NEW YORK (AP) — Chesapeake Energy Corp. shares jumped more than 5 percent Wednesday morning, as analysts said the departure of embattled CEO Aubrey McClendon gives Chesapeake the chance to boost shareholder returns.
THE SPARK: After the markets closed on Tuesday, the natural gas producer announced that McClendon will step down as CEO from the company that he founded 24 years ago. Chairman Archie Dunham said the company needed a new leader to help develop its oil and gas assets.
THE BIG PICTURE: McClendon, 53, was hailed for his aggressive acquisitions of oil and gas drilling rights that paid off as new technology helped drillers extract gas locked in shale formations. But the company's fortunes sagged when that same technology led to a production bubble and falling gas prices.
Some of McClendon's business dealings also raised questions about Chesapeake's corporate governance. McClendon said in a statement that philosophical differences with a new board led to his decision to depart, but he said he would work with the company on a transition to new leadership.
THE ANALYSIS: Citigroup analyst Robert S. Morris said McClendon's departure will strengthen the board's control of the company and pave the way for a new CEO "who could bring a fresh perspective to unlocking shareholder value." He said the stock trades at a steep discount to the value of the company's assets.
"We view the development as a positive catalyst" for the stock Morris wrote in a note to clients.
Stifel Nicolaus analyst Amir Arif upgraded Chesapeake shares to "Buy," saying McClendon's departure could mean the company will be put up for sale, or will step up sale of its assets.
"We believe that a certain segment of the investment community, who were disinclined to invest in the company due to corporate governance concerns might now take a second look at the company, creating a slightly improved potential investor base," Arif wrote in a note to investors.
SHARE ACTION: Chesapeake shares rose 99 cents, or 5.2 percent, to $19.96 in morning trading. Earlier in the session the stock reached $21.41. The shares have ranged from $13.32 to $26.09 over the past 52 weeks.