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Permalink Reply by Wilmer Sparks on December 1, 2008 at 6:26

Buck:

History is repeating itself again. When Chesapeake acquired all of its acreage for the Austin Chalk (their prospectus stated that they had over 1 million acres under lease), the price of oil was up at around $30/bbl (this was considered high at that time). Then the bottom fell out of the market and Chesapeake was left with a boatload of acreage under lease but had no funds to drill it because they were over-leveraged with debt. I remember using some shares of their stock that I had as toilet paper because it was virtually worthless at the time.

Here we are 10 years later. They have a boatload of acreage under lease and gas is selling at $13/mcf when they announce their HS discovery. They once again over-leverage themselves with debt and the bottom once again falls out. They based their exploration and production costs based upon NG being at $9/mcf and it now selling at a price of around $6.80/mcf.

Chesapeake either has the worst forcecasters on staff or they just have the worst luck.

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Permalink Reply by The_Baron on December 1, 2008 at 6:37

Maybe both. Bad forcasters and bad luck.

Who knows, maybe a good cold winter followed by a hot summer followed by a bad hurricane season will make them look like geniuses.

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Permalink Reply by Two Dogs, Pirate on November 29, 2008 at 14:13

That would be the way I would go but they are going to offer stock instead of money once the SEC oks that deal and most on GHS seem to consentrate on bonus money. CHK may rise from the ashes again, who knows, they don't call them DRACULA for nothing.

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Permalink Reply by Bobi Carr ("parker") on November 29, 2008 at 17:16

Msfva,

That sounds like a win/win solution.

I can't understand why anyone would take less bonus money than they were promised UNLESS they were given something else (higher royalties).

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Permalink Reply by Snake Stewart on November 29, 2008 at 18:55

I will have to see it to believe it tho. I dont see them any more willing to work with mineral owners then they were from the get go.I have stated several different times that I would be willing to bypass the bonus all together with the right royalty % and a guarantee to drill. After all of this, how can you trust anyone to do what is right or in the best interests of both parties.It never has been about us , nor will it ever be.We are in the way.If this slowdown isnt being played up for the cameras they may would actually be interested in dealing in this manner. Things arent nearly as desperate as they want everyone to believe in the big picture. If they were they would be packing up and trying to get in the bailout line.But then again someone like the Feds wouldnt make good busines partners either.They would probably expect to get paid on time and at the agreed upon rate.

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Permalink Reply by Grice on November 30, 2008 at 4:24

Snake, the idea of higher royalty, in exchange for lower bonus, was kicked around awhile back. it seems that it was abandoned, due to the potential loss the O&G companies would endure. While the O&G companies could have leased more property, at a reduced expense, maybe they were unwilling to sacrifice the long-term earnings. This leads me to believe the potential of the haynesville shale is still an unresolved issue, and the full value has not yet been reached.

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Permalink Reply by Snake Stewart on November 30, 2008 at 4:37

I agree wholeheartedly Grice, because who better would know the potential of this play other then the O&G's ? It apperas by their actions, or lack there of, that they would rather sit and not be able to do much of anything rather than relinquish any more of the benefits of this play. That should speak volumes to us all.

It isnt about fair for them. They would rather have it all. I would rather they didnt get any of it. The O&G's and myself seem to have more in common then I thought. This is starting to seem like a very twisted Christmas.I may even have to send Uncle Mac and Uncle Floyd a Yuletide Card. Wow! Did I just type that ? (LOL) Have a good one.

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Permalink Reply by Snake Stewart on November 30, 2008 at 4:43

I would also try to hire the services of someone that could detect counterfeit bills as a counter messure to the cash deal. (LOL)

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Permalink Reply by The_Baron on December 1, 2008 at 5:58

Just buy a conterfiet dection marker. They are less than a dollar, leaves a black mark on fake money.

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Permalink Reply by The_Baron on December 1, 2008 at 5:59

unless they do what the columbians did in the eighties. They bleached one dollar bills and reprinted them as $100's. That is why bills have the ribbon inside the paper in locations uinique to the demnonantion printed with the bills value.

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Permalink Reply by The_Baron on December 2, 2008 at 4:21

Sounds like an interesting history lesson.

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Permalink Reply by Antsu-in-Japan on December 1, 2008 at 7:35

Now, THAT made my night! Thanks for the laugh, Snake. Have a GREAT day...

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