Lessons from Bob Simpson’s $100 million cashout at XTO

By Gary Jacobson

October 12, 2008 at 8:14am

CEO Bob Simpson earned about $100 million from the sale of nearly 2.8 million shares of XTO early last week, as he raced to beat the meltdown of the market and his stock.

Here’s what we can learn from his actions:

  • Simpson is less of a risk taker, or, certainly, less stubborn, than Chesapeake Energy CEO Aubrey McClendon, who was forced to liquidate his 33-million-share stake in his company because of margin calls at the end of the week.

  • The Dallas-Fort Worth region, so far largely immune from the national economic downturn, will now join the slump. XTO, based in Fort Worth, and Chesapeake, based in Oklahoma City, are major players in the Barnett Shale of North Texas. The natural gas boom has cooled, for now.

  • The heirs of H.L. Hunt displayed almost perfect timing in selling Hunt Petroleum to XTO for $4.2 billion in cash and stock in June. Old H.L. is smiling.

  • Fundamentals rule. Yes, panic in world markets played a role at XTO and Chesapeake. But domestic supplies of natural gas are in close balance to demand, meaning prices won’t long support overly ambitious drilling plans. In some ways, Simpson and McClendon were too successful in figuring out how to coax natural gas from all of these shale formations around the country.

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