Breaking: Chesapeake to End FWPP Early, Searches for New Chairman

Still reeling from a press pounding, the Chesapeake Energy board of directors today announced that they and CEO Aubrey McClendon will end the Founders Well Participation Program (FWPP) early—on June 30, 2014 (18 months before it was due to end). The program grants McClendon the right to up to 2.5 percent ownership in each well drilled by the company, but also requires him to kick in his portion of the drilling costs. McClendon was using loans or mortgages to come up with his portion of the cash needed to drill—loans which now total nearly $1.4 billion. So stung by the revelation of just how much McClendon has borrowed, the board and McClendon will end the program.

But also part of today’s announcement is that the board of directors is looking for a non-executive chairperson. Currently, McClendon is the chairman of the board in addition to his role as CEO. When a new non-executive chairperson is found, McClendon will relinquish his role as chairman but stay at the helm as CEO. This is, no doubt, an effort to show the company is being more rigorous and impartial when it comes to the decisions by the board. That is, they want to reassure stockholders that everything is fine in the company, and that no financial funny business is going on behind the scenes.

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