Analyst Feels Chesapeake Energy is Heading Towards a Cliff; Others See it Very Differently

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From Seeking Alpha comes an article that looks at the maneuverings of Chesapeake Energy, and the analyst who writes it does not foresee a happy ending for the company.

Between CEO Doug Lawler increasing his pay to $15.4 million last year while laying off hundreds of employees and the fact that the company is selling off its best assets at their lowest value due to the sales taking place in a depressed market, the article puts forth the idea that the end for Chesapeake Energy is looking more and more like a matter of when, not if.

From the article:
March has been an outstanding month for Chesapeake Energy (NYSE:CHK) as the stock has gained in excess of 55% this month. However, this rally in Chesapeake shares has not been driven by fundamental improvements in the natural gas market, but by news of asset sales and a potential debt exchange offer. But, I think that the rally will not last for long as there are a number of challenges that Chesapeake still faces, primarily owing to the oversupply in the natural gas market. 
In addition, it looks like Chesapeake management is not up to the task of steering the company out of troubled waters. Let's see why. 
Compensation is rising in difficult times 
Driven by difficult times for the oil and gas industry, the CEO of Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) had to take a pay cut earlier this month. This was not surprising as Shell saw its profit drop to $3.8 billion in 2015 as against $19 billion the year before, indicating a drop of 80%. As a result, Chief Executive Officer Ben van Beurden saw his compensation slide by 8% to $5.61 million, driven by a drop in performance-linked shares. 
But, on the other hand, Chesapeake CEO Doug Lawler has seen his payincrease by 5% in 2015. Not only did the Chesapeake CEO saw a rise in his compensation, he also earned a whopping $15.4 million in 2015, which is almost thrice of the Shell CEO's pay, a company that's way bigger than Chesapeake in terms of market capitalization and diversity. 
This increase in pay was despite the fact that Chesapeake posted a loss of over $14 billion in 2015, while its shares slid around 70%. In comparison, Shell had posted a profit last year, while the drop in its share price was half of Chesapeake's decline. Therefore, it is evident that the Chesapeake CEO is busy paying himself while the company is in tatters due to the weakness in the natural gas market.
Continue reading this article by clicking here.

While the author states his points, the commenters on the article have not all been in agreement.  For example, here is what one person had to say:
I've seen some real trash articles on CHK, but this is in a class by itself.
The author posits - "Chesapeake CEO saw a rise in his compensation, he also earned a whopping $15.4 million in 2015"
Assuming it's 15.4 million (and its not cash), let's see what that bought:
1. Lawler renegotiated several Williams contracts, creating about 225 million EBITDA per year
2. Lawler was the first in the industry to see a long term commodity correction and took preemptive actions of eliminating the common dividend, suspending the preferred div, and reducing the work force by 15%. Estimated savings - about 300 million per year.
3. Lawler, along with Carl, packaged a bond swap, reducing the long time debt of CHK by just over 2 billion. Estimated savings on interest, about 150 million per year.
4. Lawler has been buying discounted bonds via private transactions. Estimated savings 300 million and growing.
5. Lawler's company has achieved production number gains, at the same time having slashed cap-ex spending by 60%. Estimated savings 1.2 billion per year.
6. Lawler's company has achieved amazing efficiency in the field. The average well cost has gone from the 10-14 million range to under 8 million. Estimated savings, up to 6 million per well
I could go on. Just the above results in annual savings of about 2.4 billion. Pretty nice return for a lousy 15 million. But you would never know any of that if you read this "article."
So, opinions continue to differ on what the future holds for Chesapeake Energy, as do viewpoints on how Lawler is running the company.

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