NEW YORK (AP) — Shares of Chesapeake Energy Corp. dropped nearly 5 percent after the opening bell Monday, following a report that the company colluded with a Canadian rival to suppress land prices in areas that were considered to be rich in oil and natural gas.
The report by Reuters said that Chesapeake CEO Aubrey McClendon worked with counterparts at Encana Corp. to avoid bidding against each other in public land auctions in Michigan. Reuters, which based the report on emails obtained from the two companies, said those discussions appeared to violate federal and state antitrust laws.
Harry First, a former antitrust lawyer for the Department of Justice, told Reuters: "When the talk is explicitly about getting together to avoid bidding each other up, it's a red flag for collusion, bid-rigging, market allocation."
A Chesapeake spokesman wouldn't comment specifically about allegations of collusion with Encana over land prices. In a statement, the Oklahoma City-based company said that it had previously discussed forming a partnership with Encana regarding leases in Michigan, but no agreement was reached. Chesapeake has spent about $400 million to buy leases in Michigan.
The story follows a string of reports about potential corporate governance issues surrounding McClendon. News reports in April revealed that McClendon took out more than $1 billion in loans to cover his personal stake in Chesapeake wells. Also, while leading Chesapeake, McClendon ran a private hedge fund that traded in contracts for oil and natural gas — commodities that Chesapeake produces.
Chesapeake has since stripped McClendon of his board chairmanship.
Chesapeake shares fell by 85 cents, or 4.6 percent, to $17.76 in morning trading.