Encana said in September that its separate internal inquiry concluded the company hadn't colluded with Chesapeake to fix lease prices.Michigan Attorney General Bill Schuette is still investigating, Joy Yearout, his spokeswoman, said via email.McClendon, 53, agreed Jan. 29 to resign effective April 1, citing "philosophical differences" with the board that he didn't detail.Have more to add? News tip? Tell us
