CHICAGO — Chesapeake Energy Corp. exonerated co-founder and outgoing Chief Executive Officer Aubrey McClendon for privately borrowing hundreds of millions of dollars from some of the company's biggest financiers.
The review found no intentional misconduct on the part of McClendon, the Oklahoma City-based company said in a statement Wednesday. The findings, announced three weeks after McClendon agreed to resign from the corporation he led for almost a quarter century, was the culmination of a 10-month investigation by the board into the CEO's use of minority stakes in company-owned wells as collateral for private loans.
Chesapeake has been selling oilfields, cutting jobs, reducing drilling and postponing debt reduction to plug a cash- flow shortfall triggered by a plunge in the price of natural gas, which accounts for 80 percent of the company's output. Chesapeake lost as much as 43 percent of its market value last year as the gas slump was compounded by collapsing investor confidence in McClendon's leadership.
McClendon, 53, agreed on Jan. 29 to retire effective April 1, citing "philosophical differences" with the board that he didn't detail. His grip on power at what was once the pre- eminent U.S. gas producer began to slip last year when the board inquiry commenced in April and he was deposed as chairman in June.
The board telegraphed its verdict in the Jan. 29 statement on McClendon's imminent departure, noting that as of that date, the audit had found no evidence of improper conduct.
The details of the inquiry were released before the opening of regular trading on U.S. markets. Chesapeake rose 1.8 percent to $20.36 at the close in New York Tuesday. The company is expected to report Thursday that fourth-quarter profit tumbled because of hedging contracts that linked about three-fourths of its gas output to below-market prices.
McClendon led Chesapeake from its 1989 inception, amassing U.S. gas and oil fields that cover an area equivalent in size to half of New York state. As one of the first explorers to embrace horizontal drilling and hydraulic fracturing, McClendon helped usher in a revival of U.S. gas and oil production with discoveries such as the Haynesville Shale in Louisiana and Utica Shale in Ohio.
Chesapeake sold about $11 billion in fields, pipelines and gas-processing plants last year, short of McClendon's full-year goal of $13 billion to $14 billion. The company is targeting billions more in asset sales this year to close a funding gap that Vice President of Investor Relations Jeffrey Mobley estimated at $3.5 billion during a presentation at a Credit Suisse Group conference in Feb. 5.
Brian Gibbons, a debt analyst at CreditSights in New York, estimated Chesapeake needs to raise $8 billion to $9 billion through asset sales this year to close the funding gap and adhere to the company's plan to reduce net debt to $9.5 billion.
Abandoning that debt-reduction target would lower the amount needed from asset sales to $6 billion, though it would alarm debt holders and trigger a decline in the company's notes, Gibbons said.
Under an executive perk designed to align McClendon's personal interests with those of the company, McClendon acquired stakes as large as 2.5 percent in almost every well Chesapeake drilled during the past 24 years. McClendon took out loans backed by his well stakes to fund his portion of costs. As of Dec. 31, 2011, he owed $846 million on those loans, the company reported on April 26.
Some of the loans came from companies that were involved in separate financial transactions with the company. Separate probes are in progress at the Internal Revenue Service and the U.S. Securities and Exchange Commission.