McClendon Out as CEO of Chesapeake Energy Corp.
OKLAHOMA CITY – Aubrey K. McClendon, the embattled co-founder and CEO of Chesapeake Energy Corp. “has agreed to retire from the company April 1,” Chesapeake announced at the close of trading Tuesday. In the next sentence of its statement, the company reported “its extensive review of alleged conflicts of interest and other matters involving McClendon has to date found no improper conduct.” A final report is due to be completed in mid-February.
The Reuters News Service, which published a series of investigative reports revealing McClendon’s insider dealers and “possible antitrust violations” that “triggered civil and criminal probes of the second-largest U.S. natural gas producer,” quotes “a person familiar with the terms of McClendon’s departure" as describing the decision as “a termination without cause.” As such, McClendon will leave Chesapeake with a “lavish” compensation package, according to Reuters.
McClendon acknowledged in a prepared statement included in Chesapeake's announcement that he has “certain philosophical differences with the new board” but he would work “collaboratively with the company and the board to provide a smooth transition to new leadership for the company.”
Archie W. Dunham, chairman of Chesapeake’s board, praised McClendon’s leadership over 24 years to create “one of the most valuable and innovative companies in the energy industry.” After citing some of McClendon’s accomplishments, Dunham explained Chesapeake is moving “towards more fully developing the value of its outstanding assets. Chesapeake is at an important transition in its history,” he continued, “and Aubrey and the board of directors have agreed that the time has come for the company to select a new leader.”
Chesapeake stated the company and the board “are committed to its current drilling program with respect to its existing $6.0 billion drilling and completion budget for 2013, its ongoing asset sales program and intention to reduce the company’s long-term debt.”
Chesapeake is the largest leaseholder in the Utica shale play, and holds nearly all the drilling permits and well sites to date in Columbiana and Carroll counties in eastern Ohio.
McClendon, 53, has served as Chesapeake’s CEO since the inception of the company in 1989 and served as its chairman until 2012.
As details of McClendon’s personal deals trickled out, Chesapeake also faced a debt crisis and was forced to sell $12 billion worth of assets last year. The company plans to sell another $7 billion in assets this year.
“Going forward, the company will strive to continue as a low-cost producer of oil and gas while further enhancing and strengthening its balance sheet," Dunham said. "Capital allocation and operating decisions will be made with the goal of prudently growing the company’s intrinsic value per share for the long-term benefit of its shareholders. By forging ahead with a new CEO, the company’s strong management team and talented employees will continue to develop the industry’s best assets to create substantial value for shareholders and themselves in the years ahead.”
In announcing McClendon’s exit, Chesapeake said, “The board expects to release the results of its previously announced review of the financing arrangements, and other matters, between Mr. McClendon (and the entities through which he participates in the Founder Well Participation Program) and any third party that has had or may have a relationship with the company in any capacity, in its earnings announcement scheduled for release before market open on Feb. 21. The board’s extensive review to date has not revealed improper conduct by Mr. McClendon. The board and Mr. McClendon’s decision to commence a search for a new leader is not related to the board’s pending review of his financing arrangements and other matters.”
The board has retained Heidrick & Struggles to assist in its search of McClendon’s successor, and will consult with McClendon, the company said. The search process will include a full review of internal and external candidates.
During the interim period, McClendon will work closely with Steven C. Dixon, chief operating officer, and Domenic J. Dell’Osso, Jr., chief financial officer, to transition certain day-to-day management responsibilities. McClendon will resign from the board of directors at the time his successor is appointed and "will receive his full compensation and other benefits to which he is entitled in accordance with the terms of his employment agreement," the company said. "Mr. McClendon will continue to be an important partner with the company given his stock ownership as well as his interests in certain of the company’s wells in connection with the Founder Well Participation Program, which will terminate on June 30, 2014."
MORE FROM REUTERS:
Chesapeake CEO McClendon steps down after year of tumult
Chesapeake says it is not for sale: memo
June 7, 2012: The lavish and leveraged life of Aubrey McClendon
Copyright 2013 The Business Journal, Youngstown, Ohio.
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