Exclusive: Chesapeake CEO search extends beyond deadline - source

Chesapeake Energy Corp's search for a new chief executive to replace Aubrey McClendon is likely to extend beyond an April 1 deadline, according to a person familiar with the situation.

McClendon is expected to step down on Monday even if a successor has not been named, leaving Chief Operating Officer Steve Dixon and Chairman Archie Dunham to lead the U.S. oil and gas company in the interim, the source said.

McClendon's departure was announced in late January, following a governance crisis and a liquidity crunch caused by heavy spending on oil and gas properties, and a collapse in the price of natural gas.

Chesapeake's board of directors is considering both internal and external candidates for the job they had initially said would be filled by April 1.

The reason for the delay was not immediately clear. A spokesman for the Oklahoma City, Oklahoma-based company did not return a telephone call seeking comment on the process.

Analysts said several factors may be complicating the search: the second-largest U.S. natural gas producer faces financial and regulatory headwinds, it has a knotty financial structure that needs to be simplified, and there is a crowded field of public energy companies on the hunt for a CEO.

McClendon, who co-founded Chesapeake in 1989, was one of the first oil and gas executives to recognize the vast potential of the country's shale basins. But he oversaw $43 billion in spending over 15 years to snap up drilling rights across the country, putting the company under severe financial strain when natural gas prices tumbled.

Chesapeake has to fill a projected $4 billion gap between cash flow and spending this year and sell up to $7 billion in assets to help make up that shortfall in an environment where deal valuations have softened.

A Reuters investigation last April found that McClendon had arranged to personally borrow more than $1 billion from a big investor in Chesapeake, EIG Global Energy Partners, secured by his interest in the wells.

That program granting McClendon stakes in the company's wells is the subject of a formal investigation by the U.S. Securities and Exchange Commission. The U.S. Department of Justice has also launched a probe into possible antitrust violations related to land deals Chesapeake struck in Michigan. Those deals were first reported by Reuters.

A company probe of the same matter found no intentional wrongdoing on the part of McClendon.

"I don't think the company is out of the woods," said Phil Weiss, oil analyst at Argus Research. "They are going to need somebody who can get their leverage and budget under control and sort through all the joint ventures and off-the-balance sheet stuff."

Chesapeake has competition for talented executives. Other oil and gas companies that are looking for new CEOs, or executives who are meant to be part of a succession plan, include Encana Corp , Occidental Petroleum Corp and Marathon Oil Corp .

The search for a CEO typically takes about three months, but often takes longer because of the difficulty of scheduling interviews, negotiations over contract terms, and due diligence, according to executive search firm Egon Zehnder.

"From a board's perspective, it's a pretty complex thing when you talk about a CEO search," said Trent Aulbaugh, head of Egon Zehnder's Houston office. His firm is not involved in the Chesapeake search process.

A partner at Heidrick & Struggles, the recruiting firm that Chesapeake hired, was not available to comment.

McClendon, 53, appears eager to leave Chesapeake as quickly as possible, the source said.

He has created at least two new Oklahoma companies in the last few months, McClendon Energy Operating LLC and Arcadia Capital LLC, according to documents filed with the Oklahoma Secretary of State. The documents did not provide any details about the nature of the companies.

A spokesman for McClendon did not immediately respond to an email seeking comment on his plans.

(Additional reporting by Michael Erman; Editing by Edward Tobin and Tiffany Wu)