Can oil companies go broke?

[Frankie]

I guess they can, though it's hard to imagine. Chesapeake came onto the oil scene here in OK a few years ago when they bought Kerr-McGee. They've incurred a lot of debt and oil prices are really down, as is their stock price. If they go broke, what happens to their leases?

Aubrey K. McClendon, chief executive officer of Chesapeake Energy Corporation, has sold the bulk of his stock in the company over the past three days in order to meet margin loan calls. The company, which announced the move Friday, did not disclose the size of the stock sale. Calls to the company were not immediately returned. McClendon said in a news release that he had been the company's largest individual shareholder and frequently purchased additional shares of stock on margin. He said he looked forward to rebuilding his ownership position in the company. Oklahoma City-based Chesapeake Energy Corporation is the largest producer of natural gas in the U.S. Its stock closed Friday on the New York Stock Exchange at $16.52, down $1.19, well off the $74 top of its 52-week range. Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed

 

[backhoeboogie]

If they go broke, what happens to their leases?

They'll flip them. It happens every day. Lots of leases were flipped to Chesapeake this past summer. They'll just flip them to someone else if they have to.

 

[Farmer Z]

I can't see any major oil companies going under. They might be bought out by someone else. On the other hand, you couldn't give me a share of bank stock (any bank).

 

[Lammie]

You would think that as well as Chesapeake is doing around here, it could offset some of those losses in Oklahoma. Everything around here is Chesapeake.

I am still waiting for my first royalty check. They sure do want to drill but take their time about getting the money to you. I guess it will be worth the wait, though. It's gonna come in handy around here, the way things have been.

 

[HerefordSire]

Last month, Forbes showed McClendon at No. 134 on its list of the nation's 400 richest people, with a net worth of $3 billion, an increase from $2.1 billion the previous year.

http://seekingalpha.com/article/99699-c ... sb_popular

 

[1982vett]

Last month, Forbes showed McClendon at No. 134 on its list of the nation's 400 richest people, with a net worth of $3 billion, an increase from $2.1 billion the previous year.

http://seekingalpha.com/article/99699-c ... sb_popular

Easy come, Easy go! ;-)

 

[Brute 23]

Its call an Assignment. Other companies will pick them up.(In leases put that no assignments can be made with out the signed consent of the mineral owner. It keeps companies from bouncing leases around all the time.)

Chesapeake plays real risky. They were banking that natural gas would go up and up. They buy and sell leases all day long. They will sell producing leases to go play in new areas. Its just what they do. They will probably liquidate some stuff and down size for the time being.

 

[skyline]

Its call an Assignment. Other companies will pick them up.(In leases put that no assignments can be made with out the signed consent of the mineral owner. It keeps companies from bouncing leases around all the time.)

Chesapeake plays real risky. They were banking that natural gas would go up and up. They buy and sell leases all day long. They will sell producing leases to go play in new areas. Its just what they do. They will probably liquidate some stuff and down size for the time being.

Natural gas is down about 40% or more from the peak period. I suspect Chesapeake will have to make some serious changes. They hired three of our key folks with guaranteed bonuses, guaranteed stock, and guaranteed raises for the next 2 years. It will be interesting to see how they honor those promises that they made in their offer letters.

 

[TexasBred]

Its call an Assignment. Other companies will pick them up.(In leases put that no assignments can be made with out the signed consent of the mineral owner. It keeps companies from bouncing leases around all the time.)

Chesapeake plays real risky. They were banking that natural gas would go up and up. They buy and sell leases all day long. They will sell producing leases to go play in new areas. Its just what they do. They will probably liquidate some stuff and down size for the time being.

Natural gas is down about 40% or more from the peak period. I suspect Chesapeake will have to make some serious changes. They hired three of our key folks with guaranteed bonuses, guaranteed stock, and guaranteed raises for the next 2 years. It will be interesting to see how they honor those promises that they made in their offer letters.

Havent' received royalty checks this months but got $12.60 on one lease last month and $13.22 on another, neither was with Chesapeake....not even going to talk about how the oil price fell as well. Only good thing is that all wells are producing great. But everythign else has gone down so ng probably will as well. Saw on Ft. Worth news this morning where one company just dropped negotiations with one neighborhood group in that area. They had offered them around $27,000 an acre bonus money and 25% royalty. Pulled everythign off the table. Don't know if it was Chesapeake or who. I imagine you'll see all the O&G companies pull their horns in for the short run and then come back when things settle down.

 

[backhoeboogie]

They had offered them around $27,000 an acre bonus money and 25% royalty. Pulled everythign off the table. Don't know if it was Chesapeake or who. I imagine you'll see all the O&G companies pull their horns in for the short run and then come back when things settle down.

Several companies mutually agreed to set the maximum chum money at $5K an acre in some counties. Some who had turned down $10K an acre are crying the blues now. Lots of previous offers are coming off of the table all around.

 

[TexasBred]

They had offered them around $27,000 an acre bonus money and 25% royalty. Pulled everythign off the table. Don't know if it was Chesapeake or who. I imagine you'll see all the O&G companies pull their horns in for the short run and then come back when things settle down.

Several companies mutually agreed to set the maximum chum money at $5K an acre in some counties. Some who had turned down $10K an acre are crying the blues now. Lots of previous offers are coming off of the table all around.

So I heard..some people were following the oil/gas company rep. out the door wanting to renegotiate.

 

[Brute 23]

There are little oil and gas companies that have appeared all over the place since the boom. Those are the ones probably backing out because they are privately backed by investors who may be getting nervous. Any companies of size works out of huge funds, multi-billion dollar funds. They don't shake as easy.

You may see lease money and such drop because obviously if the price they make off o&g drops they can't pay you as much. You will see other cut backs if it keeps falling.

 

[1982vett]

Hope it reigns in the ethanol craze and fertilizer prices fall with the oil and gas. I imagine that is only wishful thinking.

 

[TexasBred]

Hope it reigns in the ethanol craze and fertilizer prices fall with the oil and gas. I imagine that is only wishful thinking.

Haven't heard much talk about fertilizer prices lately. Urea supposedly went down about $200 a ton.

 

[bandit80]

Hope it reigns in the ethanol craze and fertilizer prices fall with the oil and gas. I imagine that is only wishful thinking.

Haven't heard much talk about fertilizer prices lately. Urea supposedly went down about $200 a ton.

Off subject of the thread, but I have heard from numerous people that fertilizer prices will come way down. I am in a predominantly corn/soybean area, and most producers who pre-paid for fertilizer back in August made a mistake this year. It was the right thing to do the last 3.

 

[backhoeboogie]

There are little oil and gas companies that have appeared all over the place since the boom. Those are the ones probably backing out because they are privately backed by investors who may be getting nervous. Any companies of size works out of huge funds, multi-billion dollar funds. They don't shake as easy.

You may see lease money and such drop because obviously if the price they make off o&g drops they can't pay you as much. You will see other cut backs if it keeps falling.

The little guys are real estate people. They lease up land, get it pooled, put in one well, then flip it to the big boys to develop. Nearly everyone of them only get one well in on a 640 +/- 10% pool. If they get one producing well within the lease clause, they lock up the land forever - until they flip it.

Their biggest ploy is to get poor people to sign for low royalty - and big chum money. Then they retain a royalty themselves when they flip. Once they flip they are done with the well and get a residual income henceforth.

Many of these folks are simply legal crooks. Investors follow them. Their landmen are polished. They call me regularly trying to get me baited and I love to jerk their chains.

 

[backhoeboogie]

By the way, Chesapeake just filed bankruptcy.

edit: Now I am hearing chapter 11. Direct sources cannot disclose anything at the moment.

 

[TexasBred]

By the way, Chesapeake just filed bankruptcy.

edit: Now I am hearing chapter 11. Direct sources cannot disclose anything at the moment.

Really?? Wow....they just filed about 6-7 new drilling permits in Johnson County yesterday. Maybe old T-Bone Pickens got to them too. :lol:

 

[HerefordSire]

By the way, Chesapeake just filed bankruptcy.

edit: Now I am hearing chapter 11. Direct sources cannot disclose anything at the moment.

Got a link? I heard they just closed on a credit facility for $400M.

 

[1982vett]

Stock closed at $18.35 up $2.01, not the price action of a company that filed anything close to bankruptcy.