Twin Cities confirms "no group negotiations" policy

Posted: Feb 24, 2009 11:11 PM CST

Updated: Feb 24, 2009 11:37 PM CST


KSLA News 12 Headlines More >>



SHREVEPORT, LA (KSLA) A major lease-broker in the Haynesville Shale confirms they will not be negotiating with groups anymore. It's not good news for many of the dozens of neighborhood organizations that have formed over the past several months in search of better lease terms.

Monday night KSLA News 12 reported that the East 80 Oil and Gas Leasing Coalition has run into a roadblock in their attempts to negotiate with Chesapeake Energy: they've been told the company's leasing broker, Twin Cities Development, will only deal with individuals.

We asked Twin Cities today about that, and the Director of Community Affairs Clay Baskin confirmed it. "It's our new policy for 2009, and what we are doing is, we're giving the individual lessor the opportunity to negotiate on their own behalf for their own oil & gas mineral lease." Baskin says the new policy is in response to problems they've encountered in dealing with large groups, "Past experience hasn't turned out to be as productive as we had hoped. And also whenever you have the spillover of the acreage that's not contiguous to the section that we're focusing on, then it's in effect at that particular time not acreage that we're interested in because, A, we don't have a drill site, B, there might not be pipeline access at that current moment."

As the market has slowed, Baskin says, the focus for leasing has turned from grabbing up as much leasehold to what he calls 'controlled development.' "We have the same manpower, it's just much more controlled and much more focused. So yeah, for individuals living in sections where we have drill sites and we have pipeline access, you're going to see that activity begin to pick up."

"So what we want to do is focus on section by section, and as I said before, 'controlled development,' and then move forward from one section to another as opposed to taking on maybe 4, 5, 6 or several different ranges as opposed to taking on whatever we can't develop all over, " Baskin explains. "What we have to do is we have to put them together and we have to turn them over so that Chesapeake can start drilling and see a return on their investment."

Chesapeake Energy Corporation (NYSE: CHK) currently claims 460,000 net acres of leasehold in the Haynesville Shale. About 110,000 of that is in a joint venture with Plains Exploration and Production Company (NYSE: PXP).

In addition to lower bonus offers, Baskin says Twin Cities' lease terms in recent offers are now longer. "The primary term (is) generally on a 5 plus 5 basis. And once again it has to do with the fact that if you take into account that the intricate parts of putting together an urban environment such as Shreveport and Bossier City, you need that extra time in order to fulfill your committment, not only to us to our operating parter Chesapeake, but also to the individual lessor. If you sign a lease with a lessor, you expect to have your minerals produced. But in effect, whenever we deal with so many people and so many landowners, it takes us longer over here in an urban environment to put that together. "

In other words, the longer lease terms give Chesapeake more time to develop all the acreage they've been leasing up. So what's in it for the landowner looking at signing a five year mineral lease? Who's to say natural gas prices - and therefore mineral acreage values - won't go up again in a few years? "That's exactly what it is," says Baskin, "Who knows?' And that's what we want to project to people is, first thing, we want to educate them. Second thing we want to do is give them the opportunity. What everybody has to understand is that they have the opportunity to wait. Or they have the opportunity to sign. "

Or be force-pooled. This happens when a majority of mineral owners in a unit (640 acres, or about one square mile) have agreed to lease their minerals. The operator can ask the Department of Natural Resources' Department of Conservation to "force pool" the remaining un-signed mineral owners so that the well can be drilled. Since they haven't signed a lease, force-pooled mineral owners do not receive a per-acre bonus and will get not get paid until the cost of the well has been recovered by the operator. For example, if you own 32 acres in a 640-acre unit, you would responsible for 5% of the well cost. These deep wells into the Haynesville Shale have typically cost anywhere from $5-8 million each to drill. After that, however, you would receive your full proportionate share of the revenues, ie., 100% royalty on your share of the unit. That could mean big returns - if the well is successful. The downside: if the well never breaks even, force-pooled mineral owners won't see a dime.

Baskin says forced pooling has to become economically feasible for the producing company to do so, but that decision is up to Chesapeake. "A lot of people ask me, 'When will you stop leasing?' Well, we won't stop leasing until there's 100% or until we effectively cannot lease anymore acreage and then if it is economical to go ahead and produce the well and go ahead with force pooling that's Chesapeake's call and they go forward with that process."

Buck

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I agree. This game is for keeps. Folks need to agree not to deal with Twin Cites at all. The only way we do not have the power is to give it away to them.

Taylor, The best part about playing chicken is knowing when to flinch...
I hope folks do take them out of the game.. Telling them to hit the road. Unfortunately some will "flinch " thinking they will get left out. The ones that know better will sit and wait.. with steadfast intentions to wait until a real deal comes along.

Taylor, taking a breather but hardheaded to the core! LOL
Let's not forget TC gets it's marching orders from CHK. The 5/5 lease is not for time to produce but puts time on their side to wait out the none leased. Will these groups stay together 5 to 10 years? It's easy to say I will wait as long as it takes. When friends and relatives start geting big checks month after month it will change alot of minds. Land owners will die and their off springs living in NY or where ever and don't care about anything but $ will lease. Alot will change over time. I don't think the stragey is to divide and conquer, but surround ,isolate and wait. But a good thing, they ain't the only one that can drill a well! So I'll give em 2 fingers.
I bet they sign more 5/5 leases than you would expect. We are talking about town lots here, and people get into situations where a little extra money will help. TC is running a marathon, slow and steady will win the race.
Yes but it does allow the other big or small guys like you know who to come in and snake everything so go back and tell them they can sit this one out!
Twin Cities is a land brokering firm out of Tyler Texas. We are working on helping our members that are being harrassed with a letter to finish out and send to them that is with regards to our legal rights to refuse and stop tresspassing and phone solicitations. Louisiana RS 45:844 and RS 14:63 which will restrict them soley to putting everything in writing and being sent via the US postal services. We are getting some legal egales to proof it before we make it available to our members. What is even funnier now is they are sending out maps with the leased lands colored in and they are in one color and Chesapeake is in another color- whats up with that when they tell our community members they are working for Chesapeake? So, shouldnt there only be one color on the maps between them and Chesapeake if Chesapeake is suppose to own those leases? We know what is possibly going on, but cant prove it just yet (Flipping Leases) to the highest bidders.
Eric could you up load these maps into the photo sections?
Twin Cities is a brokerage firm exclusively for CHK. They are owned by Dale Resources out of Fort Worth, TX.
Twin Cities and Chesapeake by extension, are showing their true colors. I urge everyone to stick together in their respective groups and don't cave to these bullying tactics. EVERYONE and I mean everyone should boycott twin cities. They are definitely not the only kids on the block. I have counted at least 27 companies that are actively leasing in the haynesville shale. When Chesapeake sees they can't get leases with these tactics they will change. Folks we are sitting on the largest gas field in the U.S.!!!!!! We have what everyone wants! Others will agree to deal with groups. If we let twin cities get away with this, other companies will try the same. Absolutely refuse to deal with twin cities and absolutely refuse a 5-yr. lease!!! It is for their benefit, not yours like they say. BOYCOTT TWIN CITIES!!!!!
History seems to have repeated itself in regards to the pit bull approach that CHPK and their leasing arm have decided to employ. We need just look across the state line into the Fort Worth area of the Barnett Shale and Dale Resources. Hard to teach an old dog new tricks.

No pun intended toward any of our dawgs/dogs on here. LOL
Truth be Told: Twin Cities is owned by Dale Resources and contracted to CHK. The Shreveport top dawg was previously a landman for Dale in the Barnett Shale. He actually proudly admitted this fact in a meeting with our steering committee last summer.
I urge all of you to read the thread This is a warning to all who will listen. It was started by Charles. He has documented all conversations and emails that were sent back and forth while trying to help his parents and other family members with their leases. He is rightfully disgusted with Chesapeake and JWPorter.
When are we going to say enough is enough? It is time to tell Chesapeake, Twin Cities and anyone else working with these jokers to stick it where the sun don't shine.

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