Tuesday, January 29, 2013 6:43 pm
Chesapeake's embattled CEO McClendon to retire
By JONATHAN FAHEYAP Energy Writer
The company announced Tuesday that McClendon will step down April 1 and will serve as CEO until a successor is named. McClendon will depart even though Chesapeake says a review of his business dealings has not revealed improper conduct.
Chesapeake Chairman Archie Dunham said in a statement the company needs a new leader to help develop the oil and gas assets it has amassed under McClendon.
Shares of the nation's second-largest natural gas producer rose more than 10 percent in after-hours trading. They dropped sharply last year as natural gas prices dropped to 10-year lows and some of McClendon's business dealings called Chesapeake's corporate governance into question.
McClendon, 53, was renowned for his aggression and skill in acquiring oil and gas drilling rights. As drillers learned to unlock natural gas from shale formations over the last decade, McClendon pushed the company to acquire enormous tracks of land in several states. The strategy landed the company promising assets, boosted the company's own production and helped fuel the national boom in natural gas production. But it saddled Chesapeake with enormous debt.
Chesapeake then became victim of its own success. Natural gas prices plummeted along with all the new drilling by Chesapeake and its peers, reducing revenues for the company and making the debt harder to repay.
As the financial strain on the company increased, a controversial arrangement between McClendon and the company came under renewed scrutiny. McClendon was allowed to buy personal stakes in each well Chesapeake drilled. To finance these stakes he borrowed nearly $1 billion from a company that bought oil and gas assets from Chesapeake, raising conflict-of-interest concerns.
Last spring, Chesapeake's largest shareholder, Southeastern Asset Management, called for changes in the company's management and business strategy. McClendon stepped down as chairman and the majority of the board was replaced by candidates approved by Southeastern and activist investor Carl Icahn.
Chesapeake said it will release the results of its review of the financing arrangements and other deals between McClendon and the company on Feb. 21. But the company said the decision to replace McClendon is not a result of the review, which it said has uncovered no improper conduct.
In a statement, McClendon cited philosophical differences with the new board, but said he would work with the company to ensure a smooth transition to new leadership.
Icahn said in a statement Thursday that McClendon should be proud of the company he built and that he amassed "the best portfolio of energy assets in the country."
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