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What a difference a few weeks, a few million dollars and a few new board leaders can make. This is likely what Chesapeake (NYSE:CHK) investors were saying as they headed into their annual shareholders' meeting on Friday, June 8.

The weeks prior to the meeting were filled with discontent among shareholders who received news that the natural gas producer's cash flows were in such disarray that it was struggling to cover its operational expenses. The reason stemmed mainly from natural gas prices plunging to record 10-year lows. The natural gas business, once a boon for energy companies, is no longer as profitable. Chesapeake, second in size to Exxon Mobil (NYSE:XOM) in terms of natural gas production, which had taken on billions of dollars of debt to expand its pipelines, now finds itself, having to sell those assets to make ends meet, according to Reuters.

While the decline in natural gas prices played a role in Chesapeake's financial woes, other issues related to the company's CEO Aubrey McClendon have stolen the headlines. They've also taken the focus off of the company's main financial problems, and that entails being unable and/or unwilling to make decisions in the best interest of shareholders.

In a scathing report released June 7, also by Reuters, several financial transactions made by McClendon were called into question. They included controversial investments in areas outside of the company's core business. For example, hefty investments were made in retail outlets, like shopping centers, which had nothing to do with natural gas production. McClendon is also accused of leveraging the 19% stake he has in the NBA's Oklahoma City Thunder. Reuters found that he had taken out loans against the future earnings from the basketball team without disclosing them.

Roughly $3 million of personal work was handled by a Chesapeake outfit called AKM Operations. Other personal expenses covered by the company included trips to Paris and Bermuda.

While these caveats make for great fodder for headlines about corporate greed, they pale in comparison to the issues that are directly affecting Chesapeake's finances. Again, this goes back to the debt the company accumulated as it expanded its natural gas pipelines.

Chesapeake reportedly outspent its cash flow in 19 of its past 21 fiscal years and is facing a $22 billion shortfall between cash flow and spending by the end of 2013. One of the ways Chesapeake is attempting to deal with declining natural gas prices entails accelerating its shift to liquids-rich plays by decreasing natural gas drilling. The plan calls for increasing the company's output of oil and gas liquids so that it would account for 55% of the company's 2013 revenue.

The problem is that the plan hinges on U.S. crude futures averaging $100 a barrel. Futures are not trading anywhere near that amount. Instead they are trading around $84 a barrel at the time I wrote this article.

There may be some hope in sight, as the company is in negotiation to sell its pipelines for $4 billion.

Its stock has been hammered over the past year, losing more than half of its value. At the time of writing, the stock was trading around $18, which was well below its 52-week high of $35.75. It was being called the worst performing stock in the oil and gas sector. Considering the various and extensive challenges that the company faces, I see the shares sinking further to its 52-week low of $13.32.

Some positive news during the last week of May and the early weeks of June caused the stock to rise to just above $18. The news included the increase in shares by billionaire investor Carl Icahn. He increased his stake in the company to 7.56%, making him Chesapeake's second largest shareholder. Southeastern Asset Management is the largest shareholder, owning about 13.6% of the company's common stock.

Icahn, angered that the directors on Chesapeake's board were ignoring his calls for immediate and drastic changes, shelled out about $786 million to increase the number of shares he had in Chesapeake. Eventually, the board of directors under the direction of Chairman McClendon, gave in and agreed to have four members replaced after four resigned. McClendon will be replaced as chairman.

Chesapeake's market share is $11.6 billion, which is the lowest among its peers BP (NYSE:BP), Exxon Mobil , ConocoPhillips (NYSE:COP) and Anadarko (NYSE:APC).

Natural gas producers, including ConocoPhillips and Chesapeake, were targeted last week by the Citizens for Responsibility and Ethics in Washington for possibly conspiring to limit their production to raise demand for and increase the price of natural gas in violation of antitrust laws.

News of the watchdog's allegation, which it wants investigated by the Justice Department, didn't appear to affect how any of the above-mentioned stocks were trading. Nonetheless, for Chesapeake, which is being hurt the most by declining natural gas prices, this action is aggravating.

Source: Chesapeake In Turmoil As Natural Gas Dips