On 11 December 2018, Riviera Resources, Inc. (“Riviera”) announced that it signed a definitive agreement to sell its interests in properties located in the Arkoma Basin in Oklahoma to an undisclosed buyer for a contract price of $68 million…
Down goes Frazier and Linn Energy, Sandridge Energy, and Chaparral Energy. All in bankruptcy within a month of each other. American Energy Partners are shutting the doors Newfield Exploration is leaving Tulsa. The patch has seen better days.
The Newfield exit is a bit baffling. It's not surprising that the management teams of publicly traded companies are notoriously selfish, but to close down the office that deploys 80% of the company's capital budget in order for them to maintain their faux bourgeois existence in the Woodlands is a stretch. Despite a top position in the STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher Counties), it is going to be more difficult for them to compete with locally based companies from their perch in Houston. There is something to be said for a company landman to know the local competition and to be able to drive to El Reno if need be to gather intel at the courthouse. Just as Apache's position is unraveling in the Mid-Continent after their retreat to the swamp that is Houston, Newfield could very well fall in their footsteps. It would be quite a treat to see one of the Oklahoma companies force pool Newfield out of everyone of their 42,000 new acres they recently acquired from Chesapeake.
More to follow,
Linn Energy, LLC is a large Mid-Continent operator. By rough estimation, they operate 1484 wells in Oklahoma alone in both the Anadarko and Arkoma Basins. Today, FuelFix, announced Linn expects to break their mortgage covenants in 2016. A bankruptcy announcement will likely follow unless Linn can renegotiate with its lenders. This announcement coupled with the delayed release of Linn's 10-K is an ominous sign for the operator that once delivered large distributions to its shareholders.
Leverage works both ways and many forget that when times are good and borrowed money is cheap. There will probably be little love lost between Linn and its offset operators and working interest partners. Linn has a reputation for being difficult to work with. This plus the fact they like to JIB their partners for pumpers' Coca Cola and new boots while deducting 50%+ from the gas gross revenues leaves many with a bitter taste in their mouths when they think of Linn.
More to follow,
Times have been better, but they have been worse. Oklahoma oil and gas operators are in a pinch. Did Chesapeake experience a dead cat bounce today? Will Linn Energy survive to the winter wheat harvest in Tuttle, Oklahoma? Lease prices are down and the litigating is up. The only thing we know about prices is that no private equity shop or big Wall Street bank will ever hit the nail on the head. They will always be wrong. "This time is different," "macro-price environment," "commodity headwinds," "the land grab is over," "SCOOP STACK MERGE," "NAPE was interesting," "lot of cash sitting on the sidelines," "ENCAP or NGP?" It doesn't even matter. It's all a game. Not "the Greatest Game," but a good one. Pawns hand over their money and take a 2%/20% haircut for the chance to sit at the table. It's a resources play they say, don't even need geologists. A damn shame.
More to follow.