Chesapeake Energy Corp. shareholders on Friday approved several company-proposed governance reforms, before CEO Doug Lawler touted his faith in the company.
Shareholders overwhelmingly approved measures to declassify Chesapeake’s board, implement proxy access and increase the maximum size of the board. Each received at least 98 percent of votes, according to preliminary results.
Chesapeake has undergone a leadership makeover in the past couple of years after some of its largest shareholders balked at its free-spending ways. Most of its board and senior management have been replaced.
Board Chairman Archie Dunham said Chesapeake’s board, which on Friday added Jack Lipinski to replace retiring Bob Alexander, is dedicated to serving the interests of shareholders.
This year’s annual meeting was Lawler’s first since he took the reins of the Oklahoma City-based oil and gas producer last summer.
Lawler praised Chesapeake and its employees for weathering a significant transformation over the past year. The company laid off 800 employees last year, while plans to spin off its oil-field services business will reduce its employee count even further.
“We’ve accomplished a number of great things, but ... the most exciting time for us is in the future,” he said. “I am more excited today than at any other time in the company that what we can achieve together will lead to Chesapeake being a top performing E&P (exploration and production) company against our peers.”
Lawler said Chesapeake is committed to continual improvement in all aspects of its business in an environmentally sound way.
He said the company has reorganized its business units and cut costs, with an eye toward generating the best value for shareholders. Lawler said Chesapeake has cut its capital spending in half without affecting its cash flow.
He expects the company to earn more than its spends this year, as Chesapeake continues to boost its production to a project 1 million barrels of oil equivalent a day by 2019.
“We have a lot of confidence in this forecast,” Lawler said, pointing to record production in Ohio’s Utica Shale and significant improvements in all of the company’s operations.
Lawler said he believes Chesapeake’s stock should be trading for $40 a share, based on the strength of its asset base.
The company’s stock reached a three-year high on Thursday, before slipping 2 cents a share on Friday, closing at $30.47.
SunTrust Robinson Humphrey analyst Neal Dingmann said Lawler’s estimate appears to be fair, given the stock price of its peers in the Utica and south Texas’ Eagle Ford Shale.
Dingmann said the shareholders’ approval of the governance items at Friday’s meeting should signal that Chesapeake will continue with initiatives to dispose of noncore properties and focus on its highest margin wells.
The proposals approved Friday mean Chesapeake’s directors will stand for re-election each year, while shareholders will be able to propose their own nominees.
The board also can increase its size to 10 members.