By Anna Driver
HOUSTON, March 5 (Reuters) - Chesapeake Energy Corp , a natural gas producer known for a voracious appetite for land, issued 25 million shares to shore up its 2009 acquisition budget, an unusual move that was also dilutive for investors.
Low natural gas prices in 2009 hurt Chesapeake's ability to generate cash, so the Oklahoma City company issued $429 million worth of its shares to trade for the right to drill, according to the company's regulatory filings.
Chesapeake's shares outstanding swelled 12 percent from 2008 to 612 million, with some of that increase fueled by company's equity issue, according to a filing with the U.S. Securities and Exchange Commission.
The assets acquired for the shares were 'actually accretive' for investors, said Jeff Mobley, the company's head or investor relations, adding it was a 'unique situation where equity was used to bridge a valuation proposition in purchasing acreage.'
There is no similar share issue in the works, Mobley said, adding that the company has already raised nearly all the funds its needs for its drilling budget this year.
The company's original plan to swap shares for land was controversial when it first came up in 2008. Chesapeake filed a shelf registration to issue as many as 50 million shares, valued at around $1 billion, to be used for asset acquisitions.
But investors who feared the prospect of big-time share dilution sent the company's stock to the lowest level in at least five years. In response, Chesapeake reduced the number of shares in its shelf registration to 25 million and Chief Executive Aubrey McClendon apologized on a December 2008 conference call with investors.
'In retrospect, these filings were a mistake and we greatly underestimated how the market would react,' McClendon said in 2008. 'I apologize for that, and ask your forgiveness for it.'
The company's intent was to create financial flexibility in uncertain times, the executive said, adding that the shares may be used to resolve disputed lease deals in the Haynesville Shale.
Shares of Chesapeake rose less than 1 percent to $26.28 in afternoon trading on the New York Stock Exchange. So far this year, the stock is up about 1 percent this year, outperforming a flat American Stock Exchange index of gas companies.
(Reporting by Anna Driver; Editing by Steve Orlofsky) Keywords: CHESAPEAKE/SHARES XX:SU:REUTERS#SN:nN05138637#XX:121140.0#HS:RAMSTXT_9088_2010-3-5_193344_5_63#DU:bdeal+lanreunxd1+lanreznxd1+rekwire+reawire+rexwire+bsu8rtr#XN:##XP:tfukfipdista.datastream.com ~ (anna.driver@thomsonreuters.com; 1 713 210 8509; Reuters Messaging: anna.driver.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
HOUSTON, March 5 (Reuters) - Chesapeake Energy Corp , a natural gas producer known for a voracious appetite for land, issued 25 million shares to shore up its 2009 acquisition budget, an unusual move that was also dilutive for investors.
Low natural gas prices in 2009 hurt Chesapeake's ability to generate cash, so the Oklahoma City company issued $429 million worth of its shares to trade for the right to drill, according to the company's regulatory filings.
Chesapeake's shares outstanding swelled 12 percent from 2008 to 612 million, with some of that increase fueled by company's equity issue, according to a filing with the U.S. Securities and Exchange Commission.
The assets acquired for the shares were 'actually accretive' for investors, said Jeff Mobley, the company's head or investor relations, adding it was a 'unique situation where equity was used to bridge a valuation proposition in purchasing acreage.'
There is no similar share issue in the works, Mobley said, adding that the company has already raised nearly all the funds its needs for its drilling budget this year.
The company's original plan to swap shares for land was controversial when it first came up in 2008. Chesapeake filed a shelf registration to issue as many as 50 million shares, valued at around $1 billion, to be used for asset acquisitions.
But investors who feared the prospect of big-time share dilution sent the company's stock to the lowest level in at least five years. In response, Chesapeake reduced the number of shares in its shelf registration to 25 million and Chief Executive Aubrey McClendon apologized on a December 2008 conference call with investors.
'In retrospect, these filings were a mistake and we greatly underestimated how the market would react,' McClendon said in 2008. 'I apologize for that, and ask your forgiveness for it.'
The company's intent was to create financial flexibility in uncertain times, the executive said, adding that the shares may be used to resolve disputed lease deals in the Haynesville Shale.
Shares of Chesapeake rose less than 1 percent to $26.28 in afternoon trading on the New York Stock Exchange. So far this year, the stock is up about 1 percent this year, outperforming a flat American Stock Exchange index of gas companies.
(Reporting by Anna Driver; Editing by Steve Orlofsky) Keywords: CHESAPEAKE/SHARES XX:SU:REUTERS#SN:nN05138637#XX:121140.0#HS:RAMSTXT_9088_2010-3-5_193344_5_63#DU:bdeal+lanreunxd1+lanreznxd1+rekwire+reawire+rexwire+bsu8rtr#XN:##XP:tfukfipdista.datastream.com ~ (anna.driver@thomsonreuters.com; 1 713 210 8509; Reuters Messaging: anna.driver.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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