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Chesapeake shareholders rebuke board



Published: Sat, June 9, 2012 @ 12:00 a.m.

Staff/wire report

oklahoma city

Shareholders for Chesapeake Energy Corporation showed their displeasure with the company by not supporting the re-election of two board directors.

Shareholders also withheld their support for an executive-officer compensation proposal and questioned CEO Aubrey McClendon about the corporate governance and accountability of the nation’s second-largest producer of natural gas. Chesapeake is a significant stakeholder in mineral-rights leases in the Mahoning Valley.

Shares of the Oklahoma City-based company are worth about 40 percent less than a year ago. Chesapeake still has big spending plans even though it’s taking in less cash because of a plunge in natural- gas prices. It also needs to sell off billions of dollars in assets to service a huge debt load.

“Something is out-of-balance here at Chesapeake,” said shareholder Gerald Armstrong of Denver, whose proposal to reincorporate the company in Delaware passed with the support of 53 percent of the votes cast.

Armstrong said the move would bring greater accountability to the company but that Chesapeake had resisted it. The proposal is nonbinding.

The announcement by the company Friday morning that it intends to sell more than $4 billion in assets did not appear to calm board members upset with the company’s direction.

Chesapeake will sell its interest in Chesapeake Midstream Partners, L.P. to Global Infrastructure Partners for $2 billion.

“We don’t intend to kick the can down the road. We intend to crush the can,” McClendon said referencing the sale. “We can sell billions of dollars of assets.”

These deals would bring asset sales so far this year to $6.6 billion. Biju Perincheril, an analyst at Jeffries & Co., has estimated the company needs to sell at least $7 billion worth of assets this year or risk violating the terms of some of its loans.

Before the meeting, Chesapeake had agreed with Carl Icahn and Southeastern Asset Management, its largest shareholder, to replace four of nine board members with directors they choose. The company also stripped McClendon of the chairman title. It plans to name a new, independent board chairman by June 22.

After Friday’s action, Chesapeake will be replacing six of the nine board members.

A representative of Icahn Capital, Vincent J. Intrieri, said the organization is demanding better corporate governance.

Intrieri said McClendon is a great oil and gas executive but that even the best of executives need a strong board of directors to oversee their decisions.

Share prices of Chesapeake have increased 14 percent in the past week but still remain down 20 percent for the year.


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