Chesapeake CEO Sells Holdings [wsj 10.11.08]
By BEN CASSELMAN
As natural-gas giant Chesapeake Energy Corp. revealed more financial problems Friday, the company disclosed that its co-founder and chief executive, Aubrey McClendon, had been forced to sell substantially all his shares to meet margin calls.
Mr. McClendon had been a major holder in his company, owning about 33.5 million shares as of Sept. 30, a stake of more than 5%. Between Wednesday and Friday, he sold 31.5 million of those shares -- 94% of his holdings -- for $569 million, according to regulatory filings. Those shares would have been worth nearly $2.2 billion at their July peak.
Mr. McClendon said in a prepared statement Friday that he had "frequently" purchased shares of stock using margin loans from brokerages, purchases he said showed his "complete confidence" in the company. But shares of Chesapeake have collapsed this year. Shares closed Friday at $16.52 on the New York Stock Exchange, down 43% for the week and well off their 52-week high of $69.40, reached in July.
"These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the world-wide financial crisis," Mr. McClendon said in the statement.
Reached by email, Mr. McClendon declined to elaborate. He co-founded the Oklahoma City-based Chesapeake, the largest producer of natural gas in the country, in 1989.
Mr. McClendon's sales came as the company was already reeling from the one-two punch of the credit crunch and falling natural-gas prices. Last month, the company announced plans to reduce its spending and sell assets to conserve cash.
On Friday, Chesapeake said it plans to sell $2.5 billion to $3 billion worth of assets in the fourth quarter and is cutting spending beyond its September announcement. It has also drawn down its entire revolving line of credit.
Chesapeake said it would slash another $1.5 billion from its 2009 and 2010 capital budget and was also making additional cuts to its 2008 spending. The move came less than three weeks after announcing it would cut $3.2 billion from its capital budget over the same time and a day after Mr. McClendon said in an interview that the company had no plans to further reduce capital spending.
As of Sept. 30, the company had $1.5 billion in cash and said it expects to end the year with $2.5 billion to $3 billion -- less than the $5 billion to $6 billion Mr. McClendon predicted in an interview Thursday. |
