Ed Bass, Others Win Royalty Lawsuit Against Chesapeake Energy
Aug 24 15
Chesapeake Energy improperly deducted post-production costs from royalty checks issued to Fort Worth investor Ed Bass and 20 other leaseholders stemming from natural gas pumped from about 4,000 acres in the Barnett Shale. While the summary judgment ruling by U.S. District Judge Ed Kinkeade on August 19, 2015 does not mention a dollar amount, court documents filed in the case indicate that the leaseholders could be owed at least $8.6 million and millions more could be added by the jury. The lawsuit against Chesapeake Energy states that the company improperly deducted post- production costs, expressly forbidden by the leases, and then used the sale of gas to affiliates to set a below-market price on which the royalties were paid, also a breach of the lease terms. There was a settlement conference between the parties on Friday but U.S. Magistrate Judge Paul Stickney filed a report stating that the parties were unable to reach a settlement. A trial on the damages is set to begin next month. According to the lawsuit, all the mineral-rights owners signed leases, now held by Chesapeake, that gave the company rights to produce gas under their property. The leases have been in place since about 2005, but production began much later. Under the lease terms, Chesapeake is not allowed to pass along "any part of the costs or expenses" of producing, gathering, transporting or processing gas. The landowners also contend that Chesapeake underpaid royalties because the company based their payments on a weighted average sales price and that the leases call for the use of a referenced price in the case when there is a sale to an affiliate. Lastly, the landowners assert that Chesapeake failed to act as a prudent operator when it failed to connect a number of unprocessed wells on the Winscott West and Rall Ranch to an independent third-party system, instead allowing the gas to flow to an affiliate that was unable to process it. Chesapeake, in this case and others, has denied that it underpaid royalties to the landowners and contends it has complied with the terms of their leases. The company has argued that it rightfully subtracts downstream post-production costs that do not reduce the royalties' value.
Chesapeake Energy Corporation Announces Unaudited Consolidated Earnings and Production Results for the Second Quarter and Six Months Ended June 30, 2015; Provides Operating and Financial Guidance for Full Year 2015; Reports Impairments of Fixed Assets and Other for the Second Quarter Ended June 30, 2015
Aug 5 15
Chesapeake Energy Corporation announced unaudited consolidated earnings results for the second quarter and six months ended June 30, 2015. For the quarter, the company reported total revenues of $3,033 million against $5,152 million a year ago. Loss from operations was $5,507 million against income of $610 million a year ago. Loss before income taxes was $5,596 million against income of $371 million a year ago. Net loss available to common stockholders was $4,151 million against net income of $145 million a year ago. Basic and diluted loss per common share was $6.27 against earnings of $0.22 a year ago. Cash provided by operating activities was $314 million against $1,352 million a year ago. Additions to other property and equipment were $35 million against $101 million a year ago. Adjusted net loss available to common stockholders was $126 million against net income of $235 million a year ago. Adjusted EBITDA was $600 million compared to $1,277 million a year ago. The year-over-year decreases in adjusted ebitda and operating cash flow were primarily the result of lower realized oil, natural gas and natural gas liquid prices, partially offset by increases in realized hedging gains and lower production and general and administrative costs. Adjusted net loss available to common stockholders was $126 million, or $0.11 per diluted share, which compares to adjusted net loss available to common stockholders of $235 million, or $0.36 per diluted share, in the 2014 second quarter. LBITDA was $4,890 million against EBITDA of $1,138 million a year ago.
For the six months ended, the company reported total revenues of $5,793 million against $10,198 million a year ago. Loss from operations was $10,547 million against income of $1,343 million a year ago. Loss before income taxes was $10,688 million against income of $1,117 million a year ago. Net loss was $7,810 million against net income of $696 million a year ago. Net loss available to common stockholders was $7,933 million against net income of $518 million a year ago. Basic and diluted loss per common share was $11.99 against diluted earnings per common share of $0.78 a year ago. Cash provided by operating activities was $737 million against $2,643 million a year ago. Additions to other property and equipment were $93 million against $198 million a year ago. Adjusted net loss available to common stockholders was $84 million against net income of $639 million a year ago. Adjusted EBITDA was $1,528 million against $2,792 million a year ago. Adjusted earnings per share assuming dilution was $0.00 against $0.95 a year ago. LBITDA was $9,212 million against EBITDA of $2,628 million a year ago.
For the quarter, the company's daily production averaged approximately 703,000 barrels of oil equivalent (boe), a year-over-year increase of 13, adjusted for asset sales. Average daily production consisted of approximately 119,500 barrels (bbls) of oil, 3.0 billion cubic feet (bcf) of natural gas and 79,200 bbls of NGL, which represent year-over-year increases of 11%, 11% and 24%, respectively, adjusted for asset sales. Production of natural gas was 275.4 bcf against 271.3 bcf a year ago. Oil was 10.8 mmbbl against 10.3 mmbbl a year ago. NGL was 7.2 mmbbl against 7.7 mmbbl a year ago. Oil equivalent was 63.9 mmboe against 63.2 mmboe a year ago.
For the six months, the company reported production of natural gas of 539.2 bcf against 531.4 bcf a year ago. Oil was 21.8 mmbbl against 20.2 mmbbl a year ago. NGL was 14.0 mmbbl against 15.2 mmbbl a year ago. Oil equivalent was 125.7 mmboe against 124.0 mmboe a year ago.
For the second quarter ended June 30, 2015, the company reported impairment of oil and natural gas properties of $5,015 million. Impairments of fixed assets and other were $84 million compared to $40 million a year ago.
The company expected operating and financial guidance for the year ending December 31, 2015. The company expects adjusted production growth to be 5% to 7%, liquids production to be 67 mbbls to 69 mbbls, oil production to be 41.5 mbbls to 42.5 mbbls, NGL production to be 25.5 mbbls to 26.5 mbbls, natural gas production to be 1,055 bcf to 1,070 bcf, total absolute production to be 243 mmboe to 247 mmboe and 2015 total production guidance increased to 667 677 mboe per day, up 4% from midpoint of prior guidance.
The company expects 2015 general and administrative expense to be in the range of $1.25 to $1.35, depreciation of other assets in the range from $0.60 to $0.70, interest expense in the range from $1.10 to $1.20, net loss attributable to non controlling interests and other in the range from $60 to $65, book tax rate to be in the range of 25% to 30%, capital expenditures in the range from $3,000 million to $3,500 million, capitalized interest of $475 million and total capital expenditures of $3,475 million to $3,975 million.