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Permalink Reply by GoshDarn on February 9, 2012 at 9:30

R. Griffin:

As I understand it, a certain landowner (or landowners) specifically requested a "no deductions clause" -- i.e., a "free royalty clause" -- be added to the addendum of their lease/s with CHK.  Then a certain landman, or landmen, agreed to do so, and they told the landowner/s that they'd added such a clause into the CHK lease/s.

Then later, when the well/s come in -- it turns out the so-called "free royalty" clause wasn't properly written to protect the landowner, i.e., the wording of the clause allowed CHK to take out deductions.  So basically it was a scam.

In other words, "the CHK model" was sorta an outright fraud (might be one way to describe it).  Or another way to describe it would be that the landman/landmen flat out lied to the landowner/s.

Then again, it might not have been the landman's fault.  It might have been the higher-ups at CHK.  One would assume that this scam clause was probably written by a CHK "corporate" lawyer.  (One would assume.)

Smells bad, huh?

Yes, it does.

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Permalink Reply by Roy Austin Smith on February 9, 2012 at 14:45

changed after landman turned lease.  On of the ten million scams they run on or especially the poor land owner.

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Permalink Reply by Grillin' - MmmMmm on February 10, 2012 at 4:05

I'm assuming that after the clause was added, the landowner got a chance to review before signing??  Or if the landowner signed and then asked for the change, you are kind of at their mercy.  In either case, if you sign, they are only bound by the words on the paper.  Understand the words before signing.  Please.  If you don't understnad them or don't feel comfortable, DON'T SIGN and have someone review it for you.

If you don't do the above, then NO ONE IS SCAMMING YOU!  Never sign a lease until you are happy with it and willing to live with it forever!

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Permalink Reply by mickiebyrd on February 10, 2012 at 3:48

Chesepeake does not care about a no cost royalty clause, they still stick it to you saying  it only applies to oil at production site.  Heres how they do it . Chk has makes up an affiliate company that gathers and transports your gas, Chk sells the gas to this affiliate at an extra low price and that is what you get.  It is probably not legal but until a class action suit come they will not stop.

If you get a no cost clause make sure it addresses these conditions. They may also take over a year to get you into pay.

Mickie         Barnett shale

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Permalink Reply by Grillin' - MmmMmm on February 10, 2012 at 4:08

There are fixes to the above, but only before you sign the lease.  You can designate that your gas will be priced based on a published "marker" price or price point.  These are published and the company will have to pay you based on that price.  This takes care of the "arms length transaction" issues above. 

But, if you already have a lease and this isn't in there, then you can't retroactively get it unless the company is willing to renegotiate.  I'm sure they would be willing, but it will cost you a pound of flesh! 

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Permalink Reply by Roy Austin Smith on February 10, 2012 at 6:02

very very good advice after the action is about over. before the action started rolling and the leasers already knew it was beginning , about all got was lies and deception.   this is what you get now when you talked to them and a  lot of the times you know the answers before you asked because you have seen it with your own two eyes.  deception, deception is about the only answers you get.

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Permalink Reply by Krkyoldhag on February 8, 2012 at 2:04

Samson is pretty good ..very conservative.  Land man in Tulsa...Andy Alexander at office in Tulsa.  Not family owned anymore but same management

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Permalink Reply by Roy Austin Smith on February 8, 2012 at 4:56

00.00

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Permalink Reply by LN on February 9, 2012 at 9:35

So it appears that Encana, Sampson and Petrohawk may be the best oil and gas companies to deal with and that Chesapeake is the worst oil and gas company to deal with, eh?

Thank you all for your helpful information.

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Permalink Reply by GoshDarn on February 9, 2012 at 10:30

LN:

If you ask me, there might be a debate on how good Samson is . . . as to the, um, ugly side.  But that might just be me.  I can say this, if a landowner/mineral only has had experience with just one operator and has no way of knowing, or maybe isn't up to speed on all the lying trickery, then such a naive soul might not even know when they're being taken advantage of.  Mailbox $, even poorly managed mailbox money, to some seems like manna from heaven, and they may not know that their pocket is being picked by a large percentage each month via an unscrupulous operator/landman, IMHO.  (That's why it's worth it to hire a good O&G lawyer before a person ever signs a lease.) 

Back before the Hay. Shale howling cat was out of the bag (so to speak) -- I negotiated with a mean-spirited young turk working for Samson.  He gave me a peanut offer (something like $150/acre and 3/16's -- I think it was) -- on a small interest per a track of family land in Bossier P., and he basically said "take it or leave it."

He wouldn't budge.  Wouldn't negotiate.  He thought I was too small a fish to fry, and some of my other family members had already signed off on the raw deal. 

But, y'know, hardheaded me, I said "no."  I won't sign it.  I want 1/4 royalty and more bonus.

He barked at me and went away.  (Lucky me.)

Then the deal was flipped to a decent operator -- as I've seen Samson do before, i.e., at that time they were gobbing up something like 8000 acres or more, years ago, and flipping such lease deals, i.e., Samson was buying low and making a profit on the flip sale to the real operator who'd end up drilling it -- and our section was drilled by the decent operator, and, again, this was above the HA formation before the horiz. drilling came along.  Note:  The well didn't make payout.  So I got nothing.  The small production was a vert above the HA formation. 

But the upside was -- when the HA did come a calling, I wasn't under lease to Mr. Peanut tough-guy Samson, because if I had signed and hadn't had a solid Pugh clause, i.e., if the well had stayed in production, then my family would've lost out on around $300,000 or more just on bonus money per a later lease.

Duh.

Anyway, the family track finally came out of lease because the well was P&A-ed -- and we own the land, so we didn't have to worry about losing the prescription -- and then years later, the HA came along, and we did a amazing deal with a great operator and made the big money on the bonus and got the good royalty and the protective clauses (per months of due diligence) and the well is now in pay on a strong IP.

Gotta do your homework, as you are trying to to, LN.  It's not manna from heaven.

Good luck.

  

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Permalink Reply by Roy Austin Smith on February 9, 2012 at 14:42

lucky man, you don't know how lucky.

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Permalink Reply by GoshDarn on February 9, 2012 at 15:01

Roy:

Yes, you're right.  Even though I'm not actually from Lucky, La., my family's had land near there going back to the 1800's or so.  Sawmill genealogy. 

And the Lucky surname is also familiar to me, although I'm not 100% positive there are any Lucky's in my family tree or not.  But sure, we've known some Lucky's.

I also had an exceptionally sharp uncle who would consistently knock 'em dead at the poker table during WW II, on a ship out in the Pacific.  Amazing math whiz.  Worked for a certain Seven Sisters for many decades after he got out of the Navy.  Seemed to always be on a winning card streak when gambling with the buds.  Never seemed to ever lose.  He also did exceptionally well in the stock market, too.

So, yep, somehow my dirt-poor poverty as a kid did give me a few tools/skills to make my own luck, in a way.  And sometimes luck just seems to find you, like in that Samson brouhaha.

Yet with my leasing over the years, my luck hasn't always been good.  My last hard-fought negotiation made me zip.  Of course, maybe that dead-in-the-water deal, yet again, was a bit of luck, too, since on that family-land location, CHK ain't pullin' shale NG out of the ground at these dang low prices, and we also didn't get stung by CHK's fake-out on the "free royalty clause."

So, y'know, sometimes it's fate, and sometimes a bad ol' boy makes his own luck.

 

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