Photo: Foundation OKCPS
Aubrey McClendon is out as CEO of Chesapeake Energy after turning a company he founded from scratch 30 years ago into the country’s second-largest natural gas producer.What happened?
The short answer is the low natural gas prices destroyed the company’s earnings.
The longer answer is that even before the natural gas glut, McClendon had loaded the company with debt at levels analysts believed unsustainable.
Then last year, Reuters’ investigative reporters Anna Driver and Brian Grow said McClendon was borrowing massive loans from a company that also lends to Chesapeake, and using personal stakes in well profits as collateral.
We wanted to take a look at the undeniably fabulous life McClendon built for himself, and now must leave behind.
He came from a prominent Oklahoma family. His great uncle Robert Kerr was the state's twelfth governor.
McClendon was voted senior class president and was valedictorian of the Heritage Hall school in Oklahoma CIty.
Anyway, the couple moved back to Oklahoma, where McClendon got a job working for his uncle as a landman.
In the meantime, McClendon lived a fairly opulent life. He became an unrepentant oenophile, once proposing Forbes' Chris Helman and he split a $10,000 bottle of Lafite Rothschild.
By 2008, he was topping Associated Press's list of best-paid CEOs for 2008, with a pay package worth 112.5 million, including a $75 million bonus.
That was about as good as it was going to get. That fall, McClendon had to sell more than $1 billion of his own stock to meet margin calls.
From its height of nearly $70 in the summer of 2008, the stock would collapse -75% over the next six months.
But instead of attempting to sell assets raise cash, McClendon decided to borrow heavily from Wall Street.
Then last year, Reuters revealed a potential conflict of interest in McClendon's compensation arrangement. McClendon was forced to step down as chairman of Chesapeake's board.
Activist investor Carl Icahn, who'd previously invested in the firm, jumped back into the company and got a lieutenant appointed to the board.
Icahn praised McClendon's tenure but warned the company would have to sell off assets to balance its books.
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