What does bankruptcy mean for royalty owners? Samson Resources... owned by KKR... seems to be ready to file Chapter 11. Several articles have been written about this in the past month. But i hear other companies are on the verge. Of course it doesn't help when the Saudis declared victory over the U.S. in the energy war.
In some news reports, the reporters have clearly stated that the Saudis' intent from get-to was to undercut Shale drilling. Remember on GHS when some early posts stated that the Saudis weren't actually competing on price with Shale drilling. Seems a few so-called pundits got it wrong.
A lot of reporters have to turn out copy and will seize on any angle they think will make a good story even if its basis is flawed. Anyone who may wish to make a case for Saudi Arabian intent to bankrupt Samson Resources can do so here on GHS.
For those who care to do a little in depth review they will find that the bottom line for the Saudis is defending their market share. Any production they drop will be quickly picked up by one or more global producers. And it can be hard to regain that market share going forward. Their strategy is purely self interest and other producers will have to fend for themselves. Including the other members of OPEC. If Samson or any other company, or for that matter Russia or any other country. wants to interpret the Saudi refusal to cut production as aimed at them they may do so. The fact is they are just a part of the collateral damage.
Why accept the straight forward and obvious answer when the subject lends itself to so many controversial conspiracy theories?
WOW! i didn't mean to make this such a political issue... or a conspiracy issue... or aimed at Samson. I'm still wondering about what happens to royalty payments of a company... goes bankrupt. i bring up Samson because several legitimate articles have been written about its debt and inability to make debt payments. A number of other companies are struggling too. Just kind of threw in the Saudi aspect because i have seen legitimate articles written about that. should have added Russia too.
here's a link to the Samson money troubles and a Saudi piece.
so let me get this right. Some reporter, who doesn't know a working interest from a ham sandwich, writes something about the O&G industry and you automatically take it as the gospel ?
Benny, i did not take it as gospel. i read articles from a number of sources. i'm just posing a question and seeking views from readers on the haynesvilleshale. i don't make judgement about the writers or the publications. no judgements... very simple. just asking.
I said that the shale drilling was the problem and this was what the end game was at the beginning. I was shot down by as you put it the pundits. Thanks for posting.
Yes, thanks for posting. In addition to having plenty of input from people who seem to know everything, in spite of their past representations and transparently straight forward and obvious shilling, it is good to hear from "the little people."
Could someone please answer the initial question as I'm interested in this as well. How is a royalty owner affected when the operator of a producing well files for bankruptcy? For example, if Samson Resources has been sending you a check every month for "Well X" and they file for bankruptcy does this change anything about your royalty check?
I knew Forest Oil was in dire financial straits and recently merged with Sabine Oil and Gas. Unfortunately, I have heard that Sabine Oil and Gas is also not doing well and may be forced into bankruptcy. Does anyone have solid information on Sabine as to how they are doing and what their future may hold?
I would be very interested in information on Sabine Oil and Gas. We get royalty checks from them. Worried.
Caution: I am not an expert in this field. However, Bankruptcy is a relatively straightforward process. First this basics:
It is a federal court process (reserved by the U.S Constitution to the federal govt). It is overseen by a specialty court known as the Bankruptcy Court. In the legal community it is well known that the most powerful judgeship is a bankruptcy court judge. They wield enormous contempt powers and are unafraid to use them. The entire process is founded on an orderly review of assets and liabilities - it prevents the proverbial race to the courthouse by creditors.
A company can declare itself bankrupt or the company's creditors can seek to have the company declared bankrupt. In either event, the petition filed automatically stays all collection activities against the bankrupt. The court will appoint a trustee and conduct and accounting of assets and liabilities. Chat 11 is a corporate bankruptcy for an ongoing operation. It is a reorganization, which forgives some debts whereas others are partially paid. Some may be paid in full.
A mineral lease is not a debt, except to the extent that there are royalties owed on minerals extracted. To the extent there are unpaid royalties there may be a delay in getting those paid, but since it is pursuant to a recorded lease, payment of the royalties to the mineral owner will have priority to unsecured creditors, you should see the revenues owed paid nearly in full or in full.
That is a general overview of the process. Others with more detailed experience may want to weigh in.
Thanks, Joe. The law is a curious thing. Been offline most of the day. The storms fried my cable modem... so buying a new one and getting Comcast to recognize it... took a little time. But all is well now.