KB.....that is what i am saying and have been saying....you are right just to risky for long term investing.....great pump and dump....you couldve bought it for 12 and sold it today for 19...great profit...but I buy for long term and I just cant see this guy managing a company as cash hungry as this in an environment like we have now and will have for the next few years! I may put some play money in them but no farm for me on these guys! If one of the big guys come in and buy up there asetts in the HS Play it want be good for us. Those guys dont play by the rules they make the rules...they own congress and local government....they will drill when and where they want to and pay you what they want to. I would make sure if I was getting a royalty check from HK or CHK that they paid me on time. I have heard horror stories of people having gas pulled from there land and were not getting paid for it for one reason or another because the company that controls there lease is in bankrupcy....may be a good topic to start...."What happens to your royalties if a company holding your lease goes under chapter 13 or Chapter 11?" I dont know enough about the two business to even have an opinion.
By its nature, independent oil and gas biz is very risky! Don't worry, Aubrey could afford to take the loss and still end up with lots of money, more than he'll ever need in his and his kids' lifetimes.
Very Complicated stuff! I have heard of people putting clauses in their lease that relate directly to the subject of a lease holder that is forced into bankruptcy. Again I dont have the understanding or knowledge to even go into such a thing....thank goodness I have been blessed and havent had to for go that road. I have a real strong feeling though that this may be one of the most discussed topics on this forum in the near future....and may bring record numbers back to this site.
17) It is understood and agreed that if Lessee or its assigns should ever be placed in a position of bankruptcy, either by the courts or by its own application for any state of bankruptcy, this lease shall expire and become null and void effective that date.
The lease states royalties after profits Most of the time....well in the case of bankruptcy if that well was seised under court, wouldnt it be considered non profitable untill another company bought the existing asetts and began to put those gas wells that are producing back on there books. I dont know anything about the way Companies do individual wells on their books but I would think that each well should have its individual profit and loss )P&L statement. Under that statement is the way that your profits are distributed to you. If the well is seised that this statement (P&L) Becomes negative untill the debt is managed and paid or accuired by another operating co. Like I said I know alott about running other business but am not farmiliar with bankruptcy especially in the gas production business.
Haven't been in any BK cases in Louisiana but in other states, the drilling contractors can place a lien on the well if they are owed money for the drilling of the well. The wells are generally sold/auctioned and the leases are assumed. In texas, we've had cases where the assets of the BK company were defined as their wells, leasehold, equipment, etc. But that would get sticky. However, I think there is less than a 2% chance of BK in CHK's case. Too much cashflow and very little short term debt. Current debt service is easily covered by revenue, by a factor of 2 or 3 times.
I would think that the land owner would own the Gas untill it is extracted. A lease just states that the gas co is in titled to X amount at X% after profits. So the gas in the ground would not be considered an asett untill it is produced and the royalties are payed out to the Owner. If this was the case during the bankruptcy period the O&G company must seize production of the well or pay the land owner the full owed % of mineral money. The question arizes in the profit %, I guess it is all how your lease reads. If the it is based off of profit and the Company goes into Bancruptcy one would assume that the P&L statement for every well (If this is the way they do it) would be negative (loss) there for untill a profit was claimed on that individual well gas would continue to be produced and NO royalties would be issured!
If this is the case it shows just how hard it will be in the future for these gas companies to raise capitol for this type of business in an environment like the one we are approaching! It all goes back to common investing...in times like this you want to invest in stocks that pay strong Div with a solid credit rating and a balanced dept to equity ratio! These are not the times for speculation!!!!
Its up over 22% after Lunch you will see some sale orders come flying in.....people that bought it at 12 are going to sell out between 18-20 This stock is (NOT) being driven by long term investments....its going to be like a roller coaster for a while....if it ever comes back.....there is just to much uncertaintee in the market for a stock with this type of track record to stay going up the north slope.....THE CEO TOOK A BILLION DOLLAR HIT FRIDAY TO DUMP 33.5 Million shares...You think this is winner!....its just rising with the market...if you were the lucky one to buy in at 12.....SELL SELL SELL!!!! This is my opinion...it may go back up to 50 bucks....
As exciting as this is, we know that we have a responsibility to do this thing correctly. After all, we want the farm to remain a place where the family can gather for another 80 years and beyond. This site was born out of these desires. Before we started this site, googling "shale' brought up little information. Certainly nothing that was useful as we negotiated a lease. Read More