The shale bust: What can be next?

[Idaho_Cowboy]

The shale bust: What can be next?
By Paul Greenberg
Published Sept. 29, 2016
Read more at http://www.jewishworldreview.com/cols/greenberg092816.php3#rmZuReKsUrjOocdV.99

Pipeline explosions that shut down whole towns. Floods that require evacuations of low-lying parts of long-established communities. And now some folks who are owed royalty checks say that there are drillers who take an exorbitant share of what's owed them by deducting entirely too many fees and expenses from the landowners' checks. Even ardent supporters of exploring for natural gas may rise up in protest in these ever-trying circumstances.

"This is robbery," complains Doug McLinko in Pennsylvania's natural-gas country, aka the Marcellus Shale. "People up here are fighting mad." He was speaking from what's got to be the country's largest field of natural gas. Prices were already depressed in this market, where some landowners have seen their payments go down to next to nothing or even gotten notices saying they owed the drillers money. The worldwide glut of petroleum products continues to take its toll not only on the market but people's tempers.

Here in Arkansas, as well as Texas, Ohio, Louisiana, Oklahoma and Pennsylvania, one company -- Chesapeake Energy -- is facing lawsuits over how much it's charging landowners. Those welcome checks were once the salvation of family farms. They were some folks' source of income. But now, in this market, folks may be examining their royalty checks with renewed interest -- and ire. Who can blame them? All the economic analysis in the world about how things that go up must come down, boost may only presage bust, and so dispassionately on may not help much when the wolf is at the door and yowling....
Read more at http://www.jewishworldreview.com/cols/greenberg092816.php3#rmZuReKsUrjOocdV.99

[thackney]

Chesapeake Energy Gets Subpoena Seeking Accounting Information
http://www.wsj.com/articles/chesapeake-energy-gets-subpoena-seeking-accounting-information-1475174358

Chesapeake receives DoJ subpoena on accounting for asset purchase
http://www.reuters.com/article/us-chesapeake-enrgy-investigation-doj-idUSKCN11Z23B

[Idaho_Cowboy]

Thanks for the links @thackney It will be interesting to see how this all pans out.

[IsailedawayfromFR]

Nothing new here, except to new participants.

The biggest danger is to rely upon royalties and bonuses.  The more proper way is to just look at them as a freebie that will likely not last.

[Smokin Joe]

Nothing new here, except to new participants.

The biggest danger is to rely upon royalties and bonuses.  The more proper way is to just look at them as a freebie that will likely not last.

I told more than one mineral owner (commonly the landowner) to bank the first year of royalty checks or put them in a safe investment, and don't buy anything expecting 'oil money' to pay for it that will have a payment more than 1/4 of the next checks. If they had to do it (buy equipment, for instance), pay cash for it, in full or as close as they could. I explained the decline curve on horizontal wells common in this area (production decreases from initial production by 70-80% in the first two years before it stabilizes), how that would affect income, and then reminded them that the price of oil could drop, too. I saw too many in the last boom run out and get deep in debt to buy all the toys, and then end up selling them for dimes on the dollar later to get out from under the debt. Some lost it all to bad money management.

[montanajoe]

Nothing new here, except to new participants.

The biggest danger is to rely upon royalties and bonuses.  The more proper way is to just look at them as a freebie that will likely not last.

Yep knew a land man up here 40 years ago that used to tell the same stories of how this repeats every cycle..