Southeastern Asset Management, the investment management firm headed by O. Mason Hawkins and its affiliates, reduced its stake in Chesapeake Energy Corporation (NYSE:CHK), the second largest producer of natural gas in the United States to 10.9% based on its latest 13G filing with the Securities and Exchange Commission (SEC).

Chesapeake Energy Logo

Based on the filing, Southeastern Asset Management and its affiliates currently owns a total of 73,189,801 shares of Chesapeake Energy Corporation (NYSE:CHK). The investment management firm sold 3,517,626 shares from its previous stake of 76,707,427 shares in the company during the September quarter last year.

Hawkins and Icahn fought for changes

Southeaster Asset Management is one of largest stockholders of the oil and natural gas company. Hawkins together with activist investor Carl Icahn fought against the perks of Aubrey McClendon, former chairman and CEO of Chesapeake Energy Corporation (NYSE:CHK) and demanded changes to the board of the company. The shareholders succeeded in their efforts which led to the resignation of McClendon as chairman, and he eventually stepped down from his position as CEO last year.

Confident in Chesapeake’s new leadership

In August last year, Southeastern Asset Management expressed confidence in the new management and board of directors of Chesapeake Energy Corporation (NYSE:CHK), and decided to change its regulatory filing from Schedule 13D to Schedule 13G. At that time, the oil and natural gas company reported better-than-expected second quarter financial results.  Robert Douglas is the current CEO of the company. He was a former senior vice president of Anadarko Petroleum Corporation (NYSE:APC).

Chesapeake Energy 2014 outlook

Chesapeake Energy Corporation (NYSE:CHK) recently announced that its oil production will be lower than expected for the fiscal 2014. The company said its total oil production will increase from 2% to 4% or 680,000 to 695,000 barrels of oil equivalent per day.

Chesapeake Energy estimated that its natural gas liquid production will grow between 44% to 49% while its natural gas production is expected to rise by 4% to 6% excluding lost production from assets it sold.

In addition, the oil and natural gas company projected that its capital spending will decline by 20% to approximately $5.2 billion to $5.6 billion this year. Chesapeake Energy Corporation (NYSE:CHK) is scheduled to release its fourth quarter financial results on February 26.

Equity risk state

Given the latest move of Southeastern Asset Management of selling more than 3 million shares in Chesapeake Energy Corporation (NYSE:CHK), the question is, is the stock safe or at risk? Based on the risk management algorithm of Smartstops.net, a risk monitoring firm, the shares of Chesapeake Energy trading at $24.68 per share as of Monday, February 10 are currently at an elevated risk state. See graph below:

Chesapeake Energy

Take note that the stock price of Chesapeake Energy Corporation (NYSE:CHK) tumbled 6.9% on Thursday after announcing its 2014 outlook. Amir Arif, analyst at Stifel Nicolaus, commented that the company is becoming more efficient and reducing its capital spending, but he suggested that other equities in the sector are better investment opportunities.