Replies to This Discussion

Permalink Reply by Craig Wascom on November 10, 2011 at 7:19

Does anybody have any FACTS!! How can we even discuss IP if we don't know what it is. If you do know why not let the rest of us in on it?

Permalink Reply by Joe Aldridge on November 10, 2011 at 7:22

Will, 

I agree. The problem is exactly as you state it. Its been many years since anyone has had any interest in the AC. One of the problems is it is not an easy formation to drill and produce. When I first heard the presentation the first of the year in the pre-app conference with the long laterals I was afraid that their direction could have very bad consequences for that area and the play in general.

At this point I don't know of anyone else that has any interest in the AC in this area. I was hopeful that someone would get it right this time. I don't see that happening at any point in the near future. 

Permalink Reply by littleasy on November 10, 2011 at 7:11

The last time (mid-90's) an outfit (CHK) came to Louisiana and leased-up over 1 million acres in the AC fairway, when all was said and done, some said it was a stock pump and dump scheme.  Early on in the play, insiders were quoted in Forbes as saying they wouldn't bet with the CEO (AM), while others said they wouldn't bet against him.  You can't judge a book by its cover.

Permalink Reply by Joe Aldridge on November 10, 2011 at 7:40

There were several factors that were at play in the 90's. CHK had some bad geophysics and bad geology. The second factor was the bottom of the oil barrel fell out. The price for a period of time was down in the teens. AM and CHK made the decision to stop exploring for oil and become a company that lived on gas acquisition. He turned the company around with junk bonds and that strategy. It wasn't any pump and dump scheme.

Permalink Reply by littleasy on November 10, 2011 at 8:38

Just what some said about last play.  We were leased by CHK at the time, but nothing ever came of it.  You are correct about the collapse in oil price, but CHK's share price peaked on the AC hype at the time.

 

How do you have bad geophysics and bad geology when you are leasing in areas with prior wells, logs, and data?

My guess is the LaCour well will suprise on the upside like APC's Dominque 27 well.

 

And what about other horizons in the central LA fairway (South Slope) along the shelf edge (like TMS , Wilcox, etc)?  I know APC is telling landowners they are only interested in the AC, but....

Permalink Reply by Joe Aldridge on November 10, 2011 at 12:21

littleasy,

At that time the stock price collapsed. It went down to $.75 a share. I called my broker and was told he was out of the office. I was on the fence about buying and never called back. That was the bottom for CHK's stock. The price of oil started up within a month and so did the stock price. I think it finally went to the $60.00 range. 

Now about the geology. They were drilling in Southwest LA and my concern was that they were on the plain well below the shelf and had very little fracturing.  At least that was my concern and observation when I scouted the area. To compound that they had several stock analysts that were saying the move into LA from TX was a mistake and the bottom dropped out of the stock price when the LA wells were not as productive as the TX ones.

Permalink Reply by littleasy on November 10, 2011 at 16:23

The share price of CHK peaked on 11/30/1996 at $32.69, and bottomed on 9/30/1998 at $1.19.  It didn't hit $66 until mid-2008.

 

"1996–2000 - After struggling with attempts to extend the Austin Chalk play into western and central Louisiana and the coinciding price collapse of oil and natural gas in the late 1990s, the company modified its strategy to focus almost exclusively on natural gas production. This focus utilized the newest technologies to target a more diversified, longer reserve life and lower base risk asset base and began to incorporate acquisitions into the company’s business plan." - Wikipedia

 

http://www.chk.com/investors/letters/documents/1997_annual.pdf

 

I stand on what I said about the view of some on the "high-flying" approach of CHK in the mid-1990's, especially about the period when they leased the AC acerage in CENLA.

 

"Chesapeake is among the most aggressive operators in the U.S. E&P space, able to quickly build dominant positions in emerging plays through its vast network of land brokers and a general willingness to offer more favorable lease terms than its competitors. While this approach has helped Chesapeake amass a portfolio that comprises almost every leading unconventional play in the U.S., it has also led to ongoing questions about the sustainability of the firm's business model, given its propensity to outspend available cash flow. Despite the potential for some fits and starts over the next few years as Chesapeake works through how to best monetize its extensive inventory, we're bullish on the company's ability to increase production and reserves going forward, given management's knack for creatively financing its operations and the relevance (that is, the attractiveness to third-party investors) of its current leasehold positions." - Moringstar's Take CHK

 

Permalink Reply by Joe Aldridge on November 11, 2011 at 2:13

Yes, you are right. there was another company that I was in that went from the teens to $60. I got the two crossed. I was thinking about that later and realized that it had not gone as high as I stated.

The only thing I can see is they got burned in the Chalk play back then and are not coming back now. Again, I just don't think they were drilling in the right area when they tried it the fist time. 

Thanks for your input on the company. At the time they were active in Chalk drilling they came in and the landman told me I was the first he was told to contact because I had a 10 3/4" surface pipe to 3200 ft. and they were interested in re-entering and drilling to AC. At that time I was under lease to Amoco and had almost 2 years to run on the lease. Amoco held us and by the time that lease was out CHK had changed direction. Its interesting that Kirk says Amoco had not intent to drill the area for Chalk. So they were just playing "keep away" from whomever was interested in exploring. 

Again thanks for your input about CHK.

Permalink Reply by Dion Warr, CPL on November 14, 2011 at 4:05

Joe:

 

Around the time that you are talking about Amoco and UPRC had agreements in place and an AMI.  Within the AMI, Amoco would (continue) to drill prospects in the Tuscaloosa.  UPR would drill prospects within the AC.  I wouldn't characterize it as much as Amoco playing "keep away" as much as UPR just didn't drill your acreage.  Being that the Harmon and Curet didn't really pan out for UPR, and the successes that they were enjoying at the time were located in western and central LA, basically "everyone" that was exploring AC at the time shifted focus away from that area.

Permalink Reply by Two Dogs, Pirate on November 11, 2011 at 3:15

That ain't the way  I  remember it happening. I was buying leases  for CHK in 1996 & 1997. If I remember it correctly the stock was around $60 at the first of 1997, went through a  split and became$30 then went on a down hill ride and  hit $0.75 sometime in 1998. My thought is that OPEC looked at  our  domestic drilling as a threat to their cartel and opened the spigots and brought the price down to 10 bucks thus bankrupting many mom and pops in the biz and almost busting CHK.

Permalink Reply by John Matherne on November 11, 2011 at 3:23

Now that sounds about right.

Permalink Reply by littleasy on November 11, 2011 at 6:27

Ignoring stock splits, the price action trend as stated is essentially correct.  The LaCour property was last drilled by UPRC in the early 90's.  CHK came in and leased 1 million acres in CENLA after the first LaCour well was drilled.  CHK were sued by UPRC for patent issues.  In early 2000's, APC acquired UPRC.  That was then, and this is now.  So , time will tell if anyone has a handle on the LA AC or if they have other interests?

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