Tuesday, May 22, 2012

Chesapeake Asset Sale May Just Prolong Inevitable; Meanwhile, NY Comptroller Opposes Director Re-election

From The Motley Fool:
Despite having some of the best assets in the natural gas business, Chesapeake Energy(NYSE: CHK) has become the poster child for the type of company that investors should give a wide berth. Among the problems that ail Chesapeake are very questionable corporate governance, large amounts of debt both on and off the balance sheet, strained liquidity, and murky accounting. No surprise then that the company's stock has fallen roughly 45 percent in the past six months.

Chesapeake Energy, the second-biggest natural gas producer in the United States, now has one choice to survive...it will have to liquidate some of the juiciest energy assets in the country. That is where this story gets interesting for investors in the sector as its rivals look to scoop up some of Chesapeake's prime assets at a good price. In fact, industry analysts believe there are at least $25 billion in valuable acreage that Chesapeake owns that should find eager buyers.

The company's principal assets are oil and gas leases covering roughly 15 million acres in key areas all across the country including Texas, Louisiana, Oklahoma and Pennsylvania. Chesapeake is the largest or second-largest leaseholder in many of the most promising in the US for producing shale gas and oil that have been opened by advances in drilling technology.
The article goes on to say that while these asset sales may help Chesapeake hang on in the short term, the eventual end seems to be that the entire company will have to be sold.  Read the rest here.

And then there's this story from Reuters (via CNBC):
New York City Comptroller John Liu, the city's fiscal watchdog, on Thursday urged shareholders of Chesapeake Energy Corp to withhold support for two directors up for re-election, citing the company's recent governance woes.
Last month, Reuters reported that Aubrey McClendon, Chesapeake's chief executive officer, has used his interest in company oil and gas wells as collateral for $1.1 billion in loans made by a firm that is also a financier for Chesapeake
The well stakes were granted to him as a perk and the loans may put his interests at odds with shareholders, analysts and academics have said.
"Shareholders urgently need new directors who are willing and able to exercise strong, independent oversight of Aubrey McClendon, a willful CEO with a penchant for risk," Liu said in a letter to shareholders.
Read the rest of the article here.

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