Chesapeake Energy Corp. on Wednesday absolved itself and outgoing CEO Aubrey McClendon of any wrongdoing in dealings that raised allegations of shoddy governance at the Oklahoma City-based oil and natural gas company.
The announcement likely will not mark the end of the scrutiny facing Chesapeake, which is being investigated by at least four federal and state agencies. Its board also faces more than a dozen breach of fiduciary duty lawsuits filed by shareholders.
Michigan Attorney General Bill Schuette will continue his inquiry into collusion allegations against Chesapeake and Canadian rival Encana Corp., even though both companies have cleared themselves in internal investigations.
“The importance of independent — rather than internal — investigations cannot be emphasized enough in a case involving antitrust bid-rigging allegations,” spokeswoman Joy Yearout said Wednesday. “Our thorough, independent investigation into these serious allegations will continue.”
Chesapeake also has acknowledged ongoing investigations by the U.S. Securities and Exchange Commission, IRS and Justice Department.
On Wednesday, the company said a board review of McClendon's finances found no evidence of intentional misconduct or conflicts of interest.
The board also concluded Chesapeake did not violate antitrust laws in a 2010 Michigan land sale, although it is still cooperating with Justice Department investigators.
Oppenheimer analyst Fadel Gheit said Wednesday's announcement removes some of the uncertainty facing Chesapeake.
“Whatever uncertainty was associated with the investigation, it eliminates it or reduces it,” Gheit said. “It is definitely a step in the right direction.”
Chesapeake's stock was down 12 cents Wednesday to $20.24 a share.
“All in all, I think shareholders are better off today than yesterday. Most investors do not like uncertainty,” Gheit said. “We already have operating challenges, market challenges, environmental challenges and pricing challenges.”
“We don't need another layer of uncertainty. That's the last thing people want.”
Chesapeake remade its board last year under pressure from its two largest shareholders. Last month that board won a power struggle with co-founder McClendon.
McClendon, who will step down as CEO this spring, had been under fire for nearly a year since Reuters reported in April he had secured more than $1 billion in loans against his stake in company wells.
Some of the financing involved a private equity firm that had invested in Chesapeake.
The company's board said its audit committee, led by director Burns Hargis, and its independent counsel reviewed “millions” of pages of documents and interviewed more than 50 people.
“The review of the financing arrangements did not reveal any improper benefit to Mr. McClendon or increased cost to the company as a result of the overlap in the financial relationships,” the company said Wednesday in a news release.
The review covered McClendon's financing of his expenses under the Founder Well Participation Program, which allows him to invest in each well Chesapeake drills, and the activities of a hedge fund that had been operated inside the company.
“Based on the documents reviewed and interviews conducted, no intentional misconduct by Mr. McClendon or any of the company's management was found by the board concerning these relationships and/or these transactions and issues,” the company said.
McClendon will leave Chesapeake on April 1, but the board has said its review was not the reason for his departure.
The company also announced the board has concluded Chesapeake did not violate antitrust laws in connection with its acquisition of oil and natural gas rights in Michigan in 2010.
Reuters reported in June that Chesapeake and Encana plotted to limit land prices in Michigan's Collingwood Shale.
Chesapeake said it has provided documents about its leasing activities to the Justice Department based on a subpoena it received in June, and a thorough review by outside counsel led to its conclusion that it did not violate any antitrust laws.
Encana concluded in September that it did not collude with Chesapeake in the Michigan land sale.
CONTRIBUTING: Adam Wilmoth and Paul Monies, Business Writers