CHARLESTON, W.Va. -- State business and industry leaders say they don't expect the pending resignation of Chesapeake Energy's founder and chief executive officer to have much effect on the company's practices in West Virginia."It will be interesting to see what kind of reorganization, if any, will happen at Chesapeake," said Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association. "Will there be some changes? There most probably will. In most reorganizations there are," DeMarco said."But is Chesapeake on the verge of collapse? I would doubt that very seriously because they've got such huge holdings in acreage that can be developed in some very, very worthwhile locations. In the Appalachian basin, they control millions of acres of leases that are in extremely valuable areas for future production."
Last month, Oklahoma City-based Chesapeake announced Aubrey McClendon will resign on April 1 as CEO of the company he founded 24 years ago.Chesapeake began facing financial challenges when natural gas prices dropped to 10-year lows, challenges increased by debts Chesapeake incurred after buying rights to extract gas from huge tracts of land in several states.The price of natural gas dropped, in part, because of plans to increase production from fracking operations in Marcellus and Utica Shale deposits.On Thursday, Feb. 21, the company will release the findings of its internal investigation about McClendon's financial dealings. Chesapeake allowed McClendon to acquire a personal interest of up to 2.5 percent of the value of each natural gas well the company drilled.To finance his acquisitions, McClendon personally borrowed more than $1 billion from EIG Global Partners, a major investor in Chesapeake.McClendon's deals, some critics said, raised conflict-of-interest questions. Chesapeake, however, has said McClendon is not leaving because of those deals.During the first nine months of 2012, Chesapeake reported $1 billion in losses to the U.S. Securities and Exchange Commission, as the company's debt reached $16 billion. The financial results for the fourth quarter of 2012 are still pending.Scott Rotruck, Chesapeake's vice president of corporate development and state government relations in West Virginia, did not return phone calls for this story.Chesapeake spokeswoman Maribeth Anderson said the company will announce its earnings next week, and always enters "a 'quiet' period with media prior to the release."When he testified before the U.S. Senate Energy and Natural Resources Committee last November, Rotruck said Chesapeake has 12,000 employees nationwide, nearly 700 of them in West Virginia.
Today, Chesapeake maintains regional offices in Charleston and Jane Lew. The company may soon open a third West Virginia office in the Northern Panhandle, DeMarco said.Steve Roberts, president of the West Virginia Chamber of Commerce, also said Chesapeake and other companies might increase natural gas drilling and recovery in West Virginia."The Legislature did a good job last year in providing for a sense of stability by passing the Marcellus Shale bill." Roberts said. "We have pretty specific rules in place about what companies can do and within what bounds they can operate."Companies like that level of insurance," Roberts said. "It's sort of like -- 'Tell us what the rules are so we can comply.' In West Virginia, we did that."Speaking about Marcellus Shale deposits at the November Senate hearing, Rotruck testified the company is "focused on the development of what we believe may be one of the world's largest natural gas deposits, underlying parts of West Virginia, Pennsylvania, New York and other Appalachian states.""Chesapeake is a little bit of a unique company," DeMarco said. "No matter which direction they end up taking, or what changes they end up making, they hold a huge position in the shale deposits of natural gas.
"In some shale development areas, Chesapeake goes in early, when the play is just beginning to attract people. They go in with a lot of cash and they take a huge position. That gives them a lot of options."They can produce [natural gas] in an area themselves. They can do joint ventures. They can sell their holdings," DeMarco said.DeMarco still regrets a May 2008 state Supreme Court decision, where justices unanimously denied an appeal from Chesapeake challenging a $405 million Roane County jury verdict. The January 2007 verdict compensated property owners for unpaid gas royalties, including $271 million in punitive damages.The property owners included thousands of individuals, as well as 150 businesses and land companies, such as Dingess-Rum Properties, Cotiga Land Co. and Horse Creek Land Co.Chesapeake cited the decision when it said it would build its eastern headquarters in Canonsburg, Pa., rather than Charleston as originally planned. "Chesapeake has people working in Charleston and a lot of people in Jane Lew and in a satellite office in Morgantown," DeMarco said. "But you don't have the availability of back office jobs like those in Chesapeake's Canonsburg offices today. It is unfortunate for West Virginia."After leaving Chesapeake, McClendon will receive $11.7 million in cash severance benefits over the next four years, according to Reuters News Service, as well as $33.5 million in stock benefits previously awarded to him.Reach Paul J. Nyden at email@example.com or 304-348-5164.