Chesapeake Energy Corp. is under new management, but no one knows where the beleaguered company's new leadership will take it next.
The Oklahoma City energy company on Thursday announced five new directors, shifting control of the company's future away from its founder and into the hands of its largest shareholders.
Morningstar analyst Mark Hanson questioned whether the age of the new directors indicates a plan to sell the company.
New Chairman Archie Dunham is 73. Bob Alexander, 78, is just two years away from the board's mandatory retirement age. The average age of the five new directors is 67.
“Given Dunham's age, we're left wondering if his appointment doesn't signal a significant transaction of some kind in the near future — whether an outright sale of the company or perhaps a split into a few different assets that could be affected in short order and would then allow Dunham to step down with mission accomplished,” Hanson said.
Oppenheimer analyst Fadel Gheit said the new directors have been selected to make changes at Chesapeake, but it is still unclear exactly what shareholders — led by Southeastern Asset Management — are looking for.
“Is Chesapeake going to still be a going concern? Is Chesapeake going to be a much smaller company? Is Chesapeake going to be acquired by another company? Southeastern has made it clear that Chesapeake has strong assets, but at the end of the day, they have made it clear that all options are on the table, including the sale of the company,” Gheit said.
CEO Aubrey McClendon has said Chesapeake intends to focus on harvesting its rich asset base, but analysts have estimated the company needs to raise up to $22 billion to cover its spending plans through next year.
What happens next likely will be up to McClendon's new boss.
Dunham has experience running energy companies and selling them.
“Dunham is a well-known name in the industry with a great reputation,” Gheit said.
“He has seen low commodity prices. He's a veteran. He's run a company for many years. He's also not bashful. He can sell companies. He's done it before.”
As chairman and CEO of Ponca City-based Conoco Inc., Dunham orchestrated the company's merger with Phillips Petroleum Corp.
Gheit agreed that the new directors are not likely to serve on Chesapeake's board long-term, but he said it is still too soon to tell exactly what that means for the company.
“These are all guys who have established careers. They are not coming here for any new glory or a second career,” he said. “They are basically going to be looked at to restore investor confidence and raise shareholder value.”
Standard & Poor's analyst Scott Sprinzen also is not unsure what changes the board has planned.
“Time will tell,” he said.