How Chesapeake finances Ponzi/Bubble by victimizing leased (but undrilled) Farmer Bob

"It won't be long, before I'm gonna need somebody to lien on."
 -- Aubrey McClendon sings Bill Withers


DIRTY BUBBLE ECONOMICS
A farmer signs a lease with Chesapeake,
but not yet in a spacing unit.

He goes to refinance his property (wants to buy a new truck)
and he gets a BIG surprise!

AS YOU KNOW if you've been reading my blogs,
there is ZERO cash in shale-gas exploitation
(cf. Chip Northrup¹, Deborah Rogers², David Hughes³  ... see footnotes for links).
None of the majors are making any money.

All of the drilling is being financed by Wall-St credit lines
("funny money").

Here's one way they do it:

1. SIGN Farmer Bob whose property is an outlier--
   not in a "sweet spot", but near enough.
2. Convince CitiBank, Goldman Sachs, Barclays, or CapitolONE, etc
   to underwrite a $500M line of credit based
   on Farmer Bob's FUTURE O+G production,
3. Take a lien on Farmer Bob's property without his knowledge.
4. Drill a few wells with the cash, but mostly acquire a bunch of new leases.
5. Repeat until the bubble bursts.
   

(h/t: Debbie Lambert)

http://www.timesonline.com/news/energy/liens-could-be-obstacles-for-gas-leaseholders/article_55281616-2881-544a-9c9b-19b1f0d6a4e5.html

Chip's already got a post up about it:
 
http://www.nofrackingway.us/2014/01/05/500-million-frack-lien-complicates-homeowners-refinancing/
 

With a video:

http://www.youtube.com/watch?v=eh-sRMUt7NY

Footnotes:

1) Northrup: http://www.youtube.com/watch?v=Z8ZhypHjwME&list=PLJ4sBXNT-ETp0aZilXGWBikMJgNoTeW2K

2) Rogers: https://www.youtube.com/watch?v=JYaC7L2svoQ

3) Hughes: http://shalebubble.org/drill-baby-drill/  --  http://www.youtube.com/watch?v=6r_UjRE1HvU

--
--
May you, and all beings
be happy and free from suffering :)
-- ancient Buddhist Prayer (Metta)