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As the well turns

Gazette staff June 26th, 2012

Whether Chesapeake Energy Corp. shareholders are ready to start singing “It’s a New Day” or “Won’t Get Fooled Again” (meet the new boss / same as the old boss), remains to be seen now that the company has named a new board chairman and four new board members.

Credit: Brad Gregg

Meanwhile, the latest kick to the well head for Chesapeake came in a Reuters story yesterday showing that Chesapeake possibly worked with a competitor to suppress land prices on its oil and gas plays.

According to emails obtained by Reuters, Chesapeake CEO Aubrey McClendon had explicit knowledge of his company working with another oil and gas company, Encana, to avoid bidding against each other on a public land auction and for deals with private individuals. Such actions, according to Reuters, are possible violations of state and federal laws.

Chesapeake stock fell more than 8 percent after the story was published.

The revelation came only a few days after the energy giant announced it had named former ConocoPhillips board chairman and CEO Archie Dunham as its new board chairman to succeed McClendon.

McClendon, who remains the company’s CEO, stepped down from the chairman spot in the wake of damaging stories that included his receiving more than $1 billion in personal loans to pay for an executive perk that gave him a stake in each well drilled. Chesapeake board of directors agreed to appoint an independent chairman.

As other issues came to light — such as McClendon’s involvement in a hedge fund that traded in the same commodities produced by Chesapeake — the clamor from shareholders for change in corporate governance reached Mötorhead-worthy decibel levels, culminating in a June 8 shareholder meeting in which two board members failed to win even 30 percent of shareholder votes for re-election.

Activist investor Carl Icahn, who purchased a significant portion of Chesapeake stock in the midst of the crisis, demanded that the company instate board members selected by the company’s largest shareholders.

The company also is working to eliminate $7.4 billion in assets by the end of the year to trim its significant debt.

In addition, the company announced that the board had appointed four new independent board members — three proposed by the largest shareholder Southeastern Asset Management: Bob Alexander, R. Brad Martin and Frederic M. Poses; and one by Icahn: Vincent J. Intrieri.

The new board members replaced Richard K. Davidson, Kathleen M. Eisbrenner, former Oklahoma Gov. Frank Keating, former U.S. Sen. Don Nickles and Charles T. Maxwell.

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