Chesapeake Energy (NYSE: CHK), the nation’s No. 2 natural gas producer, is all over the news this morning. Some of the headlines are flattering, others not so flattering.
The good news – at least from a publicity standpoint – as that the Oklahoma City Thunder are headed to the NBA Finals for the first time in their brief four-year history after defeating the San Antonio Spurs 107-99 last night.
For those of you who have been watching the NBA playoffs, you probably know how that relates to Chesapeake Energy. The Thunder plays in Chesapeake Energy Arena, thanks to a $36 million sponsorship deal with the Oklahoma City-based company. As the multiple overhead blimp shots the TNT and ESPN cameras show of the arena every game, the words “Chesapeake Energy” are as much a part of nationally televised Thunder broadcasts as Kevin Durant jumpers and fans in white T-shirts.
The Thunder win likely won’t have much of a direct impact on Chesapeake Energy’s stock price. But the words “Chesapeake Energy” being tattooed on the subconscious of 20 million NBA fans for another couple weeks can’t hurt from a marketing standpoint. These days, Chesapeake Energy could use all the good publicity it can get.
A special report released by Reuters today is the latest black eye in what has been a rough couple months for Chesapeake. The report details the millions of dollars the company spends on the personal affairs of one Aubrey K. McClendon, a 19% stakeholder in the Thunder.
According to the report, Chesapeake Energy’s headquarters houses a wing called AKM Operations that caters to seemingly every desire of McClendon, whose initials are the unit’s namesake.
The report says, “In 2010, the unit’s accountants, engineers and supervisors handled approximately $3 million of personal work for McClendon.” The money went toward repairing a McClendon home damaged by hail and leasing private planes to McClendon’s family for expensive vacations to Amsterdam, Bermuda and Paris – among other lavish expenditures.
That McClendon spends lavishly is no secret. Forbes magazine labeled him “America’s Most Reckless Billionaire” in a cover story last fall. What does come as a shock is that Chesapeake Energy appears to be funding his lavish lifestyle.
Surely that doesn’t sit well with the company’s shareholders.