Ahead of the annual shareholder meeting on Friday, Chesapeake Energy Corp. acquiesced to demands of major shareholder groups and Carl Icahn, who now holds 7.8% of the stock, and said four existing independent directors would resign from the board. The company also has put up for sale 337,481 net acres in its prized Utica/Point Pleasant Shale, which would give it less than one million acres in the play.

Shareholders reacted positively to the news sending shares up 6.03% (94 cents) to close at $16.52, versus $15.58 on Friday. More than 37.6 million shares exchanged hands, versus average volume of 30.4 million.

Chesapeake said its decision to oust nearly half of its nine-member board followed “extensive discussions” with Icahn and representatives of Southeastern Energy Management, the largest shareholder with 13.6% of the stock.

Three of the new directors are to be proposed by Southeastern and one seat would be proposed by Icahn or someone he designates.

Robert W. Baird & Co.’s senior analyst Michael Hall said the board shakeup “will go a long way in addressing the market’s lack of confidence around Chesapeake’s corporate governance and likely usher in a new culture of increased conservatism.”

Meanwhile, Treflis energy analysts on Monday cut their price target on Chesapeake by almost one-third to $19.12 from an April target of $27.81.

The announcement “is the culmination of a continuing effort by Chesapeake’s board to address shareholder concerns and better position the company for the future,” said CEO Aubrey McClendon. “I am fully supportive of these measures and remain focused on executing Chesapeake’s strategy.”

One shareholder is retiring this year and Chesapeake already announced that it would replace that vacated seat with the still-to-be-named independent nonexecutive chairman through a selection process that is nearing completion, the company noted. McClendon was stripped of the chairman title in early May (see Shale Daily, May 2).

The new chairman is to have “no previous substantive relationship with Chesapeake” and would be “confirmed by the reconstituted board and will be acceptable to Southeastern and Mr. Icahn,” Chesapeake stated. McClendon then is to relinquish the position of chairman but would continue to run the company and serve as a director.

The new board’s composition, including the independent nonexecutive chairman, is to be announced by June 22. The size of the board would remain at nine directors.

Icahn acquired his big stake in Chesapeake late last month and at the time demanded that four directors be replaced by two of his representatives and two representatives of another large shareholder, such as Southeastern (see Shale Daily, May 29).

“We appreciate the board’s willingness to listen to shareholders and to respond appropriately,” said Icahn. “Under Aubrey’s leadership, Chesapeake has assembled great assets and I am confident I can help the company create significant shareholder value from these assets. We enjoyed a very good relationship when I acquired almost 6% of the company’s stock in late 2010 and I look forward to a similarly constructive relationship now,” (see Shale Daily, Dec. 22, 2010).

Southeastern CEO O. Mason Hawkins said the steps taken by Chesapeake to “reconstitute” the board “will enhance oversight and provide greater accountability.”

In another move that acquiesces to large shareholder group demands, Chesapeake’s board announced that if the amendment to the bylaws to implement majority voting in director elections is approved by shareholders on Friday, it would be implemented immediately and applied to the results of the annual meeting.

“The board will also seek relief from the Oklahoma statute mandating classified boards of directors for certain Oklahoma incorporated public companies so that shareholders will have the opportunity to elect the entire board of directors at the 2013 annual meeting of shareholders.”

Chesapeake’s lead independent director Pete Miller, who also is CEO of National Oilwell Varco, said the actions would “further enhance Chesapeake’s corporate governance for the benefit of all shareholders. We greatly appreciate the substantial contributions of all of our directors but recognize our shareholders’ desire for change.”

The Utica/Point Pleasant acreage for sale, which encompasses 510,847 gross acres, is mostly in the wet gas/oil window of the play, land that Chesapeake had planned to target in its move to a more liquids position. Eighty percent already is held by production (HBP).

As of May, Chesapeake had 1.3 million net acres in the Utica Shale (Pennsylvania and Ohio combined), according to figures compiled by NGI’s Shale Daily. The latest sale would leave the company with an estimated 963,000 net acres in the prospective play.

The “rationale for selling” is because capital spending has been cut, “altering the company’s plans to develop all of its highly prospective Utica acreage,” Chesapeake stated. “Utica/Point Pleasant development will be focused where Chesapeake’s land ownership is more concentrated.”

The Utica land is limited to the Cincinnati, Utica, Point Pleasant and Trenton intervals, according to Chesapeake. About 270,500 net acres are HBP by shallower zones (Queenston and Clinton counties) or held by storage, it said.

Chesapeake now has two operated wells in the acreage for sale. One well is a stratigraphic test that was drilled this year and is temporarily plugged. The second is an exploratory well also drilled this year that is scheduled to be hydraulically fractured in July. There also are five nonoperated wells across the leasehold that were drilled between 1995 and 2005, all vertical completions in naturally fractured Utica intervals with “minimal production volumes,” Chesapeake noted.

The bid date for the Ohio sale is July 11 with an effective date of sale July 1. A closing date is tentatively set for Aug. 17.