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All's not yet well at Chesapeake Energy

SAN FRANCISCO (MarketWatch) -- Chesapeake Energy Corp.'s boardroom is now packed with new faces and Carl Icahn, the outside agitator behind it, is reassuring shareholders the company is under control. That's not the same as saying it's out of danger. It's not.

Chesapeake introduced its new board members Thursday. Former ConocoPhillips boss and industry old-timer Archie Dunham has been appointed chairman, filling the seat CEO and company co-founder Aubrey McClendon was forced to vacate in a shareholder rebellion prompted by his flagrant disregard for some basic rules of corporate governance.

Dunham is joined by four new directors, one nominated by Icahn, Chesapeake's second-largest shareholder, and three more chosen by Southeastern Asset Management, its biggest shareholder.

"We believe Chesapeake is now headed in the right direction," Icahn said in a statement accompanying the announcement. Among the first orders of business: completing an audit of company-backed personal loans to McClendon.

Great. But reining in McClendon is not going to solve Chesapeake's problems. Bigger issues remain.

The company, up against a capital shortfall of about $10 billion, is in the midst of a massive asset sale. The goal is to sell about $14 billion in production properties, most of it natural gas. But the boom in domestic shale gas production has flooded the market, driving gas prices this spring to a 10-year low. This is probably the worst time to be selling natural gas assets in a generation.

Chesapeake knows that, which is why it's been scrambling to rebalance its production portfolio more heavily in favor of oil.

But look at oil prices. July crude futures fell below $79 a barrel in New York Thursday for the first time in nine months. Read the latest on oil prices.

With the global economy going nowhere fast, energy traders are pricing in stark market realities faster than their counterparts in the equities market, and their near-term view on energy demand is overwhelmingly bearish.

That's not helping Chesapeake Energy (CHK) , whose share price fell another 4% Thursday to $18.13.

So while Icahn has reason to feel good about installing outside directors to supervise the company, an ever-uglier energy market is making McClendon's executive indiscretions look like the least of Chesapeake's problems.

If energy prices continue to deteriorate, no one is going to be interested in buying some of Chesapeake's assets. They'll be looking instead at buying the whole company.

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