Options Trading: Chesapeake Energy Corporation (NYSE:CHK)

A total of 650 block trades were executed Wednesday in CHK.

Typically at least 10,000 shares or more represent a single block unit.

The block trading activity shows that $230,066,041 worth of shares were bought, and $105,347,713 worth of shares were sold by institutional investors.

The positive net cash flow of $124,718,327 into the stock shows that investment houses have positive outlook for shares of Chesapeake Energy Corporation, many are probably betting the once Chairman, now CEO will be booted within a short period of time before the company becomes Enron 2.

On the options front: total of 186,241 Call and 254,099 Put contracts were traded yielding a 1.36 Put/Call Ratio.

Chesapeake's business model relies on nontraditional sources of financing. The company has historically recaptured a significant portion of its aggressive leasehold spend through joint venture transactions now subject to SEC and regulatory scrutiny.

Inability to locate JV partners for future deals may cause the company to issue equity or sell assets at below-market rates to help fund operations.

Chesapeake's strength lies in land acquisition and leasehold resale, not necessarily longer-term resource production.

There is of course tha outstanding loans to McClendon, over $1b that could take 10-20% off the market cap of the company should they not be recovered.

With the un-conventional acreage rush in the US now for the most part over, it remains to be seen whether Chesapeake can successfully operate under a more traditional E & P company model.

Chesapeake Energy Corp.is a Nat Gas and Crude Oil exploration and production company engaged in the exploration, development and acquisition of properties for the production of Nat Gas and Crude Oil.

On the volume side: 145-M shares were traded which is greater than the average 90 day volume.

Chesapeake Energy Corporation is trading below its 50 and 200 day moving average.

Chesapeake Energy Corporation (NYSE:CHK) and Chairman/CEO Aubrey McClendon have attempted to pacify regulators and shareholders with a bit of a corporate 2 step. Instead of stepping aside McClendon was removed as Chairman and took up the role of supervised CEO a move that will only serve to annoy shareholders and regulators.

The allegation is McClendon had an unusual corporate perk that allows him to invest in a 2.5% interest in every well the company drills. According to Reuters, McClendon has borrowed up to $1.1 billion against his personal ownership stakes in wells owned by the Company. At least $500 million of these loans have come from private equity firm EIG Global Energy Partners, which has also provided financing to Chesapeake.

To answer critics of dodgy boardroom maneuvers with further dodgy boardroom maneuvers will see a sell off in the stock and increased pressure from regulators.

The next question is how fast can McClendon repay these loans, and will he survive that financially?

With Wall St regulators hot after CEO perks and bonuses, McClendons troubles could not have come at a worse time, in the interests of himself, and the company he should extract himself and beat a hasty retreat, that may be his only chance to live to fight another day.

Should he attempt to defend his actions, as legal as they were, the Obama inspired regulators of Wall St will ruin him and Chesapeake Energy Corporation (NYSE:CHK).

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service