Archie W. Dunham, 73, the former chairman of ConocoPhillips, was appointed Thursday as Chesapeake Energy Corp.’s independent nonexecutive chairman, effectively making him founder Aubrey McClendon’s boss. McClendon, who had been chairman since he co-founded the company 23 years ago, remains CEO and president, and he gets to keep his seat on the board of directors.

Dunham, a well-regarded oil executive who helmed predecessor Conoco Inc. as CEO for several years, has had “no previous relationship” with the company, Chesapeake noted.

“Under Aubrey’s leadership, Chesapeake has built an extraordinary portfolio of natural gas and oil assets in creating one of the world’s leading energy companies,” said Dunham. “As I evaluated this opportunity, I was attracted by the clear mandate to provide strong oversight while working closely with the company’s exceptional 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, who worked for ConocoPhillips and its predecessor companies beginning in 1966, was elected president and CEO of Conoco Inc. in 1996 and served as chairman from 1999-2002. He then was elected chairman of the merged ConocoPhillips in 2002 and held that post until retiring in 2004 (see NGI, Sept. 27, 2004).

His resume is long, once serving as chairman of the United States Energy Association, the National Petroleum Council and the National Association of Manufacturers. Dunham also has been a director of the American Petroleum Institute, as well as a member of The Business Council and The Business Roundtable. In 2000 he was awarded the New York Mercantile Exchange CEO of the Year for Global Vision in Energy and in 2006 was inducted into the Offshore Energy Center Hall of Fame.

Dunham, who grew up in Oklahoma where Chesapeake is headquartered, was considered instrumental in orchestrating Conoco’s initial public offering that separated the company from DuPont in 1998, which at the time was the largest in U.S. history, as well as in negotiating the merger of Conoco and Phillips Petroleum Co. in 2002 (see NGI, Sept. 2, 2002; March 18, 2002; Nov. 26, 2011).

However, Dunham’s selection did little to lift investor or analyst enthusiasm. Analysts with TheStreet kept a “hold” on Chesapeake with a score of “C,” noting that its “strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and generally poor debt management.”

SunTrust Robinson Humphrey’s Neal Dingmann said whether Chesapeake is able to follow through on its realignment plan depends on how McClendon adjusts to serving as CEO only instead of pursuing more acquisitions. “Aubrey is known as still being a land man, not really as an operational CEO,” he noted.

Four new faces also were appointed to the board as independent directors, with three chosen by Southeastern Asset Management, Chesapeake’s largest shareholder (13.9%) and one by Carl C. Icahn (7.6%). Southeastern’s appointees are Bob G. Alexander, R. Brad Martin and Frederic M. Poses. Icahn appointed Vincent J. Intrieri, a close associate.

Alexander, 78, is the founder of Alexander Energy Corp., which was sold to National Energy Group (NEG) in 1996. He served as chairman and CEO of NEG from 1998 until its $1.5 billion sale in 2006 to SandRidge Energy Inc. Tom Ward, who is chairman and CEO of SandRidge, co-founded Chesapeake with McClendon.

“I think they’ve got some really good assets,” Alexander said in an interview Thursday with the Wall Street Journal. “The thing I think they need to do is limit drilling to how much cash they have available.” He added, “I always had the opinion, even when I had my own company, that everything’s for sale.”

Martin, 60, is the former chairman and CEO of Saks Inc., positions he held from 1989 to 2007. He now serves on the boards of FedEx Corp., First Horizon National Corp. and Dillard’s Inc. Poses, 69, is CEO of privately held Ascend Performance Materials. From 1999 until its acquisition by Ingersoll Rand in 2008 Poses was chairman and CEO of Trane Inc.; he also is nonexecutive chairman of TE Connectivity Ltd. and is a director at Raytheon Co.

Intrieri, 55, who has worked for Icahn-related entities since 1998, has served as senior managing director of Icahn Capital LP, the entity that manages the various investment funds, since 2008. He is currently the chairman of CVR Energy Inc., and also serves on the boards of Federal-Mogul Corp. and Dynegy Inc.

“Chesapeake has the assets and the opportunity to become the U.S.’s preeminent, low-cost energy producer and to significantly grow its value per share,” said Southeastern CEO O. Mason Hawkins. “We believe this board will prudently guide, assist and complement management’s efforts to capture its potential.”

Dunham and the four new directors replace Richard K. Davidson, Kathleen M. Eisbrenner, Frank Keating and Don Nickles, who have resigned from the board, as well as Charles T. Maxwell, who retired at the annual meeting earlier this month (see NGI, June 11). Davidson and board member V. Burns Hargis submitted their resignations when they did not receive support of a majority of the shares voted.

The board accepted Davidson’s resignation at the time, but Hargis is chairman of the board’s audit committee and “reflecting input” from Southeastern and Icahn, the board declined to accept the resignation until a review of McClendon’s financing arrangements are completed. Hargis is to continue to lead the review but is not to remain chairman of the audit committee. Once the review is completed the board plans to “revisit his resignation.”

Louis A. Simpson, who was proposed by Southeastern in 2011, will remain on the board as chair of the nominating and governance committee. Pete Miller also will continue on the board as chair of the compensation committee; the lead independent director role in which he had served has been eliminated.

Final board committee assignments are to be made by the new members, Chesapeake said. The board also is to take the “necessary actions to enable shareholders to elect the entire board of directors at the 2013 annual meeting of shareholders.”

“We believe Chesapeake is now heading in the right direction,” said Icahn. “With the board providing strong oversight, the management team will be sharply focused on realizing the value of its assets and the company will be well positioned to create substantial value for shareholders going forward.”

Although Icahn “has reason to feel good about installing outside directors to supervise the company, an ever-uglier energy market is making McClendon’s executive indiscretions look like the least of Chesapeake’s problems,” said energy analyst Jim Jelter. “If energy prices continue to deteriorate, no one is going to be interested in buying some of Chesapeake’s assets. They’ll be looking instead at buying the whole company.”

Last week Chesapeake announced that it was laying off 70 employees from its Barnett Shale workforce and transferring other staff members, leaving about 700 in its North Texas offices. The transferred employees are headed for the company’s Oklahoma City headquarters or “more prolific” shale plays. The layoffs should not come as a “surprise given historic low natural gas prices and our company’s ongoing strategy to redeploy assets to more economically promising fields,” said Chesapeake’s Julie H. Wilson, vice president of Urban Development. “It was of course a disappointment.”

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