It certainly looks like Chesapeake is about to collapse. Stock trading halted this morning at a bit over 1.50 per share, bankruptcy attorney's retained, all caused by an upside down balance sheet, although this has been a slippery slope for them well over one year.
I have producing leases with CHK and have noted that royalty checks are coming, if they come, at different times, and that things in Converse County...well, are apparently in a state of flux.
Bottom line is with all of us who share Chesapeake Leases, what happens now?
I am sure that this has nothing to do with the numerous lawsutes Chesapeake for taking deductions when the contracts stated NO deductions or the awards for the mineral owners.
Truthfully it does not! I am aware of the issues with Chesapeake however the smart money says that to litigate against a company who, at the very least, will seek Chapter 11 protection is nothing short of futile.
Good Morning John:
We haven't spoken in a while but always good to hear from you.
1) Concerning the CHK Royalty Checks: My last 2015 check was Oct 30, 2015. I did not receive a check or a statement for Nov 2015 or Dec 2015. Checks started again Jan. 29, 2016. So, a 2 month non payment of royalty -- or so it appeared.
2) In early Dec 2015, I looked at the Wyoming Oil & Gas web site. We participate in 4 wells and CHK had sold oil and gas from all 4 of those wells during the period which would have resulted in a royalty check for Nov 2015. But there was no check and also no statement. So I called into the CHK Call Center and asked why no royalty check and also no statement for Nov 2015. I was told that indeed CHK did sell oil and gas but all the proceeds that would have been paid to me in royalty where used to pay my portion of the Converse County property tax. They also informed me I would NOT be receiving a royalty check in December 2015 because CHK would still be recovering money from me that CHK had already paid to Converse County for property tax. I asked why no statement on-line to show what was happening. They didn't have a very good answer other than there was no on-line statement that I could view which showed the property taxes being paid. I asked if they had a statement. They said yes and they then agreed to send me a paper statement via the mail which they did.
3) I had planned to audit the paper statement to see if CHK was deducting the correct amount for property tax. So far I haven't taken the time to do the audit. Maybe in the next couple of weeks. There are many entries on the statement and it will take some time to figure things out.
4) As to CHK going Bankrupt, I don't have any info. I assume it would be a Chapter 7 not Chapter 11 but who knows. It all depends on the price of oil and who knows when that will sort itself out. If they go bankrupt, royalty owners will receive a notice from the court. There are many write-ups on the internet that offer advice on what to do once that notice is received.
Personally, I am hoping for a new owner for CHK's assets in Converse County. My guess is that would work out better in the long run. Only time will tell.
Stay in touch.
John Linden
Alamo, CA
Have been through a few mergers/sales/bankruptcies. Same pattern. Assets go into receivership until they are purchased and new operator takes over. Mineral owner/lessor does nothing.
Hello John
I have been dealing with every issue that you mentioned and yes, I too need to audit the data.
Regarding what is happening with Chesapeake I would think that a Chapter 7 liquidation is unlikely at this time; do think that we may well see a Chapter 11 re-organization instead. How that will play out with the stake holders remains somewhat uncertain. I am aware that there has been some Chinese financing, for want of a better word, going on with Chesapeake for some time, the flux in the WON and the Chinese economy may well be a factor as that proverbial well may be drying up....no pun intended.
As for other operators for CHK's assets in Converse County, that too is uncertain. We are all aware that the collapse in oil prices has strained every aspect of the petroleum energy sector and I suspect there are few operators willing or able to accept the burden of Chesapeake's holdings without a deep discount on acquisition costs. Under Chapter 11, that will never happen and anything under Chapter 7 will require Court Approval which could take years.
John