Cash-strapped Chesapeake Energy Corp. was determined to find an operational leader when it sought out an Anadarko Petroleum Corp. executive to be its new CEO.
The nation’s second-largest natural gas producer after Exxon Mobil Corp. announced last week that its new leader will be Robert “Doug” Lawler, 46, who is senior vice president of international and deep-water operations at Anadarko.
“The board was really looking for a strong operator, a strong engineer, someone who could apply cost discipline and capital efficiency,” said a person familiar with the search.
Chesapeake’s co-founder and former CEO Aubrey McClendon was known more as a land man who was able to acquire a sweeping portfolio of attractive drilling leases across the country, but struggled to develop them and generate revenue.
“I think they felt like Doug brought everything to the table they were looking for: operational excellence, outstanding leadership, high engagement with employees and impeccable integrity,” the person said.
Analysts and investors reacted positively.
“I have long maintained that Chesapeake would be best served by going outside the organization to fill McClendon’s spot,” Phil Weiss, an analyst for Argus Research in New York, said 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.”
Weiss noted that Anadarko “has a relatively high cost structure, so I am less certain of his abilities in those areas.”
Chesapeake, which has been a prominent investor in drilling in shale formations in eastern Ohio, is still struggling because of low natural gas prices and heavy debt. Though it has looked to grow its earnings by boosting oil production, natural gas still makes up 76 percent of its total output, down from 81 percent a year ago.
Chesapeake’s total debt, which last year grew to more than $16 billion, is now $13.4 billion.
Officials say the Oklahoma City-based company will sell assets to help plug that gap and keep its operations running.
Chesapeake’s board of directors, itself shuffled last year after an uproar from investors over concerns about McClendon and his leadership, turned to Lawler to help drive the company forward.
“Doug is a talented and proven executive with the ideal skill set to lead Chesapeake forward and capitalize fully on our world-class assets,” board chairman Archie Dunham said in a statement.
Lawler, who will begin his new job June 17, is an engineer who helped develop and operate massive projects at Anadarko, including a role in a large-scale liquefied natural gas endeavor in Mozambique.
“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,” Dunham said.
Lawler, in a statement, expressed excitement about Chesapeake’s asset base, which is dramatically different from that of Anadarko, a global exploration and production company.
“The growth potential of the company is tremendous,” Lawler said.
Lawler will help Chesapeake distance itself from issues involving McClendon.
The U.S. Securities and Exchange Commission is investigating McClendon’s loans from banks that also loaned money to the company, and a perk that gave McClendon a personal ownership stake in Chesapeake’s wells. The U.S. Department of Justice is investigating allegations of collusion involving McClendon and executives from Canadian natural gas producer Encana Corp.
“The hire should begin to turn the page on the Aubrey McClendon saga that has consumed the story for the past year,” said David Tameron, an analyst for Wells Fargo, in a note to investors.
During 25 years at Anadarko and Kerr-McGee, which Anadarko acquired in 2006, Lawler served in multiple engineering and leadership positions within a diverse geographic portfolio including U.S. onshore, deep-water Gulf of Mexico and international assets. He holds a bachelor of science degree in petroleum engineering from the Colorado School of Mines and a master of business administration from Rice University.
Tudor, Pickering, Holt & Co. said in a research note to clients that it is hopeful Lawler can improve capital discipline 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.
The Houston office of Heidrick & Struggles handled the CEO search for Chesapeake.