Chesapeake Bites McLendon

by: Trader Mark October 13, 2008 | about stocks: CHK    
Trader Mark

Trader Mark

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Wow. Aubrey McClendon, CEO of Chesapeake Energy (CHK), is infamous for his constant buying of his own company stock. I wrote late last week that the stock of CHK was a case study of hedge funds blowing up and liquidating [Oct 9: Hedge Fund Liquidation in Pictures]. I guess it wasn't just hedge funds.

  • Aubrey K. McClendon, the billionaire chief executive of Chesapeake Energy Corp., has sold "substantially all" of his stock in the company over the past three days in order to meet margin loan calls, the company said Friday.
  • Chesapeake Energy did not disclose the size of the stock sale, pending the filing of documents with the Securities and Exchange Commission, but media reports have placed the number of shares at more than 33 million, making him the Oklahoma City-based company's third largest shareholder.
  • "I am very disappointed to have been required to sell substantially all of my shares of Chesapeake," McClendon said in a news release. "These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis."
  • Between Wednesday and Friday, he sold 31.5 million of those shares -- 94% of his holdings -- for $569 million
  • Last month, Forbes showed McClendon at No. 134 on its list of the nation's 400 richest people, with a net worth of $3 billion, an increase from $2.1 billion the previous year.
  • McClendon said he looked forward to rebuilding his ownership position in the company.

That's okay! First, many of these shares were surely grants handed to him on a yearly basis by the executive compensation committee. Further, in our "heads we win, tails we still win" culture of payoffs (er, I mean salary negotiations) the "company" will "independently" decide that if we want to keep the CEO working hard, we cannot just pay him a salary and his normal option grants - we need to load him with a boatload of new stock and options. Heck, with these low prices we can price the options at a price that poor Aubrey can make all the money he lost (and more) in 5 years. Because that's how it works. Because unlike normal workers in the rank and file - we cannot risk CEOs "not being incentivized" because their work ethic apparently disappears if the carrot is not immense. I am not going to watch this day in and day out but just you wait - there will be a massive option grant in the next 24 months because the board of directors of American companies are just the lapdog of the CEOs. You know - like using the companies profits to buy back stock, while simultaneously issuing tons of new stock and options to the top 5 insiders. It's just a big transfer of wealth from shareholder to the "elite few".

Sorry for being so cynical - but this is just the reality of our "fair and balanced" system. Just out of blanket curiosity I will be checking back in a year's time to see how the "incentive system" is "adjusted" so he can once again show he is the "biggest believer in his own stock by buying with his own money" (his own money provided by the compensation board of course). We saw a ton of this after the NASDAQ blowup where tech company insiders got loaded right back up once their stocks imploded so they can get rich the second time around. Because their stocks falling so far was a "Black Swan event" that only happens once in a lifetime. Or twice every decade. The spirit of fairness is so absent - how can the "rank and file" workers in public companies be expected to 'work as hard as possible' if the CEOs and CFOs and the COOs are going to get "retro fitted" with a new set of options and stock grants to make sure they "are motivated". This will be a carbon copy inside executive suites akin to post 2002 - watch for it. Because the board of directors are looking out for "shareholder interests". Yep.

Now as for the hedgies? If you are a very good hedge fund customer who throws a ton of business towards your prime broker, he can "let it slip" that the CEO of CHK is selling (not that this EVER happens - cough cough) and what can you do? Short CHK to the ground. Because Wall Street is a "fair and even playing field" ;)


Disclosure: No position

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This article has 32 comments:

  •  
    Oct 13 12:10 PM
    Do you homework next time. Over the weekend SEC form-4 reported Aubrey's stock sales of about 31 million shares. Since you didn't know this it makes me think you may have other missing information in your article.
    Reply | Link to Comment
  •  
    Oct 13 12:30 PM
    I had CHK going up along with PBR and got out near the top.
    Bad news is I rode DVN down almost as much.
    Nattie has been having problems recently, demand destruction, contrarian television ads of Pickens & Aubrey, etc.
    Kenneth Heebner's of CGM Focus recently remarked CHK had been one of his holdings.
    CHK is up 20% today, with a 29.9% short ration-so clearly that boat sailed late last week. A pullback to attractive levels may be in the pipe, but I would certainly establish a position well before we elect the next president before it regains its mojo.
    Good post as always.
    Reply | Link to Comment
  •  
    Oct 13 01:27 PM
    Shades of Enron!!!! Someone will lose in this deal.. It sure won't be me. I got out of this mess long ago!
    Reply | Link to Comment
  •  
    Oct 13 01:59 PM
    Natural gas is a volatile commodity. I remain long CHK, recently added to my (small) position because of attractive price level and because over the mid-term, say 18-24 months I believe it will return to close to its previous high. It is apparent that there was some over-expansion, but natural gas is an important component of any hope of energy independence. It makes a hell of a lot more sense to subsidize infrastructure and nat. gas distribution for transportation than to subsidize ethanol.
    Reply | Link to Comment
  •  
    Oct 13 02:33 PM
    Sooner: big difference...Enron had no real assets. CHK has a large amount of real assets, producing wells, reserves, undrilled acreage, etc. that many companies would love to buy from them. Also, if CHK stops drilling they have a very attractive cashflow situation. Their big problem is their drilling expenditures are outpacing their revenue. That is easily fixed. Unless someone comes in and buys them.

    CHK is no Enron by a long shot!
    Reply | Link to Comment
  •  
    Oct 13 02:35 PM
    As usual your comments are some of the most constructive and educational to be found anywhere on the boards.
    Reply | Link to Comment
  •  
    Oct 13 03:06 PM
    I don't want to sound like I'm bearish on CHK, because I'm not. They're still huge and bought up nearly all the leases around, and I think they will always be the major contender in the NG field. But at its peak, you couldn't write one negative thing about CHK without everyone jumping all over you like you were an idiot for doubting Aubrey. And mostly the thinking went like this: Aubrey is spending all his money buying CHK, so that shows that he as an insider believes its going up, up, up. That thinking always made me nervous, and even though I rode one of CHK's waves to jump off near the top, I never got back in because my "hype-meter" kept blinking (I picked up XTO instead but still follow CHK closely). Now I think its clear that Aubrey was really just buying everything on margin --- not REALLY spending his own money, but merely speculating in it. It's also likely that the CEO of XTO (and lots of others) probably have been doing the same. Again, I'm NOT bearish on CHK or tying to bash them. Just maybe a little less enthusiastic than some. Also, I think the time for a buyout was when they were dirt-cheap last week. It's not like the oil majors are running around scooping up gas right now. If they had good incentives to do that, they would have been doing it already full force at these prices.
    Reply | Link to Comment
  •  
    Oct 13 05:25 PM
    people forget, but if we can ever get back to 2-3 gdp (small growth), we will be faced with monsterous energy prices. rememebr spring. Basically, I think this one is a lock to double up from here in 3 years. Thats all you can ask. I am long CHK but bought much higher in the low 40's (not long ago). I am in just about everyday since to lower cost basis. Stocks are on sale people. BAC, AAPL, and many other face double up in the next 2 years. This is actually the chance of a lifetime.
    Reply | Link to Comment
  •  
    Oct 13 06:16 PM
    Aubrey McClendon is a reckless CEO.

    His reckless use of leverage has cost himself and his shareholders billions.

    Its curious that Aubrey did not simply pony up the cash to meet his margin call and preserve his position.

    Could it be that CHK's leveraged position has brought the company itself to the brink of liquidation.

    Aubrey certainly has nothing to lose now, and given the fact Aubrey has a 2.5% working interest in every of CHK's well, his financial status will be unimpaired regardless of what happens to CHK. The FOUNDER WELL PARTICIPATION PROGRAM that allows Aubrey to be an owner in such well puts him in conflict with CHK shareholders.

    His reckless use of leverage on behalf of shareholders and in his own personal life raises the question? Should he be running the company?
    Reply | Link to Comment
  •  
    Oct 13 06:28 PM
    A steep learning curve for a lot of folks....
    Reply | Link to Comment
  •  
    Oct 13 09:10 PM
    Please tell me how someone with a 2.5% WORKING INTEREST can create a conflict of interest? Do you know what a working interest is? He is paying his proportionate share for every well he participates in out of his own money. So, how can that be a conflict? If he forces the company to drill bad wells, guess what? He also loses. But if he forces the company to drill good wells, he AND THE COMPANY make money in proportion to the cash they put up. In this scenario, under no circumstance can he make money if the company doesn't. Its about as aligned as a CEO can get.

    Was he reckless with his own money? I'll let him, his wife and his kids decide that. I see someone who believed in what he was doing and where his company was going...so much so that he put his own fortune at risk. He could have stuck in CD's or something and been content.

    If you look at the debt structure of the company, you will see that they are not in any real danger of having these loans called in. They don't come due for a while. All he has to do to solidify the balance sheet is stop drilling for a couple of quarters or find someone to invest in one of his drilling programs. Quite frankly, I think CHK will be back in the 70's within 3-5 years. I'm not going "all in" like Aubrey did, but I've got a nice chunk of change riding on it. Buying it at $15 was a gift. Worst case scenario: ExxonMobil buys it at $25 between now and the end of the year!!
    Reply | Link to Comment
  •  
    Oct 13 10:06 PM
    Mmarrkk,

    You've been drinking the CHK cool-aid for some time.

    A couple of months ago, I warned you that CHK was PRECARIOUSLY LEVERAGED. I believe CHK was trading in the 50's. You threw a tantrum over my article. Mmarrkk, CHK is down 60% since I wrote my article.

    A big reason why its down is Aubrey put downside pressure on the stock price as he dumped over 33 million shares in just a couple of days.

    Thanks Aubrey.
    Reply | Link to Comment
  •  
    Oct 14 09:52 AM
    Oh c'mon Lea. CHK is down just like everything else in the market is down. The recent drop is proof of nothing other than fundamentals went completely out the window. Did Aubrey being forced to sell his puts contribute? Yes, for about one day. It was down something like 10-20% the other day because of it. The huge slide came long before news of this broke, and EVERYTHING has been sliding. NG has taken huge hits as prices have come down. CHK has a lot of money coming in, and worst case is they'll start selling off some of these leaseholds to the majors like they did with BP. You've been harping on this leverage issue before, and while I don't think they're going to have enough to keep up their former pace of break-neck expansion, they definitely are not going away. Aubrey's interests are completely aligned with the shareholders, ESPECIALLY since he gets the 2.5%. I just don't buy into this cult of personality thing. But aside from that, CHK has great prospects, and if I didn't have XTO right now as my gas play (which I picked merely based on valuation at the time), I'd be picking up CHK. Were they hyped a lot? Sure. But I wouldn't count them out by a long shot.
    Reply | Link to Comment
  •  
    Oct 14 10:00 AM
    Lea: again, like you did months ago, you bypass my question completely. I asked you to explain how Aubrey's WI in wells was a conflict of interest? Can you answer that question first? In plain and simple english, write one paragraph (or ten) but stay on topic: how is Aubrey's WI in drilling programs a conflict of interest. C'mon now. I know they must have taught you how to stay on topic in grad school. On post, one topic.

    Then, we can have a discussion regarding all of the other items.
    Reply | Link to Comment
  •  
    Oct 14 10:01 AM
    That's how capitalism works, guys. If you don't like it, you can always invest in companies in countries like Russia where the game is REALLY rigged against you.

    But not to worry. In another couple of months your favorite defender of freedom and fairness Obama will be in the White House. Between him and the new Congress, I'm sure things will change in your favor.

    They'll see to it that NO ONE makes any money. You know, change you can believe in!
    Reply | Link to Comment
  •  
    Oct 14 10:06 AM
    CT: I really don't think Lea knows the difference between a Working Interest and an interest bearing CD. She just can't seem to put together a good story. Yes, she said it was overleveraged in the 70's, but that's not why this stock is down. Its also not down because Aubrey had to sell his shares to cover margin calls (hint Lea: that's not dumping per se). She might also have noticed that the majority of the ride down from 70 occurred before Aubrey sold a single share. She might also note that the shares are up above where they were when Aubrey sold the shares. Could it be that Aubrey is buying again, now that he's had a few days to move money around?

    XTO, HK, CHK, etc all move down viciously in relationship to the price of NG, the view that demand would be going down and along with it the price of NG. Quite honestly, I see lots of people shutting in production and shutting down drilling programs. Drilling permits in the US for nat gas wells are flattening to down. This says production is going to start dropping soon, making the supply/demand balance teeter the other way and prices will move up to about $8. At that point, CHK's knockout hedges will be safe, they will be collecting $9 for their 85% of their gas and their revenues/cashflows will be strong.

    Lea: can you guess what CHK's debt-to-cap ratio is?
    Reply | Link to Comment
  •  
    Oct 14 11:32 AM
    Trader Mark,

    I don't think reserve stock given as compensation is a bad thing - provided it is given broadly to the organization, and not just the Chief(s) executive. One of the other great follies foisted on the country by FASB and SarbOx was the effective elimination of employee options, even in private companies.

    Millions of Americans benefited from options in the 90s. Sure, there were misuses and blow ups, but there were also secretaries and line workers who made significant money that would not likely have received otherwise.

    Finally, there would be no CHK without Aubrey and his many years of work as a founder. It wasn't always fat city in the oil and gas patch.

    Regards...

    Disclosure: I don't own CHK, but do have mineral properties, and am thinking about buying CHK.
    Reply | Link to Comment
  •  
    Oct 14 11:32 AM
    Mmarrkk,

    CHK has working interest partners in many of their wells. CHK, like all oil and gas firms, has ongoing disputes with its working interest partners, royalty owners, etc. That is why the firm, at shareholder expense, employs a team of attorneys to litigate these disputes.

    The question that naturally arises, "is CHK as vigililant in its dealings with Aubrey McLendon as it is in its dealings with outside royalty owners and working interest partners?" Do you think the legal team treats the man that signs their checks in the same manner they treat outside parties?

    CHK does not benefit from Aubrey being a working interest partner in CHK wells. CHK is foregoing revenue by granting him this exclusive privilige. The revenue CHK is foregoing is estimated at $100-$250 million per year. Aubrey is piggy-backing off CHK's reputation and ability to go to credit markets and purchase large leaseholds and exclusive counter-party relationships.

    The very fact that CHK attorneys are arguing on behalf of Aubrey that he does not have to disclose the benefits he receives from this exclusive program is illustrative of such conflict. Do shareholders not have a right to know of the benefits he receives from this program? Without such disclosure, shareholders have no way to determine whether this program is in thier best interest.

    Should they every find out that Aubrey is pocketing a couple of hundred million (and growing) from this program they will run his ass out the door. Its been hidden from them because CHK attorneys, who are supposed to represent the shareholders, are aligned with the man that signs thier checks.

    CHK is a highly leveraged company that has cash flow problems. How much better would CHK's financials and stock price be at that moment had CHK not given Aubrey 2.5% of the Gross Income (not net income, gross income) over the last 10 years?

    We don't know because the numbers are hidden from us. These numbers are hidden because of the huge conflict that exists.
    Reply | Link to Comment
  •  
    Oct 14 12:32 PM
    Okay, you see they are not giving him 2.5% of the Gross Income. Again, you prove you don't have a clue. He gets net revenue, just like BP, HK, or any number of other WI partners. YOu see, he pays for his 2.5% share of the drilling costs, then CHK gives him the NET REVENUE from the well, after deducting operating costs, COPAS overhead charges, transportation fees, royalties, and severance taxes. Does that sound like Gross Income to you?

    Please.

    And CHK doesn't have a cashflow problem...they have a spending problem. Cut their drilling/leasing budgets in half and they will be socking away cash on their balance sheets.

    Actually, without Aubrey's 2.5% program, their cash requirements would be 2.5% higher than they are right now! Not to mention Tom Ward's 2.5%. And again, this was granted to these two guys as founders of the company. Sorry, but that's what was agreed to a long time ago.
    Reply | Link to Comment
  •  
    Oct 14 02:25 PM
    Mmarrkk,

    How you can continue to defend the FOUNDERS WELL PARTICIPATION PROGRAM and the lack of disclosure of the benefits Aubrey receives and shareholders forego is mind boggling.

    If CHK goes bankrupt today, Aubrey McClendon is unimpaired as he has a working interest in all of CHK's wells. Shareholders interest in those wells are subject to the creditors and thus CHK shareholder will have nothing.

    Would you rather own CHK stock or a working interest in thier wells? Shareholders don't enjoy that privilidged choice, only Aubrey McClendon.

    If the FOUNDERS WELL PARTICIPATION PROGRAM is so good for shareholders, then managment must prove it and disclose the benefits Mr. McClendon receives from the program.

    Its that simple. Disclosure, disclosure, disclosure!

    I think you would agree that given the choice of protecting the privacy of a CEO of a publicly traded company and providing disclosure to that CEO's shareholders the shareholders should prevail.

    If CHK were to go bankrupt and the detail of this program come to light, Aubrey would be consider in the same light as Dick Grasso, Angelo Mozilo, Robert Nardelli, etc
    Reply | Link to Comment
  •  
    Oct 14 03:32 PM
    I believe that part of starting a company and nurturing it through its infancy and evolution is being rewarded. Aubrey and Tom started this company with $50,000 each of their own money. They took their ideas and their sweat equity, turned it into a viable entity and then took the company public. Part of the compensation for the company going public was the Founders Well Program. That was the deal made. That's why I support it.

    Do you think it is right for a company to have to pay a licensing fee to another company for use of their products/ideas? This is similar. The founders started the company, built it, then worked a deal to be compensated. Part of the compensation is this program. Included in their annual reports and in all disclosures is the fact that it exists and that Aubrey will get 2.5% WI in each well. When you buy shares of this company you are subject to these disclosures and in essence, agree to them. Fact: the disclosure says he gets a 2.5% WI. What he makes off of that is not our business. An investor in oil and gas companies should know what getting a 2.5% WI involves.

    By now, its well-known that he gets this WI. If someone (you) has a problem with that, then have them not buy the stock.

    End.
    Reply | Link to Comment
  •  
    Oct 14 04:26 PM
    Mmarrkk,

    You must be Mark Lester an officer of the company.

    Defend the the FWPP all you want but it will become scandalous and just another, "i told you so."

    By the way, I think your down 60% or more on the shares you claimed to be buying about 3 months ago. Shit, you must be down substantialy on every share of CHK you've bought.

    Aubrey's own purchases of CHK shares was the impotous for everyone else to overlook the leverage and negative cash flow and pile into the stock. Aubrey has sold out all these shareholders. OUCH! Aubrey sold every damn share he had. He would not even keep a round lot of 100 for memory sake. He sold em all. What confidence.

    Keep drinking the cool aid.

    At current gas prices, Natural Gas companies cant make money on drilling. Meantime, those leases become expiring assets. If prices stay depressed very long, the highly leverage companies will be toast. CHK is near the top of the highly leveraged.

    Just like the highly leveraged investment banks went to zero, so will the highly leveraged in all indutries.

    Keep drinking the cool-aid Mmarrk!
    Reply | Link to Comment
  •  
    Oct 14 05:09 PM
    Wrong about being an officer.

    Yes, down on the shares I bought at 40 but still up some of my older holdings. But I really am looking further out than the next 2 years.

    My only problem right now is that Cramer is back to pushing this stock! Talk about contrarian!!

    Tell you what, in 1 year, come back and tell me where CHK is! I'd bet a nice steak and a beer that a) they aren't bankrupt and b) I'll be well in the money! In the meantime, enjoy some good ol' OKC basketball brought to you by Aubrey and friends!
    Reply | Link to Comment
  •  
    Oct 14 05:18 PM
    for paulk8756:
    if u know so much about "how capitalism works", then you should know that such asinine viewpoints led to an extended downturn and delayed recovery in the early 30's, major bank failures which rippled throughout smaller regional banks, britain going off the gold std., japan "militarizing&quo... their economy, and eventually their entire economy/society/region... i rec. you educate yourself in the basics of capitalism: i rec. reading: The House of Morgan (1990) by Ron Chernow [esp. ch.16 "Crash" and ch.17 "Depression" and ch.35 "Bull"]. if u see a lehman bros. company ferrari smashed head-on into a wall, i don't think an observation like "that's how motorcars work folks!" is very helpful-- if u think so, i rec. you trade in your car for a wheelbarrow so you can load up on printed money to buy a loaf of bread, as capitalism might "work" like THAT sometimes too!
    btw, i am neutral on all common stocks, exc. slightly bullish on recession "resistant" issues that can pay high yields in an econ. downturn, altho i agree with you on the likelihood of finding these kinds of bargains in a much smaller, more manipulatable marketplace like some forex's.
    Reply | Link to Comment
  •  
    Oct 14 07:36 PM
    for paulk8756:
    if u know so much about "how capitalism works", then you should know that such asinine viewpoints led to an extended downturn and delayed recovery in the early 30's, major bank failures which rippled throughout smaller regional banks, britain going off the gold std., japan "militarizing&quo... their economy, and eventually their entire economy/society/region... i rec. you start with: The House of Morgan (1990) by Ron Chernow [esp. ch.16 "Crash" and ch.17 "Depression" and ch.35 "Bull"]. if u see a lehman bros. company ferrari smashed head-on into a racetrack wall, i don't think an observation like "that's how motorcars work folks!" is very helpful-- i rec. you trade in your car for a wheelbarrow so you can load up on printed money to buy a loaf of bread; see, capitalism can "work" like THAT sometimes too!
    Reply | Link to Comment
  •  
    Oct 14 08:19 PM
    I think he was buying on the way up to attract everybody to the secondary offering at 68.50.
    Reply | Link to Comment
  •  
    Oct 14 08:57 PM
    No wonder I was able to buy CHK at $12.70 on Friday! But, I can't brag because I only bought 70 shares worth a whopping $889. I had spread my free cash among different limit orders. It was a “target rich” environment last week. I set the CHK one at a stupid low price because I thought it was premature to buy nat gas stocks. I was looking for the mid 2009 nat gas glut. I was shocked when it triggered.

    What a greedy guy, McClendon. Who is left to impress that won't be impressed by $3 billion - Warren Buffet? He's competing with Larry Ellison of Oracle for the billionaire nut-job award.
    Reply | Link to Comment
  •  
    Oct 14 10:27 PM
    Well, call me the arbitrator. I think WI agreements with a CEO have tremendous potential for abuse, since they are essentially accounting-created transactions. But they do seem to be common in the industry, and a reasonable way for a founder to get part of the lifetime income from a good discovery. AS LONG as they stand up to an honest audit.

    Leverage is your friend and your enemy. Clearly Aubrey did not manage his personal margin leverage very well, but I admire that he paid his money and took his chances with the rest of us. 98% of all CEO's take their stock as risk-free options. Not only that, but his conviction was so strong that he did not sell at all until forced to do so. I would give up every investing tool I have and just buy alongside CEO's with that much conviction if I could find 10 of them. Most if the time they will win big. And I bought a little more CHK last week at 18 and 14 (since I could), so thank you Aubrey!!

    HIs mis-management of margin does give me some concern about company leverage as well, but CHK seems to have a clear plan for raising cash now, and hopefully he has learned a lesson. We shall see,

    Dems or Repubs, natural gas is in our future. Coal, Solar,and Nuclear are all bad choices for transportation in the near future. The Aubrey & Boone team have made their case with good ads, and natgas is the only clean fuel we can use TOMORROW to replace oil. When congress or the market finally figures it out, prices will rebound and likely break their long-term tie to oil. This is a two year hold for me. I may even buy more on a dip below $20.
    Reply | Link to Comment
  •  
    Oct 15 05:52 AM
    @LEA: you harp on the cash flow "problem" but you don't back it up with real, cold numbers. Yopu didn't in your half-baked bashing article either. The hedges will take care of lots of your "cash flow worries" - rest assured.
    And, btw, if you think that at current NG prices drilling doesn't make money and production gets shut down left and right, then well, for how long do you think the NG prices will stay that low?
    Aubrey has made really good forecasts of NG prices right a year ago and half a year agon and the company's hedges were structured accordingly. They are hedged for the downturn times this year and next and in part the year after. And if you believe NG will be at $6 3 years from now, then you will have seen a lot of companies going under till then. but i don't think CHK would be among them.
    Reply | Link to Comment
  •  
    Oct 15 02:24 PM
    CHK bought tons of Haynesville acreage at inflated prices.

    Given the fact no one can drill that acreage profitably at current prices, and if those prices don't rise to profitable levels over the next year, CHK will have to sell those expiring assets (leases) at substantial losses.

    Folks, CHK has problems. In the oil and gas world, what Aubrey has done to CHK is not too different than what the managements of Bear Sterns Lehman and Merrill did in the world of banking.

    The default of one counterparty to a CHK hedge could impair CHK's financial condition and create doubt among other counter parties that cause them to not contract with CHK. Such a scenerio would spell a chain of events that could lead CHK into a death spiral.

    The investment banks fell like smoke thru a keyhole. Don't think for a minute that a leveraged natural gas company cant go the same way. They fell like dominoes in the 1980's and leases that once fetched $1000 could not even be given away.

    It happens folks and it happens quickly.

    Again, if CHK goes, Aubrey McCLendon is unimpaired as he continues to own all his working interest in all of CHK wells. Instead of being a partner with CHK shareholders, he will be a partner with CHK creditors