The Oil and the Glory
The shocking, shocking behavior of Aubrey McClendon
Let’s say you are hired to watch Aubrey McClendon, the titan of Oklahoma City. George Mitchell technically enabled the shale gas boom with his technological improvements in hydraulic fracturing. But it was uber-gambling, go-for-broke McClendon who, sweeping up millions of acres of land, putting down rigs and drilling before almost anyone else had risen from ...
Let’s say you are hired to watch Aubrey McClendon, the titan of Oklahoma City. George Mitchell technically enabled the shale gas boom with his technological improvements in hydraulic fracturing. But it was uber-gambling, go-for-broke McClendon who, sweeping up millions of acres of land, putting down rigs and drilling before almost anyone else had risen from their chair, parlayed Mitchell’s invention into the global, game-changing industry it is today. He single-handedly made his company, Chesapeake Energy, the king of the shale gas patch.
The thing is, McClendon (pictured above, left, with Jack Nicklaus) has a few … ummmm … eccentricities. Like the glutton in the sweet shop, the cash-minded McClendon cannot resist a taste of potentially profitable ventures to which he takes a hankering. He wants to run a hedge fun, for instance, not to mention a professional basketball team, a cattle ranch — and let’s have some restaurants! Every now and then, McClendon requires personal cash infusions in the tens of millions of dollars to cover bad investment bets. You are paid to patrol those gorging instincts, as described by the Wall Street Journal’s Russell Gold, yet what to do when he simply goes on being … being, well, Aubrey McClendon? He is your charge. Yet he is so … entertaining. And successful!
Until he isn’t, and don’t you look flat-footed, and downright unseemly, when you shout about McClendon’s excesses, and threaten his throne?
So we have the current narrative of McClendon. Three weeks ago, McClendon was broad-sided by a Reuters expose regarding his unusual contractual right to invest side by side with Chesapeake in shale gas wells, and borrow money to do so from Chesapeake partners. Today, Chesapeake’s main investor, an investment firm called Southeastern Asset Management, is demanding that McClendon curb his speech, and who he meets with — or else. By else, Southeastern means Chesapeake could be sold to the highest bidder. Already, Southeastern is partly responsible for McClendon losing his title as chairman, leaving him solely CEO. That’s not a huge deal, but given the choice, most senior executives would prefer to be both.
But is the board, Southeastern or anyone close to the matter truly surprised by McClendon’s behavior?
Much has been said about Chesapeake’s rubber-stamp board of directors. This impression has been reinforced by Reuters’ latest followup, in which we see McClendon trading commodities, and receiving retroactive permission from the board to continue. One would like to imagine McClendon — deer-in-the-headlights expression crossing his face — caught red-handed by a tut-tutting board member as he makes a personal trade on gas futures from his cell phone while meanwhile sweeping up more shale-gas acreage for Chesapeake. But given the after-the-fact permission slip, one concludes that this highly unusual behavior — a significant CEO acting like a simple trader — was not outed so much as having his behavior chalked off as yet another McClendonism, an avocation to be tolerated while the CEO earns millions for the hangers-on (more on that below).
In the current griping, one senses opportunism in folks who, having skin in the game, must have read an expose last October by Forbes’ Chris Helman, who made issue of McClendon’s over-extended use of debt. Or a piece a year ago at this time by Theo Francis at footnoted.org, who documented Chesapeake’s 2010 bankrolling of a few other McClendon eccentricities — $6 million in sponsorship bills for the Oklahoma City Thunder basketball team, in which McClendon holds a 19.2 percent stake; a $119,000 bill for his family’s personal security, and another $500,000 for his family’s use of the corporate jet.
Or a red flag for those concerned about oversight – salaries of $248,000 to $623,000 to each Chesapeake board member.