Chesapeake and the Deutsche Bank mortgage

I know it's still a fairly long time horizon, but does anyone have any insights or guesses as to what will happen when the five year period ends on the leases Chessie purchased from Everflow Eastern in 2012 and mortgaged to Deutsche Bank?

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Permalink Reply by Joseph-Ohio on September 17, 2015 at 6:59am
'...........why should they??'

Future value.

How far into the future ? Remains a pregnant question in my mind.

It's a new world as far as leaseholds go from what I can interpret.

'New', because of long horizontal bores as opposed to (old) conventional single shot holes.

The game has changed big time.

JMHO.
Permalink Reply by Summer Johnston on September 17, 2015 at 8:53am

So Jesse, would your thought be that if--and it's all an if--Chessie does NOT renew those leases with Everflow or somehow extend them that the leases die and Deutsche Bank eats the half billion or so it advanced Chessie in the form of a mortgage? 

I cannot see how DB has any right to extend the lease b/c the lease agreement was between Chessie and Everflow.

Permalink Reply by Jesse V. on September 17, 2015 at 9:11am

The wording of Leases are very clear. If the payment for option to extend is not made the Leases will expire. It happens all the time. If the acreage is considered of value at the cost of the extension then they will pay the extension. If not they'll let it expire. If we were talking about cheap lease renewals at around $100/acre sure pick it up. But if they aren't doing anything to develop this investment prior to losing it don't expect for them pay a high bounty to possibly not develop for another 5 years. 

I'm not familiar with this area. I'm just telling you what I have seen play out across the marcellus region over the past 7-8 years. Areas are drilled and production and flow are proven. The areas with good production are considered far more valuable than areas that for one reason or another come in at low levels or simply aren't considered good geologically. 

As far as the bank is concerned. I have no clue. I assume these Mortgages were likely secured against more than just the Leases in that area. Yes, Chesapeake likely will be scrabbling soon to either unload or file for bankruptcy protection. To my knowledge I have never seen a bank try to operate leases they had security interests in.  

Permalink Reply by Summer Johnston on September 17, 2015 at 10:15am

If memory serves me correctly, I thought it was just the minerals themselves that guaranteed the mortgage, that if Chessie didn't pay back the half billion then Chessie forfeited without dragging this through the courts and DB would assume the rights. Of course, if the lease is voided, that would seem to indicate DB would be holding an empty bag. 

It's hard to believe but the Everflow to Chessie assignment was all done over 3 years ago already. 

Do you think that it's an all-or-nothing deal whereby all the leases are in the basket or that piecemeal lease renewals could occur? It's so complicated.

Mike MurphyPermalink Reply by Mike Murphy on September 18, 2015 at 2:37am

Debtwire reporting that getting "low-ball" bids for dry Utica. Hoping for $2B, but buyers offering ~$700MM. final bids due in 4 wks

on their  way out stock fell 4.4%

looks like you wont need to worry about CHK renewing anything

Permalink Reply by Summer Johnston on September 18, 2015 at 5:19am

Mike, andmaybe that's what you're trying to convey here, what good will it do a company that purchases Chessie's dry Utica--or any of the Utica, if the leases expire in the next couple of years? 

Chessie apparently doesn't have $$$ to extend the leases and they end in less than 2 years anyhow. 

Permalink Reply by Joseph-Ohio on September 18, 2015 at 3:00am
Jesse V.,

Maybe that's yet to happen ? ?

I've read elsewhere on here (albeit much earlier) that it doesn't take much action to maintain control of acreage (due to work done or intent to commence work on spudding a well or some such).

Someone wrote once that some E & P parked a truck (or something other like a 'dozer / loader) to show work was commencing and it was enough to maintain control of the acreage. Don't know what if anything else was involved - perhaps a Unit Declaration / other paperwork.

Any validity in that tact I wonder ? ?
Permalink Reply by Joseph-Ohio on October 4, 2015 at 1:22am
A thought:

What landowner that ever bought land did so not thinking of it's future value ?

Is it wrong to think that to also be reasoning for O & G ?

I don't think so.

How about you ?
Permalink Reply by Joseph-Ohio on October 12, 2015 at 4:47am

When are these leases we're writing about (or maybe the majority of them) coming to term ?

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