HOUSTON—A conversation about U.S. shale and unconventional development invariably leads to the mighty Chesapeake Energy Corp. (NYSE: CHK).

Yet when Doug Lawler, Chesapeake’s president and CEO, joined the company in June 2013, it was a funhouse mirror reflection of its reputation, on the brink of bankruptcy while paying beekeepers and amassing a wine collection.

“Despite all your best due diligence, what I found when I got inside the company was much, much worse than I thought,” he said at the Houston Producer’s Forum luncheon on April 21.

Lawler stepped in at Chesapeake after the departure of the company’s co-founder and then CEO, Aubrey K. McClendon, who left due to pressure from activist investor Carl Icahn.

Lawler resolved to rebuild Chesapeake. At the luncheon, he likened himself to Ernest Shackleton, the British explorer who led expeditions in Antarctica during the early 1900s.

Shackleton’s crew for the expeditions are said to have responded to a bleak recruitment notice: “Men wanted for hazardous journey. Small wages. Bitter cold. Long months of complete darkness. Constant danger. Safe return doubtful. Honor and recognition in case of success.”

Doug Lawler, CEO, president, Chesapeake “When I went into Chesapeake—that’s what I thought,” he said. “It was a really, really challenging dark time.”

The company had begun floundering when Icahn, who is known for forcing big changes at companies he invests in, acquired a 7.5% stake in Chesapeake in 2012. At the time, Icahn said in a statement that "now more than ever the company needs the stewardship of a strong board—a board that can instill confidence in the shareholder base and restore accountability and credibility."

McClendon founded Chesapeake with Tom Ward in 1989 and built it into one of the top E&P companies in the U.S. During his leadership, Chesapeake discovered the Haynesville Shale, Utica Shale, Powder River Basin, Tonkawa Sand and Mississippi Lime unconventional plays.

But the company had overextended and was drowning in debt with little relief in sight. By the time Lawler stepped in, he realized Chesapeake needed ballast to right itself—and money.

Cleaning House

When he arrived at Chesapeake, Lawler didn’t waste any time cleaning house of the company’s current “culture of entitlement,” he said.

Within two months as CEO, several directors and top level executives were shown the door. He also downsized the workforce by 18%—laying off more than 800 employees during his first year with the company.

In a note to employees, Lawler said this reorganization would make Chesapeake more “‘competitive and focused,’” said David Tameron, senior analyst with Wells Fargo Securities, in a report.

“Our take on this is the Doug Lawler era has begun,” Tameron said.

Lawler came to Chesapeake after a stint at Anadarko Petroleum Corp. (NYSE: APC), where he had served in increasingly senior leadership roles. He had started his career with Kerr-McGee Corp. in 1988, which was acquired by Anadarko in 2006.

For Lawler, the company was quite a culture shock. Every day he discovered something that simply blew him away, he said.

“Whether it was bee keepers in gardens, wine collections and all kinds of crazy things—we are an E&P company,” he said.

Despite all the inherited baggage, the company has solidly increased productivity while lowering spending since Lawler arrived.

In 2013, Chesapeake reduced its capex to $6.9 billion, down from $13.4 billion in 2012.

Lawler instilled a new philosophy of value creation through financial discipline and strategic capital allocation based on prescribed performance metrics geared toward increasing value.

Under Lawler’s direction, the company also began a campaign to divest a bulk of its noncore assets. The company also spun off of its service company, Seventy Seven Energy Inc., and in late 2014 sold its southern Marcellus assets to Southwestern Energy Co. for nearly $5 billion.

Past The Ugly

For the most part, Lawler said the hard part for Chesapeake is over. “The ugly process,” he said, took place in 2013 with the company fine-tuning its performance the following year.

“I look to 2015 and beyond as how Chesapeake can align the quality assets, the quality employees with performing better in the E&P group,” he said.

Like most E&P leaders, the plunge in commodity prices is now among Lawler’s worries.

“Chesapeake is burdened with legacy debt,” he said. “We’re fighting that challenge every single day. Without having additional cash flow from higher [commodity] prices, it makes it more difficult to offset and improve that debt.”

Due to the low commodity prices, Chesapeake announced in March another cut to its capex to $3.5 billion from $4 billion for 2015. This was a huge reduction from the capex of $6.7 billion for 2014.

The company also announced a decline in its targeted production in 2015. It expects to operate 25-35 rigs this year, down 55% from the 64 rig average in 2014.

“While we’re all experiencing the financial impact of the low commodity prices, I believe the last man standing will be the company that’s the most efficient operator with the best assets,” he said.

Lawler also said at the luncheon that he has a great relationship with the notoriously meddlesome Icahn.

Just last month Icahn boosted his stake in Chesapeake to 10.98%. Icahn's holding company, Icahn Associates, disclosed it held about 73.1 million shares through an amended 13D filing in March, up from the roughly 66.5 million shares it held at year-end 2014.

After joining the company, Lawler said a reporter asked him when he thought his honeymoon with Icahn would end. His response—“it will end when I stop driving the greatest value for shareholders. And I fully expect him to fire me when that happens.”

The Oklahoma City-based company is a leader in most of the country’s shale plays and the second-largest producer of natural gas in the U.S. It has also gained relative financially health at a time of poor commodity prices compared to other E&Ps.

Despite the challenges Chesapeake faces in the current commodity climate that outcome for Lawler seems unlikely.

Contact the author, Emily Moser, at emoser@hartenergy.com.