CHK - Chesapeake Energy In Trouble?

[m22au]

Thanks for your detailed comment AAA.

Quote from AAAintheBeltway:

In any list of companies with miserable corporate governance, CHK has to be close to the top. McLendon is a legend in the E & P business, but he seems to lack any basic understanding of the distinction between the CHK treasury and his personal checking account.

 

[AAAintheBeltway]

Quote from AAAintheBeltway:

In any list of companies with miserable corporate governance, CHK has to be close to the top. McLendon is a legend in the E & P business, but he seems to lack any basic understanding of the distinction between the CHK treasury and his personal checking account.

In the aftermath of his disastrous forced sale of margined company stock in 2008, the company generously stepped up and bought a load of so-called cowboy art from him for a whopping price.

He has had this embarrassing percentage participation in every well for a long time. It's basically just a rakeoff, extra compensation for him that they avoid disclosing I guess. What in the hell is a company doing lending the CEO money against company stock that he uses to "invest" in wells the company is drilling? How exactly is this benefitting the company or its shareholders? How can it even be legal?

We may not be able to avoid subsidizing waste in the government, but there is an easy way to avoid being part of this debacle. Just say no to CHK.

I need to make a correction. Apparently CHK is not directly lending the money to McClendon. The biggest lender however is also a big lender to the company, so that raises a new set of questions, such as is their business with CHK contingent on loaning McClendon vast sums?

People will rationalize it and say it doesn't hurt shareholders, but that's not true. First, these are company assets he is buying, so there should be an outside appraisal and Board approval for each transaction. Then they should all be disclosed to shareholders, because it is part of his comp just as surely as stock options. third, he is using stock that was probably given him through incentive options to fund this. So the shareholders get ripped off twice, first when he gets the options, second when he uses them to take a share of a corporate asset. Finally, it's not like his reckless borrowing hasn't hurt sharehodlers badly before. He suffered a forced margin liquidation in the afermath of the 2008 meltdown that tanked the stock. Of course, the company later bailed him out by buying his "art" collection and I suppose giving him even more shares. Shareholders weren't so lucky.

Aubrey has had a decent record of adding value to the company through clever hedging. Actually, he takes credit for it. It is probably analysts who come up with the hedge program and he just signs off on it. Whatever, but there are plenty of other gassy E&P stocks to invest in where you don't have to wade through this kind of shit.

 

[murray t turtle]

Quote from Landis82:



CHK is SUPER leveraged, ( check their miniscule cash position ) and with the credit markets "frozen" are unable to re-finance their debt . . . My guess is that the market place smells that they are in trouble, and at the very least will have to make yet another Secondary offering.

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Good points.

Tek wise, CHK still could downtrend to $9.99/+;
most of the trends are down.

Carl Ichan may help, on the bullish side. Not a prediction