CEO leaves Chesapeake cash-starved
Chesapeake Energy Corp.'s departing chief executive officer will leave to his successor a shrunken, cash-starved version of what was once the preeminent natural gas producer in the world's biggest market for the fuel.
Aubrey McClendon's agreement to resign effective April 1 culminated a shareholder revolt by Carl Icahn and Southeastern Asset Management Inc.'s O. Mason Hawkins that earlier had cost the CEO the chairmanship he'd held for more than two decades. McClendon also relinquished his annual bonus and saw executive perks curtailed amid federal investigations of a portfolio of personal loans that topped $840 million.
Chesapeake climbed 6 percent to $20.11, after earlier reaching $21.20 for the biggest intraday gain in almost nine months.
Chesapeake lost as much as 43 percent of its market value in 2012 as scrutiny of McClendon's financial transactions destroyed investor confidence in management and cratering gas prices drained the company of cash. Unfinished tasks facing the next CEO include raising $8 billion from asset sales this year to plug a funding shortfall, and converting a company that pumps enough gas to supply 20 percent of American household demand into an oil producer.
“Companies have life cycles and during various stages it can make sense for some people to leave,” Philip Weiss, an analyst at Argus Research Corp. in New York, said. “Aubrey McClendon was very good at accumulating land but now that Chesapeake is moving into an asset-harvesting mode, they must have decided they needed someone with another set of skills.”
An internal board investigation of McClendon's use of his stakes in thousands of company-owned wells to secure personal loans so far has found nothing improper, Chesapeake said in a statement released on Tuesday.
“The imminent departure of CEO McClendon proves that major strategy changes are likely, and we envision a reduced spending environment that is less reliant on asset sales,” Tim Rezvan, an analyst at Sterne Agee & Leach Inc. in New York, who has a neutral rating on Chesapeake shares, wrote in a note to clients today.
Archie Dunham, the former ConocoPhillips chief who replaced McClendon as chairman in June, thanked the outgoing CEO for his “enormous achievements,” in an e-mail to employees.
The company isn't for sale and employee perks such as on-site childcare and a fitness center at the company's Oklahoma City headquarters won't be discontinued, Dunham wrote.
In a separate e-mail to Chesapeake employees, McClendon attributed his imminent departure to “certain philosophical differences” between him and the board without elaborating. Dunham and McClendon declined to be interviewed, according to Michael Kehs, a Chesapeake spokesman.
Icahn and Hawkins, who together control 22 percent of Chesapeake's stock, pushed for McClendon's resignation.