Is History Doomed To Repeat Itself? - Read "Is Chesapeake Energy Abandoning the Marcellus Shale Region?
Whether we agree/disagree or are neutral on the contents of this article, it is an enlightening and thought provoking read.
http://www.examiner.com/article/is-chesapeake-energy-abandoning-the...
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Replies to This Discussion
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Permalink Reply by Jim Shoos on
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Is it just me... or does Tom Corbett have an uncanny resemblance to Leslie Nielsen? : )
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Robert Magyar, the author of this article, must have pretty close ties with both Deborah Rogers & Chip Northrup. And for the record...CHK. needs to deleverage 10-12 billion...not 22 billion, of which they have already amassed close to $6 billion with their recent $4 billion deal with GIP. (Global Infrastructure Partners)
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Permalink Reply by Area Man on -
It's annoying reading article after article how CHK and their unique business model are leading all producers into the hole. They are the anomaly, NOT the frontrunners indicating the entire industry is collapsing.
And yes, many operators are focusing on wet gas right now, but reserves are reserves. They will be developed at some point. People tend to have a very shortsighted view of the oil and gas industry – we will be in the Appalachian basin for quite some time. We just work on a different time scale, and perhaps that isn’t communicated well so the public hears wealth will instantly flow. A little bit of time should bring stability to these parts, but that’s not nearly as fun to speculate and write articles on!
Cheers,
-Area Man
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You made two very good points. The other producers should not be lumped together with CHK at this point in time. CHK is indeed an anomaly and their current problems do not/should not translate to others.
I do feel there is a disconnect between the reality of actual production and the expectations of many leaseholders. There are many people that I have talked to that have totally unrealistic expectations concerning timing, their lease and future royalties, growing pains of early prep, etc.
To be fair to them, most if not all of their information has come from interactions with landmen who were attempting to sign them to a lease. And we all know that landmen are not all created equal, especially in their mode of "presentation". ;o)
Time will bring clarity on many things.
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You're clueless!!!
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Permalink Reply by Bluflame on -
A.M.,
For what it is worth (probably not much!), I agree with your opinion. Also, I believe CHK and the other producers are victims of their own success in developing the Marcellus Shale. It's a matter of NG supply far outstripping demand. The current low price/MCF is creating new opportunities for NG which were not available at higher prices. (coal-to-gas power plant conversions, NG vehicles, LNG exports, etc) In the meantime, as noted in the article, producers are abandoning the Marcellus in droves the for "greener pastures" of the wet gas zone. BTW, wet gas prices are also descending.
It will take time for the market to achieve equilibrium, but eventually the pendulum will swing. A cold 2013 winter season would contribute. At that point, the rigs will return to the dry gas region.
CHK IS an anomaly; Mr. McClendon is a serial entrepreneur with a seemingly insatiable appetite for risk. The stars mis-aligned for his vision of a fully vertically-integrated O&G company. Of course, his "sideline ventures" haven't helped his case. But the man has vision. Arguably, there may not have been a Marcellus or Utica play without the aggressive actions of CHK, and in particular, Mr. McClendon. For better or worse, I am in his corner. Not a popular place to be these days!
BluFlame
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Mr. Flame,
I respect the fact that you're willing to be in Aubrey's corner. Most people have no interest in defending him these days. As far as prices normalizing, I have to disagree. Storage fields are nearing their maximum capacity. Even a very cold 2013 winter may not be enough to push demand high enough to effect supply. Prices should rise above $3-3.50 at some point within the next year but that isn't enough to make plays like the dry Marcellus profitable. The nat gas business has always been about feast then famine then feast again. The companies that are well positioned in liquids already should survive the lean years. Companies like DVN and APC can ride the pain train for much longer than CHK who is still 75% nat gas.
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Permalink Reply by Bluflame on
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Hello Marcus,
I'm not suggesting a timeframe for "normalization", only the inevitability of a turnaround in NG prices at some future point. I've been through multiple feast and famine cycles in the O&G industry. The only predictable thing is unpredictability!
Like most of us, Mr. McClendon's prime assets of vision, aggressiveness, and creativity are also his main liabilities. It's worth noting that CHK has been voted several times as a "best company to work for". In my eyes, that says a lot about his leadership qualities. I'd make a small wager that no business run by Carl Icahn ever qualified.
BluFlame
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Range gets 108% ROI at $5/mcf in the wet Marcellus. At strip they make 77%, which is a nice way of saying that they lose 23% over ten years. I don't have numbers for their dry gas break even point, but other plays like the Barnett are uneconomical below $5.50-6.
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Permalink Reply by Gary on
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In this wall street webcast, RRC says ..at todays gas prices they make 25% on the dry gas in the NE PA gas and 90% on the wet gas in SW PA gas..lots of interesting info in this webcast..abit slow in the beginning but good stuff throughout ..Q& A at the end is good
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I'm right there with you...anyone who recieved a healthy bonus check owes it to CHK. regardless if the signed with them.
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