By Anna Driver and Brian Grow
(Reuters) - Chesapeake Energy Corp
McClendon, who co-founded the company 23 years ago and built it into the second-largest natural gas producer in the country behind Exxon Mobil Corp
Chesapeake, struggling with weak cash flows amid the lowest natural prices in a decade and a massive $10 billion funding gap, is racing to sell assets as its focuses spending on its most profitable fields.
The company's shares sank 4.0 percent to $18.27 in afternoon trading, while its peers were down between 2-3 percent.
In May, Chesapeake said it would split the job of CEO and chairman. That decision came in the wake of a Reuters report saying McClendon, both chairman and CEO at the time, had arranged more than $1 billion in personal loans using his interest in company wells as collateral.
The arrival of Dunham, a former U.S. Marine who earned two degrees from the University of Oklahoma, heightened speculation the company could seek a buyer.
"This guy's got a lot of contacts around the world. He seems to me like he would be a good choice to run Chesapeake or sell it out," said Mike Breard, an analyst with Hodges Capital Management.
On Wednesday, the Financial Times reported that China's Sinopec Corp <0036.HK> was considering a multibillion dollar bid for Chesapeake assets.
In addition to Dunham, Chesapeake's board appointed four other new independent members proposed by the company's top two shareholders.
Southeastern Asset Management, the largest shareholder with a 13.9 percent stake, brought in Bob Alexander, Brad Martin and Frederic Poses, while activist investor Carl Icahn, who owns 7.6 percent, proposed Vincent Intrieri.
At a rare public appearance, Southeastern CEO O. Mason Hawkins said he believed Chesapeake's shares were worth more than $50 apiece and would eventually top $100 if gas prices rebound.
Tim Rezvan, an analyst at Sterne Agee, said the board changes "should give investors confidence that a more palatable spending plan will be in place next year."
Dunham, 73, spent more than three decades at Conoco and served as its president and chief executive when it sealed the deal that created ConocoPhillips
Dunham has been credited with turning around a struggling Conoco in the 1990s when, as head of its oil and gas production business, he sold $2 billion of assets and focused spending on its best-performing fields.
Some analysts wondered whether Dunham might have been selected to prepare Chesapeake for a possible sale.
"Given (Dunham's) age, I'm left wondering if his appointment doesn't signal something bigger is afoot," said Morningstar analyst Mark Hanson. "At 73, he obviously is a very accomplished guy. That Marine Corps service probably gives him some sharper elbows. If this is his last hurrah, it's not going to be waiting for gas prices to recover, it's going to be a sale."
Another shareholder said Dunham's membership on the boards of Union Pacific Corp
"I would have thought the chairman would have been a little more hands on," said David Dreman, chairman of Dreman Value Management LLP, which owns about 1 million shares. "We're not getting an active chairman."
Despite being rejected by about three quarters of the company's shareholders in a vote earlier this month, Chesapeake said it would keep V. Burns Hargis on the board to help complete a review of McClendon's financing arrangements.
"The news (of the appointments), which is welcome and positive, is tempered by the decision to keep Hargis," said Michael Garland, head of governance for New York City Comptroller John Liu.
"It's a bad decision justified by flawed logic," he said. "They are keeping the director who chaired the audit committee that failed in its oversight and is now investigating what went wrong."
The five new directors will replace Richard Davidson, Kathleen Eisbrenner, Frank Keating and Don Nickles - who resigned - and Charles Maxwell, who retired at an annual meeting on June 8.
McClendon retains some power despite the changes. The board amended company bylaws to give the CEO the authority to call board meetings and special shareholder meetings.
(Additional reporting by Matt Daily and Michael Erman. Writing by Matt Daily and Patricia Kranz; Editing by Bernadette Baum and Andre Grenon)