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Granite Wash Royalty Trust From Chesapeake Energy

by Kenneth E. DuBose on July 12, 2011

A Granite Wash Royalty Trust on Chesapeake Energy’s property in the Mid-Continent Region of Oklahoma is the latest ploy to raise capital. The devil is in the details when it comes to Royalty Trusts. Will the trust operate into perpetuity or will it dissolve after so many years.  Will the operator drill in this area again?  If there is no drilling planned and the trust dissolves at some future date, you are just buying a decline curve without much upside. Make sure to review this trust in the same manner as you would any investment. You might be better off buying shares in the producing company.

“Chesapeake Energy Corp (CHK.N) said on Thursday it plans to raise up to $584 million in an initial public offering of units tied to production from a basin in western Oklahoma.”"Unit holders will receive quarterly distributions of cash from the proceeds that Chesapeake Granite Wash Trust receives from the sale of oil, natural gas and natural gas liquids from the wells in the Granite Wash basin, according to a filing with the U.S. Securities and Exchange Commission.”

“Chesapeake, known for its inventive means of raising cash to fund exploration and land acquisition, said production proceeds will come from 60 producing wells and 122 development wells to be drilled on 28,700 acres held by Chesapeake, the filing said.”

Read the full news release at reuters.com

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