UPDATE: Chesapeake Names New Chairman, Adds Four New Directors

--Chesapeake approves new chairman, five new directors

--New chairman has extensive M&A experience

--Moves may signal intent to sell company

(Adds analyst comment, other information.)

 
   By Ben Lefebvre 
 

Chesapeake Energy Corp. (CHK) on Thursday appointed Archie W. Dunham, former chairman of ConocoPhillips (COP), as its new independent chairman and named four new independent directors, the result of a corporate governance shake-up called for by angry investors.

The changes could also indicate plans to put large chunks or even the entire beleaguered company up for sale, as the new board members, advanced in age, are led by a former executive experienced in the ways of oil-business transactions, analysts said.

Mr. Dunham, 73, will take over the chairmanship held until now by Aubrey K. McClendon, a move long sought by investors who said McClendon, who is also chief executive, held too much power in the company. Mr. Dunham served as CEO of ConocoPhillips for six years before stepping down in 2002 and has no previous ties to Chesapeake. As CEO of Conoco, Dunham engineered the oil-and-gas giant's spinoff of E.I. DuPont de Nemours & Co. (DD) in 1998, the largest such move ever. In 2002, he helped orchestrate Conoco's merger with Phillips Petroleum, a move that formed ConocoPhillips.

Angry investors, led by Carl Icahn, who recently became Chesapeake's second-largest shareholder, also pushed for replacing half of the board. Shareholders had complained that the previous board did little to rein in Mr. McClendon, who was often criticized as running the business he co-founded more as a private concern than as a public company.

A common thread running among many of the new board appointees is their relatively advanced age, with one board member being in his late-70s. The average board member age is now 65, up from 63 with the previous board. Morningstar analyst Mark Hanson said this means they aren't planning for long tenures. "If that's not setting up the company for sale, I don't know what is," Mr. Hanson said.

Mr. McClendon and the board have faced tough scrutiny since it emerged in April that Mr. McClendon has secured loans for more than $1 billion from financial firms that do business with Chesapeake, pledging his stakes in the company's wells as collateral. Chesapeake, which produces more natural gas than any U.S. company after Exxon Mobil Corp. (XOM), has been beset in recent months by decade-low prices for its principal commodity and a string of governance controversies.

Days before its June 8 annual meeting, the embattled natural-gas giant agreed to shuffle its board and to let Mr. Icahn and Southeastern Asset Management Inc. appoint four new members.

Southeastern, Chesapeake's largest holder with a 13.9% stake, appointed three new members: former energy executive Bob G. Alexander, former Saks Inc. (SKS) CEO R. Brad Martin and chemical-company executive Frederic M. Poses.

Mr. Icahn, who owns 7.6% of Chesapeake, has appointed his own agent, Vincent Intrieri, to the board. Intrieri is a senior managing director of Icahn Capital LP and a director at Dynegy Inc. (DYN) and CVR Energy Inc. (CVI), where Icahn holds significant and controlling stakes, respectively.

The five new directors replace Richard K. Davidson, Kathleen M. Eisbrenner, Frank Keating and Don Nickles, who have resigned, and Charles T. Maxwell, who retired at the annual meeting.

Chesapeake shares were at $18.72 in recent trading, down 1.7%. Shares are down 34% year over year.

--Saabira Chaudhuri and Ryan Dezember contributed to this article.

Write to Ben Lefebvre at [e-mail].