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Chesapeake Energy Corporation Business Update Call Transcript

All in all, I have a negative perception of their CEO. We have the following quotes…

"Late last week I noticed we had $1.5 billion of cash on hand and we are still managing to have between $2 billion and $2.5 billion of cash by year end"

"and that is the false rumour than Chesapeake does not have sufficient liquidity to be a going concern"

"Another set of questions has arisen surrounding the universal shelf and other stock pilings we made the day before Thanksgiving. In retrospect these filings were a mistake and we greatly underestimated how the market would react. I apologize for that and ask your forgiveness for it. Our intent was to create broad financial flexibility for an uncertain economic and commodity market environment over the next few quarters."

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Now lets look at what the investors saw…
In a series of filings with the SEC LATE Wednesday (the day before Thanksgiving!) they revealed plans to issue almost $2B in common shares to raise cash for day-to-day operations and to subsidize drilling leases it is in the process of renegotiating. One Billion slated for "general corporate purposes" will not be used immediately, it said.

First of all, doing this late in the day before Thanksgiving gave the perception of being sneaky… As a shareholder, I was quite annoyed when I came back from Thanksgiving. I immediately dumped my holdings.

Second, CHKs stated purpose of that filing was to raise cash for day-to-day operations… Given this, it appears that CHKs actions and their own statements are a primary source for the so called "fake rumour" that they don't have sufficient liquidity.

Third, the statement that "Late last week I noticed we had $1.5b in cash on hand…" also hurts this CEOs credibility. If a company needs to raise cash, and according to their SEC filing, they needed to raise cash… Then I would absolutely expect the CEO to know how much cash he has on hand on a daily basis. His comment makes it sound like he hits his head says "DAH" and goes out and cancels the SEC filings.

Fourth, a lot of the questions sent the CEOs way seemed way to detailed with respect to the internal operations of CHK for outsides to know. I started to wonder how many of those questions were fed to people on the transcript call to forester the impression that the CEO was on top of his companies operations… This impression was magnified by the apparent surprise that the CEO stated when he determined the company has $1.5b on hand "late last week".

On a final note, McClendon took umbrage with Joe Allman - J.P. Morgan Securities who apparently had, in the past, referred to CHK management as a bunch of "drunken sailors". You know what, on thinking about it, that is close to the perception I have about CHK management… Way To Go Joe Allman!