The story raised questions about the financial underpinnings of the company and suggested that today’s natural gas boom is likely to be a short-lived euphoria driven by new drilling technology and corporate greed.
Well, this morning Reuters hit with an important story revealing that the financial shenanigans at Chesapeake are even more complicated than anyone knew. And, as always, McClendon is right in the middle of it.
Reuters reports: McClendon has borrowed as much as $1.1 billion in the last three years by pledging his stake in the company’s oil and natural gas wells as collateral, documents reviewed by Reuters show.
The loans were made through three companies controlled by McClendon that list Chesapeake’s headquarters as their address. The money is being used to help finance what could be a lucrative perk of his job – the opportunity to buy into the very same well stakes that he is using as collateral for the borrowings.
The story caused Chesapeake’s stock to tank as much as 10 percent during the day and made it one of the most actively traded stocks on Wall Street. Let me unpack this a little and explain why this is a big deal.