Replies to This Discussion

Permalink Reply by JK on April 4, 2013 at 10:41am

This is a new one from chk.

Never heard this before.

I figure they will use alot of different excuses.

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Permalink Reply by gary smith on April 4, 2013 at 10:58am

the dog ate them.

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Permalink Reply by Valorie Krauss Huckabee on April 4, 2013 at 11:08am

Never heard this before

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Permalink Reply by Tico on April 4, 2013 at 2:08pm

We didn't get ours either, they told me on the phone they couldn't sell the gas, statoil did, but they couldn't?????

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Permalink Reply by Jack Straw on April 4, 2013 at 2:28pm

Companies have the ability to hedge gas sales (sell gas forward).

They can line up contracts whereby they guarantee to sell a certain amount of Natural Gas at a certain price, upon a certain date.

If a company thinks that Natural Gas prices will rise in the future, they are less likely to hedge.

If a company wants to assure that they will have sufficient cash flow, they will hedge (sell forward) enough Natural Gas such that they are guaranteed of a certain amount of cash flow.

If a company thinks that Natural Gas prices will fall in the future, they are likely to hedge (locking in a price they believe to be attractive). 

If a company has a lot of debt, their lender(s) may require them to hedge a sufficient amount of production to cover their operating cash flow requirements and (importantly) enough money to make interest payments to lenders.

I would suggest that Statoil possible hedged production from your well (they could have essentially sold the gas that was produced in February six months earlier).

It is quite possible that CHK had not hedged their production, and when they tried to sell the gas their was either no buyer or (more likely) the price a buyer was prepared to pay was less than CHK was willing to accept.

 

Hedging is a critical strategy that can either make or lose a lot of money for a company.

There is a futures market for Oil and for Natural Gas.

 

All IMHO,

                 JS

 

 

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Permalink Reply by robert c miller on April 4, 2013 at 3:12pm

Did anyone  get an attorney prior to getting royalties to make sure the correct percentage

is being paid?Just curious because Iam in line for royalties this summer according to those in the know at Gulfport.

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Permalink Reply by JK on April 4, 2013 at 3:15pm

Jack Straw,

Thank you for this explanation.

I've never heard this before and it does make sense in the gas business.

We make all these assumptions and accusations from a point of non-knowledge.

All guess work and in the end it is still business.

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Permalink Reply by jett on April 4, 2013 at 3:25pm

Jack,

Thanks so much for explaining "hedging" in such a way that was so easily understood.

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Permalink Reply by Stan G on April 5, 2013 at 5:17am

I understand what you are saying about hedging but the well produced gas. Statoil paid royalties on their share from this well. Where is the CHK gas from this well now?

It had to have been sold.

They are just playing games with the money like they do with deductions. They screwed up their finances so they are taking what they can from all over, particularly landowners, to make their books look better.

I for one am glad they got rid of Aubrey. Maybe they can fix themselves and start being a decent company again.

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Permalink Reply by Jack Straw on April 5, 2013 at 7:57am

Stan, RE: "Statoil paid royalties on their share from this well. Where is the CHK gas from this well now?"

That is a good question, but one that likely only CHK could answer (and then only if you could reach someone who both knew and was willing to answer).

It is possible that Statoil sold their share of the gas and CHK moved that gas into storage, pending a buyer. To add insult to injury, CHK would in all likelihood then charge back a portion of the storage costs to the royalty holder as a "Marketing Expense".

In a perfect world, the royalty holder would be treated as a partner. Sadly,  as a landowner, we live in no where near a perfect world. We are rarely contacted except when something is wanted of us; and even then only the minimal amount.  

Good luck in finding out the details. If you succeed, please post to inform and educate us as to the details of the games played (games for which we are not informed of the rules).

 

All IMHO,

                  JS 

 

 

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Permalink Reply by Denver Gallentine on April 8, 2013 at 9:15am

Jack, very interesting. I am constantly amazed @ how much info I get from these sites. Thank you. - Denver

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Permalink Reply by 2z248p19vqnh9 on April 13, 2013 at 9:58am

Excellent explanation of how the G&O Co.'s 'take care of business', Jack. The G&O Co.'s in some ways must play' in these traitorous waters. They are NOT good for 'individuals' unless they are 'seasoned', and even then - can loose your shirt +. As Jack said, for companies...and the 'make or loose' a lot of $$$ - yes.

For individuals - 'hedging' or 'futures markets' are VERY dangerous territory. Wouldn't ETF's be better? or possibly UIT's for individual persons?- or individual stock ownership itself would be better than futures? IF stock goes down - still OWN it, can 'dollar cost average' by getting some shares lower IF the stock is just going through a trough. BUT there is much homework to do. 

Investing In Oil And Gas UITs   *This information may help individuals - you have helped with understanding of WHY things happen within the G&O circles, Jack. This may help individuals.

Again, well put, Jack. (calls/puts...).

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