Trouble With the Top Man

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Aubrey McClendon, CEO of Chesapeake Energy Corp.

Aubrey K. McClendon, Chesapeake Energy’s audacious chairman and chief executive, has ridden the busts and booms in natural gas like a rodeo cowboy. He became a billionaire as the company he co-founded aggressively outbid competitors for land leases and drilled highly productive wells in virtually every major shale gas field in the country. And he acquired trophy assets like an N.B.A. team and a $12 million antique map collection.

But Mr. McClendon also borrowed heavily, with loans currently of $846 million, to finance his participation in an unusual compensation plan that allowed him to invest alongside Chesapeake in every well that it drilled, sharing in both the profits and the expenses.

Now Mr. McClendon may be about to tumble off the bucking bronco. Record low natural gas prices are undermining the value of the company’s investments and his own. Chesapeake announced on Thursday that it was phasing out the contentious compensation plan and undertaking a review of Mr. McClendon’s financial relationships with outside parties.

And a growing chorus of criticism about Mr. McClendon’s risk-taking management style and his compensation could force further changes at the company, the nation’s second-largest producer of natural gas, after Exxon Mobil .

The Securities and Exchange Commission has begun an informal inquiryinto Mr. McClendon’s financial arrangements. Some analysts have called for the company to appoint an independent board chairman.

Standard & Poor’s downgraded Chesapeake’s debt further into “junk” territory on Thursday, warning that “turmoil resulting from these developments could hamper Chesapeake’s ability to meet the massive external funding requirements stemming from its currently weak operating cash flow and continuing aggressive capital spending.”

Chesapeake shares fell more than 3 percent on Thursday to close at $17.56. Over the last year, the stock price has swooned by 45 percent.

The shares of other prominent gas explorers like Encana and Southwestern Energy have also been battered by low prices for the fuel. But Chesapeake, based in Oklahoma City, has come under particular criticism because of Mr. McClendon’s strategy of borrowing vast sums of money to buy land and drill wells and the passive attitude of the company’s board, which has repeatedly deferred to his personal financial interests.

The shareholder disapproval reached a peak over the last week after Reuters reported that Mr. McClendon had used his personal stake in Chesapeake wells as collateral for up to $1.1 billion in loans used mostly to pay his share of the costs of Chesapeake wells in which he had invested.

“When it comes to disclosure with this guy, there always seems to be something amiss, something in the picture that hasn’t come out,” said Mark Hanson, an energy stock analyst at Morningstar.

Most of the loans came from EIG Global Energy Partners, an investment fund that has put money into some Chesapeake assets. The overlapping relationship has led many analysts to say that there was at least the appearance of a conflict of interest since Mr. McClendon could give his lenders a sweetheart deal in exchange for a preferential interest rate on his loans.

The company’s top lawyer said last week that “the board of directors is fully aware of the existence of Mr. McClendon’s financing transactions.” But on Thursday, the board appeared to backtrack, saying it “did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions.”

Board members include former Senator Don Nickles and former Gov. Frank Keating, both prominent Oklahoma Republicans.

Philip H. Weiss, an analyst with Argus, said that the latest company statement “tells me that they lied and they didn’t know what is going on.”

Chesapeake has emphasized that it would not be responsible for Mr. McClendon’s loans if he could not repay them. It has denied any conflict between Mr. McClendon’s interests and its own.

Through a spokesman, Mr. McClendon declined to comment on Thursday. “Litigation is constraining our normal open door policy,” Michael D. Kehs, a company vice president, wrote in an e-mail.

The Texas oilman T. Boone Pickens, a fellow booster of natural gas, defended Mr. McClendon.

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“It’s hard to be an entrepreneur if you don’t have skin in the game, and Aubrey always has skin in the game,” he said.

Chesapeake still produces nearly 10 percent of the country’s natural gas. But as it tries to manage a gaping $10.3 billion debt, it is rapidly selling off assets. In the last month alone, the company has announced $2.6 billion in asset sales. That includes shares in a subsidiary that it sold to an investment group that included EIG, the firm that lent money to Mr. McClendon.

The company has announced plans to sell $10 billion to $12 billion in assets this year and another $5 billion in 2013.

In recent years, it has tried to move more of its drilling into oil, since prices for crude are still high. But in an indication of Chesapeake’s weakening condition, Mr. McClendon is poised to sell its 1.5 million acres in the West Texas Permian basin, one of the hottest oil drilling spots in the country.

Even after the sales, Chesapeake will hold some of the richest positions in American shale fields, sometimes in partnerships with international oil companies.

Fadel Gheit, a senior energy analyst at Oppenheimer & Company, called Chesapeake “by far one of the most undervalued energy assets.”

Mr. McClendon, who has dismissed environmental concerns about gas extraction techniques like hydraulic fracturing, is no stranger to controversy.

Five years ago, he was fined $250,000 by the N.B.A. for bragging that he and his partners did not buy the Seattle SuperSonics to keep it in Seattle — a statement that was at odds with the N.B.A. commissioner’s intentions. The Sonics moved to Oklahoma City anyway for the 2008-9 season. They play in Chesapeake Energy Arena.

Mr. McClendon donated millions of dollars to the Sierra Club from 2007 to 2010, money that the environmental group neglected to disclose even as it advocated increased use of natural gas as a replacement for coal.

Later, the Sierra Club cut its ties to the natural gas industry as concerns rose over water and air pollution caused by drilling for gas.

Criticism of Mr. McClendon has mounted again since the company disclosed late Friday that Mr. McClendon had paid $661 million to the company over a three-year period to finance his share of the special compensation plan, called the Founder Well Participation Program, that will now be phased out.

Mr. McClendon had received $351 million in cash from his stakes in the wells, but he was obliged to contribute just over $1 billion in drilling costs.

Several analysts say those losses have reminded investors of a previous McClendon debacle. During the 2008 financial crisis, Mr. McClendon was forced to sell more than 30 million Chesapeake shares worth more than half a billion dollars to cover margin calls from brokers who had lent him money.

The company’s stock price fell more than a third as Mr. McClendon sold his shares.

Chesapeake tried to give him a financial lift with a $75 million bonus and by agreeing to buy his personal map collection. After a shareholder lawsuit, Mr. McClendon agreed to buy back the maps.