Replies to This Discussion

Permalink Reply by JD on August 11, 2010 at 12:33

Les B,

I think the majority of us on GHS have the utmost respect for your opinion. You are level headed and you are good at correcting and/or neutralizing misunderstanding about the O&G business. However, in the case of CHK there are too many signs that indicate they operate a bit different than other operators. Here is a summary;

* Many on this site have noticed the price paid to them is quite a bit lower than what is reflected on the NYMEX. They have also noticed that price to be lower than the price paid by other operators.

* SONRIS Lite indicates CHX disposes of their gas in NE LA (in most cases)thru "affiliate" Louisiana Midstream.

Now Les, the most important indicaters are the following two paragraphs that appear on their check stubs;

* "Gross Value refers to the sales price received by the operator/lessee before deduction of taxes. It may reflect the price received from an affiliate."

* "Deduct refers to the deductions identified in the Deduct Code below and are limited to taxes or deductions made by operator/lessee. Deductions made by the purchaser/transporter (affiliated or non-affiliated) are not shown."

They admit that they sell to an affiliate in some cases. They also choose not to disclose deductions made by purchaser/transporter (affiliate or non-affiliated).

I am going to give this debate a rest and let others decide for themselves. But please Les B. Please acknowledge that something looks a bit different about CHK's business aproach. A business aproach that benefits their stockholders over the royalty owners.

JD

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Permalink Reply by JD on August 11, 2010 at 13:58

I mean no disrespect what-so-ever for Les B. I appreciate the info he has provided and will continue to do so.

Permalink Reply by Two Dogs, Pirate on August 11, 2010 at 14:36

Once upon a time there was a Barber in a shop on the corner of Bolton & Elliott in Alexandria, that could fart the tune "Dixie". "Oh I wish I was in the land of cotton, ole times there not forgotten, Look Away, Look Away, Dixie Land". I heard the tune one time farted by the Barber. Have any of you out there on GHS heard someone fart 'Dixie'".

Permalink Reply by Les Bamburg on August 11, 2010 at 15:59

JD, I was not debating the merits of Chesapeake prices or the fairness of their net pricing. I only commented that information on Sonris was not sufficient to know if Louisiana Midstream was purchasing the gas or merely transporting the gas. If Chesapeake was my lessee I would have to ask them if they were selling gas to an affiliate and how was the transfer price being determined.

By the way it is more likely Chesapeake is selling the gas to Chesapeake Energy Marketing Inc which is the entity that holds capacity on the downstream interstate gas pipelines. I am just not sure if the sale would occur at the delivery into Louisiana Midstream or at the delivery into the downstream pipeline.

It is not likely Louisiana Midstream would take title to the gas since Chesapeake is contemplating the JV or sale of their midstream company. It is much cleaner for LM to simply collect a fee for services provided.

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Permalink Reply by w.r. frank on August 12, 2010 at 4:40

What I don't understand is if you have a cost-free royalty with language such as this:
"It is agreed between the Lessor and Lessee that, notwithstanding any language herein to the contrary, all oil, gas or other proceeds accruing to the Lessor under this lease or by state law shall be without deduction for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form;",

then CHK has a duty to obtain the best market price available. Based on the data presented (WE DO NEED MORE DATA), its affiliate is not paying the fair market price for NG at the wellhead and with a no-cost royalty clause CHK can't say that the lower price was to compensate for transportation.

Permalink Reply by Henry on August 12, 2010 at 6:04

w.r. frank,
When I initially started this discussion, I had hoped to also look at deductions for transportation, dehydration, etc. But it became immediately apparent that the first, and most immediate issue is whether or not all the operators are even getting the royalty owner a fair gross price for the gas, before deductions. So for the near term, I am just collecting data on the gross price. Once we find out what's going on with this, we can then attack deductions next. So far, it looks like something fishy is going on with Chesapeake. But I'll be the first to admit I have only limited data. To make a strong case, I NEED MORE DATA!

What will I do with my data? Well, I'll first see if the Shreveport Times would like to do some real investigative reporting. Maybe next, I'll take my data to "GoMarcellusShale.com" and let all those unleased landowners make a decision about who they would like to lease with.

Permalink Reply by Henry on August 11, 2010 at 13:21

Maybe Katie McCullen would like to jump into this discussion....?

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Permalink Reply by FXEF on August 11, 2010 at 14:27

Henry,

Katie McCullen will jump into this discussion when....

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Permalink Reply by Henry on August 12, 2010 at 5:57

kj,
Thanks. I am collecting data by production months, so if you could give me the price for the month it was produced/sold, I think that would match what everyone else is giving me.

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Permalink Reply by king john on August 13, 2010 at 7:50

xto- deep vertical, haynesville lime, gathering line into an enbridge pipeline.

march-4.33
april-3.50
may-3.72

kj

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Permalink Reply by Henry on August 12, 2010 at 12:23

KJ,
No problem. I'll keep looking for your numbers.

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Permalink Reply by king john on August 13, 2010 at 9:48

devon, deep vert, shelby county, stockman field,gathering line, into sister's pipeline, southwestern. there is a little lag on this production vs real time, so i only have two of the months you asked for, at this time.

march-4.55
april-3.56

if you desire, i do have lots of historical data. older months than you requested. do you want cotten valley prices as well ?
kj

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