I was advised that Chesapeake is filing for bankruptcy, is this true?
Lots of speculation by media pundits but no official announcement from Chesapeake.
If this is true, what does that mean for the landowners?
The first thing that Chesapeake would do, if the company indeed filed bankruptcy, is ask the court to allow their continued payment of royalty to their mineral lessors. The only thing of real value that Chesapeake has is its leases and non-payment would invalidate those agreements. If the court accepts the company's bankruptcy plan, they would shed debt and be able to invalidate contracts for gathering, treating and transportation in order to get lower operating costs. That depends to a large extent on the company's creditors. If the court rejects the plan, it can force a liquidation of assets which means the leases would be acquired by other companies. Either way the wells are still operated and the royalties still paid. Mineral lessors would not be materially impacted and their leases would remain in force.
What if the landowners decide that they do not agree on the absurd marketing, gathering and transportation costs? And wants To be released from Chesapeake due to being illogical in their practices.
I doubt that a bankruptcy court would rule on Chesapeake's marketing arrangement but might allow the company to shed some of their more burdensome gathering and treating contracts which would lower the company's costs and thus that of their mineral lessors. I guess Chesapeake mineral lessors could hire their own attorneys and attempt to be part of the court's deliberations but the chances of that happening are slim and even if attempted I wouldn't think the objections would carry much weight in court. Although an important point for mineral lessors, it would be an insignificant matter compared to the influence of the major creditors and stockholders in the court's view.
We dont get a vote.
The short answer is yes. They are doing a reverse split to buy time and try to stave off a filing. But the grim reaper is already at the door.
I was advised that they were filing for bankruptcy within the next year! Cheating Ches has not been honest and forthcoming in the practices and that’s completely unfair to the landowners “in more ways than one.”
Chesapeake's obituary has been written many times but this does look like the dead end with no way out. As far as the company's Haynesville mineral lessors are concerned, I think the best outcome would be for Comstock to end up with the assets either through an acquisition pre-bankruptcy or through a court liquidation. That would relieve lessors of the CEMI marketing charge at the very least. The one thing we don't want to happen is see Chesapeake emerge from a bankruptcy preceding with its leases intact.
Chesapeake’s gathering, treating, and transportation pipeline contracts are very burdensome(in the range of $0.35/ mmcf). They are a vestige of the massive growth in the early days where takeaway capacity was more important than cost. It will probably take bankruptcy to void these contracts. That is the way the other major players have gotten out from under the legacy contracts. It is my understanding that this is one of the main issues with Comstock taking them over. Tbh, for the mineral owner I feel a bankruptcy is in their best interest.
I really don’t care about Chesapeake’s bankruptcy! A life principle: “measure before you cut and not the other way around.” Chesapeake didn’t feel sorry one bit when they were cheating people out of their royalties by charging ridiculously high production cost. Hell I'm in the wrong business, I need to be in the business of gathering. How is it landowners inherit the property and what’s under the property rightfully only for someone to underhandedly through crooked measures, steal it or tell you it’s not worth much. Example: “that’s like me have a 1962 Ferrari GTO (if your a car collector you know this cars worth) you come to me with an offer that we both agree on. You call me after purchase of the car and tell me it’s my responsibility to pay for shipping of the car, putting gasoline in the car and I’m responsible for any maintenance.” Or we could have not come to some type of middle ground! Get the hell out of here!