Aug 4 (Reuters) – When U.S. oil and gas producer Chesapeake Energy Corp (CHK.O) emerged from bankruptcy in February, it presented investors with a healthy balance sheet, a new board of directors and a pledge to restrict spending.
Since then, the company has undergone a senior management reshuffle and, according to two sources familiar with the matter, its interim CEO has told employees the company is considering acquisitions that could help double its size.
The mixed signals, some investors say, explain why the rise in Chesapeake shares has lagged behind its rivals. One problem is that no one is exactly sure about the company’s true post-bankruptcy strategy.
Chesapeake shares have gained about 21% since the company emerged from bankruptcy. But shares of rivals Antero Resources Corp (AR.N) and Range Resources Corp (RRC.N) climbed around 67% and 53%, respectively, during the same period. Natural gas prices, meanwhile, climbed around 43% to $ 4.06 per million British thermal units.
Investor confidence in the Chesapeake reboot began to falter in April after then-director Michael Wichterich unexpectedly sacked CEO Doug Lawler, who had led Chesapeake for eight years, and returned to his post. acting.
Lawler had been widely credited with reducing the company’s $ 13 billion debt with a conservative spending approach and leading the company to bankruptcy.
At a town hall shortly after the layoff, Wichterich told employees he has a knack for making deals and recited a litany of deals he made during his career, two sources say who attended the meeting. He then told them that Chesapeake had to grow or would become an acquisition target, the sources said, who added that he had mentioned the doubling in size of the company.
“It freaked out a lot of people,” said one of the sources, who asked not to be named to discuss the case.
Chesapeake did not make Wichterich available for an interview and declined to comment for this story.
During mayoral days, and contrary to what Wichterich had told employees, rumors began to circulate in the market that the company’s new post-bankruptcy board wanted to sell assets as valuable as the company’s properties in South Texas.
In June, three other senior executives – the general counsel for Chesapeake, the chief accountant and the vice president of exploration and production – left. They had all been part of Lawler’s team.
Chesapeake was once America’s second-largest gas producer. He went bankrupt after years of overspending on acquisitions that left him strapped for cash and unable to tap vast resources.
He also suffered a scandal that sapped morale. Its founder, Aubrey McClendon, died in a violent car crash in 2016, a day after being indicted by a federal grand jury for rigging offers to lease natural gas.
Today, the company’s sprawling Oklahoma City campus is filled with vacancies due to staff losses.
While it’s not uncommon to replace a CEO after bankruptcy, Lawler was highly regarded on Wall Street and had been praised for keeping the debt-laden company afloat for years.
Chesapeake said the search for a new permanent CEO to replace him could take several months.
As part of its current compensation plan, Wichterich received a salary of $ 61,250 per month until the end of July. That jumped to $ 204,583.33 per month in August, according to a regulatory record.
Not everyone is worried about the future of Chesapeake Energy. A former employee contacted by Reuters said there were plenty of “bright people” working at Chesapeake who would take the Oklahoma City-based company to the next level.
And one investor, who spoke on condition of anonymity, said he has confidence in the decisions made by the current board and management and is happy with the company’s financial situation.
Analysts and people close to the company say deals could be made, likely in the form of additional additions to the company’s natural gas assets, which are considered better than its oil properties.
Opportunities abound as several private equity firms seek to pull out of the Haynesville and Appalachian shale deposits.
But investors this year have sanctioned companies offering to increase production through acquisition.
Shares of Pioneer Natural Resources (PXD.N), for example, fell 6% in April immediately following the acquisition of DoublePoint Energy. Less than two months later, Cabot Oil & Gas Corp (COG.N) and Cimarex Energy Co (XEC.N) both fell around 7% after announcing a merger.
Some energy investors would prefer shale companies to figure out how to generate higher returns on investment, said Robert Thummel, managing director of Tortoise, an energy investment firm.
Thummel previously owned Chesapeake, but said he would need to see “several quarters of discipline and a clear path to return the capital to shareholders” before buying it back.
Reporting by Liz Hampton in Denver Editing by Richard Valdmanis and Matthew Lewis
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