Chesapeake to use $2 billion in loans to cut debt costs

OKLAHOMA CITY, Okla,. Thu Nov 1, 2012 – Chesapeake Energy Corp. said Thursday it is working with banks to issue $2 billion in debt to pay off more-expensive loans on its bloated balance sheet.

The company said it is setting up a five-year term loan facility, and would use proceeds to pay off a loan it obtained in May of this year, as well as other debt.

It is not clear yet what the interest rate would be for the new loan, as it has not been priced yet, but executives want to repay several expensive loans with rates all above 6 percent.

Chesapeake said last month that it planned to pay off most of a pricey $4 billion bridge loan after receiving $2.8 billion in cash from the sale of some of its oil and natural gas properties in the Permian Basin. It said then that it would pay down the loan to $1.2 billion with plans to repay the full balance by the end of the year.

The loan, made in May, was a lifeline at the time for the U.S. energy company that was staring at a funding shortfall of about $10 billion. So far this year, Chesapeake has sold about $12 billion of its assets, a situation that has alleviated its liquidity crunch.

Chesapeake’s investment bankers on the Permian deal, Goldman Sachs and Jefferies Group, provided the loan.

In May, Chesapeake replaced $4 billion in existing debt with the new $4 billion, which came at a steep 8.5 percent interest rate and would rise to more than 11 percent if the company did not pay it off by the end of the year.

Michigan land owner caught between energy giants with millions at stake

GAYLORD, Mich., Tue Jun 26, 2012 –A Michigan land owner who alleges he was jilted by two of North America’s largest energy companies says emails made public Monday by Reuters prove that the two companies colluded to kill deals that could have earned him more than $54 million.

Walter Zaremba, who is locked in litigation with Encana Corp., Canada’s largest natural gas producer, said he has long suspected that Encana and Chesapeake Energy Corp. had been working together, which would be a possible violation of state and federal antitrust laws.

Encana and Chesapeake, the second-largest natural gas producer in the United States, withdrew offers for Zaremba’s land in quick succession in 2010. That came after they had engaged in a bidding war for his property in the weeks prior, according to the documents reviewed by Reuters.

Emails and other documents show that executives of the two companies discussed detailed plans for preventing Zaremba from getting the price he wanted for about 20,000 acres of land where both sought to drill for gas and oil.

“If they refrained from bidding that’s problematic,” said Harry First, a former lawyer for New York’s Attorney General and at the Department of Justice. “If the two major buyers are saying ‘Let’s agree that one of us stays out of the bidding and we’ll split this up later,’ then the benefit doesn’t go to the sellers.”

Another legal analyst questioned Zaremba’s contention that talks between Encana and Chesapeake cost him millions. Logan Robinson, a law professor at University of Detroit Mercy, said Zaremba’s claim that he lost out because both companies withdrew their offers could be “iffy” because nothing prevented Zaremba from seeking a different buyer for his leases.

On Monday, Reuters disclosed emails that showed a broader strategy by Encana and Chesapeake — two of North America’s largest energy companies and fierce rivals — to suppress land prices in Michigan, a region with what was once considered to have one of the most promising shale plays in the United States, the Collingwood formation.

Chesapeake shareholders rebuke board, seek changes

OKLAHOMA CITY, Fri Jun 8, 2012 – Chesapeake Energy Corp. shareholders delivered a sweeping rebuke of the company’s board on Friday, withholding support for two members up for reelection in the wake of a governance crisis and poor financial performance at the U.S. oil and gas company.

The company said the two directors – V. Burns Hargis, the president of Oklahoma State University, and Richard Davidson, a former chief executive officer of Union Pacific Corp. – had tendered their resignations from the board after winning the backing of just slightly more than a quarter of the shareholder votes cast.

“The vote is fundamentally a referendum on the entire board,” Michael Garland, head of corporate governance for the New York City comptroller, told the annual meeting of investors.

The shareholders also soundly rejected the company’s executive officer compensation program, with only 20 percent backing the measure. However, that vote was only an advisory measure and is not binding.

“Obviously we’ll be studying the result of the vote today and see what needs to be done,” CEO Aubrey McClendon told the investor meeting.

Shares of Chesapeake, the second-largest U.S. natural gas producer, have lost about half their value over the last year as it seeks to convince its shareholders that it is still a good investment despite steep drops in profits and a spate of corporate governance scandals centered on McClendon.

Chesapeake Energy Corp. shares tumble after CEO loan story

NEW YORK, Wed Apr 18, 2012 – Shares in Chesapeake Energy Corp. fell nearly 10 percent on Wednesday after a Reuters report that CEO Aubrey McClendon had borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells.

The stock dropped 9.6 percent to $17.28 in early afternoon. Shares last traded at that level in July 2009.

The volume of Chesapeake shares changing hands was more than double the 10-day moving average, and the stock was the most actively traded on the New York Stock Exchange.

“It’s certainly not a positive article,” said Capital One Southcoast analyst Marshall Carver. “I think that has something to do with” the stock drop.

At a previously planned presentation to analysts and investors Wednesday morning, McClendon did not mention the Reuters report.

The CEO, who appeared subdued compared with his usual upbeat demeanor, was not asked about the report as he discussed the company’s drilling program and asset sales.

The news threatens to “put a cloud” over the company’s planned initial public offering of its oilfield services unit, Brean Murray analyst Ray Deacon said.

Chesapeake wants to raise up to $862.5 million from the IPO, first announced on Monday.