Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 31, 2019 at 13:40

I saw those new permits too Steve and thought the same thing.  I checked, they are twelve month permits. Time will tell.

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Permalink Reply by Skip Peel - Mineral Consultant on November 5, 2019 at 5:28

“CHK is reducing its 2020 capital expenditure forecast by ~30% to ~$1.3-1.6 billion with plans to operate 10-13 rigs, which it estimates will result in flat y-o-y oil production and free cash flow, including targeted ~10% reduction in LOE and G&A expense.

Q3 Haynesville production (24% of total) declined 9.4% y-o-y and 7.2% sequentially. CHK placed 5 Haynesville wells on production in Q3 with no completions planned in Haynesville or Mid-Continent (5.0% of Q3 production) in Q4.”

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Permalink Reply by Chopman on November 5, 2019 at 10:12

I am guessing that the majority of these 10-13 rigs will be drilling in more oil weighted plays.

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Permalink Reply by Skip Peel - Mineral Consultant on November 5, 2019 at 10:29

Oil and wet gas.

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Permalink Reply by Spring Branch,mineral owner on November 5, 2019 at 11:11

I can tell you that three of the new CHK well permits are the Gilmer 33&28-15-14.  Section 33 has one HA well

namely the Ashley 33.  Section 28 has never had a HA well drilled in it in spite of the fact that the offset Section 33 well is one of Chesapeake's better early Haynesville wells.  The reason for this is British Petroleum (BPX)has most of the acreage in Section 28 as a result of continuous shallow production dating back to the 1950's.

BPX farmed out their acreage to CHK in Section 33 and I suspect there is a drilling commitment related to the farm-out.

I also see that CHK has filed Application for 4 alt unit wells in Section1 of 15/14.

I have been told that next year Chesapeake plans to drill 7 HA wells and frac 12 HA wells.  As always, plans can change!

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Permalink Reply by Henry on November 5, 2019 at 11:41

Yes, earnings this morning for CHK were awful..... 

"Shares of Chesapeake Energy Corp. sank 9.6% in premarket trading Tuesday, after the oil and gas company reported a wider-than-expected loss on revenue that fell more than forecast."

What's that word, "schadenfreude?"  Stock price is $1.28.  Remember, it peaked at about $65 during the early days of the Haynesville Shale.

Imagine if you loaded your 401k with that stock at $65.  Ouch!

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Permalink Reply by Skip Peel - Mineral Consultant on November 5, 2019 at 12:20

I am reminded of the curse that Aubrey put on most of the mid-major companies with his prediction of the "Shale Haves and the Shale Have Nots".  His idea of tying up vast amounts of land in presumed economic unconventional basins, indeed more than CHK could drill, to make a profit my selling acreage to late comers looked like a winner for a while.  Even at the inflated lease terms in "hot" basins, there were buyers.  For a time.  "Early mover" became a common phrase in energy media and if you weren't an early mover you paid the going price or you didn't get a land position.  Thus, a Shale Have Not. This philosophy infected most of the mid-majors to one extent or another.  And the damage done has yet to be overcome for many of them.  At least speaking of the ones that still survive.

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Permalink Reply by Steve P on November 5, 2019 at 13:43

So, let's not dwell on those days.  I did buy CHK stock - twice - but in small amounts.  bought in low 30's, sold in high 20's.  

I have family property and minerals in DeSoto Parish - SE of Mansfield, in what nearly every map considers core acreage.  I'm leased to CHK, which has one nine year old well in my section.  This area is prime for some CULs, but if CHK isn't going to drill it, and not going to sell it either, then my gas will stay in the ground.  In my head, I used to have converging graphs -One portraying the price of NG and years (a/k/a my age) and the other is of wind/solar/batteries becoming more widespread and cheaper and my age.  Ten years ago, my vision was keeping gas in the ground until (a) prices rose and (b) I retired and the royalties would be at a lower tax rate (and when I actually needed the money).  Foolish me!  Now the charts are (a) my age and (b) the looming obsolescence of NG.  Forget about that $5 or even $8 NG, just get it out and sold at any price.

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Permalink Reply by Skip Peel - Mineral Consultant on November 5, 2019 at 13:55

Steve, I deal with mineral owners, some of them clients, having the same decision challenge.  Each case is unique but for the last year I have been encouraging many of them to consider a liquidation strategy.  The first element to come to grips with is the future price of natural gas and as you state and most believe, it will be years before prices above $3/mcf are sustainable.  Once that is a given, the next question is a combination of near term development potential as a major value metric and the individual tax situation.  Offers for minerals with no leading indicators for new wells get some really low offers since the first of this year.  Something of the order of $2000 to $2500 per royalty acre in a proven location with a decent operator (not CHK).  If there are well permits, and most operators still wish to drill multiple wells with one or more rigs, the range may be $3500 to $3750 per royalty acre.  There are of course extenuating circumstances and location issues.  Not knowing the exact location of your minerals, they may or may not be core Haynesville.  If not core then Tier 1 for sure.  The better news is that most of the fairway south of about the 13 north townships have economic Mid-Bossier.  That is actually better in my personal opinion than core Haynesville with no economic Bossier.  North of say mid 14 north townships.  It could go on but then again I have to save something for my paying clients.  Good luck.

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Permalink Reply by Henry on November 6, 2019 at 11:48

Ouch (again)!  Stock price is now $0.91.

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Permalink Reply by Skip Peel - Mineral Consultant on November 6, 2019 at 12:03

I hope none of our GHS members are holding CHK stock at this point.  We've seen enough bankruptcies by now to know what will happen if CHK goes that route.

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Permalink Reply by Henry on November 7, 2019 at 1:28

Triple ouch!

"Analyst Sameer Panjwani at Tudor, Pickering, Holt downgraded Chesapeake to sell from hold, and lowered his stock price target to zero."

ZERO!

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