Chesapeake stock tumbles on cash flow cut

Chesapeake shares fell $5.24, or 24.3 percent, to end at $16.34.

The company cut its cash inflows to between $7.8 billion and $9 billion for 2009 from its old forecast of $9.9 billion to $11.5 billion, according a filing with Securities and Exchange Commission. For 2010, the company now expects cash inflow of $8.2 billion to $9.5 billion, down from a prior forecast of $9.2 billion to $10.8 billion.

The company figures to release more details about the cut beginning Wednesday afternoon when it begins a two-day investor conference.

Chesapeake said last month it was reducing its drilling activities as part of a plan to trim capital expenditures by about $3.2 billion through 2010. It said the move is in response to an approximately 50 percent decrease in natural gas prices since June 30 and concerns about the possibility of a gas surplus.

The company also lowered its full-year production growth estimate to 18 percent from 21 percent.

The company has said it has access to adequate amounts of money to ride out the credit crunch and that it is generating $2.5 billion to $3 billion this quarter by selling assets.

Friday, the company said billionaire chief executive and co-founder Aubrey McClendon had sold 31.5 million shares, nearly all of his 6 percent stake in the company, to satisfy margin loan calls.

McClendon used margin loans to continue to buy Chesapeake stock. Brokers offer these loans, with securities used as collateral. When a stock falls below a certain point, the investor must sell stock or pony up more cash to cover losses.

The stock sunk to a four-year low of $11.99 Friday, well off its 52-week high of $74 hit on July 2. Monday, the stock jumped 22 percent, its largest single day increase, amid a historic market rally.