Shades of 1929 for Chesapeake’s Aubrey McClendon

By Gary Jacobson

October 11, 2008 at 12:24pm

Risk taking caught up with Aubrey McClendon, the outspoken energy company CEO who helped fund the Swift Boat attacks against John Kerry four years ago and has been busy touting the benefits of compressed natural gas in TV ads this election cycle.

The head of Chesapeake Energy said Friday that margin calls forced him to sell “substantially all” of the company stock he held. Just a few months ago, his roughly 33 million shares were worth, on paper, more than $2 billion.

“These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis,” McClendon said in a statement. The price of Chesapeake stock hit a high of about $70 a share in July and closed Friday at $16.52.

McClendon said he is still confident about the company’s future, but some analysts are more cautious, especially about the firm’s hedging activities that are supposed to lock in prices for future production of natural gas and oil. They worry that counterparties may not be able to honor their deals with Chesapeake and other energy firms.

“They have always been the risk takers, the gunslingers,” Tulsa money manager Jake Dollarhide told The Oklahoman about Chesapeake. “When it has paid off, it has paid off handsomely. But in their history, shareholders have experienced a wild ride.”

Chesapeake, based in Oklahoma City, has said in recent weeks that it is cutting back drilling and growth plans. It maxed out its revolving credit line at the end of the third quarter to guarantee access to the cash.

The Oklahoman said much of McClendon’s estimated $3 billion personal fortune was tied up in Chesapeake stock. McClendon is also a minority owner of OKC’s NBA team, the Thunder.

McClendon was Chesapeake’s largest individual stockholder, but much of his buying was done on margin with borrowed money. Margin calls exacerbated the stock market crash in 1929. Equity requirements (50 percent) are higher today, but the market swoon in many cases has been steeper.

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  • #1.   Fred 10.11.2008

    Greetings from Seattle, Aubrey, you lying SOS.

    This is just the beginning for you in your decline to hell.

  • #2.   Jim Burke 10.12.2008

    I saw Aubrey was #134 on the Forbes 4oo list with a worth of $3B. I don’t ever remember someone losing 100% of such a large number in the span of 3 months.

  • #3.   Jack from Seattle 11.22.2008

    Well, now, I’m not so sure about Fred’d comments about declining into hell, but I sure do find it amusing that after stealing the Sonics from us, you have in effect stolen your family’s security due to your own deceit.

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