Chesapeake Energy Corporation (NYSE:CHK) unable to declassify peak management, CARBO Ceramics Inc (NYSE:CRR)

Posted by Chris Bell June 17, 2013 0 Comment 1225 views

On Friday, Chesapeake Energy Corporation (NYSE:CHK) shareholders rejected a proposal which would have made it simpler to replace its entire board of directors at one shot. The board itself had supported the declassification. This proposal would have eliminated the board structure that currently exists, in which the 3-year terms of 8 directors, are staggered. For the last two years, the company has been on shaky ground. A range of Reuters investigations had led to civil as well as criminal investigations of CHK. Last year, as well as at the beginning of 2013, heavy-duty investors such as Carl Icahn had agitated for a reshuffling of management as well as the board. However, it was the staggered board system that acted as a hurdle to replacing all directors at one go.

Does the management matter?

If a list had to be made with the most important factors as the basis of an investment decision, the most likely ones that would be pointed out would probably be the balance sheet, growth, cash flow, moat etc. All of these are no doubt important, but one factor that cannot be overstepped is management and unfortunately, it is also one that is very difficult to analyze. Do the individuals at the helm of a company actually act the way leaders should?

Ties that matter

CARBO Ceramics Inc (NYSE:CRR) has two main customers, Schlumberger Limited and Halliburton Company In 2011, 92.3 percent of the company’s total revenue came from the sale of proppant sales. Almost 50 percent of total sales in 2012 had been generated from these two companies. CARBO’s management team is intertwined with the energy industry, specifically in its oilfield services. Gary Kolstad, the President and CEO spent 21 years at SLB before he joined CARBO Ceramics Inc, while the vice president of marketing and sales, Don Conkle, spent 26 years in the same company. Little wonder then that Schlumberger Limited. (NYSE:SLB) is one of the companies top two customers. Both have served in numerous roles at SLB and know the ins and outs of the energy industry. This should come in handy for investors who are wondering what the rocky environment of  dipping natural-gas drilling activity will bring to them next.

About Chris Bell

Chris Bell is an investing reporter for GDP Insider. Chris covers financial markets and Wall Street, concentrating on developments affecting individual investors and their portfolios. Chris is also over consumer reporter and covers a wide variety of issues ranging from housing to immigration to urban poverty. Chris graduated from the University of Scranton with a degree in Communication and Philosophy. Chris's diligent investigations earned him the honor of being named "Best Reporter" once by the Headliners Foundation of Texas and once by the Houston Press Club.

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