Chesapeake in the News: Addressing CEO's Questionable Financial Maneuvers & Well Blowout in Wyoming

Two news items today concern Chesapeake Energy.

The first comes via an official release from Chesapeake, and has to do with the company's response to recent criticism of CEO Aubrey McClendon's unique situation related to the Founder Well Participation Program - criticism which has negatively impacted the company's stock.

CEO Agrees to Separately Provide Enhanced FWPP Disclosure Board to Review FWPP Financing Arrangements OKLAHOMA CITY, Apr 26, 2012 (BUSINESS WIRE) --Chesapeake Energy Corporation (NYSE:CHK) today announced that its Board of Directors has determined that it does not intend to extend the company's Founder Well Participation Program (FWPP) with its chief executive officer, Aubrey K. McClendon, beyond its present 10-year term ending December 31, 2015. The Board of Directors and Mr. McClendon have committed to negotiate the early termination of the FWPP and the amendment to Mr. McClendon's employment agreement necessary to effectuate the early termination. The FWPP, which was approved by shareholders for a 10-year term in 2005, in conjunction with Mr. McClendon's employment agreement with the company, provides Mr. McClendon a contractual right to participate and invest as a working interest owner (with up to a 2.5% working interest) in new wells drilled on the company's leasehold.Following consultation with the company's Board of Directors, Mr. McClendon will separately disclose supplemental information regarding the interests he has acquired through the company's Founder Well Participation Program as of December 31, 2011. The company also announced the Board of Directors is reviewing the financing arrangements between Mr. McClendon (and the entities through which he participates in the FWPP) and any third party that has had or may have a relationship with the company in any capacity.
Chesapeake also wishes to clarify a statement appearing in its April 18, 2012 press release captioned "Chesapeake Energy Corporation General Counsel Henry J. Hood Issues Statement." The statement that "the Board of Directors is fully aware of the existence of Mr. McClendon's financing transactions" was intended to convey the fact that the Board of Directors is generally aware that Mr. McClendon used interests acquired through his participation in the FWPP as security in personal financing transactions. The Board of Directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions.
Chesapeake Energy Corporation (NYSE:CHK) is the second-largest producer of natural gas, a Top 15 producer of oil and natural gas liquids and the most active driller of new wells in the U.S. Headquartered in Oklahoma City, the company's operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S.Chesapeake owns leading positions in the Barnett, Haynesville, Bossier, Marcellus and Pearsall natural gas shale plays and in the Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime, Bone Spring, Avalon, Wolfcamp, Wolfberry and Niobrara unconventional liquids plays. The company has also vertically integrated its operations and owns substantial marketing, midstream and oilfield services businesses directly and indirectly through its subsidiaries Chesapeake Energy Marketing Inc., Chesapeake Midstream Development, L.P. and Chesapeake Oilfield Services, L.L.C. and its affiliate Chesapeake Midstream Partners, L.P. (NYSE:CHKM). Further information is available atwww.chk.com where Chesapeake routinely posts announcements, updates, events, investor information, presentations and news releases.This news release includes "forward-looking statements" that give Chesapeake's current expectations or forecasts of future events. Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties, and actual results may differ from the expectation expressed. The Board of Directors and Mr. McClendon may be unable to reach agreement on an early termination of the FWPP and a related amendment of his employment agreement. We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this news release, and we undertake no obligation to update this information.Additional Information and Where to Find ItThe company has filed a preliminary proxy statement with the Securities and Exchange Commission in connection with its 2012 annual meeting of shareholders. The definitive proxy statement is not currently available. INVESTORS ARE URGED TO READ THE PRELIMINARY PROXY STATEMENT AND, WHEN IT BECOMES AVAILABLE, THE DEFINITIVE PROXY STATEMENT, BECAUSE THESE DOCUMENTS CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. You may obtain the preliminary proxy statement, the definitive proxy statement (when available) as well as other relevant documents, free of charge, at the website maintained by the SEC at www.sec.gov. Copies of the proxy statement and other filings made by the company with the SEC can also be obtained, free of charge, at www.chk.com.
SOURCE: Chesapeake Energy Corporation
Chesapeake Energy Corporation
Jeffrey L. Mobley, CFA, 405-767-4763
jeff.mobley@chk.comor
John J. Kilgallon, 405-935-4441
john.kilgallon@chk.comor
Media Relations:
Michael Kehs, 405-935-2560
michael.kehs@chk.comor
Jim Gipson, 405-935-1310
jim.gipson@chk.com

The second story, from the Chicago Tribune, covers a Chesapeake well blowout in Wyoming which resulted in the evacuation of dozens of residents.

NEW YORK (Reuters) - Dozens of residents were evacuated from their homes after aChesapeake Energy-operated well leaked natural gas and drilling mud in Wyoming, the company said on Wednesday.
Chesapeake lost control of a shale well late on Tuesday while installing a casing, triggering the leak, the company said in a statement. It wasn't clear how much gas or fluid escaped the well.
A "cloud" of gas could be seen a mile away from the blown-out well, said Russ Dalgarn, coordinator for the Converse County Emergency Management agency in Wyoming.
No injuries, explosion or fires have been reported, and air quality readings near the well were "normal" on Wednesday, with the leaked gas "dissipating into the atmosphere," Chesapeake coordinator Kelsey Campbell said in a statement.
The company has plans to "bring the well under control" as soon as safety conditions permit.
The cause of the incident was under investigation.
Sixty-seven residents within a 2.5 mile radius of the stricken well were asked to evacuate, Chesapeake said. The evacuation was voluntary, and several residents chose to remain in their homes.
"A blowout in a well builds uncertainty and distrust. We need more careful monitoring and regulation of drilling activities in the state," said Bruce Pendery, program director at Wyoming Outdoor Council, an environmental group that has pressed for heightened scrutiny of drilling in the state.
The boom in on-shore production in shale oil and gas -- often near homes and populated areas -- has heightened concern about these accidents. The Rockies and Northern Plains region has stepped up drilling of promising oil and gas reserves in the Niobrara Shale, which straddles Colorado and Wyoming.
The regional office of the U.S. Environmental Protection Agency (EPA) is sending an inspector to the site of the accident. EPA received reports of an oil sheen on an irrigation channel and a pond near the well, said agency spokesman Martin McComb. Neither is a source of drinking water for nearby communities, he said.
Chesapeake may have encountered a pocket of high-pressure natural gas while drilling the well, McComb said.
Chesapeake said the oil-laden drilling mud that leaked from the well is mostly being contained on site.
Oklahoma City-based Chesapeake is the No. 2 U.S. natural gas driller. Last year, it signed a joint-venture agreement with Chinese national oil firm CNOOC for a third of its Niobrara interests.
Around a year ago, Chesapeake had a blowout on a well in the natural gas-rich Marcellus shale of Pennsylvania. It took six days to bring under control and prompted a fierce backlash among area residents opposed to the drilling method known as hydraulic fracturing, in which water, sand and chemicals are pumped deep underground to fracture hydrocarbons-bearing shale rock.
In Wyoming, Governor Matt Mead said the state will investigate this week's incident, to get a "better sense of what can or should be done in the future."
Chesapeake shares rose 2 percent to $18.13 on the New York Stock Exchange on Wednesday.
(Laura Zuckerman contributed reporting from Salmon, Idaho. Editing by Marguerita Choy; Editing by David Gregorio)

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