Shares in Chesapeake Energy Corp fell nearly 10 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 9.6 percent to $17.28 in early afternoon. Shares last traded at that level in July 2009.

The volume of Chesapeake shares changing hands was more than double the 10-day moving average, and the stock was the most actively traded on the New York Stock Exchange.

It's certainly not a positive article, said Capital One Southcoast analyst Marshall Carver. I think that has something to do with the stock drop.

At a previously planned presentation to analysts and investors Wednesday morning, McClendon did not mention the Reuters report.

The CEO, who appeared subdued compared with his usual upbeat demeanor, was not asked about the report as he discussed the company's drilling program and asset sales.

The news threatens to put a cloud over the company's planned initial public offering of its oilfield services unit, Brean Murray analyst Ray Deacon said.

Chesapeake wants to raise up to $862.5 million from the IPO, first announced on Monday.

Now that loan documents are made public, it just adds another layer of complexity to an already opaque corporate web, Deacon said.


As quoted in the Reuters story, 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 a 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.

Companies involved in natural gas production have seen their shares hit recently as excess supply and warm weather undercut prices of the commodity.

(Reporting by Ernest Scheyder, Matt Daily, Anna Driver and Edward Krudy; editing by John Wallace and M.D. Golan)