Chesapeake Business Practices

[Maynard]

Several Investment Funds Shed Chesapeake Shares In 1Q 05/17 12:21 PM

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HOUSTON (Dow Jones)--Several large hedge funds and investment advisory firms sold large positions in Chesapeake Energy Corp. during the first quarter.

The sales by some of the largest movers and shakers on Wall Street is a sign that the company was losing some its luster with key investors even before it was rocked by a governance scandal in April.

The company has long been criticized by analysts for the Byzantine financial arrangements it needs in order to fund its expensive drilling program. Chesapeake, the second-largest natural gas producer in the U.S., bore the "brunt of investor anger" when a mild winter led to decade-low natural gas price levels, said Oppenheimer analyst Fadel Gheit.

In any case, by shedding the shares, these investment funds spared themselves a major drop--Chesapeake is trading at $13.50, at a 52-week low and down 42% from the end of the first quarter. In recent weeks, revelations about Chief Executive Aubrey McClendon's personal loans from financial institutions that had done business with Chesapeake triggered further scrutiny of the company's finances and prompted the board to strip McClendon of his chairman role.

Also, concerns about liquidity resurfaced last week when the company warned in a filing that it might delay deals in order to protect its revolving credit facility. In a sharp twist, the company obtained a $4 billion loan to pay its credit facility, but that has so far failed to assuage investors. The stock is down 3.5% in midday trading Thursday.

S.A.C. Capital Advisors LP, the hedge fund run by prominent financier Steve Cohen, shed 91% of its Chesapeake shares during the first quarter, retaining only stock worth about $541,645 as of March 31.

Millennium Management LLC sold 86% of its shares in the Oklahoma City-based oil and gas company, and at the end of the first quarter had about $5.7 million worth of shares left.

Fidelity Management & Research Co., which serves as investment advisor to Fidelity's mutual funds, sold 59% of its Chesapeake holdings, but it held shares worth $164 million at the end of the quarter.

Highbridge Capital Management LLC sold all its Chesapeake holdings in the first quarter. Two Sigma Investments LLC sold 98% of theirs. OZ Management LLC shed 64%. Adage Capital Advisors LLC sold 57% of its Chesapeake stock.

A contrarian bet: Citadel Advisors LLC, which sextupled its Chesapeake holdings to 2,952,233 shares, worth $68.4 million at the end of the first quarter.

All of the firms either declined to talk about their positions or didn't respond to requests for comment. The information about their holdings comes from regulatory filings and other disclosures compiled by Dow Jones Newswires.

[dankrutka]

Where the heck has MikeOKC been lately?

He's been all over CHK for years and now that things are hitting the fan in earnest he's been completely AWOL for a couple of weeks.

I was just thinking that. He was continually dismissed, or castigated, by many on this board for trying to point out what we all know now - CHK is a ticking time bomb.

[ou48A]

While far more details have become much more clear…… for several years it’s not been too hard to see that CHK was being operated in a far more risky way than other similar energy Co. Going back over 10 years this has always kept me from buying CHK stock.
Hard lessons are still remembered well from the early 1980’s oil bust. Its best we remember them VERY, VERY well.
CHK operations were and are a constant reminder of the energy companies who failed around the nation during the 1980’s.

I’m not sure how they will do it, but I sure hope CHK can survive in OKC.

[Allentown]

I’m reading through this board a little after registering recently and I may have stumbled upon something;

http://www.okctalk.com/showthread.ph...660&highlight=

This guy says something about;

“Maybe it’s not so much a case of me being ‘weird’ as those of you who believe you have your finger on the pulse of OKC need to pull your heads out and realize what is happening right in front of you……and how it may impact your state if corrective action isn’t taken.”

I’m wondering if that ‘kook’ has any role in any of this?

[Pete]

I saw this mentioned elsewhere and it's an interesting thought...

Perhaps Devon would be interested in some or all of Chesapeake's assets?

Devon has tons of cash and cash flow and if things really got bad for CHK, perhaps they would step in and take on a bunch of their employees as well as their assets.

[soonerguru]

I saw this mentioned elsewhere and it's an interesting thought...

Perhaps Devon would be interested in some or all of Chesapeake's assets?

Devon has tons of cash and cash flow and if things really got bad for CHK, perhaps they would step in and take on a bunch of their employees as well as their assets.

Nice thought but I don't see that happening.

[Pete]

How about Devon teaming with SandRidge and Continental to divide them up??

All have aggressive growth goals and the need to hire lots more people.

[SharkSandwich]

How about Devon teaming with SandRidge and Continental to divide them up??

All have aggressive growth goals and the need to hire lots more people.

I could see Devon and/or SandRidge bidding on some of CHK's Permian assets, but I don't see them filling the employee void if the CHK ship goes down.

[soonerguru]

They're better off letting CHK fail first and then they can have their pick of employees. Seriously doubt Devon has any interest in investing in a bunch of overpriced -- and only partially developed -- real estate in Nichols Hills.

[lasomeday]

I saw this mentioned elsewhere and it's an interesting thought...

Perhaps Devon would be interested in some or all of Chesapeake's assets?

Devon has tons of cash and cash flow and if things really got bad for CHK, perhaps they would step in and take on a bunch of their employees as well as their assets.

LOL, not going to happen.

[ljbab728]

A vote for ousting Hargis and Davidson from the board?

http://newsok.com/new-york-city-comp...rticle/3676516

[Roadhawg]

News last night said there was a drive to vote out a couple board members

[Pete]

Shareholders meeting is in about a month and there are lots of upset people.

[OKCTalker]

JP Morgan's $2 billion loss was announced shortly before their shareholder's meeting, but after proxy votes were cast. Their shareholders didn't have the opportunity to change their votes, and are furious. CHK shareholders don't want the same thing happening to them, especially with significant information being discovered almost daily.

[OKCTalker]

After the market closed today, Reuters reported cuts to CHK directors' compensation. Their pay has been reduced by 20% to $350,000 consisting of $100,000 cash and $250,000 "equity" (I suppose CHK stock), and "personal" use of their aircraft has been eliminated.

Is this the best that CHK can do to appease unhappy shareholders on the subject of director compensation? They would still receive far more than directors at comparably-sized companies. Also, a 20% reduction to $350,000 implies a current level of $437,500, but I recall most of the directors were in the $500's. As for "personal" use of the aircraft, as slippery as CHK is, I can see that directors will be given "business" reasons for all future flights on the aircraft, and their travel hours won't be significantly curtailed. As a reminder, Devon reported total use of private aircraft last year - business and personal - to be $98,000.

Getting CHK to cut costs is like fighting a drunk for the bottle.

[ou48A]

Maybe a little good news for CHK


http://www.bloomberg.com/news/2012-0...tml?cmpid=yhoo

May 18, 2012 3:23 PM CT


Rising natural-gas prices have provided some relief to Chesapeake Energy Corp. (CHK), which has seen its shares plummet this year on management controversy and a looming cash-flow shortfall.

Gas rose to a 13-week high of $2.705 per million British thermal units on the New York Mercantile Exchange today. The fuel has gained 42 percent since touching a 10-year low last month of $1.902. Chesapeake, the second-largest U.S. gas producer, told investors on May 2 that $2 per million Btu gas prices would result in a loss this year, whereas at $3 the company would be profitable.

Chesapeake, based in Oklahoma City, rose 6 percent to $14.36 at the close in New York. The shares are still down 36 percent this year after Chesapeake began a review of Chief Executive Officer Aubrey McClendon’s personal loans backed by stakes in company wells and said it may run out of cash as early as next year.

“Every penny in gas price helps,” Biju Perincheril, a New York-based analyst for Jefferies & Co., said today in an interview. Today’s gains increased the average gas price for the year to $2.406. Jefferies forecasts gas will average $2.75 this year, Perincheril said.

Gas prices will continue to rise until the summer and may reach as much as $3 per million British thermal units as companies continue to slow production and electricity producers switch from coal to gas, Michael A. Hall, a Denver-based analyst with Robert W. Baird & Co., said in an interview.

It’s unclear if the price increase will last long enough to help Chesapeake and other gas producers with their cash crunch, Hall said. He expects prices to rise to $3.75 in 2013.

Futures contracts show gas prices averaging $3.656 in 2013.

[soonerguru]

After the market closed today, Reuters reported cuts to CHK directors' compensation. Their pay has been reduced by 20% to $350,000 consisting of $100,000 cash and $250,000 "equity" (I suppose CHK stock), and "personal" use of their aircraft has been eliminated.

Is this the best that CHK can do to appease unhappy shareholders on the subject of director compensation? They would still receive far more than directors at comparably-sized companies. Also, a 20% reduction to $350,000 implies a current level of $437,500, but I recall most of the directors were in the $500's. As for "personal" use of the aircraft, as slippery as CHK is, I can see that directors will be given "business" reasons for all future flights on the aircraft, and their travel hours won't be significantly curtailed. As a reminder, Devon reported total use of private aircraft last year - business and personal - to be $98,000.

Getting CHK to cut costs is like fighting a drunk for the bottle.

This is nothing. It's embarrassing, actually. The hubris of this company is insane. They don't seem to understand that they are in a crisis. These little changes are window dressing.

[Maynard]

Fitch Downgrades Chesapeake Energy On Aggressive Capital Spending 05/18 05:32 PM

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DOW JONES NEWSWIRES

Fitch Ratings downgraded Chesapeake Energy Corp.'s (CHK:$14.36,00$0.81,005.98%) rating further into junk territory, citing the natural gas producer's aggressive capital spending amid weak natural gas prices.

Chesapeake's rating was lowered one notch to double-B-minus from double-B, placing it three notches below investment grade. The outlook remains negative, as the rating firm expects funding gaps to persist at the company.

Fitch and Moody's Investors Service lowered their outlooks on Chesapeake to negative earlier this month, pointing to the company's aggressive capital spending program.

Chesapeake's push to develop gas and oil from shale rocks has helped create a U.S. energy boom. Chesapeake and other companies have been so successful at finding natural gas that the price of the fuel recently hit a 10-year low.

Separately, a series of revelations detailing possible conflicts-of-interest issues involving Chesapeake Chief Executive Aubrey McClendon has a brought fresh wave of criticism against the company and its board. Doubts about Chesapeake's governance, complicated finances and natural-gas prices near historic lows have cost Chesapeake billions of dollars in market value.

[Allentown]

Personally, I am much more worried about the next round of BRAC and how it will affect Tinker.

I like this post!

[BrettM2]

I like this post!

Tinker was recently selected to be the new command base for the new Air Logistics Complex idea that the Air Force is switching to. Now, rather than be one of three depots, we are the command depot with a Lt. General in charge. That should help us fight off any BRAC ideas.

[Easy180]

Tinker was recently selected to be the new command base for the new Air Logistics Complex idea that the Air Force is switching too. Now, rather than be one of three depots, we are the command depot with a Lt. General in charge. That should help us fight off any BRAC ideas.

Wasn't aware of that...That should put us closer to the bottom of the list

[Pete]

CHK's stock is up to almost $15 again, so things seem to have stabilized, at least in the short-term.


More on their Board pay:

A Bloomberg review of company filings show some outside directors on the company board have received other benefits apart from compensation, including the hiring of relatives and donating to universities that the board members also serve, according to Bloomberg.

Bloomberg reports that Chesapeake’s directors will still be paid 34 percent more than the average company board members’ pay at 15 other exploration and production companies last year, despite the 20 percent cut.

[soonerguru]

CHK's stock is up to almost $15 again, so things seem to have stabilized, at least in the short-term.


More on their Board pay:

Dead cat bounce?

[Pete]

Natural gas prices are up and all the energy stocks are doing better.

[ou48A]

Dead cat bounce?

It could be.
But these things usually take months to years to fully play out.

The poor economy is another factor helping to hold down NG prices and few expect significant economic improvement any time soon.
We are coming up on hurricane season and if we see several events that result in prolonged shut-ins it could help boost prices?