Thursday, October 9, 2008

Conspiracy theory?

T. Boone Pickens and Aubrey McClendon of Chesapeake Energy have gotten together on using compressed natural gas vehicles. Here's the video of Aubrey. (I'm sure everyone has already seen the Pickens' Plan commercials for wind energy.)

But look at the story bandied about on the street. Aubrey has been a big buyer of CHK stock at much higher prices, and supposedly he has used his stock to finance some of these purchases, and now he is facing margin calls. This was spurred by the drop in his stock, which was further spurred by Exxon's sale of of Texas's Barnett Shale to Harding Energy Partners, who sold it to Chesapeake last week. If it isn't good for Exxon, does that mean it's not good for Chesapeake?

Who knows if the margin rumors are true, or if they just want to raid Chesapeake. But tonight, we had a story in the WSJ that the credit crunch and sinking prices of gas were hurting CHK:

Chesapeake Energy Corp. is scrambling to sell assets and cut costs as falling energy prices and tightening credit threaten to derail the company's dramatic growth...

The Oklahoma City company has spent aggressively and borrowed heavily to fuel its climb this year to become the largest U.S. natural-gas producer. Its efforts were supported by natural-gas prices that leaped to a high of $13.577 per million British thermal units in July before fears of a supply glut sent prices plunging. Natural gas settled at $6.825 Thursday on the New York Mercantile Exchange...

Nonetheless, Chesapeake's dilemma drives home how the credit crisis is threatening the business model of many independent oil and gas producers in the U.S. -- a model Mr. McClendon helped create. As gas prices rose and new technology unlocked vast new reserves of oil and gas, companies leased millions of acres of land, often at sky-high prices, and counted on being able to borrow money and sell shares to get the money to drill it.

Where do these margin rumors start? Well, we don't know what factual basis they have, but we do know that CHK needs to sell some properties. And we also know, that the short interest in CHK shot up to 36 million shares, from 28 million two weeks ago, the fourth largest increase on the NYSE.

And we also know that Aubrey McClendon owns almost 34 million shares. It looks like the shorts want somebody to capitulate.

And a lower price forces the weaker hand. And tonight the shorts got some help from the WSJ. Anybody know who fed this story to the press?

And does anybody think that big oil wants someone touting CNG for cars?

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