The Chesapeake Energy (CHK) board bowed to investor pressure today and agreed to end a special perk (“The Founder Well Participation Program”) for CEO Aubrey McClendon a year early. McClendon has come under fire for a clause in his contact that allows him to take 2.5% stakes in wells that the company is drilling, which has raised concerns about conflicts of interest.
But for some reason the board did not decide to end the perk immediately. Instead it will end in 2014.
A question about the timing could come up in a conference call following the company’s earnings release after the market closes, wrote Sterne Agee analyst Tim Rezvan. And if the answer is disappointing it could take the wind out of the stock, which is up 6.5% today.
“We were not surprised to see the early cancellation of the FWPP, but we were surprised that the termination will not occur until mid-2014. We hope to get additional insight on tomorrow’s call to determine if McClendon intends to participate in the program in 2013 and 2014, which we would view as bearish for the stock.”
Rezvan also warns investors that the board’s decisions today (they will also find a non-executive chairman to replace McClendon, who will remain as CEO) don’t fix Chesapeake’s other fundamental problems.
“The release does nothing to ease concerns about a perceived liquidity risk the company faces in a prolonged sub-$3/mcf world, and it does nothing to hint at prices the company may fetch for assets being marketed. At the end of the day, no deal will be as beneficial as a return to a world of $4/mcf natural gas, and we continue to view the company’s preliminary 2013 capital program as suspect if gas prices remain at their current level.”
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