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Risks Related to the Units
−Removed: Chesapeake's ability to satisfy its obligations to the Trust depends on its financial position, and in the event of Chesapeake's bankruptcy, it may be expensive and time-consuming for the Trust to exercise its remedies, and the Trust may be treated as an unsecured creditor of Chesapeake.
−Removed: Chesapeake is obligated to market, or cause to be marketed, the oil, natural gas and NGL production related to the Underlying Properties.
+Added: If the financial position of Chesapeake degrades in the future, Chesapeake may not be able to satisfy its obligations to the Trust.
+Added: Chesapeake is obligated to market, or cause to be marketed, the oil, natural gas and NGL production related to the Underlying Properties and to provide management services to the Trust.
Due to the Trust's reliance on Chesapeake to fulfill these obligations, the value of the Royalty Interests and its ultimate cash available for distribution is highly dependent on Chesapeake's performance.
Chesapeake's ability to perform its obligations will depend on its future financial condition, economic performance and access to capital, which in turn will depend upon the supply and demand for oil, natural gas and NGL, prevailing economic conditions and financial, business and other factors, many of which are beyond Chesapeake's control.
−Removed: As a result of the impacts to Chesapeake’s financial position resulting from declining industry conditions and in consideration of the substantial amount of long-term debt outstanding, Chesapeake has recently engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code.
−Removed: During any bankruptcy of Chesapeake, it is possible that payments of the royalties may be delayed or deferred, and the ability to collect cash payments being held in Chesapeake's accounts that are attributable to production from the Trust properties, and even its ability to demand any of these remedies, may be stayed or prohibited by the bankruptcy proceeding.
+Added: On June 28, 2020, Chesapeake and certain of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the "Chapter 11 Cases") for reorganization (the “Bankruptcy Filing”) under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).
+Added: On June 29, 2020, the Bankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In re Chesapeake Energy Corporation, Case No.
+Added: 20-33233 (DRJ).
+Added: Subsidiaries with noncontrolling interests, consolidated variable interest entities and certain de minimis subsidiaries (collectively, the “Non-Filing Entities”) were not part of the Bankruptcy Filing.
+Added: The Non-Filing Entities and the Trust will continue to operate in the ordinary course of business.
+Added: The Debtors continue to operate the business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
+Added: Chesapeake’s ability to perform its obligations related to the operation of the underlying properties and its obligations to the Trust will depend on Chesapeake’s future financial condition and economic performance, which in turn will depend upon the supply and demand for oil and natural gas, prevailing economic conditions and financial, business and other factors, many of which are beyond the control of Chesapeake.
+Added: Chesapeake cannot provide any assurance that its financial condition and economic performance will not deteriorate in the future.
+Added: A substantial or extended decline in oil or natural gas prices may materially and adversely affect Chesapeake’s future business, financial condition, results of operations, liquidity, ability to emerge from Chapter 11 bankruptcy, ability to finance planned capital expenditures or ability to comply with the financial covenants contained in its debt instruments.
+Added: If the reduced demand for crude oil in the global market as a result of the economic effects of the outbreak of the COVID-19 pandemic continues, and a continued low level of demand and prices for oil and natural gas or otherwise persists for the near future or longer, or if the outbreak adversely affects employees of Chesapeake and such employees’ ability to conduct Chesapeake’s operations, such factors could have a negative impact on the financial condition and economic performance of Chesapeake.
Risk Factors Relating to the COVID-19 Pandemic
−Removed: The ongoing coronavirus (COVID-19) pandemic and related economic turmoil have affected and could continue to adversely affect proceeds to the Trust and quarterly cash distributions to unitholders.
−Removed: The ongoing COVID-19 outbreak, which the World Health Organization declared as a pandemic on March 11, 2020, has reached more than 200 countries and has continued to be a rapidly evolving economic and public health situation.
+Added: The ongoing COVID-19 pandemic and related economic turmoil have affected and could continue to adversely affect proceeds to the Trust and quarterly cash distributions to unitholders.
+Added: The global spread of COVID-19 created significant volatility, uncertainty, and economic disruption during the first six months of 2020.
+Added: The ongoing COVID-19 outbreak has reached more than 200 countries and has continued to be a rapidly evolving economic and public health situation.
The pandemic has resulted in widespread adverse impacts on the global economy, and there is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus, such as quarantines, shelter-in-place orders and business and government shutdowns.
+Added: State and local authorities have also implemented multi-step policies with the goal of re-opening.
+Added: However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases.
The Trust's reserves and quarterly cash distributions depend primarily upon the prices realized by Chesapeake from the sales of oil, natural gas and NGL.
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There is no guarantee that any actions taken by Chesapeake in light of COVID-19 will be effective in preventing future disruptions to its business.
−Removed: Moreover, future
−Removed: operations of Chesapeake could be negatively affected if a significant number of its employees are quarantined as a result of exposure to the virus, which in turn could negatively affect proceeds to the Trust and the Trust’s reserves and quarterly cash distributions to unitholders .
+Added: Moreover, future operations of Chesapeake could be negatively affected if a significant number of its employees are quarantined as a result of exposure to the virus, which in turn could negatively affect proceeds to the Trust and the Trust’s reserves and quarterly cash distributions to unitholders.
Chesapeake regularly monitors the credit worthiness of its customers and derivative contract counterparties.
−Removed: Although Chesapeake has not received notices from any of its customers or counterparties regarding non-performance issues or delays resulting from the pandemic, to the extent there is an outbreak of COVID-19 in the communities in which it operates, it may have to temporarily shut down or reduce production, which could result in significant downtime and have significant adverse consequences for its business, financial condition and results of operations.
+Added: Although Chesapeake has not received notices from any of its customers or counterparties regarding non-performance issues or delays resulting from the pandemic, it may have to temporarily shut down or further reduce production, which could result in significant downtime and have significant adverse consequences for its business, financial condition, results of operations and cash flows.
Furthermore, the impact of the pandemic, including a resulting reduction in demand for oil and natural gas, coupled with the sharp decline in commodity prices following the announcement of price reductions and production increases in March 2020 by members of OPEC+ has led to significant global economic contraction generally and in our industry in particular.
While an agreement to cut production has since been announced by OPEC+ and its allies, the situation, coupled with the impact of COVID-19, has continued to result in a significant downturn in the oil and gas industry.
−Removed: Oil prices declined sharply in April 2020 and remain volatile.
+Added: Although OPEC+ finalized an agreement in April 2020 to cut oil production by 9.7 million barrels per day during May and June 2020, and OPEC+ agreed in June 2020 to extend such production cuts until the end of July 2020, crude oil prices have remain depressed as a result of an increasingly utilized global storage network and the decrease in crude oil demand due to COVID-19.
Oil and natural gas prices are expected to continue to be volatile as a result of the near term production increases and the ongoing COVID-19 outbreak and as changes in oil and natural gas inventories, industry demand and national and economic performance are reported, and we cannot predict when prices will improve and stabilize.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
+Added: August 14, 2020
CHESAPEAKE GRANITE WASH TRUST
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.