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Last updated: June 21, 2012 9:45 pm
Chesapeake Energy, the US gas producer, has appointed Archie Dunham, former head of ConocoPhillips, as its new chairman in a boardroom shake-up intended to address investors’ concerns over corporate governance and give large shareholders more influence.
Mr Dunham, who has been appointed along with four other new independent directors, replaces Aubrey McClendon, Chesapeake’s co-founder who has drawn criticism in recent months over his personal finances. Mr McClendon will remain chief executive.
Chesapeake, which is the second-largest US natural gas producer after ExxonMobil, also named three new directors nominated by Southeastern Asset Management, its largest shareholder with 13.9 per cent, and one nominated by Carl Icahn, the activist investor who took a 7.6 per cent stake in the company last month.
Five directors are leaving the board, which has also been criticised for its oversight of the company’s strategy and Mr McClendon’s activities.
Chesapeake’s shares plunged in April after revelations that Mr McClendon had borrowed extensively against his personal stakes in the company’s wells, building up a debt of $846m at the end of last year. The company promised to appoint an independent chairman as one of its first responses to the news about Mr McClendon’s debts.
Concerns have also grown over the company’s mounting debts and off-balance sheet liabilities, as its cash flow is hurt by low natural gas prices.
Facing a funding gap between cash flow and planned capital spending of about $10bn this year, Chesapeake is targeting $11bn in asset disposals, including the $4bn sale of pipeline assets announced this month.
Mr Dunham worked at Conoco for more than 30 years, starting as an engineer and rising to president, chief executive and chairman. In 2002 he oversaw the merger of Conoco and Phillips Petroleum, creating the third-largest US oil company at the time.
Southeastern’s chosen directors are Bob Alexander, founder of Alexander Energy, Brad Martin, former chief executive of Saks, and Frederic Poses, chief executive of Ascend Performance Materials. Mr Icahn named Vincent Intrieri, senior managing director of Icahn Capital and a director at Dynegy and CVR Energy, in which Mr Icahn also owns stakes.
They replace Richard Davidson, Kathleen Eisbrenner, Frank Keating and Don Nickles, who resigned, and Charles Maxwell, who retired at the company’s annual meeting this month.
Burns Hargis, the president of Oklahoma State University who heads the board’s audit committee, resigned when shareholders rejected his re-election at this month’s annual meeting earlier this month. However, he will be staying on while he leads the board’s review of Mr McClendon’s finances.
Mr Icahn said on Thursday: “We believe Chesapeake is now heading in the right direction. With the board providing strong oversight, the management team will be sharply focused on realising the value of its assets and the company will be well positioned to create substantial value for shareholders.”
Mr McClendon remains a member of the board along with Louis Simpson, named by Southeastern last year, and Merrill “Pete” Miller Jr. Chesapeake has said shareholders will be able to elect the entire board at its 2013 annual meeting.
The company’s shares closed down 4.8 per cent at $18.12 on Thursday in New York. The stock has fallen nearly 19 per cent this year.
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