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You can shear a sheep many times, but you can skin him only once. The actions of Chesapeake's...

You can shear a sheep many times, but you can skin him only once. The actions of Chesapeake's (CHK +3.3%) Aubrey McClendon aren't Enron-esque, but the actions - and CHK's legalese reaction - are remarkable in their tone-deafness, Kid Dynamite writes. CHK needs to understand that shareholders feel they may be getting sheared, and may react by bailing before they get skinned.
Comments (20)
  • Hardly the first time the (CHK) CEO has done some rather odd things financially, which is why I have stayed away from it except for a couple of very short term trades. IMO, (CHK) definately does not fall into the "buy and hold" category. These stories continue to pop up, which has made me wonder how many other similar stories have not surfaced yet.
    23 Apr 2012, 02:19 PM Reply Like
  • Why would/should CHK care if shareholders bail, they have already sold the shares and neither gain from keeping them nor lose from their leaving. CHK gets no revenue from shareholders, so the only reason for the board to care what they think is if the board believes the shareholders might vote them out. Until they fear shareholder action more than they benefit from allowing McClendon free reign they are unlikely to change their behavior. And since institutional shareholders almost never vote out boards nothing is likely to change--shareholders can leave or live with it. And they are probably insured against any fiduciary duty lawsuits--so they really are acting predictably and in their own best interests. Just one more reason for shareholders to never allow any one person to be both CEO and Chairman of the Board, it is never in the shareholders best interests.
    23 Apr 2012, 02:34 PM Reply Like
  • cos i agree with your explanation. on target. a company doesn't care what the market float fiat share certificates are going for unless, of course, the company it self owns a whole bunch of it...and then they have a paper loss. further, a company of this size doesn't "finance/expand" via shareholder price of the usually borrows. this could be a slick way for the company to gain back a lot of cheaply priced shares...and besides, in this day and age, if a company goes belly up, common stock holders never get in on the last supper leftovers...even bondholders get the shaft in these modern times. common shareholders> you don't anything in the own a piece of paper. that's it.
    24 Apr 2012, 12:42 AM Reply Like
  • I sold my CHK at $25 due primarily to the moribund nat gas market. This stock is dead money even though it is asset rich due in part to the lack of confidence in the Board and senior management. There are just too many other good O&G plays to waste my money on CHK.
    23 Apr 2012, 02:49 PM Reply Like
  • We'll see a shareholder lawsuit soon. The bottom is closer, but not in yet.
    26 Apr 2012, 10:35 AM Reply Like
  • "Why would/should CHK care if shareholders bail?"


    Uh, I believe that affects their stock price and market value of the company. But maybe that's just me, or economics. Remember, the shareholders are the owners of a public company.
    23 Apr 2012, 05:10 PM Reply Like
  • Nat gas prices cannot stay low forever. Go beat another dead horse. It's so popular to kick something when it is down shows how brilliant you are,writing what as already been written a thousand times over. Aren't you the same guy who used to write about how corrupt (GLD) after 10,000 others had written that story. PS (GLD) is still around and (CHK) will be too.
    23 Apr 2012, 05:46 PM Reply Like
  • Bad behavior is never good. This guy has a history of bad or questionable behavior that we can substantiate. The next question is what else has he done that we don't know about. I repeat, bad behavior is never good...and it is usually repeated.
    The CEO must go. The board is just as guilty because they tolerate this jerk. This company is not operated for the benefit of the shareholders. It is operated for the benefit of management.
    23 Apr 2012, 06:22 PM Reply Like
  • Calling a CEO a "jerk" is a little harsh. He and his management team have built one of the most successful E&P cos. in the US. I admit that some of his dealings should not be allowed by the board but let's not stoop to name calling. Take your money and invest elsewhere. I made money in CHK but I think with present management many on Wall Street will stay away. Plenty of good oil names out there.
    23 Apr 2012, 06:30 PM Reply Like
  • jjmc2001, do you think we are at the inflection point for NG prices?
    23 Apr 2012, 07:04 PM Reply Like
  • With continued weak demand and an oversupply we may be near the bottom but I see no reason for NG prices to rise in the US quickly. This could change with some NG legislation but that is unlikely this year. I think we will be grinding along a bottom for the next couple of quarters.
    23 Apr 2012, 08:33 PM Reply Like
  • If everyone can just get a little more negative, I will back up the truck. Bought some today.
    23 Apr 2012, 07:33 PM Reply Like
  • I have liked CHK as a trading vehicle the last couple of years but for all of the aforementioned reasons the investment community is not enamored with CHK. Now might be a good time to nibble. I might be inclined to buy some OTM calls for next winter and hope they can sell some JV deals to keep funding their shortfall. When I owned it I sold covered calls against my profitable position for over 18 months. Shares got called away mid-March for $25. I am elated now.Much better names out here like COP,MRO, SD, TPLM moving up the risk ladder. Read Mike Filloons articles for more knowledge on the oil patch. He is the man on SA.
    23 Apr 2012, 08:40 PM Reply Like
  • **Chesapeake, producer of more U.S. natural gas than any company except Exxon Mobil Corp. (XOM) (XOM), outspent its cash flow in 19 of the past 21 years while amassing millions of acres of drilling leases from the Rocky Mountains to Appalachia.
    **Last week’s disclosures of the loans revived debate over financial management of a company already burdened with a $10.3 billion net debt load, more than twice the size of Exxon’s and the lowest price-to-earnings ratio of any independent U.S. energy producer.
    **Chesapeake had negative free cash flow (CHK) of $8.547 billion in 2011, the 10th consecutive year that outlays exceeded inflows, according to data compiled by Bloomberg. Since 1991, the only years when the company posted positive free cash flow were 2000 and 2001. It’s paid its expenses with a combination of operating income, asset sales and loans.


    What is there to like? They are propped up by investment dollars, you dig a hole too deep in debt guess what happens? They are currently paying $900 million or more in interest per year for their debt and gas prices show no signs of possibly rebounding until winter later this year and even then the US has record supply levels. Aubrey is seeking foreign investors as well to keep the money machine running. Also, I don't know any company that would pay $30 billion or more for this company so don't expect a buyout anytime soon. It is a mirage, don't be fooled.
    24 Apr 2012, 09:34 AM Reply Like
  • Has Aubrey McClendon done anything illegal, immoral, or un-ethical in regards to these (his) personal loan transactions? I hate to be too Naiveté, but I don't find anything here short of jealousy that Aubrery can borrow such a large sum of money. Are the lenders also stupid--or acting in some un-ethical mannor? Where is the borrowed money going? Is it back to the CO. for his portion of the well(s) that he is purchasing or investing in?? Can someone explain this to me?? I'm long the stock
    24 Apr 2012, 01:52 PM Reply Like
  • Illegal, perhpaps not - there are still several court cases pending.


    Unethical, I would say definately yes.


    24 Apr 2012, 03:06 PM Reply Like
  • Unethical.....! So, we should punish CEOs for cheating on their wives as well?
    24 Apr 2012, 07:44 PM Reply Like
  • I could be wrong, but I don't think you can compare wife cheating with 10's of millions of very questionable financial practices.


    You are free to buy all the CHK you want, if you are so confident, then go all in on it. But, I will not touch it myself.
    25 Apr 2012, 12:57 PM Reply Like
  • Your comparison is moot. This has to do with dollars. If you were a shareholder in 2008 (I was) and watched as Aubrey had to meet margin requirements and dump massive amounts of stock (thereby devaluing the company) you would not be interested in the BS he pushes across the table. The guy does not pay leasing costs, brokerage costs, and then I guarantee he slow pays his drilling costs (most partners have to pay 100% upfront on horizontal wells). CHK, the company pays for this and it affect shareholder value. When did everyone forget the owners of public companies are the shareholders? The board is there to guide the policies that would be in the shareholders best interests.
    25 Apr 2012, 09:31 AM Reply Like
  • Jack Wildcat--where did you get your information?? I assume ALL working interest in these wells pay their appropriate share of the cost associated with the well---including lease cost, brokerage, etc. If Aubrey is not paying his fair share and the Board is allowing it... that is one thing. If he is paying it that is another. I believe the on going IRS & SEC investigation(s) will bring this to light if these are the facts.


    There certainly are a lot of negative opinions out there about Aubrey..Personally I want to give the man the benefit of the doubt. He has done a lot of "good" for a lot of people and built a pretty substantial company that helps employ a lot of American families. Some of you guys need to look for the good in Aubrey rather than all the bad. Further I am not as opposed as some to having the same person severing as CEO and Chairman at the same time. However, I want the CEO to be heavily invested in the Co. Stock with his own money, That way he has a pound of flesh in the game as well as the rest of the share holders aka. owners.


    I believe we have seen the bottom, near term, for NG and CHK. The sooner ,we as a Nation, get together and get off this foreign oil binge we are on the better off this country will be economically. Remember these things come November--
    6 Jun 2012, 04:20 PM Reply Like
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