Saturday, March 5, 2016

Executive profile: Aubrey McClendon

(Update 6/10/16) When Aubrey McClendon drove his Chevy Tahoe into a bridge the day after he was indicted for allegedly rigging the price of oil and gas leases, suspicions arose that he had killed himself. But a two-month probe by Oklahoma Police has found nothing to suggest the Chesapeake Energy (NYSE:CHK) founder committed suicide. "Our investigators found no information that this was anything other than a car accident," Captain Paco Balderrama said, but "we may never know 100% what happened."
Aubrey McClendon, considered 
U.S. shale pioneer  and a maverick in the energy industry, died in a fiery single-car crash on March 2, 2016, less than 24 hours after he was indicted by a federal grand jury for conspiring to rig bids for oil and natural gas leases.

Born on July 14, 1959, in Oklahoma City, Aubrey Kerr McClendon was the great nephew of Robert S. Kerr, a former Oklahoma governor, U.S. Senator and founder of Kerr-McGee Corp- an oil and gas company established in 1927 and sold to Anadarko in 2006.

McClendon earned his bachelor’s in History from Duke University in 1981. It was there that he met Katie Upton (whose grandfather was the founder of Whirlpool), whom he married in 1981. Katie is the cousin of U.S. Congressman Fred Upton, whose niece is the supermodel Kate Upton.

In 1982, McClendon started his first oil and natural gas investment company, Chesapeake Investments. In 1989, with a $50,000 investment and only ten employees, he co-founded Chesapeake with Tom L. Ward- the founder and former CEO of Oklahoma-based Sandridge Energy. They took Chesapeake public in 1993.

Chesapeake Makes its E&P Mark
McClendon established Chesapeake as a leader in onshore U.S. operations, pioneering the development of unconventional natural gas and oil plays. He led the company to hold significant positions in the nation’s largest shale plays. The intersection of this strategy with Chesapeake's controversial compensation policies translated to immense personal financial success. He was recognized as the highest paid CEO of all S&P companies in 2008, with annual compensation of $112 million.

One of McClendon’s overriding interests has been advocating aggressive exploration, production and cultivation of natural gas. He has consistently made the case for natural gas as a clean fuel and a significant source of job creation. This was reflected in his steerage of Chesapeake towards natural gas production more than oil production. But in 2010, McClendon began transitioning the company to more balanced production, with the objective of having 50% of its revenues come from oil production by the end of 2013. This was a move many of his peers would follow as gas prices became relatively repressed with the surge in shale production.

By 2013, Chesapeake had amassed U.S. gas and oil fields that cover an area half the size of New York State. One of the first explorers to embrace hydraulic fracturing and horizontal drilling, McClendon helped usher in a revival of U.S. production by playing a pivotal role in discoveries such as Ohio’s Utica Shale and Louisiana’s Haynesville Shale.

In 2009, Platts awarded Chesapeake with Producer of the Year and Industry Leadership awards. In 2011, McClendon was named to the Forbes “CEO 20-20 Club,” a group of eight elite American CEOs who have a minimum of 20 years of service as CEO and produced a minimum of 20% annual returns to shareholders during their tenure.

But by 2012, the success of the innovative drilling methods led to a glut of North American gas that drove prices to a ten-year low, prompting Chesapeake to cut jobs, pledge to cut spending and sell in excess of $10 billion in oilfields and pipelines to help close a gap between drilling expenses and cash flow. During the first three quarters of 2012, Chesapeake lost $1.07 billion and net debt increased by 56% during that period to $16.1 billion.

Forced to relinquish his position as chairman of that company in 2012 following a shareholder revolt led by activist investor Carl Icahn

In April 2012 a report revealed that in 2008 McClendon borrowed approximately $1.1 billion against his personal stake in thousands of Chesapeake wells, thus raising the potential for conflicts of interest and ethical quandaries regarding the company’s management practices. The investigation centered on whether the 2008 stock offering consisted of inadequate company disclosures regarding how McClendon had borrowed against his entire Chesapeake shareholding.

A separate investigation was opened into whether Chesapeake colluded with a competitor to suppress prices in land deals in 2010.

It was in the context of these investigations and the aforementioned troubling company performance that, in June 2012, Chesapeake’s board decided to replace McClendon as Chairman, naming Archie W. Duncan as independent, non-executive Chairman. McClendon retained his position as CEO per the terms of the board’s decision.

Investigations into the allegations found that McClendon did not engage in improper conduct. In early 2013, the Department of Justice ruled in favor of Chesapeake in both cases.

He was a member of the Professional Basketball Club, which owns the NBA Oklahoma City Thunder, as a 20% investor. He had also contributed to political campaigns, most notably to the group Swift Vets and POWs for Truth, which opposed Democratic presidential candidate Senator John Kerry in the 2004 election. was is also one of the nation’s 100 largest landowners, according to Land Report magazine.

McClendon with relative Kate Upton at Thunder basketball game

McClendon dies in a car crash March 2, 2016

Aubrey McClendon hit speeds of 89 miles an hour just before his Chevy Tahoe slammed into a concrete bridge on March 2  in a fatal crash, according to a report issued by the Oklahoma City Police Department.

The day before he died, Mr. McClendon was indicted on a federal antitrust charge after a lengthy Justice Department investigation. The former chief executive of Chesapeake Energy Corp. was accused of conspiring with a second company to rig bids for the price of oil-and-gas leases between 2007 and 2012. Mr. McClendon, who went on to found rival American Energy Partners LP in 2013, adamantly denied the charge.

“I am proud of my track record in this industry, and I will fight to prove my innocence and clear my name,” he said in a statement through his attorney on the night the indictment was announced.

Mr. McClendon was in his Oklahoma City office early the next morning, strategizing how to do just that, according to a person familiar with the matter.

The Justice Department has dropped the charge against Mr. McClendon, citing his death. He was the only person who had been indicted as a result of the government’s bid rigging investigation.

Chesapeake is shielded from criminal charges and fines because it has been cooperating with the Justice Department probe under a federal leniency program.

Katie McClendon pictured with her late husband in February 2014

McClendon and his wife have three adult children: Jack, Callie and Will.

“I’ve known Aubrey McClendon for nearly 25 years. He was a major player in leading the stunning energy renaissance in America. He was charismatic and a true American entrepreneur. No individual is without flaws, but his impact on American energy will be long-lasting,” billionaire oil tycoon T. Boone Pickens said in a statement.

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