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Chesapeake Energy Shares Bounce After Upgrade

The Exchange

Chesapeake Energy (CHK) and CEO Aubrey McClendon are remaining in the news, but the stock is shaking off the latest reports about his loan arrangements, even as the market overall is pulling back Monday.

Giving the shares a little upward momentum was an upgrade from BMO Capital Markets, which increased its rating on the oil and gas driller to outperform from market perform, saying Chesapeake's assets are a bigger story than McClendon.

Reuters, which earlier this month reported that the Oklahoma City-based company's chief borrowed as much as $1.1 billion in recent years to fund the cost of stakes in wells that were granted to him by Chesapeake, said this weekend that "at least one former board member had undisclosed personal financial ties" to McClendon, loaning him money in the late 1990s. The report says Frederick Whittemore, now retired, made the loans during a time when he helped set McClendon's compensation.

The Reuters report quoted McClendon's spokesman as saying the arrangement between the two concluded in March 1999. The report further stated that: "Although nearly 14 years old, the McClendon-Whittemore deal raises a number of concerns, some analysts said. Among them: whether a board member who helps determine McClendon's salary should have a separate, private financial relationship with the CEO he oversees."

For the time being, shareholders weren't looking terribly concerned about the latest revelations. In recent trading, Chesapeake was up 64 cents, or 3.6%, to $18.36. The stock closed at $19.12 on April 17, the day before the original Reuters report ran, and this past Friday, it ended at $17.72, a decline of 7.3% in that span. It was as low as $17.03, on April 23, and the range for the past year is $16.78 to $35.75.

Later this week, investors and analysts will have a chance to ask the company direct questions about McClendon's loans. Chesapeake is scheduled to hold its first-quarter earnings conference call on Wednesday at 9 a.m. ET, so the recent disclosures will likely factor heavily into the Q&A.