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In response to recent media reports of shady dealings inside Chesapeake Energy Corp. and with its CEO, the board of directors does not plan to extend a lucrative well drilling program past its current deadline of Dec. 31, 2015.
After initially saying in a prepared statement by the company’s general counsel that the board of directors "is fully aware" of the existence of financial transactions relating to CEO Aubrey McClendon’s use of interests acquired through the Founder Well Participation Program, a revised statement from the company said the board did not review, approve or have knowledge of McClendon’s specific transaction or the terms of such transactions.
A report by Reuters found that McClendon borrowed as much as $1.1 billion in the last three years to invest in the company’s wells with those same wells used as collateral for the loans. Under the terms of the FWPP – approved by shareholders in 2005 for a 10-year term – it allowed McClendon to invest in company wells as part of his employment package. The current agreement allowed McClendon to invest as a working interest owner in up to 2.5 percent of all new wells drilled by the company.
The board of directors and McClendon jointly announced April 26 that an agreement had been reached to negotiate the early termination of the FWPP and an amendment to McClendon’s contract to facilitate the early termination.
As part of the agreement, McClendon has agreed to disclose supplemental information regarding the interests he has acquired in the FWPP as of Dec. 31, 2011. The company said the board of directors is reviewing the financial agreement between McClendon and his FWPP interests and any third party he may have had a relationship with the company in any capacity.