Chesapeake Energy Corp. (NYSE:CHK) announced Tuesday that CEO Aubrey McClendon will resign after a tumultuous year in which a series of Reuters investigations triggered civil and criminal probes of second-largest U.S. natural-gas producer.
News of McClendon's plan to depart on April 1 sent the company's shares up 8 percent, Reuters reported. The stock has recovered in recent months after losing almost half its value last spring when a Reuters report opened Chesapeake and its co-founder up to intense scrutiny.
In a statement released after the closing bell Tuesday, reported by CNNMoney, Chesapeake's board praised McClendon's "strong leadership" and said an "extensive review" of his alleged conflicts of interest had yet to uncover any improper conduct. The firm said its "decision to commence a search for a new leader is not related to the board's pending review of his financing arrangements and other matters."
Federal regulators and Chesapeake's board are both looking into whether McClendon, 53, blurred the line between his personal dealings and the company’s, and into possible antitrust violations. Big shareholders took control of the board in June after the CEO was stripped last year of his title as chairman of the company he co-founded in 1989.
The internal deliberations that led to McClendon's departure remain unclear, Reuters said. The findings will be released next month, but Chesapeake said in a statement that the review has "to date found no improper conduct."
"[A]s the company moves towards more fully developing the value of its outstanding assets, Chesapeake is at an important transition in its history and Aubrey and the board of directors have agreed that the time has come for the company to select a new leader," Chairman Archie Dunham said in the company's statement Tuesday.
McClendon said in the statement that he had "certain philosophical differences with the new board," but that he was looking forward "to working collaboratively with the company and the board to provide a smooth transition."
McClendon is a part-owner of the Oklahoma City Thunder basketball team, whose arena bears Chesapeake's name.
The results of Chesapeake's review of McClendon's financing arrangements will be released when the company reports its quarterly earnings on Feb. 21, CNN said.
"I think that the controversy, governance and other issues that have been pulled up have caused lots of questions about him," David Larcker, professor of accounting at Stanford University's Graduate School of Business, told Reuters. "This was just sucking up so much time, it had to be a reasonable decision to change management."
A Reuters investigation published last April found that McClendon had arranged to personally borrow more than $1 billion from EIG Global Energy Partners, a firm that also is a big investor in Chesapeake.
The loans, arranged through McClendon's personal shell companies, were secured by his interest in company wells. McClendon is allowed to take a 2.5 percent stake in every single well Chesapeake drills under the Founders Well Participation Program.
Chesapeake shares rose to $20.50 in post market trading, up from a New York Stock Exchange close of $18.97.
One question outstanding is how much it will cost Chesapeake to be rid of McClendon. If the company were to stick strictly to the terms of his employment contract disclosed last year, he might end up owing Chesapeake money, rather than vice versa, The Wall Street Journal reports.
The company won’t give details on McClendon’s exit package, and it’s possible that a severance agreement could alter the terms.
According to a proxy statement cited by the Journal: “If Mr. McClendon retires from the Company prior to December 31, 2013, within 180 days after his retirement date Mr. McClendon would be required to pay to the Company an amount equal to the original $75 million amount of his 2008 well cost incentive award multiplied by a percentage equal to the number of full calendar months remaining between his termination date and December 31, 2013 divided by 60 months.”