There is much mystery surrounding proper language to provide protections to the Lessor for

post-production deductions by the Lessee against royalties due. I am aware of the Chesapeake vs. Hyder

ruling, which I believe presumes that an oil and gas company can use the "work back" method of accounting,

to deduct post-production costs, back to the "well head" even though contrary language is present in the lease

stipulating "no costs" shall be deducted. It seems the "magic words" need to be clearly referenced in the lease, or

attached exhibits, and those words are "free and clear" or "cost free" as specifically applying to all royalty proceeds paid, and that great care needs to be taken, to clearly identify, that royalties should be calculated  "at the point of sale"

instead of being calculated "at the well head". Relating to this, I have a Chesapeake lease, where the language reads

that no post production charges, of any type, will be deducted from the Lessor's royalties, period. Though this language, (not verbatim) does not stipulate where, or, how the royalty was to be calculated; neither "at the well head" or "point

of sale" is even referenced. I can only say, that on my past royalty statements,  "post production" costs have never appeared on my statements;  and so am I to conclude that this "no costs" royalty provision is working, or, that Chesapeake had used the "work back" method of accounting, back to the "well head" and  provided no notice of those expenses to the Lessor, as they have interpreted the law, allowing them to do so.

If anyone could put this in layman's terms, it would be greatly appreciated in the negotiating process of developing a good lease.

Shelby

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Yes.  Chesapeake changed the name in 2014.

CHESAPEAKE ENERGY MARKETING, L.L.C. Limited Liability Company (Non-Louisiana) OKLAHOMA CITY Active

Previous Names
  CHESAPEAKE ENERGY MARKETING, INC. (Changed: 11/20/2014)  
Business: CHESAPEAKE ENERGY MARKETING, L.L.C.
Charter Number: 34543767Q
Registration Date: 11/21/1996
Domicile Address
  6100 NORTH WESTERN AVE.
  OKLAHOMA CITY, OK 73118
Mailing Address
  6100 NORTH WESTERN AVENUE
  OKLAHOMA CITY, OK 73118
Principal Business Office
  6100 NORTH WESTERN AVENUE
  OKLAHOMA CITY, OK 73118
Registered Office in Louisiana
  3867 PLAZA TOWER DR.
  BATON ROUGE, LA 70816
Principal Business Establishment in Louisiana
  405 HWY. 167 SOUTH
  CHENEYVILLE, LA 71325
Status
Status: Active
Annual Report Status: In Good Standing
Qualified: 11/21/1996
Last Report Filed: 10/24/2016
Type: Limited Liability Company (Non-Louisiana)
Registered Agent(s)
Agent: C T CORPORATION SYSTEM
Address 1: 3867 PLAZA TOWER DR.
City, State, Zip: BATON ROUGE, LA 70816
Appointment Date: 8/15/2005

Officer(s) Additional Officers: No 
Officer: CHESAPEAKE ENERGY CORPORATION
Title: Manager
Address 1: 6100 NORTH WESTERN AVENUE
City, State, Zip: OKLAHOMA CITY, OK 73118

Mergers (1)
Filed Date Effective Date: Type Charter# Charter Name Role
10/12/2007 10/12/2007 MERGE 34543767Q CHESAPEAKE ENERGY MARKETING, L.L.C. SURVIVOR
36283767Q BROADSTAR GAS GATHERING, LLC NON-SURVIVOR

Thanks Skip!

You're welcome.

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