Chesapeake Energy Corp. stock was traded heavily Wednesday, the first business day since the company announced the impending retirement of co-founder Aubrey K. McClendon.
More than 73 million shares of Chesapeake stock traded hands Wednesday, up from an average of 13.5 million a day over the past three months.
The stock closed at $20.11, up 6 percent or $1.14 a share, but it failed to hold on to all of the gains it made when news of McClendon's retirement broke Tuesday after the market closed.
Sterne Agee analyst Tim Rezvan said Tuesday's aftermarket rally was likely fueled by short-covering, but Chesapeake still faces major challenges.
The company, which needs to sell at least $4 billion in assets, has a limited inventory of top-shelf oil assets and unhedged exposure to continued low natural gas prices, he said.
Rezvan said one last bad bet on natural gas may have sealed McClendon's fate at Chesapeake.
“The elephant in the room for Chesapeake has been the company's unhedged gas production in '13 and '14,” Rezvan wrote in a research report issued Wednesday.
He said Chesapeake hedged its gas at $3.03 a thousand cubic feet in the fourth quarter, when the actual price rose to $3.56, while bullishly predicting a price recovery this year that has not materialized.
“We believe that a failure to mitigate price risk was a key driver of tension between the CEO and the board,” Rezvan said.
McClendon acknowledged “philosophical differences” with Chesapeake's reconstituted board in Tuesday's retirement announcement.
He will step down as CEO and a member of the company's board April 1, although he could stay longer if the search for his successor is ongoing.
Bernstein Research analyst Bob Brackett said the change could be positive for the company since McClendon's prowess as a landman does not fit Chesapeake's evolution beyond its land grab roots.