Mason Hawkins, CEO of Southeastern Asset Management Inc., is confident with the new members of the board of Chesapeake Energy Corporation (NYSE:CHK). Hawkins said all of the leadership controversies enveloping Chesapeake are “now moot.”
In a letter to the shareholders of Southeastern Management, which owns 13.9 percent of Chesapeake Energy Corporation (NYSE:CHK)’s shares, Hawkins made an assurance that the new members of the board, of the second-largest producer of natural energy in the United States, are fully committed to the interests of the shareholders. He said, “We go forward at Chesapeake with one of the best and most vested independent boards that we have seen.”
Hawkins also informed its shareholders that Southeastern management fought behind the scenes against the Founder Well Participation Program (FWPP), a perk provided to Aubrey McClendon, CEO of Chesapeake, which allowed him to purchase 2.5 percent of all the wells drilled by Chesapeake.
According to him, he worked with Carl Icahn in pushing McClendon and the former members of Chesapeake to implement governance changes, and focus on important issues such as managing costs, cutting discretionary spending, and concentrating on the operations of the company. As a result, McClendon gave up his position as chairman, and he was replaced by Archie. Bob Alexander, Brad Martin, Fredrick Poses, and Vincent Intrieri were also appointed as new members of the board of Chesapeake.
The controversies regarding Chesapeake started in April, when Reuters reported the issue regarding the $1.1 billion of unreported loans, by McClendon, from the company for a period of three years. He used the money to purchase 2.5 percent interests of each well drilled by the company. McClendon used those shares to secure the same loan he used in purchasing his stakes. After the first controversy, many other negative issues about McClendon’s business practices came out.
Chesapeake Energy is currently facing investigations from the Securities and Exchange Commission (SEC), the United States Department of Justice (DOJ), and the Internal Revenue Service (IRS). The company is selling a half million acres of its oil and gas holdings in the Rocky Mountains to pay its long-term debts, and to fund its drilling operations in oil-rich areas. The company is experiencing a cash shortage of approximately $18.6 billion.
Chesapeake is expected to report its second quarter profits on August 6, 2012. Its stock value as of Friday (July 20, 2:00 PM ET) fell by 6.67 percent to $17.06 per share.