Markets: News  

Chesapeake leads energy stock retreat

NEW YORK (MarketWatch) -- Chesapeake Energy Corp. led declines among energy stocks on Monday, with a fresh report from Reuters about possible antitrust violations at the company hitting the stock as the broad equities market and crude oil prices eroded on fears tied to European debt.

Crude oil futures (CLQ2) declined 0.6% to $79.30 a barrel, casting a cloud over the energy sector. See Futures Movers for more on crude oil prices.

Chesapeake Energy (CHK) Chief Executive Officer Aubrey McClendon sent emails about efforts to keep bidding prices low for land in an apparent violation of antitrust laws, according to a Reuters report on Monday.

Shares of Chesapeake fell 8.5% as the worst performer in the S&P 500 (SPX) .

The Reuters story cited internal Chesapeake emails the news agency had seen.

One email from a Chesapeake deputy to McClendon said the company had been in touch with rival firm Encana Corp. (ECA) (ECA) "to discuss how they want to handle the entities we are both working to avoid us bidding each other up in the interim." McClendon's response to this was, "thanks," according to the report.

An antitrust expert contacted by Reuters said the emails amount to a "red flag" for collusion and market allocation.

Spokesmen for Encana and Chesapeake confirmed they had discussions about a formal joint venture but no agreement was reached.

Shares of Encana fell 4.1%.

Separately, the Wall Street Journal reported that Devon Energy Corp. (DVN) and Chesapeake Energy appear to be the most exposed to a glut in natural gas liquids production. Shares of Devon fell 2.1%.

Among big cap oil firms, Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) dropped about 1% each. The two oil majors are components of the Dow Jones Industrial Average (DJIA) , which fell 138 points, or 1.1%.

The Energy Select Sector SPDR Fund(XLE) , which tracks energy stocks in the S&P 500, fell 2.2%.

Checking the broad benchmarks in the energy sector, the NYSE Arca Oil Index (XOI) fell 2%, the NYSE Arca Natural Gas Index (XNG) dropped 1.9%. The Philadelphia Oil Service Index (OSX) lost 3.4%, weighed down by a decline of 6.3% by component Helmerich & Payne(HP) .

Among energy stocks in the deal-making spotlight, Linn Energy LLC(LINE) moved down by 2.4%.

The Houston firm said it'll pay $1.03 billion to buy properties in the Jonah Field in the Green River Basin of Wyoming from BP America Production Company, a unit of BP PLC(BP) . See story about Linn Energyy

The deal is expected to close by July 31.

The Houston firm said it'll tap into its revolving credit facility to make the purchase. Linn Energy said the acquisition will add about 145 million cubic feet equivalent per day of liquids-rich natural gas production.

The deal will immediately add to Linn Energy's distributable cash flow per unit, plus it offers "significant future drilling inventory."