CHK has sent out a letter to its leaseholders about revisions to their monthly statements....
"...Previously, the per-unit price of gas was reported after subtracting allowable deductions. Going forward, the per-unit price of gas may appear higher because certain deductions previously subtracted by our purchaser will now be listed separately. The bottom line will remain the same...."
I have no idea why they are doing this, but I bet a lot of people are going to erupt when they finally see how much CHK is taking out to pay their affiliated purchaser.
I would anticipate the new accounting format would serve to emphasize the "arms-length" relationship with the midstream facilities purchased by Access. A prediction would be that the statements will now show a gross pricing structure more in line with market norms, with "adjustments" or deducts to accommodate for moving gas marketed by CEMI through the midstream system (formerly owned by CHK, but now owned by Access), which, with the midstream operations now in the hands of a third party, will be further insulated from allegations of self-dealing on the part of CHK dealing with CEMI dealing with CHK Midstream.
Another assumption would be that a good portion of the purchase price that CHK was paid based for its midstream assets was based upon the continued and maintained existence of long-term marketing, processing and transportation contracts which originated during the time that CHK substantially controlled the midstream subsidiary. Thus, likely adjustments will be shown as accruing at the point of this transfer from CEMI to Access rather than as adjustments or deducts paid to or "netted out" by CEMI.
Who knows what CHK will claim. However, you can read all public documents filed by CHKM (49% owned by CHK) and by Access. It does not take commodity risk by buying NG. It charges a $/mcf fee for gathering and processing, with a take or pay for most of the NG and dedicated acreage, plus a usage $/mcf, and a fuel charge. At the tailgate of the processing plant, the NG enters an intrastate or interstate pipeline for transportation to Carthage, Perryville or S. Louisiana (Tiger). All major producers in the Haynesville Shale have take or pay minimum volume commitments to the pipelines, with some additional usage fee per mcf for actual volumes transported and fuel charges for volumes transported.
Other than the sham booking fraud perpetrated between CHK Louisiana and CEMI (both 100% beneficially owned by CHK), everyone in the NG business in N. LA knows that the first real sale for cash of NG occurs at the regional trading hubs in Perryville, Carthage and S. LA.
For leases with "no cost" clauses, CHK is attempting to do indirectly (by the sham sale to CEMI) what CHK is prohibited from doing directly under express language in many of its leases. CHK is doing this in TX, ARK, LA, OK, WV.
Access Midstream Partners, MLP: ACMP:
"An MLP is typically a limited liability company (LLC) treated as a partnership for taxation purposes and traded on a public exchange. As a partnership, an MLP is a pass-though entity. In other words, MLPs pass 100% of their taxable income through to their investors who pay income taxes. Unlike corporations, MLPs do not pay federal income taxes. Instead, investors are treated for tax purposes as if they directly earned the MLP’s income. By avoiding double taxation, MLPs have access to lower cost of capital, which allows them to build and operate low-return assets to provide a sufficient rate of return to attract investors."
We, my HS Friends are supplying 100% of the revenues for ACMP so these MLP's can "attract investors."
Why are WE liable for "federal taxes" on our minerals...when All of our minerals are going to a MLP that doesn't pay any federal taxes????
Well, the MLP doesn't pay taxes but the individual Limited Partners who own the MLP are responsible for paying the federal taxes. So if 10 of us own an MLP and the MLP get's $1,000,000, the MLP doesn't pay any taxes and distributes all of the $1,000,000 to the limited partners who own the MLP. Each of the LP's get $100,000 and then they have to pay the federal taxes. It really is quite simple (from that standpoint) and I'm guessing your rant will take a different tack.
This could be a real positive for those folks who have a "cost free" lease clause in that you would know if you were being charged for a deduction which your lease excluded.
True. But it might just make you more miserable when you find out you are being cheated, and cannot do anything about it.
<how much CHK is taking out to pay their affiliated purchaser>>>
Self-dealing is strictly against the Louisiana Civil Code.The matter is subject to civil suit. However, the dollar amounts involving private small-tract landowners are frequently too little to be of interest to attorneys.
This is certainly a possibility, but if I had engaged in less than legit business in the past and were forced to correct it I would do so without acknowledging my past mistake. I would certainly focus on "going forward".....lol To admit wrong opens me to bearing responsibility for righting those wrongs, and business just doesn't do that anymore. I sincerely hope that this move is a step into the light for this operator.
You can put lipstick on a royalty stealing pig and it will still be a royalty stealing pig.
Cheating should be a crime...not a civil matter...
Imagine some shyster conning some senior citizen...the police go after the shyster...if the shyster changes his name to driller...he can con the same senior citizen out of their minerals and no one cares...
For the driller...it's a probability game...the rewards outweigh the losses..
I just wish our land was under lease by someone other than Chesapeake, though it may not matter, perhaps they are all crooks. I originally leased to another small company, Empressa, but Chesapeake bought them out, we did not have a voice in the matter. It just seems that when this happens the landowner should have some say as to who the lease will go to if the lease changes hands. Empressa did drill a cotton valley well, it was not a very productive well, and Chesapeake has shut it in, and it has been for a couple of years now. Chesapeake did drill a Haynesville in our section, and that is what is holding our lease now, so I guess we are tied to them forever.