CNBC’s Kate Kelly reports the latest details from Chesapeake Energy’s annual meeting, as its embattled CEO faces angry shareholders. David Dreman, Dreman Value Management chairman & CEO and Chesapeake shareholder, owns about a million shares of the company’s stock and discusses why “he wouldn’t buy any more shares at this point.”
okay, the tension is mounting in oklahoma city. in about an hour from now, the em battled chesapeake will face disgruntled shareholders at the company’s annual general meeting. kate kelly is already on location as those shareholders gather. kate, what is the latest? presummablely, it’s about the asset sales?yeah, simon, the company announced earlier this morning,they’re expected to sell $4 billion and three separatetransactions. this was widely televised a couple of days ago, but it took a longer than expected. it was kind of later in terms of the announcement time than we had hoped. the other thing was that of the directors were up for reelection today. so those folks are likely to tender their resignations. ironically, the board does not have to accept those resignations and will probably not make a final decision on whether to do so today. people are starting to file into the meeting which is taking place behind me. more than 200 shareholders are expected today and possibly even more than that. it’s unclear who may show up atthe last minute. there is definitely some tension in the air. the company is clearly v nervous about the media coverage. they’ve asked us to sign sheets saying that we understand that we can’t interview people on campus. we’re actually shooting rightoff of the campus, as i speak. i might add, i said this does not preclude me from approaching them. i added that to it. i’ve never seen anything like that in terms of an annual meeting.you can see that there’s a lot of anxiety. first thing on the docket is the reelection of the shareholders in this proxy and the second will be to see whether they adopt a majority shareholder approval clause, which the board is supporting in which two-thirds of the votes cast have to be in favor in order forthem to be elected. that’s kind of the scope of it, carl. and the transaction toda it will give them about 2 billion in proceeds. i’m told about a billion, billion anhalf in debt relief. but does that do anything to the leverage? how healthy is this? and do shareholders really care about that? that’s the question. i think they’re top of mine for many shareholders. certainly mine for any recently. that’s actually a little built more of a drop in the bucket, if you will. so they’re making some progress. the other thing is, as always is the case, aubrey and his lieutenants like to give you a positive surprise, right? so this pipeline deal, when theyfirst emerged a couple of days ago, i think people wereexpecting to see news on the asset sales. it’s probably what aubrey has up his sleeve. he’s going to get those done assoon as he can. but he’s going to hit us with the pipeline sales today and hope to hit us with the base. you say nothing precludes you from approaching management. i don’t think it would preclude you from approaching anyone. but, seriously, my jobl is to talk to people and really be professional about it.but i didn’t come out here not to get some interviews, right? did you go to the oklahoma city thunder game last night? did you see him there? i did not. last night, i went to the metro wine bar which is one of the local restaurants which aubrey has a partial or an entire stake in. i’m always working. if i were working and i saw you coming, i would put on my running shoes. let’s just, as we stay with the subject, get a shareholder’s take on what will happen today. david dreman is ceo. i guess he owns about 1 million shares, david? yes, that’s correct. so you’ve lost what?7 or $8 million in the last two, two and a half month sns. our clients have, yes. so what do you want to have happen today?well, we’ve been in discussion with the management and the board of directors for quite some time. and as things unravel, just moreand more negative factors come out. and there’s a enormous amount of must be money that’s being spent all the way from real estate to rowing. i think mcclendon put a $9 million rowing course on the river there. and it just goes on and on and on.they’ve got a couple hundred million in real estate. d here’s a company that we just saw a minute or two ago. and the boards of directors is paid. the average directors are making roughly $500,000 a year, including something like 43 hours of air travel a year. dreeman, forgive me for interrupting. you’re a very experienced investor. it’s not great news to know thatmcclendon was a monarch in that company. why sudly are you able to turn on the board this way. have you been able to pledge so much of your client’s money? well, a lot has been comingout that we really didn’t know clearly. for example, the fact that he 5% of every gas well drilled that he had the same financing as the company did, which is a possible conflict of interest, a lot of this, as they say, is coming out. we knew bits and pieces. but when you put the story together, i think in the last six weeks or so, we know an awful lot more. again, it’s struggling. and it’s being pushed. instead, it would run out of cash early next year if they didn’t take action. so they said they’d run out of cash early next year if they didn’t take action. but what is your time line forthe company? you’ve been a long-term investor in chesapeake.how long are you willing to wait before throwing in the towel?how much money are you willing to lose before you say nolonger? well, right now, i think there’s a — we have to take stock of assets and see what really is there, what they’re going to sell and how much of their most important properties will they have to sell and what’s going to be left. so it’s — it’s too early to throw in the towel. this is after all, the second largest gas producer in the united states. also, i would bt buy anymore stock at this point. jugs in a word, david, which is a greater ally for your clients at the moment? aubrey mcclendon? well, you see, the — all of e things that aubrey mcclendon has done in the past years and increasing, i don’t think as talented as he is, he should bea member of chesapeake anymore. i think that he should be either resigned or be fired by the reconstructed board.
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