Chesapeake Energy Corp. is facing an uncertain future without iconic founder Aubrey McClendon.
McClendon just lost a power struggle with the new board forced on the company by its two largest shareholders, heaping additional uncertainty on a company that has been struggling to get its finances in order for more than a year.
The Oklahoma City natural gas and oil company sold more than $11 billion worth of assets to avert a cash crunch last year, with plans to raise as much as $7 billion that way in 2013.
Despite the leadership change, Chesapeake spokesman Michael Kehs said the company's focus remains the same.
“Our ‘core of the core' asset development strategy has not changed,” he said. “We have a tremendously talented team that is working to produce some of the best geologic assets in the world on behalf of our shareholders. That is our focus.”
Morningstar analyst Mark Hanson said McClendon's departure is likely good news for the company's shareholders. Chesapeake's stock is up $1.36, or 7 percent, to $20.33 since Tuesday's announcement.
“One of the largest overhangs on Chesapeake's stock price has been effectively lifted, and with Chairman Archie Dunham seemingly running a tighter ship, we expect more financial discipline going forward,” he wrote this week in a research note for clients. “Chesapeake still faces significant financing needs over the next few years, although planned asset sales should help bridge its funding gap.”
Dunham, the former Conoco executive, assured employees last week that Chesapeake was not for sale, but Morningstar had identified the company as a possible takeover target because of its asset base and expertise in developing tight oil and natural gas deposits.
For now, Chesapeake is searching for a new chief executive for the first time in its history.
Argus Research analyst Phil Weiss said Chesapeake stands a better chance of getting its finances under control with a new CEO.
“This is a company that needs greater fiscal responsibility and control. It needs to cut down leverage. It needs to cut down spending. It needs to become more focused,” he said. “While they've talked about doing those things in the past, they haven't been so successful at delivering on those promises.
“I think if you bring in the right person, it increases your ability to do that.”
Weiss said Chesapeake should probably hire a CEO from outside the company.
“My preference would be somebody with a good financial background with a solid No. 2 guy who understands from the science side,” he said.
Chesapeake's next CEO will take the reins of a company being investigated by at least three federal agencies based on questions about McClendon's business dealings and accusations of collusion with another natural gas company leading up to a 2010 lease sale in Michigan.
It also could be forced to sell more assets to pay for its ongoing shift to oil from low-price natural gas.
Fred Morgan, CEO of the State Chamber of Oklahoma, said Chesapeake remains an important part of the community.
“The company has reshaped America's energy prospects and has helped drive the conversation nationally regarding energy independence,” Morgan said. “Chesapeake has been, and I am confident will remain, a significant and prominent player in the energy sector, our state and our community for years to come.”
No matter what happens at Chesapeake, Oppenheimer analyst Fadel Gheit is convinced Oklahoma City will continue to thrive.
“In a $90 oil environment, life is good,” he said.
CONTRIBUTING: Adam Wilmoth, Energy Editor