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.
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.
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.
Debtwire reporting that
$CHK 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
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.
When are these leases we're writing about (or maybe the majority of them) coming to term ?