Chesapeake Energy CEO Aubrey McClendon to exit April 1
BY ROD WALTON World Staff Writer
Wednesday, January 30, 2013
1/30/13 at 8:01 AM
Read emails to employees from
Aubrey McClendon and Archie
Dunham.
Read the latest news concerning the
energy industry in Oklahoma.
Aubrey McClendon, the petroleum landman who started Chesapeake Energy Corp. and built it into one of the nation's biggest natural gas producers before losing power when the company floundered in debt, will step down as CEO and president effective April 1.
A news release from Oklahoma City-based Chesapeake announced McClendon's imminent departure Tuesday.
McClendon, 53, lost his chairmanship of the company's board last year amid a financial collapse due to falling natural gas prices and Chesapeake's lack of liquidity.
The longtime face of Chesapeake told employees that the resignation was mutually agreed upon with the board of directors.
"Although this is due to certain philosophical differences that exist between the board and me, the separation will be amicable and smooth," McClendon wrote in the e-mail. "I have the utmost confidence in you and the company's future and I will always treasure the time we have spent together building Chesapeake into the unique and dynamic company that it is today."
The company's press release did not name who would succeed McClendon in heading up the company's day-to-day operations.
"Over the past 24 years, Aubrey McClendon has created one of the most valuable and innovative companies in the energy industry," said Archie Dunham, the former Conoco Inc. CEO who stepped in as Chesapeake chairman of the board last year.
"Under Aubrey's strong leadership, Chesapeake has built an unmatched portfolio of natural gas and oil assets in creating one of the world's leading energy companies."
Dunham called McClendon a pioneer in the leading the U.S. shale revolution, developing historic natural gas reserves found within shale deposits deep beneath the earth's surface. Chesapeake held leases on millions of net acres in most of the nation's predominant shale plays.
"However, as the company moves towards more fully developing the value of its outstanding assets, Chesapeake is at an important transition in its history and Aubrey and the board of directors have agreed that the time has come for the company to select a new leader," Dunham said. "The board will be working collaboratively with Aubrey to make a smooth transition to Chesapeake's next chief executive officer."
McClendon's and Chesapeake's success - along with other gas producers such as Devon and SandRidge - helped push Oklahoma City into the forefront of U.S. energy cities. Chesapeake holds the naming rights to the former Oklahoma City Arena, and McClendon has been a regular courtside supporter of its main tenant, the NBA's Oklahoma City Thunder.
"At the minimum, it is the end of an exciting but volatile era," Tulsa money manager Jake Dollarhide, CEO of Longbow Asset Management Co., said Tuesday afternoon after learning the news. "Aubrey has a tremendous energy mind and is a pioneer in the industry, and it will be incredibly strange to think about Chesapeake being in existence without Aubrey running the show."
McClendon, an Oklahoma native and Duke University graduate whose extended family also once ran Kerr-McGee Corp., founded Chesapeake in 1989 with Tom Ward, who later departed to start SandRidge Energy. An aggressive acquisition strategy, sometimes called "the land rush plan," pushed Chesapeake to prominent positions in the Barnett Shale of central Texas and Fayetteville Shale in Arkansas, among other plays.
Daily production was topping 3 billion cubic feet equivalent by 2011's second quarter.
Through the years, McClendon enjoyed success but also endured criticism from some who questioned his compensation and highly leveraged growth strategy. None of it seemed to bother the CEO publicly.
"I do think a key to success in any walk of life is having a short memory and a thick skin - I know it has served me well over the years," he said in a 2011 interview with Forbes magazine.
By 2012, however, the criticisms found traction as Chesapeake was forced into a restructuring plan to unload billions in debt. The company has sold numerous assets, including its pipeline spinoff Chesapeake Midstream Partners LP - now called Access Midstream Partners and substantially owned by Tulsa-based Williams Cos. Inc. - to reduce the debt burden.
McClendon also lost control of his boardroom in the past year. Dunham was called out of retirement to chair the board, while activist investor Carl Icahn increased his take to 9 percent of the company and championed changes that may or may not have pushed McClendon out the door.
"This move has Carl Icahn written all over it," Dollarhide said.
Icahn, for his part, praised McClendon's tenure in building Chesapeake, which now employs 12,000 people and is the nation's second-largest natural gas producer. The investor said the company had "the best portfolio of energy assets in the country.
"While it is known that some of these assets will be sold by the company in due course, I do not believe that this will in any way effect the ultimate realization of Chesapeake's potential," he said.
A March 2012 article in Rolling Stone magazine accused Chesapeake of environmentally unsafe drilling practices. The article by Jeff Goodell charged that McClendon profited more from land acquisition than actual production.
"McClendon dominates America's supply of natural gas the same way the Tea Party-financing Koch brothers control the nation's pipelines and refineries," Goodell wrote. "To hear him tell it, the cleaner-than-coal fuel he produces will revive our faltering economy, free us from the tyranny of foreign oil and save the planet from global warming."
Chesapeake responded by estimating that lease royalty owners had received more than $14 billion in payments over the previous three years.
McClendon himself was well compensated despite the company's recent struggles. In 2011, he received a $1.95 million bonus, similar to previous years.
Earlier this month, however, Chesapeake reported that McClendon would forgo his 2012 bonus and that his use of corporate aircraft would be limited. McClendon overall made $18 million in 2011 and $21 million the previous year.
The co-founder's high-rolling style generated headlines good and bad for the past decade. In 2008, he sold more than 33 million company shares to help meet margin calls on his stock. Last year it was learned that he had borrowed money to fund his own personal stake in oil and gas wells operated by the company.
Key events in Chesapeake Energy Corp. history
1989
Tom Ward and Aubrey
McClendon launch
Chesapeake Energy
Corp. with $50,000
after working together
for several years in a
private partnership.
1993
Chesapeake issues common
stock in the open
market through an initial
public offering at a split-adjusted
price of $1.33
per share.
1999
In the wake of lower
commodity prices and disappointing
drilling results
in Louisiana, Chesapeake
stock falls to all-time low
at 62 cents a share on
Feb. 22.
Mid 2000’s
Chesapeake successfully
switches focus to longerlived
reserves and grabs
vast pieces of acreage in
shale fi elds. The company
grows rapidly, expanding
its northwest Oklahoma
City campus and payroll.
2006
Ward leaves Chesapeake
and later became CEO of
SandRidge Energy.
2008
Slumping energy prices
amid an economic collapse
force Aubrey McClendon
to sell nearly all of his
Chesapeake stock. The
board’s decision to award
him a $75 million bonus
soon after prompts
criticism.
2011
Low natural gas prices again
begin eroding the stock
price.
2013
CEO McClendon announces
he will retire in April.
Original Print Headline: McClendon to exit
Rod Walton 918-581-8457
rod.walton@tulsaworld.com
Associated Images:
Illustration and photo by The Oklahoman
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