Replies to This Discussion

Permalink Reply by intrepid on October 10, 2008 at 18:17

Don't assume. It's probably an option not an obligation.

• ▶ Reply

Permalink Reply by BirdDawg, plain ole' idiot on October 9, 2008 at 15:41

Folks,
You need to realize that if you are not in a unit that they (O& G) need to complete, you are probably not going to get a decent lease (or any lease) right now. And if you think they are going to come back later and lease you for the big bucks, I am afraid it may not happen in any near time frame (a few years). It is not that I want this to happen, it is just that I think this is what will happen. I hope I am wrong. I am on the shalers side. But it does not look good.

• ▶ Reply

Permalink Reply by P.G. on October 9, 2008 at 16:45

If the oil cartels do something stupid like start shorting oil supplies to drive up prices, I would imagine there would be a renewed interest in nat gas for transportation fuel.

My main concern would be for our government to nationalize oil and gas production. If that were done I would be afraid they would lay claim to our minerals and we would get nothing.

• ▶ Reply

Permalink Reply by Grice on October 9, 2008 at 17:15

OPEC recently had a meeting, and it was agreed not to change the supply rates. They are scheduled to meet again in mid December to reevaluate their position.

One report indicated that OPEC did not want to get involved in the U.S. political debates, which is what would have happened if they had decided to cut their supply rates.

• ▶ Reply

Permalink Reply by Trainman on October 9, 2008 at 17:25

Suggest all read article tilted "Energy firms likely to trim their spending", Houston Chronicle, Business section, page 1D, dated Wed. Oct. 8, 2008.

Synopsis as Follows: "The financial crisis tha has choked credit markets also may stem the flow of natural gas companies as the situation shakes out... All the oil companies, large and small, will cut back their capital spending..." Plains Exploration and Production Co. announced that it is selling the remaining 50 percent of oil and gas assets in West Texas in order focus on the growing Haynesville shale in East Texas and Louisiana. "...Chesapeake... said it would cut drilling capital expenditures by $3.2 billion and expected $2 billion of excess cash in 2009 and 2010 to pay down debt." "The company... also curtailed some output and lowered production growth projections." "Chesapeake CEO ... attributes the pullback to concerns about natural gas prices, which have fallen 50 percent since July, rather than to the credit crises." Petrohawk... said last week it would cut its 2009 capital budget by a third... and realocate spending to projects viewed to have the best potential for reserves growth, such as developements in the Haynesville and Fayettevill shale plays." "This is in response to lower natural gas prices and the credit crunch..."

• ▶ Reply

Permalink Reply by Grice on October 9, 2008 at 17:39

Chesapeake Energy Corp. is scrambling to sell assets and cut costs as falling energy prices and tightening credit threaten to derail the company's dramatic growth.

The Oklahoma City company has spent aggressively and borrowed heavily to fuel its climb this year to become the largest U.S. natural-gas producer. Its efforts were supported by natural-gas prices that leaped to a high of $13.577 per million British thermal units in July before fears of a supply glut sent prices plunging. Natural gas settled at $6.825 Thursday on the New York Mercantile Exchange.

Now Chesapeake is dramatically cutting back the costly land-leasing program that defined the company's rocketing growth.

It also faces the difficulty of trying to sell some of its gas-producing properties in South Texas in what has become a buyers' market. The sale is on top of other asset sales and spending cuts Chesapeake announced in September.

Charles Maxwell, an energy analyst who sits on Chesapeake's board, said the company suffered from "an excess of enthusiasm" when prices were rising earlier this year.

"I didn't think it would come to this," Mr. Maxwell said, adding that he believes the company's long-term prospects are solid.

Chesapeake co-founder and chief executive Aubrey McClendon said his company expects to end the year with $5 billion to $6 billion in cash -- enough to keep growing without tapping the capital markets.

The company had no cash at the end of the second quarter.

"We can continue to be the number one driller in America, the number one leaser in America ... because we're a big company, we generate a lot of cash," Mr. McClendon said.

He added that the company has insulated itself from falling natural gas prices with a hedging program that has effectively locked in an average price of $9.25 per million BTUs for 75% of its expected 2009 and 2010 production.

Nonetheless, Chesapeake's dilemma drives home how the credit crisis is threatening the business model of many independent oil and gas producers in the U.S. -- a model Mr. McClendon helped create. As gas prices rose and new technology unlocked vast new reserves of oil and gas, companies leased millions of acres of land, often at sky-high prices, and counted on being able to borrow money and sell shares to get the money to drill it.

Chesapeake was especially aggressive, at one point planning to spend $18 billion in 2008, more than three times its operating cash flow. Last spring, the company raised more than $3 billion in debt and equity despite promising the previous fall not to tap the capital markets "for the foreseeable future."

Chesapeake's shares hit a high of $69.40 on July 2, up 77% from the start of the year. Its shares closed at $17.97 Thursday on the New York Stock Exchange.

The extensive drilling by Chesapeake and its peers led to fears in recent months of an oversupply of natural gas, sending prices tumbling.

Mr. McClendon said the company will spend less in the future, but only because it's already got most of the land it needs.

But that land is only valuable if companies have the money to drill it -- and a growing number of analysts are skeptical that Chesapeake and some of its peers will be able to find enough money to drill all the land before the leases expire.

In recent weeks, a series of companies have announced billions of dollars worth of cuts to their capital budgets. Chesapeake itself led the way, announcing Sept. 22 that it would cut its capital budget by $3.2 billion, or 17%, through 2010. The company also said it planned to sell $1.75 billion worth of assets on top of the nearly $7 billion of assets the company has already sold this year.

Mr. McClendon said the company is slowing its acquisition of new land and plans to cut about a quarter of its 4,000 land men, private contractors hired to lease land on behalf of the company.

In Louisiana, where Chesapeake helped create a leasing frenzy earlier this year, the company's leasing has all but stopped, according to attorneys representing landowners there. The company has scaled back even further in Pennsylvania, where Tom Murphy with the Penn State Cooperative Extension says Chesapeake has canceled some leases before they have been finalized. Mr. McClendon said Chesapeake has delayed lease agreements, but denies canceling any signed deals.

"There are a lot of disgruntled individuals who thought they had a deal on the table and didn't realize the company had an out," Mr. Murphy said.

—Russell Gold contributed to this article.
Write to Ben Casselman at ben.casselman@wsj.com

• ▶ Reply

Permalink Reply by Gas Baron on October 9, 2008 at 23:31

Greenwood Hills Group signed with JPD Energy (CHK) 10/04/08 @ $22,500 per acre 25% Royalties
Everyone got a 25 Business Day Draft.
We shall see if they Hold up their end of the Bargain.

• ▶ Reply

Permalink Reply by RJ on October 10, 2008 at 2:34

Would seem to me they could have halted the Greenwood hills deal anytime they wanted to. Why would they go forward just to let the deal fall through by letting the Draft expire along with the lease??

• ▶ Reply

Permalink Reply by RJ on October 10, 2008 at 2:55

Also it would seem if these people who recieved Drafts just last SAT want to know if they will be paid. They Should contact JPD energy direct. I think they are located in downtown Shreveport on travis street. They also have a web page that one can google. Would be interesting to know what JPD says about this.

• ▶ Reply

Permalink Reply by Gas Baron on October 10, 2008 at 4:29

Just got off the Phone with JPD Energy.
They stated that the Drafts would be honored, not a problem.
What CHK was having to do now was pay from CHK monies whereas before they where using Creditor money to pay the lease.
The credit crunch is changing the Way they pay signing bonuses but they are paying

• ▶ Reply

Permalink Reply by RJ on October 10, 2008 at 4:36

Hmm Well if they told you they were good drafts.Then Im sure a lot of folks in Greenwood will sleep better. Good to hear.

• ▶ Reply

Permalink Reply by Bill G on October 10, 2008 at 4:40

These guys are taking a 5% loss on there stock today! They have 13B of debt on there books before the crash today! If i got a check from these guys I would run every redlight to get to the bank....then when i got there I would go inside and cash it....No time to wait in line....these guys are OUT OF MONEY....I REPEAT THEY ARE BROKE!

• ▶ Reply

• ‹ Previous
• 1
• …
• 4
• 5
• 6
• 7
• 8
• …
• 22
• Next ›
• Page