It's been a year since Chesapeake Energy Corp.'s shareholders voted out most of the board of directors, chastised then CEO Aubrey McClendon and drew a line on corporate governance (see Daily GPI, June 11, 2012). Prized assets since have been sold, capital budgets have been cut, offices closed.
McClendon, once the face and vision of the Oklahoma City operator, also is gone, moving out April 1 to start up another exploration company in an office building not too far away from his former corporate headquarters.
And Chesapeake today? New CEO Doug Lawler, a former Anadarko Petroleum Corp. executive, starts work on Monday (June 17) (see Daily GPI, May 21). Then the real fun starts, acting CEO Steve Dixon told shareholders during the annual meeting on Friday. Dixon is returning to his former job as COO, but he gave shareholders a preview of what's to come.
Buying, delineation, land retention -- all of that's done. Now it's time to execute.
"We've made a huge investment in the last three years that sets us up for the next three years," Dixon said. "Our success will be better than our peers. We can allocate our capital. We have good clarity. We don't have to go look" for drilling sites. "We know where the next three years of drilling are located, we just have to go do them. The hard work already has been done...
"No one else can duplicate what we've done. The vertical integration we have, the carried drilling dollars we are using...all of these are unique to Chesapeake...In my 23 years, it's never looked brighter to me in that time."
Nonexecutive Chairman Archie Dunham, who came in last year from retirement, listened to shareholders thank the management staff and employees for holding the company together in what was a trying time for all concerned. Dunham said he appreciated the sentiment, but he gave all of the credit to Dixon, CFO Nick Del'Osso and Chesapeake staff.
"I'm bullish on Chesapeake," Dunham said. "I'm buying Chesapeake stock. When I look at the future of the company, I see the best portfolio of any major oil and gas company in North America, with the possible exception of ExxonMobil. We have an outstanding management team, that is clearly aligned with board strategy going forward..."
Dunham then went on to explain why keeping a company like Chesapeake strong was imperative not only for shareholders, but also to the nation's health.
"We have a unique opportunity in this country, with the opportunity of being energy independent in 10 years," said the former ConocoPhillips chief. "With the right kind of leadership, regulatory environment...industry can rapidly develop shale gas and oil, and not only be independent going forward, but if we're not importing oil into North America, we don't have the Sixth Fleet floating around the Straits of Hormuz...We can even reduce our military budget going forward...
"If we can just go forward as a company, as an industry, as a nation, we can be energy independent, and that offers tremendous opportunities for America, and Chesapeake is going to be a part of that..We need to be a leader in energy independence in North America..."
Shareholders still expressed concerns about McClendon, who Dunham acknowledged has a piece in an estimated 17,000-plus wells that Chesapeake has drilled. McClendon will continue to be able to participate in any well that Chesapeake drills through June 2014 under a unique Founder Well Participation contract that he had with the company. McClendon's value to Chesapeake can't be underestimated -- to a point, Dunham said.
When the history of the U.S. energy patch is written, McClendon "will be given credit for creating one of the greatest oil and gas companies in North America," Dunham told shareholders. His "leadership, his vision, the attributes of the company's culture, speed and agility to get people on the ground and to get leases signed" was incredible. That ability gave Chesapeake an estimated 15 million acres of leasehold across North America, "probably the most outstanding gas properties maybe in the world, certainly in North America. And I give Aubrey and the employees full credit for that..."
With "all of that," Dunham said, "came all kinds of things personally" to McClendon and co-founder Tom Ward, who now runs crosstown rival SandRidge Energy Inc. "This was not a totally foreign concept" for company founders to receive all types of special perks.
"But it's not appropriate in today's world. And it won't be approved going forward."
The company since last year has not only pulled back in its operating areas, but it also has pulled back on the perks. The only people who have company cars, said Dunham, are security people and those that need to have them. No executives in Oklahoma City drive a company car, he told shareholders. "I can assure you of that." The current level of debt remains "unacceptable" and "will be an ongoing concern."
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