The board said on May 1 that it would replace Mr. McClendon, used personal stakes in the company’s wells to obtain more than $800 million in private loans. Icahn said Friday in a letter to the company’s board that was included in a Securities and Exchange Commission filing.Ĭhesapeake, the natural gas producer, lost almost half its market value in the last year as the impact of falling gas prices was compounded by revelations that the chief executive, Aubrey K. Icahn, the billionaire investor, bought a 7.56 percent stake in the Chesapeake Energy Corporation and demanded a new slate of directors amid growing shareholder concern about the company’s management.įour of Chesapeake’s nine directors should be replaced by candidates nominated by himself and other major investors, Mr. This leaves the open swap posistions for 2008 as a % of estimated total natural gas porduction anywhere between 38% and 72% depending on the knockout contracts and dates. Of the 299 bcf's, 138 bcf could potentially be knocked out according to the outlook. On the bottom of page 3 of the current outlookĬertain hedging arrangements include knockout swaps with provisions limiting the counterparty’s exposure below prices ranging from $5.45 to $7.50 covering 138 bcf in 2008, 5.45 to $7.50 covering 343 bcf in 2009 and $5.45 to $7.50 covering 172 bcf in 2010.Ĭhesapeake has hedged 72% of its 2008 natural gas production (299 Bcf's) with open swap posistions.
The fixed priced received by CHK includes a premium in exchange for the possibility to reduce the counterparty's exposure to zero, in any given month, if the floating market price is lower than certain predetermined knockout prices." "For knockout swaps, Chesapeake receives a fixed price and pays a floating market price. of Chk's 2007 10K defines their knockout hedges as follows: The management of their hedging program over the years has been very impressive. Historically the premium that CHK has received compared to the actual swaps that are knocked out are definately in CHK's favor. Chesapeake has used knockout swaps for sometime now.
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