Replies to This Discussion

Permalink Reply by Ken Boone on February 3, 2013 at 9:14

Greetings,

I am unleased  too. Once payout happens, will the operator mail out a check for all of the back revenue for the past say 4 years? Or will the check be for now?

Even though you do not receive any revenue until the well is paid off, will the money date back to the first completion of the well.

For example if the well was completed in January 2010 and the well is paid for in January 2014. Once 2014 comes will the first revenue check be for only one month or for money dating from January 2010?

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Permalink Reply by Skip Peel - Mineral Consultant on February 3, 2013 at 9:50

The operator of the well keeps the UMI's share of production to pay for the UMI's share of the well costs.  Once a well reaches payout (recovery of the cost of drilling, completing and operating the well) the UMI will begin to receive payment for 100% of their proportional share of production from that day forward subject to periodic deductions for continuing operating costs.  This is the case IF the well ever reaches payout.  At today's prices some wells will never payout or make take years to do so.  Mineral owners who lease get royalty paid from the first day of production whether the well ever pays out or not. 

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Permalink Reply by Steve P on February 3, 2013 at 10:12

Nice summary of "the facts," Skip.  And a strong dose of reality for too many landowners who listened to the proverbial "water cooler" experts.

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Permalink Reply by Greedy Landowner on February 3, 2013 at 11:50

I am very happy I didnt lease. It didnt fit for my specific situation at the time. The assumption made by many is that if you are leased with them then you dont get charged the same charges as unleased owners. Keep thinking that.

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Permalink Reply by Steve P on February 3, 2013 at 15:19

glad that's working for you. for 19 out of 20 landowners, it doesn't work as well as a 1/4th lease with a lease bonus. for most of us, money in the bank from the lease bonus plus royalty checks is a " better deal."

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Permalink Reply by Henry on February 4, 2013 at 1:22

I have a tiny unleased tract.  The well is never going to reach payout because it had mechanical difficulties during drilling, driving up its cost.  The company was kind enough to offer me a lease going back to first production. (Obviously this is not CHK I'm dealing with here.)  So I chose to lease, but not for financial reasons.  I chose to lease because I don't want my children having to deal with this after I'm gone.  They don't live in Louisiana and don't need the headache of having to dog the company on each and every well that ever gets drilled, especially on a tiny tract.  So put me in the 19 out of 20 who chose a lease.

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Permalink Reply by Greedy Landowner on February 4, 2013 at 3:02

Before making a decision to lease you have to consider so many options and make the best decision possible at the time. I have mineral interest that I leased, was glad that I did and if I had to do it again I would have done it just the same. I also have a small tract that I chose not to lease and again if I had to do it all over I would have done the same. Now there is a 3rd small parcel that I missed the bus on and probably should have leased because it ended up being a deal like Henry's.

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Permalink Reply by Pam on February 5, 2013 at 15:29

That's sweet you got a deal going back to first production, Henry.  I think I'd take that too, if offered, but no one seems interested.

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Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2013 at 16:10

Henry is a savvy negotiator who does his homework.  I suspect that he found a way to create some "interest"!  LOL!

Permalink Reply by Dion Warr, CPL on February 11, 2013 at 8:55

Greedy:

Before decrying CHK anymore (I know, it's a popular sport on several running threads), please be aware that CHK has sold a substantial portion of its gathering and midstream business already (to Access, if memory serves) and is looking to sell of the remainder to other third parties in the very near future if all according to their plans.  As such, they are and will not be selling to a "wholy or substantially owned subsidiary".  They just cashed out of the entire division.  You will be dealing with someone else as far as marketing and costs from the mouth of the well to the ultimate sales point.

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Permalink Reply by Greedy Landowner on February 11, 2013 at 16:07

I was previously aware of the sale.  We all, whether individuals or corporations, earn our reputations based on how we behave with those that we interact with.  

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Permalink Reply by Steve P on February 4, 2013 at 8:42

Henry and GL both make good points about administration.  Of course, I am a lessee on my few parcels and had to send a certified letter to our friends at Chesapeake last week to get them to do a simple task, and will be sending one to Encana this week, for a simple task but one they didn't take care of after I sent an email.  So being a lessee requires a bit of diligence as well.  I think being an unleased interest owner in a well would be daunting if one wanted to do it right.

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