Relenting to investor pressure, Chesapeake Energy Corp.'s board and Chief Executive Aubrey McClendon agreed to separate the roles of CEO and chairman and announced the early termination of a program that gave McClendon stakes in thousands of oil and gas wells.
McClendon will remain as CEO but relinquish his role as chairman.
The board intends to appoint a nonexecutive chairman and will consider candidates "with no previous substantive relationship with Chesapeake," the Oklahoma City company said Tuesday. Chesapeake said it would solicit input from major shareholders.
Chesapeake's shares rose in morning trading on the New York Stock Exchange.
Southeastern Asset Management, Chesapeake's largest shareholder, is "pleased that the board has listened to our input." said O. Mason Hawkins, head of the firm. "Aubrey was right to recognize that these actions are in the best interests of the company and its shareholders," Mr. Hawkins said in a prepared statement.
The moves came after it was revealed that Mr. McClendon used stakes acquired in the well-participation program to borrow up to $1.4 billion, some of it from institutions that had done business with Chesapeake.
The news sent Chesapeake's down sharply, costing the company billions of dollars in market value and adding fuel to criticism that the board had given McClendon too much power. Some analysts have warned that the company's financial structure and liquidity concerns could present a risk for shareholders. After the news of the loans was revealed, those analysts heightened their calls for a board overhaul or McClendon's ouster.
The well-participation program had provided McClendon with the right to invest in up to 2.5% of new wells. Chesapeake said Tuesday that McClendon, the company's founder, will receive no compensation for the contract's early termination.
"The board appreciates Aubrey's cooperation in these measures and has confidence in Chesapeake's future," said Merrill A. Miller Jr., Chesapeake's lead independent director.
Chesapeake on Monday said the Internal Revenue Service was reviewing aspects of the well-participation program. The Securities and Exchange Commission is conducting an informal probe of the arrangement.
In an amendment to its annual report on Monday, Chesapeake confirmed that McClendon has mortgaged his well stakes with lenders, some of whom have business relationships with Chesapeake.
McClendon has received loans from private-equity firm EIG Global Energy Partners as well as from Wells Fargo & Co., Bank of America Corp. and Goldman Sachs Group Inc. None of the companies have commented on the relationship.
Chesapeake's push to develop gas and oil from shale has contributed to a U.S. energy boom. Companies have been so successful at finding natural gas that the price of the fuel recently hit a 10-year low. The low price helped pus Chesapeake's shares down 45% over the past year, as have concerns about the company's governance, debt and financial complexity.
The story first appeared on WSJ.com
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