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The oil and gas industry is currently undergoing an unprecedented price collapse that many have cited as seemingly impossible to rebound from. There has been a shock to supply as well as an aberrant drop in demand. The industry was already suffering due to falling natural-gas and crude oil prices and then collapsed even further following the Coronavirus pandemic. Excess supply, specifically from
To navigate the unfortunate industry circumstances numerous energy companies have been prompted to slash shareholder distributions, rack up increasing levels of debt, and sell or write-down the value of their assets. This steered many companies towards filing for bankruptcy. As of
Since 2014, the Company's stock has steadily plummeted albeit experiencing a few spikes. At its peak, post the 2008 Financial Crisis, Chesapeake stock traded for above
The Company's stock crashed so low in March that on
Experts had warned that bankruptcy was inevitable, however optimistic investors continued trading and holding the stock. The company is roughly
Chesapeake Proceeds to Make Pay Cuts in the Face of COVID
In May, the Company announced that it would be cutting bonuses for senior executives while creating new quarterly bonus incentive programs for non-executive and non-managerial employees. Additionally, it announced decreases in the target variable compensation of the four highest paid named executive officers (target variable compensation was cut by 34% to Chief Executive Officer
The Company also reduced non-employee director compensation by around 15% on an aggregate basis and announced that all non-employee director compensation would be paid in cash on a quarterly basis. Furthermore, in terms of payment to senior executives and named executive officers, the company released a statement affirming that target variable compensation received by those employees would be prepaid with an obligation to refund up to 100% of the compensation on an after-tax basis (50% based on their continued employment for a period of up to 12 months and 50% based on achieving certain specified incentive metrics).
These individuals were also required to waive participation in the Company's 2020 annual bonus plan and waive their rights to all equity compensation awards with respect to 2020. The Company proceeded to cancel all outstanding equity compensation awards held by its named executive officers and vice presidents.
Internal Influences: The Necessity of Diversity
While many of Chesapeake's issues can be attributed to external factors, one must not overlook or undervalue how ill-advised decisions made by the Company's executive leadership may have aggravated existing difficulties.
Source: CGLytics
The Company's Board of Directors is lacking in several areas of expertise that are crucial to the success of a Company. In an eight-person Board, only two members possess Industry and Sector expertise, while only one member has Financial expertise.
Chesapeake's leadership was not equipped to navigate the financial pressures troubling the oil industry. The acceleration of Chesapeake's demise was largely due to the accumulation of excessive amounts of debt. In addition, the Company was not diverse in its investments and allocated much of its funding towards horizontal drilling and hydraulic fracturing.
Recent studies have proven that diversity leads to more profitability. Gender, cultural, and generational representation in a Company's executive leadership are necessary for innovation in both growth and problem solving. Chesapeake's board of directors has no cultural representation and little diversity with regards to gender and age.
Plans Moving Forward
Chesapeake announced that filing for Chapter 11 bankruptcy protection will enable the Company to obtain a more sustainable capital structure and a healthier balance sheet. Chesapeake has secured
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