After cutting Chesapeake Energy Corporation (NYSE:CHK) CEO Aubrey McClendon’s 2011 pay by 15%, the energy firm said they will not offer performance-based awards in 2012. This comes after the highest holding shareholders voted against the executive’s proposed compensation saying that he was being paid too much.
In 2011, McClendon earned $17.9 million which was down compared to his 2010 compensation of $21 million. The CEO’s pay has changed to the performance-based pay after the board of directors stripped McClendon of his chairman title and announced they would be replacing the open spot with an outsider. Reuters had exposed the CEO’s personal stakes in his company’s wells as well as collateral for loans which ultimately lead to his firing from the board of directors.
Chesapeake Energy Corporation (NYSE:CHK)'s share price has not been kind to investors this year as it is down 25% YTD. As of today’s session, Chesapeake is down 2.25% to $16.79.
Chesapeake Energy Corporation (NYSE:CHK) is having a rough year as you can tell. Natural gas hit multi-year lows a few months ago which certainly hurt the company’s bottom line but then we had the CEO scandal at the beginning of May involving his personal investment in the firm’s wells. The board continues to pledge support for shareholder value but ultimately have been unable to deliver thus far.
This may open up an opportunity for an activist shareholder such as Carl Icahn to come in and turn things around. This year we have certainly seen exploding activist shareholder activity from major hedge funds. However, there are some external factors that there is nothing we can do about such as energy prices which have been falling as of late.
Remember, oil production accounts for 59.6% of Chesapeake’s share price where as natural gas production comes in second with 36.9%. Crude oil, which was recently was around $103 a barrel, is now trading at $96.60 as of today’s trading. This is a huge drop in oil which is great for consumers but terrible if your firm relies on oil production as over half of your share price.
The bottom line, is that Chesapeake flourishes during periods of high oil and natural gas prices and currently we are seeing the right conditions that warrant a higher share price for Chesapeake. If you believe that oil and natural gas will rise during the summer or in a later time, now might be a good time to do some research on the stock and determine if the stock works into your investment goals so that you can get a lower price.