Tuesday, August 28, 2012
Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells - a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest.The loans, which haven't been previously detailed to shareholders, are used to fund McClendon's operating costs for an unusual corporate perk that offers him a chance to invest in a 2.5 percent interest in every well the company drills. McClendon in turn is using the 2.5 percent stakes as collateral on those same loans, documents filed in five states show.
The damage control from Chesapeake has been, well, a bit peculiar, and weak. While the actual loan transactions and failure to disclose to the shareholders may be “legal”, it does bring up the issue of conflict of interest and makes one wonder what else is going on with McClendon.
As Reuters dropped more shoes regarding Chesapeake Energy and Aubrey McClendon over the next few weeks, I kept hearing a chorus of nuns singing “How do you solve a problem like McClendon?” Unlike Maria von Trapp, Aubrey doesn’t have a Mother Superior looking out for him, but he does have the Securities Exchange Commission (SEC) looking AT him.
The Wall Street Journal reports: (emphasis added)
The previous week, Chesapeake Energy announced three oil and gas asset monetization transactions for proceeds of $2.6 Billion.
Rolling Stone rebutted the rebuttal.
The company issuing the rejections wasn't much of a business at all. It was a shell company - a paper-only firm with no real operations - called Northern Michigan Exploration LLC.
“Chesapeake says it didn’t have to say more and cites as legal justification a court ruling involving Martha Stewart.”
It wasn't long before ENRON and Chesapeake Energy would be spoken in the same breath.
Chesapeake Energy quickly circled the wagons and fired up the spin machine by retaining George Sard, the CEO of Sard Verbinnen. Sard was described as a "spinmeister of the apocalypse" by Portfolio magazine in April 2009, because he has worked as a PR consultant for so many high-profile clients in moments of utter, humiliating public collapse."
Sard's clients have included the Madoff brothers (Ponzi scheme), Eliot Spitzer (prostitution), Martha Stewart (insider trading), former Lehman Brothers CEO Dick Fuld (Ponzi scheme), and AIG (Ponzi scheme). His firm was also on the scene during the Enron collapse -- JPMorgan hired him to beat back accusations that the bank was complicit in the Enron fraud (it eventually paid $135 million to settle SEC charges).
----Gee, those worked out really well, didn't they?
Sard describes itself as: (Emphasis added)
Sard Verbinnen & Co (SVC) is a leading strategic corporate and financial communications firm. We provide communications counsel and services to clients including multinational corporations, smaller public and private companies, investment firms, financial and professional service firms, and high-profile individuals.
The firm’s highly experienced senior professionals provide sound, objective advice and execution support to clients across a broad spectrum of industries. Our work encompasses corporate positioning, media relations and investor relations, transaction communications, litigation support, crisis communications, and other special situations.
We are regularly cited as one of the top M&A and crisis communications advisors in North America.
"I'm deeply sorry for all of the distractions of the past two weeks," McClendon, co-founder of Oklahoma City-based Chesapeake, said on a conference call to discuss first-quarter results today. McClendon said the company may have to sell more assets than planned to cover a gap between cash flow and revenue if natural-gas prices remain depressed. These sales won't interfere with debt-reduction targets or plans to boost oil production, he said.
Goodwin said there are limited ways to punish a corporation. "It is not a life. It is not a being. It can't go to jail," he said. "The only thing that it can do is help make sure something like this doesn't happen again." - U.S. Attorney Booth Goodwin speaking about West Virginia Mine Settlement, December 6, 2011“Corporations are people, my friend,” Former Governor Mitt Romney at Iowa State Fair. August 2011"I'll believe corporations are people when
executes one." – Unknown Texas
The Curtain: American Clean Skies Foundation
The “ACTIVITES” section of ACSF states:
The Foundation has an active energy policy and research program.We also provide funding for energyNOW!, an editorially independent TV news magazine on
’s major energy and environmental challenges. The program is distributed nationally by Bloomberg TV and by the ABC affiliate in America Washington DC
Vice President of the T. Boone Pickens Foundation.
Clean Energy Fuels is a “GOLD MEMBER” of Kentucky Clean Fuels Coalition.
Littlefair is Chairman of the Natural Gas Vehicle America (ngvamerica.org) and has been a Board Member and Officer for 10 years. Littlefair was an officer at Mesa Inc. (a T.Boone Pickens venture), and served in various capacities for 10 years. Littlefair served in the Reagan White House from 1983–1987.
In May 2012, T. Boone Pickens sold his shares in Chesapeake Energy.
Ralph Eads IIIAubrey McClendon, CEO of Chesapeake Energy and Ralph Eads III, the Chairman of Jefferies Energy Investment Banking Group go way back in their association.
McClendon and Eads were Sigma Alpha Epsilon fraternity brothers at Duke University.
Prior to joining Jefferies, Eads was Co-President of Jefferies Randall & Dewey. In February 2005, Jefferies acquired Randall & Dewey, which became Jefferies' Energy Investment Banking Group. Eads was President of Randall & Dewey.
His career includes being the Executive Vice President of El Paso Corporation, where he was responsible for El Paso’s unregulated businesses. Previously, he was Managing Director and head of the Energy Group at Donaldson, Lufkin & Jenrette. He has held investment banking positions at S.G. Warburg, Lehman Brothers, and Merrill Lynch.
Eads is the Board of Trustees for Duke University.
Also on the Duke Trustee board is Xiqing Gao, the Vice Chairman, President and Chief Investment Officer of the China Investment Corporation (CIC), China's sovereign investment fund. CIC has minority interest in Chesapeake Energy's CHK-Utica in Ohio.
McClendon and Eads are partners in Clos Dubreuil, a winery in Bordeaux, France.
By May 2012, Chesapeake Energy shares had taken a beating. A series of articles by Reuters revealed many problems both with how Chesapeake Energy conducted business and how McClendon’s personal interests may have some conflicts.
McClendon was removed as Chairman of the Board, and in June 2012 Chesapeake appointed new board members.
Around the same time as the S&P downgrade other market analysts were downgrading Chesapeake from "Buy" to "Hold", or "Hold" to "Sell".
Jefferies said that the sale of some of the company’s assets in the Marcellus Shale should help bridge the 2012 funding gap. Commenting, the analyst noted that “Progress along this front should result in the stock reflecting more of the upside embedded in CHK’s asset base. An update on the Utica JV should be imminent.”
McClendon is depending now on his Jefferies confidant at an even more crucial moment. Falling gas prices, combined with the buying binge, is forcing Chesapeake to unload assets to keep the company afloat. Along with Goldman Sachs Group Inc. (GS), Jefferies bankers are seeking buyers for oil-rich prospects and lending Chesapeake $4 billion in the meantime.
“Without Wall Street, Chesapeake wouldn’t be able to do what it has done,” said Phil Weiss, an analyst at Argus Research in New York who rates the shares “sell.”
Eads and New York-based Jefferies declined to comment.
“Ralph Eads and Jefferies have unmatched expertise in the E&P business and have added enormous value to Chesapeake’s business and its shareholders over many years,” Chesapeake said in a statement, referring to the exploration and production industry. “We deeply value our long-term relationship.”
Chesapeake Energy has made the headlines this week. Not because of a gas well explosion or because CEO Aubrey McClendon has more fiduciary responsibility problems, but rather because of failing to file production reports with the Pennsylvania Department of Environmental Protection (DEP).
Perhaps an Intro to Form Completion 101 course is needed?
Proper completion of Production reports aren’t the only paperwork the Natural Gas corporations finds problematic. Seems many of the natural gas corporations have paperwork problems.According to Energy-in Depth(EID):
Thanks to EID for confirming the natural gas industry inability to fill out a simple form, and manage proper record keeping procedures.
The Fort Worth SEC regional office asked Chesapeake and McClendon to preserve certain documents related to the inquiry. If these documents were prepared with the same care exhibited with the production reports the SEC will be pulling out their hair.
Per Reuters: Chesapeake Energy in U.S. antitrust investigation, By Brian Grow, ATLANTA, Thu Aug 9, 2012
Excerpt (Emphasis added) : Chesapeake has received a subpoena from the antitrust division of the Justice Department's Midwest field office, requiring the company to produce documents before a grand jury in the Western District of Michigan, according to a filing with U.S. regulators on Thursday. In June, Reuters reported that Chesapeake plotted with its top competitor, Canada's Encana Corp, to suppress land prices in the Collingwood shale in Northern Michigan.
Emails between Chesapeake and Encana showed the two companies repeatedly discussed how to avoid bidding against each other in a public land auction in Michigan two years ago and in at least nine prospective deals with private land owners.
Ohhhh, that pesky paperwork again….
Part 2: Chesapeake Energy – Behind the Curtain
Friday, August 17, 2012
|Salt, or Sodium is Na on the Periodic Table|
"(With) a grain of salt," in modern English, is an idiom which means to view something with skepticism, or to not take it literally.
Many of you might have seen the headlines, and soon to be Energy-in-Depth infomercial/talking point regarding CO2 (carbon dioxide) levels.
Decline in CO2 surprises science
Experts cite power plants’ switch from coal to natural gas as a driving factor.
I read the article beyond the hyperventilating headline, and have a few questions.
The article stated CO2 levels dropped for FIRST 4 MONTHS OF THIS YEAR.
January-April were also part an extremely warm winter The Natural Gas industry have attributed the rapid drop of natural gas prices, the natural gas glut, and their own financial woes on the warm winter.
If we had a normal winter or colder winter - would CO2 levels dropped? A normal or colder than normal winter would have resulted as an increase in demand for Natural Gas by powerplants and homeowners.
We are now having record-breaking HEAT all over the country - which means more electrical usage for Air Conditioning, and power plants would be using more fuel to meet the demand.
Assume for a moment, that the "driving factor" is the switch from coal to natural gas, then May-August CO2 levels should show a similar drop.
Here's where the grains of Na are needed. "In a little-noticed technical report, the U.S. Energy Information Agency, a part of the Energy Department, said this month that total U.S. CO2 emissions for the first four months of this year fell to about 1992 levels"
LITTLE NOTICED TECHNICAL REPORT - was little notice given to it because it only covered 4 months of data? On something of this nature, is it reasonable to expect this is a trend?
The article mentions it as a Littled Noticed Technical Report, little noticed why? Because it only covers 4 months? And who noticed it?
Without reading the entire report, it's unknown what factors were included or excluded to get those numbers.
Wednesday, August 15, 2012
The Natural Gas Industry has spent over $23,000,000 in campaign donations to Pennsylvania candidates.
Gas and Oil lobbies have spent $71,182,656 this year alone.
Individuals and political action committees affiliated with oil and gas companies have donated $238.7 million to candidates and parties since the 1990 election cycle.
Add in the amount of money spent on public relations, television ads, radio ads, bill boards, magazines and newspaper ads. Add in the cost of labor to maintain and produce all of that, plus the time and money for presentations, smoozing the public, and damage control.
TV commercials during the Olympics aren’t cheap.
That adds up to one large pile of money.
NO. If we weren’t effective in our efforts, the Natural Gas and Oil industry would not have to spend money on public relations, lobbying, and campaign donations.
Keep up the good work. Make ‘em Spend their Money.
Apache’s transparency was shot through with cracks. In Texas and Oklahoma, the company reported chemicals it used on only about half its fracked wells via FracFocus.org, a voluntary website that oil and gas companies helped design amid calls for mandatory disclosure.Energy companies failed to list more than two out of every five fracked wells in eight U.S. states from April 11, 2011, when FracFocus began operating, through the end of last year, according to data compiled by Bloomberg. The gaps reveal shortcomings in the voluntary approach to transparency on the site, which has received funding from oil and gas trade groups and $1.5 million from the U.S. Department of Energy.
“FracFocus is managed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission, two organizations whose missions both revolve around conservation and environmental protection.The primary purpose of this site is to provide factual information concerning hydraulic fracturing and groundwater protection. It is not intended to argue either for or against the use of hydraulic fracturing as a technology. It is also not intended to provide a scientific analysis of risk associated with hydraulic fracturing. Finally, this site does not deal with issues unrelated to chemical use in hydraulic fracturing such as Naturally Occurring Radioactive Material (NORM). This topic is beyond the current scope of this site.”