Chesapeake Energy Corp. CEO Aubrey McClendon on Wednesday told investors he's “deeply sorry” that his personal finances have come under scrutiny as shares fell the most in three years.
“I'm deeply sorry for all of the distractions of the past two weeks,” Mr. McClendon, co-founder of Chesapeake, said on a conference call to discuss first-quarter results. Mr. McClendon said the company may have to sell more assets than planned to cover a gap between cash flow and revenue if natural gas prices remain depressed. These sales won't interfere with debt-reduction targets or plans to boost oil production, he said.
Chesapeake on Tuesday reported an unexpected first-quarter loss of $71 million, cut cash-flow estimates, reduced its drilling budget and said it may run out of money next year under the weight of the lowest gas prices in a decade. Chesapeake needs gas prices of $5 a thousand cubic feet in 2014 to achieve his $7 billion cash flow goal for that year, Mr. McClendon said.
Chesapeake on Tuesday said it would strip Mr. McClendon of his role as chairman and appoint an independent person to the position he has held since co-founding the company in 1989. Chesapeake's board said it's searching for a new chairman and will call an early halt to an incentive program that allowed McClendon to amass personal stakes in thousands of company-operated wells.
Mr. McClendon raised concern among some of his biggest investors, including Southeastern Asset Management, after news reports last month showed that he used his stakes in company wells as collateral to borrow hundreds of millions of dollars. Potential conflicts between his personal and professional duties overshadowed the CEO's efforts to shave a net debt load that swelled to twice the size of Exxon Mobil Corp.'s at the end of 2011.
Southeastern, Chesapeake's biggest shareholder with a 17% stake as of Dec. 31, pushed for the separation of the chairman and CEO roles.
New York City Comptroller John C. Liu, whose office manages pension funds holding 1.57 million Chesapeake shares worth $28.4 million, called the separation “a welcome step toward a more independent board,” in a statement on Tuesday.
The nominating and corporate governance committee on Chesapeake's board is considering chairman candidates with “no previous substantive relationship” with the company, according to the statement. Mr. McClendon will remain chairman until a replacement is named.