Chesapeake Energy

Chesapeake Energy Corporation (NYSE:CHK) announced this morning that the company has appointed Archie Dunham to take the vacant non-executive chairman title that once belonged to CEO Aubrey McClendon, reports Businessweek (Bloomberg). Dunham is a retired ConocoPhillips (NYSE:COP) chairman that left the oil company in 2004.

In addition to Mr. Dunham, Chesapeake Energy Corporation (NYSE:CHK) has also named Bob Alexander, Brad Martin, Fredrick Poses and Vincent Intrieri to the board of directors.  This latest shake out in management is another sign that Carl Icahn could be doing some house cleaning for the company and reappointing leaders that can help promote growth and shareholder value.

Unfortunately, the old board was no longer efficient and it was costing shareholders.  The other problem was that everyone trusted McClendon too much. With this new board of retired executives, they may not sucker up to McClendon like his old board which is just what shareholders want.

Chesapeake Energy Corporation (NYSE:CHK) once had prime shale locations in some of the largest reserves here in the US.  Unfortunately, the weak energy environment has hit Chesapeake’s numbers and given the company a shortage in cash.  In fact, the company faces $22 billion fall in cash flow by the end of 2013.  Obviously, the energy firm has been spending more than it has been making which is giving way to a fall in cash holdings which the company must sell off assets to stay afloat.

Since May 25th when Carl Icahn announced that he has taken a 7.6% stake in the firm, the stock has been performing much better and so far he seems to have shareholder support for his reform ideas.  So far, it seems his reforms are working better than the way the company was running before.  According to Icahn’s reforms, the legendary investor sought to sell off some company assets to help keep the company from running out of cash and shake up the board of directors.

The future risks that Chesapeake faces are high in the coming months.  On one hand, natural gas got a nice jump last week on news that natural gas production was lower.  However, the market seems to be positioning itself in a drop in crude oil over the next few months or so.  Analysts are increasingly becoming bearish on oil as sentiment in the US combined with Europe is putting a lot of pressure on the markets.

The bottom line here is that Chesapeake could have some tough times ahead just because the energy markets are expecting large moves which could be unfavorable for the company.  Additionally, we will see how Carl Icahn is able to shield Chesapeake from any energy headwinds over the coming months.