NEW YORK (Reuters) - Shares in Chesapeake Energy Corp fell nearly 4 percent on Wednesday after a Reuters report that Chief Executive Aubrey McClendon had borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells.
The stock dropped 3.8 percent to $18.39 in early trade. Through Tuesday, the stock had lost 14 percent this year.
Companies involved in natural gas production have seen their shares hit recently as excess supply and warm weather undercut prices of the commodity.
McClendon and Chesapeake said the loans did not pose any conflict of interest. The loans are private transactions that the company has no responsibility to disclose or to vet, Chesapeake said.
"There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way," McClendon wrote in an email to Reuters.
But traders appeared to be erring on the side of caution.
"I think where there is smoke, there may be fire - and investors are still in a shoot-first mentality," said David Lutz, a trader at Stifel Nicolaus in Baltimore.
The loans, which have not been previously detailed to shareholders, were used to fund McClendon's operating costs for an unusual corporate perk that offers him a chance to invest in a 2.5 percent interest in every well the company drills. McClendon in turn used the 2.5 percent stakes as collateral on those same loans, documents filed in five states showed.
Analysts, academics and attorneys who reviewed the loan documents said the arrangement raised the potential for conflicts of interest.
(Reporting By Edward Krudy; editing by John Wallace)
