Chesapeake Energy (NYSE: CHK) CEO to Retire

Chesapeake Energy (NYSE: CHK) investors are saying goodbye and good riddance to the company’s once-hailed co-founder and CEO Aubrey McClendon.

Shares were up 8% today after yesterday’s announcement that the CEO would step down on April 1. This comes at the end of a downward spiral for McClendon, who faced scrutiny and criticism after using stakes in company wells to take out personal loans.

But at the height of his career, McClendon’s success was very real. He helped co-found the company in 1989 with Tom Ward, the company’s former President and COO.

The young company began with horizontal drilling in Texas and Oklahoma, completing an IPO in 1993 and making its first major natural gas discovery in 1994.

This discovery kick-started the momentum that allowed Chesapeake to grow from a company with $50,000 in capital and just two employees into the second-largest natural gas producer in the nation.

The company currently has natural gas operations in the Barnett shale, the Haynesville shale, and the Marcellus shale, and it also operates in the Utica shale, Eagle Ford shale, Niobrara shale, and the Anadarko Basin.

Source: Chesapeake Energy

But in April 2012, natural gas prices hit a ten-year low, falling below $2. This struck natural gas producers particularly hard as they struggled to remain profitable, drilling expensive wells for little reward. To this day, natural gas prices still remain firmly below $4.

That summer, Chesapeake Energy reported a budget shortfall of more than $22 billion that it planned to reconcile through asset sales. In 2012, the company sold between $11 billion and $12 billion in assets. More sales will come this year, as the company still remains saddled with debt.

But McClendon’s actions caused even more suffering for the company last year. It was reported that he borrowed over $1 billion in personal loans from stakes in company-owned wells. This raised questions and sparked an inquiry from the Securities and Exchange Commission.

After backlash from shareholders, he was removed as chairman and a number of board members were replaced.

When the announcement of his retirement was made yesterday, shares went up 10% after hours and continued their high ride today. Shareholder approval of this decision was reflected in that move.

But McClendon does not leave the company on a sour note. He received much praise from billionaire investor Carl Icahn, a major shareholder and one of the company’s new board members. From the New York Times:

“Aubrey has every right to be proud of the company he has built, the world-class team of people at Chesapeake and the collection of assets he has assembled, which in my opinion are the best portfolio of energy assets in the country,” he said.

Other members of the company also had good things to say. From the press release:

Archie W. Dunham, Chairman of the Board, stated: “Over the past 24 years, Aubrey McClendon has created one of the most valuable and innovative companies in the energy industry. Under Aubrey’s strong leadership, Chesapeake has built an unmatched portfolio of natural gas and oil assets in creating one of the world’s leading energy companies. He has been a pioneer in the development of unconventional resources, and he has also been a leader in the effort to make the United States energy independent.”

Without McClendon, Chesapeake would not have seen the success it has in its 24 years of existence. But the company hit a major lull this year, and it will take a lot to come back from that.

The scrutiny into McClendon’s actions has only exacerbated the company’s problems, and investors and the board of directors alike hope new leadership will steer the company in the right direction.

That’s all for now,

Brianna Panzica

@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.