pocket change............
While the natural gas rush in the Marcellus Shale has slowed, claims on that gas continue to shift with Chesapeake Energy Corp. using its natural gas as collateral for borrowing.
The result is a mortgage filed earlier this year, and amended a few times, with the most recent at the end of June, in a staggering amount — up to $10 billion.
It’s likely the most zeros that have ever turned up on a document at the Wyoming County Recorder of Deeds office.
The mortgage also applies to Chesapeake mineral rights in Ohio, Louisiana, and Oklahoma. The massive document has pages listing every lease Chesapeake has in Wyoming County.
Amid collapsing prices of natural gas, the already highly leveraged Chesapeake has been selling assets and trying to build liquidity. Part of that has been accessing credit it needs to survive. Earlier this year, the company noted that creditors reaffirmed the company’s borrowing base, the value of collateralized assets of $4 billion, essentially a borrowing limit.
Chesapeake is trying to ease the minds of nervous creditors, worried about what they are owed while being asked to hand over more money to a shaky entity.
“Chesapeake is trying to tell their creditors ‘we are good for it, and we are going to take care of you,’” said Steven Saunders,
a Scranton energy attorney. “The creditors want to know what their interest is — that’s every single lease getting listed on the mortgage.”
It doesn’t mean much for the leaseholders, however.
Les Greevy, a Williamsport attorney active in the National Association of Royalty Owners, said he doubts the mortgage will significantly impact landowners.
“Chesapeake takes a lease from the landowner in exchange for the right to remove the resource and obligation to pay a royalty,” he said. “If Chesapeake mortgages their interest in property, that does not change the royalty or the relationship.”
Natural gas royalty owners have other real problems. The historically low price of natural gas hasn’t been generating royalties. Mr. Greevy said his last royalty check was 89 cents.
Chesapeake said in March it would not pay royalties for that month because the company lost money on the gas it drew from the earth.
Mr. Saunders expects some angst from landowners, who thought, even if they received a modest lease bonus, that royalties would be the big boon. Instead they’ve been getting pocket change.
“People will see their name on a $10 billion mortgage, shake their heads, and say ‘I won’t see a dime of it,’” he said.
chasgas
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Replies to This Discussion
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Permalink Reply by 0ym9x5ag7ury2 on
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Let's all stop crying and take action in the form of letters to all of those who think we don't know what is going on.
Let your state officials know that we are watching and they will lose their next election for taking Chesapeake Bucks while those who elected them are being stolen from.
We are at a critical point where Chesapeake is trying to survive so they can use our stolen royalties to buy their way in the US as they have always done.
If you aren't in a lawsuit, then put together a Class Action lawsuit and take it to Chesapeake Energy. Don't sit around letting your high blood pressure lead to an early demise, take action and be around to see the fruits of your labor, maybe even spend some of the stolen cash that the ceo is stuffing in his bank account.
Those with Pugh Clauses in your leases, pull your land that isn't under production, teach Chesapeake that reaching out 1200 plus feet from a lateral to hold you and your neighbors land by 1/2 acre of production is yesterdays thinking, today we will act and deny the use of our land for collateral.
For those not under production, demand a release when your lease ends or it will remain as part of Chesapeake's collateral or they will flip it when leaving your state, especially Ohio where the RICO Act has been violated.
Speak Up and Speak Out, let the US Banks, Lenders and stock traders know that anyone who invests in this company will lose, since there is a line of landowners in every state under production waiting for their day in court to collect what was taken unfairly or outright stolen.
It's time domestic oil and gas companies follow the laws of each state and the federal government.
See what happens when you borrow money then tell the lender that you found a loophole in the contract or it can be interpreted several ways so you don't have to pay the lender back, so you give them 50 cents a month. You will lose, so why should big O&G get to play this game if we can't, they are people too as ruled by the US Supreme Court.
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Ron Hale's first sentence says it all. Do not sit back and be a spectator, be an active participant. Perhaps legal action and letters but I do feel that there are other avenues. If gas is being "stolen" under the guise of market enhancement then non-violent actions, like those of the 1960's and 70's are not unreasonable.
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John,
PA landowner are being stolen from by overcharges on pipeline use and Market Enhancement Charges.
Ohio is being overcharged for Natural Gas Liquid processing by Chesapeake's Access Midstream plants similar to the PA pipeline overcharges.
Now Chesapeake wants Net Back/Production Charges. They conduct a phony sale to themselves, rob Ohioans then charge us for all activities to get the product to the end buyer where we should be sharing in the real sale price.
I won't mention the 25% Royalty Total E&P has paid Ohioans but the money has never made it out of Chesapeake's possession. Shame on the whole lot of them.
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John,
In order to have a peaceful "Assembly" you would need to weed out any drug users that could become violent and those who play war video games and don't know the difference between real life and a game, who might do something unpredictable.
With todays combat ready police forces, you wouldn't survive a misunderstanding where peaceful citizens had one bad egg show up in the group with a gun and cause a slaughter to ensue. After that someone would have to go to jail and become a Felon and I don't think that would be the local police. There goes your right to bear arms and your day job.
Personally I'll stick with the letter writing idea and a good criminal activities case.
A heart felt Thanks to all those who used our tax money to heavily arm our police forces so they could "protect" us from ourselves.
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Yeah, you go right ahead and "participate"....it will be hilarious watching sleazy lawyers argue on behalf of their hundredaire and thousandaire 2 nickel clients.....good luck with your ASS action suits....all the best to you while you take on BILLIONAIRES....the money you get will buy you a pack of hotdogs which is actually rather fitting since you all have been getting weinered anyway according to hail storm Hale....lol
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Permalink Reply by craig on
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Do you not believe in the rule of law?
Sounds like you might be part of the problem.
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I'll tell you what I believe.....I believe about 75% of you people went into this with your heads up your keisters and NOW you're unhappy....no one held a gun to anyone's head so stop all your whining and be grateful for what you have and what you are getting
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And you as well
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Permalink Reply by tacoma7583 on
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Do the banks that have issued mortgages to CHK, even know that they are not renewing them, reducing the collateral? Some of theses lease that probably only have to pay the "intial payment" maybe $100 to renew it.
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Tacoma,
To see an example of a Chesapeake Loan go to the Carroll County Records on line and do a search on the Deutsch Bank. This is the loan Carroll County & Columbiana County Ohio leases held the mortgage for Chesapeake.
I hear Total E&P can take over our wells if Chesapeake should fall on their butts. Being an International Company they will probably pay a fair royalty. What they are paying now is not making it to the landowners.
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Permalink Reply by jnm on
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There is an advantage to Chesapeake having your lease listed as collateral for a loan.They are forced to renew it if it comes due. I am a member of an organization that has land in an area where few wells have been drilled and the ones drilled have been poor performers. Last fall out of the blue we received a check to renew the lease for three years as called for in the original lease. It was several hundred thousand dollars of "found money". We were quite happy to accept it and not worry about any "conspiracy theories".
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