Chesapeake Energy Corp. has named an executive from The Woodlands-based Anadarko Petroleum to become CEO of the cash-strapped natural gas giant.
Robert “Doug” Lawler, 46, who is senior vice president of international and deepwater operations at Anadarko, is set to take over the Oklahoma City company as of June 17. The move gives Chesapeake a leader with an engineering background from a company known for its ability to develop large oil and gas projects and bring new production online.
Chesapeake has been without permanent leadership since former CEO Aubrey McClendon left the company earlier this year. McClendon, who co-founded Chesapeake and built it into a natural gas leader, also oversaw its slide into debt that grew to more than $16 billion at one point. The company now has $13.4 billion in debt and has tried to plug a cash shortage of about $3.5 billion by selling assets and taking out more loans.
Driving growth: Anadarko spending plan targets US shale
Lawler’s hiring drew positive responses from analysts who had long looked for changes at Chesapeake that showed the company was serious about changing its strategy.
“I have long maintained that Chesapeake would be best served by going outside the organization to fill McClendon’s spot,” said Phil Weiss, an analyst for Argus Research in New York, in an email. “This certainly hits the mark in that regard.”
There were some concerns, however, despite Chesapeake’s praise for Lawler as an executive with a reputation for “superior operational performance and capital efficiency”
“I will note that (Anadarko Petroleum Corp.) has a relatively high cost structure, so I am less certain of his abilities in those areas,” Weiss said.
The hire was expected to draw positive responses from investors because of Lawler’s experience at a “highly respected” exploration and production company, said David Tameron, an analyst for Wells Fargo, in a note to investors. Additionally, “the hire should begin to turn the page on the Aubrey McClendon saga that has consumed the story for the past year,” Tameron said.
Shares in Chesapeake were up about 4 percent, or 73 cents, by midday on Wall Street, trading at $21 on the New York Stock Exchange.
McClendon was known primarily as a land man who built up a sweeping portfolio of drilling leases nationwide, but struggled to develop them and build production while keeping costs down. At one point he estimated the value of the company’s land assets to be worth as much as $60 billion, more than four times the company’s market value. He also led the company to become the nation’s second largest natural gas producer after Exxon Mobil Corp, a position that left it heavily unbalanced and vulnerable to natural gas price swings.
But as natural gas prices fell and the company’s cash problems grew, McClendon also drew scrutiny for questionable perks and dealings that prompted investigations from the U.S. Department of Justice and the Securities and Exchange Commission.
Earlier this month the company reported better-than-expected first quarter earnings, but is still struggling to overcome its heavy debt load.
Archie Dunham, chairman of Chesapeake’s board, said in a statement: “Doug is a talented and proven executive with the ideal skill set to lead Chesapeake forward and capitalize fully on our world-class assets. Throughout his 25 years in the upstream E&P industry, Doug has earned a reputation as a highly engaged and knowledgeable leader who delivers superior operational performance and capital efficiency. The Board is confident that Doug’s deep technical upstream and engineering expertise as well as his strategic and financial skills will serve Chesapeake well. We look forward to working with him to create value for Chesapeake shareholders.”
Said Lawler in a statement: “I am honored and excited to be joining Chesapeake Energy with its unparalleled asset portfolio, focused management team and very talented and dedicated employees. There is significant value in Chesapeake’s asset base and the growth potential of the Company is tremendous. I look forward to accelerating the momentum that the Chesapeake team has built to generate value for our shareholders in the years ahead.”
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During Lawler’s 25 years at Anadarko and Kerr-McGee, he served in multiple engineering and leadership positions within a diverse geographic portfolio including U.S. Onshore, deepwater Gulf of Mexico and international assets. He is a member of the Society of Petroleum Engineers, the World Affairs Council and The Houston Museum of Natural Science. He holds a bachelor of science degree in petroleum engineering from the Colorado School of Mines and an MBA from Rice University. He and his family are in the process of moving to Oklahoma City.
Tudor, Pickering, Holt & Co. said in a research note to clients Monday morning that it is hopeful Lawler can improve capital discpline and spending decisions at the company.
“That said, we believe there is a substantial wall to climb given the balance sheet leverage and need to materially sell assets . . .,” the report says.
Read ongoing FuelFix coverage of Chesapeake’s troubles:
- Chesapeake founder to get $11 million as he builds new company (April 19)
- Unable to find a CEO, Chesapeake resorts to stop-gap leadership move (April 3)
- Hedge funds in Chesapeake bond fight seek to end intervention (March 26)
- Chesapeake to sell $2.3B in notes to pay off debt (March 19)
- Chesapeake sued for fixing prices, underpaying landowners (March 18)
- Chesapeake under investigation by SEC (March 1)
- Chesapeake says CEO’s loans, emails, showed no wrongdoing (Feb. 20)