McClendon Out as Chairman at Chesapeake (CHK)

Aubrey McClendon, chairman and CEO of Chesapeake Energy Corp. (NYSE: CHK), will relinquish his chairman’s role as soon as the company’s boards appoints a new non-executive chairman. The announcement said only that a new non-executive chairman would be appointed in “the near future.”

McClendon has also agreed to an early termination of his Founder Well Participation Program (FWPP), the deal that has caused the company to stand in the spotlight recently as a model of lousy governance. The FWPP agreement will terminate 18 months earlier than its planned expiration date of December 2015, and McClendon will receive no compensation “of any kind” for agreeing to the earlier date. Under the FWPP, McClendon was allowed to invest up to 2.5% in new wells drilled by Chesapeake. Questions related to McClendon’s use of this right as collateral for loans to pay for his share of the drilling led to the early termination of the FWPP and to his ouster as chairman.

In the company’s announcement, McClendon said:

I am completely supportive of the Board’s plans to separate the positions of Chairman and CEO and to bring an independent Chairman onto the Board. This action reflects our determination to uphold strong corporate governance standards and will also enable me to focus my full time and attention on execution of the company’s strategy, the implementation of our transformation into a major oil producer and the completion of our asset monetization and joint venture objectives.

In other words, as a company we’re going to continue selling off assets to pay down our debts and to buy more leases. The only difference is that I (McClendon) won’t get to cream-off any more of the profits.

The company reports first quarter results after the markets close today. Chesapeake is expected to EPS of $0.29 on revenue of $2.75 billion. That’s a drop of nearly -50% in earnings and a rise of more than 70% in revenue from the same period a year ago. Production and revenue are way up on the back of low, low prices for natural gas, but earnings are hit by higher costs in addition to the low sales price for natural gas.

But dumping McClendon as chairman has boosted the stock by about 8.8%, to $20.06 in a 52-week range of $16.78-$35.75.

Paul Ausick