Other execs get caughtStock of Chesapeake Energy Corp., a major player in the North Texas Barnett Shale, plunged Friday as investors worried that tight credit markets and declining natural gas prices could halt the company's breakneck growth.
The drop pushed chief executive Aubrey McClendon to sell off his 5.8 percent stake in the company that he helped found. According to a company news release, the lower share price triggered margin calls on his personal investments. As of last month, he owned 33.5 million shares.
Mr. McClendon's sell-off comes the same week that the chief executive of Fort Worth-based XTO Energy Inc. announced he sold $101 million worth of shares of his company. Bob Simpson sold 2.78 million XTO shares on Monday and Tuesday.
Shares of Chesapeake, an independent natural gas company based in Oklahoma City, closed Friday at $16.52, down 6.7 percent. The share price has skidded the past three months; on July 2, the shares closed at an all-time high of $69.40.
Falling natural gas prices not only squeeze the energy producer's revenue, but they could also cause some of Chesapeake's hedging contracts to go sour.
The company said Friday it will cut its drilling budget by $1.5 billion for 2009 and 2010.
That's on top of a $3.2 billion cut Chesapeake announced last month.
Still, Chesapeake said it expects to boost production 18 percent this year and 16 percent next year.
The company said it complies with its debt covenants, and all of the company's 36 banks, except for Lehman Bros., continue to lend to Chesapeake.
The company borrowed the remaining capacity under its revolving credit facility and invested the money in short-term Treasuries and other securities, leaving Chesapeake with about $1.5 billion in cash on hand.
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Can you guys believe how much money they just lost? I know theres greed involved but you got to feel badly for someone who just lost a 5.8 percent stake in his own company thats worth millions!