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Chesapeake Energy Corp. CEO Aubrey McClendon uses his mobile phone as he walks through the French Quarter in New Orleans, Louisiana in this March 26, 2012, file photo.


Add a supine analyst community to the long list of problems facing Chesapeake's shareholders. Wall Street's finest should have leapt for chief executive Aubrey McClendon's jugular on Wednesday's earnings call. Instead they fell at his feet.

Not only did they ignore the transgressions that finally forced the energy company's lacklustre board to strip Mr. McClendon of the chairmanship on Tuesday – such as secretly borrowing $1.1-billion (U.S.), including some from a Chesapeake business partner, against his stake in company wells. They also failed to take the boss to task over a Reuters exclusive that he had been running a $200-million hedge fund trading in natural gas while leading the nation's second-largest producer of the commodity.

That should be the final straw for shareholders and the board. Granted, there's no indication he was using inside information. Even so, his dabbling in day-trading represents a conflict of interest. That should be grounds for the board to find a replacement – and for shareholders to dump the stock.

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Chesapeake's latest quarterly earnings, released on Tuesday, look pretty dismal, too. Not that it is known as a stellar operator – the firm has been burning cash for a decade and has more than double the leverage of its peers. But its stated goal of reducing debt by selling assets isn't working.

Hawking off its wares netted Chesapeake $2-billion last quarter. But its investment in wells rose 19 per cent from the last quarter of 2011 to $2.5-billion. Worse, despite its pledge to downsize, the company actually spent more buying property than it received from what it sold. All in, net debt actually rose by just over $2-billion.

On top of that, revenue is coming under increasing pressure. Natural gas prices are at a decade low and asset sales are taking a toll on expected oil output, which the firm cut by a quarter for 2013. The cost of extracting oil is rising, too, pushing costs up further. Since drilling for black gold is, by Mr. McClendon's own admission, at the core of the firm's future, that's a big worry.

Analysts may have let Mr. McClendon wriggle away from such contradictions – only three of 36 have an outright sell on the firm. Investors should not.

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