Aubrey McClendon

Posting the article here because it is by subscription to view the article at The Journal Record but I am a subscriber:

McClendon forced to sell off his Chesapeake shares
by By David Page and Marie Price
The Journal Record October 13, 2008

OKLAHOMA CITY – Aubrey K. McClendon, Chesapeake Energy co-founder and CEO, involuntarily sold “substantially all” his shares of the company’s common stock over three days to meet margin loan calls.

“These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis,” McClendon said is a statement released by the company. “In no way do these sales reflect my view of the company’s financial position or my view of Chesapeake’s future performance potential.”
Chesapeake’s stock prices have plunged along with other energy stocks as crude and natural gas prices dropped to their lowest levels in more than a year. The energy sector has fallen alongside a broader sell-off on Wall Street.
Natural gas prices peaked at $13.577 per thousand cubic feet in July and closed down 29 cents on Friday at $6.535 per 1,000 cubic feet on the New York Mercantile Exchange. Chesapeake is the largest producer of natural gas in the U.S.
In New York Stock Exchange trading Friday, Chesapeake closed down 6.72 percent, or $1.19, at $16.52 after trading as low as $11.99. The 52-week high is $74.
McClendon owned 33.5 million shares of the company’s common stock, according to his latest filing with the U.S. Securities Exchange Commission. The shares would have been worth $2.5 billion when the stock peaked at $74 in July.
The company has more than 500 million shares outstanding.
Last month, Forbes showed McClendon on its list of the nation’s 400 richest people, with $3 billion, an increase from $2.1 billion the previous year.
“I have been the company’s largest individual shareholder for the past three years and frequently purchased additional shares of stock on margin as an expression of my complete confidence in the value of the company’s strategy and assets,” McClendon said. “My confidence in Chesapeake remains undiminished, and I look forward to rebuilding my ownership position in the company in the months and years ahead.”
Chesapeake officials hesitated to comment beyond information released on the company’s Web site.
Jeff Mobley, Chesapeake’s senior vice president of investor relations and research, confirmed that McClendon’s sell-off of his stake in the company was due to margin calls, but declined to give specific time frames for when they were made.
“It’s in response to margin calls that were associated with Mr. McClendon’s investments in Chesapeake,” he said.
Also on Friday, Chesapeake released a list of issues to be addressed in an investor and analyst meeting scheduled for Wednesday and Thursday.
Chesapeake reported borrowing the remaining capacity under its revolving credit facility at the end of the third quarter and investing the proceeds in short-term U.S. Treasury and other liquid securities.
As a result, the company had cash on hand of about $1.5 billion as of Sept. 30.
The company reported that all lenders participating in its credit facility except Lehman Brothers fully funded their commitment.
Lehman Brothers, which filed for bankruptcy, did not fund its $11 million share of the advance, Chesapeake reported.
For the fourth quarter and all of 2009 and 2010, Chesapeake has hedged about 81 percent, 72 percent and 46 percent of its expected natural gas and oil production at average prices of $9.50, $9.63 and $9.89 per thousand cubic feet, respectively.
Chesapeake reported collecting about $375 million in premiums for written calls with strike prices above current market prices for natural gas and oil in the fourth quarter, as well as 2009 and 2010.
According to information from the company, as of Sept. 30, Chesapeake’s natural gas and oil hedging positions had a positive mark-to-market value of about $40 million, an improvement of $6.6 billion since June 30.
“What it indicates is that the hedging we have done has protected the company and its assets,” said Tom Price, senior vice president of corporate development. “The volatility of the market has been such that what was reflected as a mark-to-market loss at the end of June of 2008 has reversed itself to the positive by $6 million, on behalf of the company and its shareholders.”
Chesapeake said its Lehman Brothers exposure included amounts for unpaid gas sales and amounts owed under derivative contracts. It received cash payment for natural gas physically marketed through a former Lehman Brothers affiliate.
As to the losses on the terminated derivative contracts, Chesapeake estimated that the amount by which the net value of financial natural gas and oil hedges with Lehman Brothers exceed the amount Chesapeake expected to receive from selling or rehedging the gas will not exceed $50 million.
Responding to lower natural gas prices, the company intends to further cut its capital expenditures budget by about $1.5 billion over the next two years through reduced drilling and lower leasehold spending.
These cuts are in addition to a $3.2 billion capital-expenditure reduction announced on Sept. 22.
The company plans to generate cash proceeds of $2.5 billion to $3 billion in the fourth quarter from the sale of a 25 percent interest in the Marcellus Shale, the sale of leasehold and associated production in three other areas and the sale of its fourth volumetric production payment, all of which are underway.
“We have announced intents to look for partners in Marcellus previously,” said Mobley.
Chesapeake anticipates generating excess cash of $1.5 billion to $2 billion in the fourth quarter, and $1 billion to $1.5 billion each in 2009 and 2010, assuming successful completion of asset sales and spending cuts.
Chesapeake has been selling assets.
Earlier this month Houston-based Plains Exploration and Production Co. agreed to pay $1.65 billion to buy a 20-percent interest in Chesapeake’s interest in the Haynesville Shale natural gas field in north Louisiana and east Texas.
Plains Exploration also agreed to fund 50 percent of Chesapeake’s 80-percent share of drilling and completion costs for future wells in the joint venture until an additional $1.65 billion has been paid.
Earlier during the summer, British oil and gas giant BP spent $1.7 billion buying Chesapeake properties in the Woodford Shale play of southeastern Oklahoma and then said it plans to spend another $1.9 billion to buy 25 percent of Chesapeake’s Fayetteville Shale properties in Arkansas.
The Fayetteville assets include daily net production of approximately 180 million cubic feet of natural gas equivalent and approximately 540,000 net acres.
Chesapeake reported a second-quarter loss of $1.6 billion, or $3.17 per share, including $2.08 billion in one-time non-cash mark-to-market losses on hedges. Chesapeake posted net income of $518 million, or $1.01 per share, during the second quarter of 2007.

http://www.journalrecord.com/article.cfm?recid=92887

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.