Founder and former CEO and chairman of Chesapeake Energy Corp. (NYSE: CHK) Aubrey McClendon was indicted late Tuesday on charges of conspiring to rig the price of oil and gas leases in Oklahoma. McClendon resigned as CEO on March 31, 2013, after giving up his chairman’s role in May of 2012.
This is not McClendon’s first rodeo. In June of 2012, Reuters revealed emails indicating that McClendon directed one of Chesapeake’s vice-presidents to “smoke a peace pipe” with Encana Corp. (NYSE: ECA) in an effort to rein in the bidding on leases for rights to drill on properties in Michigan’s Utica-Collingwood shale play. The two companies admitted discussing the formation of an “area of mutual interest,” but that no joint venture was formed, nor did the two companies submit any joint bids.
In February of 2013, Michigan oil and gas field developer Northstar Energy filed a federal civil suit against Chesapeake and Encana for colluding to keep the price of leases low in the Utica-Collingwood shale play. The suit was settled in 2015 for $25 million.
[recirclink id=317822]
The model that McClendon set up at Chesapeake is what led to the company’s current budget problems. Under McClendon, Chesapeake aggressively leased acreage in many shale gas plays then proved the presence of the energy resource and, finally, flipped the property for a profit. As natural gas prices collapsed, the company took on a number of partners that were given a share of production in exchange for cash and promises to provide more cash for operations in the future.
According to The Wall Street Journal, the grand jury charged McClendon with bid-rigging for a five-year period between 2007 and 2012. McClendon said that the charges are “wrong and unprecedented” and that he will fight “to prove my innocence and clear my name.”
Chesapeake said in a statement that it does not expect to face charges in this matter.
Top Gaining Stocks
Top Losing Stocks