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Permalink Reply by Skip Peel - Mineral Consultant on April 6, 2012 at 7:02

CHK mortgaged a group of it's earliest HA horizontal wells.  I don't know how often this has occurred but this first instance was relatively early in the Play.  The conveyance instrument is in the public records of Caddo Parish.

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Permalink Reply by Hopeful About Natural Gas on April 6, 2012 at 17:05

Good site Sesport!  Many thanks.  I also found this tidbit about Aubrey's salary.

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As Chesapeake's acreage expands, Mr. McClendon is afforded a 2.5 percent stake in every well drilled through a unique corporate program.

The program, called the Founders Well Participation Program and reported on by Reuters last year, has helped Mr. McClendon's compensation skyrocket to one of the highest salaries of any chief executive in any sector. In 2010, he earned more than $21 million."

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Permalink Reply by Hopeful About Natural Gas on April 6, 2012 at 17:09

Sesport, this is a very cool site from Penn.  Thanks for posting it.  Lots of info that I was not aware of. Like a Penn law for doctors that requires fracking companies to disclose chemicals if they are treating a patient they suspect has been exposed to the fluids.  Also, news about a new movie staring Matt Damon that is anti-fracking.  All in all, this is a very complete site by the newspaper about the shale up there.  Thanks for posting this link.

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http://shale.sites.post-gazette.com/

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Permalink Reply by Steve P on April 9, 2012 at 12:37

Not a good analogy.  when a landowner (or a mineral owner) grants a mortgage to a bank (or whatever), that owner commits to do or not do certain things with the asset, i.e., pay your property taxes.  One of the things you commit to NOT do is permit "waste" to occur.  In this case, if you owned the minerals underlying the land, you mortgaged those too, so when you sign an O&G lease, you are granting a lessee to produce those minerals, thereby diminishing the value of the assets.  Since the minerals are encumbered with that mortgage, then it is the mortgagee's obigation to secure a subordination of the minerals from the mortgage holder.  It is no different than if you tried to sell your house to a 3rd party without paying off your mortgage. 

 

If Chesapeake or any other operator wants to mortgage their leases, they presumably hold those leases free and clear from any other encumbrance (like an IRS tax lien) and they are free to mortgage them.  They would not need any permission from the land or mineral owner unless the lease included a provision specifically requiring such approval.   Most leases do not have such a provision, and it would require a very powerful land owner to be able to obtain such a provision.

 

Lessees can and do routinely assign leases, or certain rights within leases to other operators.  They are not required to give notice to the land or mineral owner when they do that, so the mortgages are no different.

Bundling - the problem with bundling mortgates was that once bundled, the purchasers of the bonds secured by the mortgaged really didn't perform any due diligence on that the value of the asset was that was secured by the mortgage.  Further, some huge % of the population owned a home and nearly all of them were mortgaged, so the bond market was flooded with the bundles, and the market (very very foolishly) assumed that the price of houses would keep getting higer so the bundles were pretty secure even if there were a few bad apples in the bundle.  The folks granting mortgages on mineral leases and the bond buyers purchasing the bundled lease mortgages are much different than the housing market investors.

 

 

 

 

 

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Permalink Reply by Hopeful About Natural Gas on April 7, 2012 at 19:54

Gotta love that pic of Aubrey!!  Seriously, this article contains some eye opening info about how much he makes off of each well.  He's been doing it since 1993.

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Love him or hate him, Aubrey is the reason most of us are here today.  Others developed fracking and discovered the shale but Aubrey dug the wells that have turned the US from an importer into an exporter of natural gas.  We all have a brighter economic future because of the gas CHK has found.  He should make big bucks for doing that. Aubrey is the ultimate wildcatter of the 21st century. It's fun to watch him in action and I think he will be in the history books for something.  Maybe he's been too successful finding too much natural gas. I just hope he can do the same for oil!

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and, he really infuriates me with his poor PR skills that have really hurt the image of the industry and CHK.  They should be sending some of their young PR staff to meet with these reporters.  Aubrey is a big target these days and I don't think he's going to get fair treatment in hardly any publication. It's hard because he's such a lightning rod.  I can't wait to see how all this turns out in a few years down the road ...

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