Chesapeake Energy Corp. and its executives haven’t been making many friends lately in West Virginia after announcing last week their plan to turn their Eastern Division regional headquarters in Charleston into a field office and eliminate 215 of 255 jobs here.
And don’t forget CEO Aubrey McClendon’s parting shot at the state judicial system. McClendon blasted the state Supreme Court for failing overturn a $405 million Roane County court award to royalty owners, rather than blame his company’s calculated business decision to take on that risk when it bought Columbia Natural Resources four years ago.
McClendon said the job cuts were inevitable once the company decided not to build a $40 million headquarters near Yeager Airport.
Last year was not particularly kind to Chesapeake, or to energy companies in general, as natural gas prices plummeted. Chesapeake’s stock price fell from a high of $74 last summer to its current level of around $14 — a drop of more than 80 percent.
Its net income suffered, too, as reported last month. Income for the year was $623 million, about half of what it made in 2007. And the company lost $866 million between September and December.
That loss, and the dropoff in yearly income, were the result of an accounting measure, however: Chesapeake marked down the value of its massive oil and gas reserves by $1.8 billion to reflect the drop in energy prices. Meanwhile, sales were surging.
McClendon himself apparently got caught short while trading stocks on margin and was forced to sell most of his company stock in October, according to Morningstar, a financial information firm. He sold 11.4 million shares on Oct. 9 and another 15.5 million a day later. His net proceeds? About $460 million in cash.
As CEOs go, McClendon earns a relatively modest $975,000 a year in base salary, as Chesapeake’s last proxy statement to shareholders shows. But bonuses, stock option awards, other perks and, especially, stock awards boosted his total compensation to $15 million in 2006 and nearly $19 million in 2007.
In part because of his “forced liquidation” of stock, board members awarded McClendon a new five-year contract on Dec. 31. The one notable change is an incentive award of $75 million, granted “as a deposit for credit against joint interest billings … with respect to the Executive’s interest in wells….”
Ask McClendon’s accountant for clarification, if you wish. He gets free use of the company accountant.
He also gets free unlimited use of the company’s eight-seat corporate jets for personal travel. That perk alone was worth $600,961 in 2007. (Other top execs can use the jets too, but their hours are limited: Chief Financial Officer Marcus Rowland gets 175 hours a year, others 50 to 75 hours.)
Company-covered costs include fuel, maintenance, crew travel expenses, landing fees and hangar costs, not to mention on-board catering.
And like other companies, Chesapeake offers perks to its top executives like country club memberships, life insurance, financial advice and tax reimbursements for the cost of family travel to board meetings.