Wednesday, September 5, 2012

Is Chesapeake Energy Abandoning the Marcellus Shale Region?

This is huge news! 
The Marcellus Shale releases dry gas (no oil mixed in).  But dry gas is so cheap that it is not economically feasible to extract and sell.  Wet gas which contains some oil is much more profitable.  The oil separated from it can be sold for $90 a barrel.  Even T. Boone Pickens has dumped his investments in Chesapeake Energy.  Wet gas is found in the Utica Shale, a formation below the Marcellus and prevalent in SW PA and Ohio. 

The June shareholders meeting of Chesapeake Energy was tense as shareholders became aware of the difference between dry gas and wet gas.  Might they have been told of this from the beginning, they asked.  They are understandably very upset and confused.  Leaseholders are wondering if they will ever get the royalties they were promised. 

The Marcellus Shale Play is still at the speculative stage.  Now the actual figures are looking quite bad in comparison to the wildly optimistic predictions that landmen made to convince landowners to sign leases.

Read the article here.

Aubrey McClendon was stripped of his chairmanship of Chesapeake.  Now some are calling for his resignation from the Board of Directors.  Chesapeake may be headed for disaster as its cash flow dwindles by the day.


smurfette said...

I hope Aubrey gets kicked out on his butt. What a lovely industry-"Oh, it's true we did come in and pollute your well water and soil and air, but the stuff doesn't bring in QUITE enough money now, so BYEEEE!"

Peacegirl said...

Smurfette- I agree completely. This gas industry has been engaged in pure speculation while getting all these leases and promising the world to landowners. But I think people in general didn't realize the guesswork that was going on. They thought it was a sure thing. I would bet my bottom dollar that the people who signed leases had no idea that this was a gamble, and they surely expected at least some royalties. Now I guess the Christmas trees (well heads) left behind on hundreds of well pads will just sit there forever while weeds grow up and cover them. Years from now some kids will find them and wonder what they are.

Bettines said...

While I'm not surprised that the gas "business" seems to be going "bust" - I feel so sorry for the landowners that were "sold" a bill of goods and signed a gas lease based on a dream that this would "save" them. I am Relieved that - although the "presence" of the gas industry will be felt in the Valley forever - Camp did Not "go down that road" and make a Huge error in judgement in signing a lease. Unfortunately, it may be too late to really "save" Camp if it is found that our water has been contaminated - anyone have a match? Sorry. Thanks for the update, Peacegirl - keep up the good work!

Anonymous said...

I see that CHK is now borrowing money from its partners (Anadarko, Stat-oil, Mitsui) and mortgaging leases in Bradford County, PA. Does the investment community know about this? Why would CHK be borrowing money from its partners and not a bank???