Chesapeake Energy’s new chairman, Archie Dunham, will face major challenges with the company’s financial situation while trying to work things out with both CEO, Aubrey McClendon and Chesapeake’s biggest shareholders. The shareholders want to see more conservative measures taken in regard to expenditures and expansion while McClendon is more of the “spender.”
Dunham, a former chairman at ConocoPhillips, will serve as an essential “voice” for a board that has been unable to control spending. Chesapeake will hopefully shift its focus from purchasing more and more land for drilling to actual oil and natural gas production.
On the brink of a credit downgrade, Chesapeake hopes to sell as much as $14 billion in assets in 2012. The company is about halfway to that goal, totaling about $6.6 billion this year. Cheseapeake might also sell some land in Texas’ Permian Basin oil fields, hopefully adding to the income by at least $5 billion according to McClendon.
Phil Weiss, an analyst for Argus Research Corp., knows how necessary it is for a change of power within the company. “I think change is needed for this company to survive, let alone thrive,” Weiss said. “So either these people are brought in to be change agents or they’re brought in for a quick sale,” he added. A quick sale might be difficult with Chesapeake’s precarious background.
The question now is: How quickly can Dunham work his magic with Chesapeake? The 73-year-old chairman will most likely not be there to stay, given his age. Age might only be a number to Dunham, who says he was excited to join the board. “…I was attracted by the clear mandate to provide strong oversight while working closely with the company’s exception management team, talented employees and reconstituted board in a situation where we have the opportunity to create substantial value for all shareholders in the years ahead,” Dunham said.
The good news, though, is that with his age comes valuable experience. During his time with ConocoPhillips, Dunham utilized the sale of company assets to help put its finances back on track. Hopefully he can do the same for Chesapeake Energy.