Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2020 at 14:04

There are many reasons for continuing development besides the current price.

Permalink Reply by Richard David Otley on July 1, 2020 at 14:54

You might be looking at the begining of the downward trend. The political and economic pressures have yet to really shift into gear. That is something Fed funny money cannot counter. We are not talking DJIA here; it is demand for a commodity

Permalink Reply by Skip Peel - Mineral Consultant on July 1, 2020 at 15:03

There are a number of potential reasons for companies to drill wells besides commodity price and economic and political pressures.  The article is clear that there is a "drilling commitment" as part of the deal.

The agreement calls for a minimum of four wells to be drilled in the initial program year, which begins in the third quarter of 2020, increasing to a minimum of 15 wells per year beginning with the third program year.

Black Stone knows full well that natural gas prices will be depressed for the foreseeable future and they have reasons to continue development.  Only the company knows but some of the usual reasons are cash flow to cover overhead, debt service and un-drilled leasehold that must be developed to hold the leases in force before the lease term expires.  I suspect that Aethon can get out of the deal by paying a penalty but Black Stone would just sign up another operator to take their place.

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