CHESAPEAKE ENERGY BACKING OUT OF WV?

(02/04/2009)

Chesapeake Energy Corporation, reported to be the nation's largest gas producer, appears to be backing off its' investments in West Virginia's natural gas fields.

Scott Rotruck, Chesapeake's vice president of corporate development, declined to comment on speculation of a pending announcement that would affect as many as 140 Chesapeake employees who work in the company's eastern operations in Charleston.

The company has indicated that the multi-million-dollar jury verdict in Roane County against the company in a natural gas royalties case and the state Supreme Court's refusal to hear Chesapeake's appeal, continues to be a problem.

The company lost a $4 million verdict to royalty holders, who sued after the producers charged production costs to them.

Chesapeake has slashed spending and reduced its capital budget for 2009, the result of a string of negative economic news concerning the company and low natural gas prices.

Chesapeake has 430 employees in West Virginia, with about 220 of those working in Charleston.

Charleston Mayor Danny Jones said he's heard talk of a Chesapeake pullout for about a week.

Jones said, "It would be terrible. It would empty a building. It would have a significant negative effect on the city of Charleston."

Chesapeake's stock plunged from a high of $74 last summer to a five-year low of $9.84 in early December.

The company's shares were trading at $15.57 this week.

Kanawha County Commission President Kent Carper told Charleston newspapers that Chesapeake officials have made repeated promises to expand operations in West Virginia, but have not followed through.

"It would absolutely be a kick in the teeth. These are really good jobs. This company made all these promises. They're making an absolute fortune off our natural gas here in West Virginia," Carper said.

"If they do leave, they're going to blame the city and the county and the state," Carper said. "They're going to say we weren't business-friendly."

Last spring, Chesapeake nixed plans to build a $35 million regional headquarters after the lawsuit.

The company was also upset over a state Supreme Court ruling following the Roane case. The court voted 5-0 to deny a request for an appeal from Chesapeake and NiSource, upholding a Roane County jury verdict that required the gas companies to pay $405 million in royalties and punitive damages to landowners who the court said they cheated.

Last October, Chesapeake and NiSource agreed to pay $380 million to the landowners and drop their appeals as part of a settlement.

Late last year, Chesapeake chief executive officer and founder Aubrey McClendon was forced to sell 33.4 million shares of Chesapeake - essentially all his stock in the company - to meet a margin call in a $570 million fire sale.


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