Replies to This Discussion

Permalink Reply by RJ on February 22, 2012 at 0:55

Google Joint Gas lease. Has info on Community leasing

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Permalink Reply by Larry L on February 22, 2012 at 1:39

Thanks. very good info http://oilandgas.uslegal.com/pooling-unitization-and-joint-leases/

I am even more persuaded that the "unitizing" of 30 and 31 is not proper... but I will wait for specific answers from CHK to questions which were emailed to them today.

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Permalink Reply by DrWAVeSport Cd1 on February 24, 2012 at 5:35

Larry L,

I know this "Community Lease" discussion has centered around the CHK "2% mistake," and "division order" questions/problems...  But, Please keep us GHShalers informed as to the "Community Lease," in association with the "Unitizing" of Sec. 30 and 31 by CHK. 

Again, your post has been quite enlightening.

I have seen many a CHK "lease," but haven't seen the CHK "Community Lease,"...as defined by CHK to you. 

Thanks in advance.

DrWAVeSport Cd1 2/24/2012

 

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Permalink Reply by Larry L on February 24, 2012 at 15:57

First of all the phrase "community lease" never is used in the lease but is an interpreted concept used by CHK. It is not related to "unitizing" (which relates to drilling) but relates to the distribution of royalties over multiple "drilling units".

I think that we on this forum should consider the pros and cons.

Why would CHK choose this option...seems like a lot more work and paper work?

From the owners perspective it gives diversity to their royalties.

From CHK perspective it lets them hold onto the royalties for more than a month if under $100 monthly because of small unit interest.

 

Any thoughts???

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Permalink Reply by DrWAVeSport Cd1 on February 25, 2012 at 7:03

Larry L,

"Any Thoughts???"  Yeah...Lots of Thoughts...LOL  But not funny.

Has your (?) been answered as to the Sec 30 & 31 combination by CHK been answered?

Another question... Am I clear in understanding that CHK will withhold royalty $$$/checks, if under $100, based on CHK "property #? rather than paying royalty $$$, if under $100, based on CHK "owner #?"

e.g., if  CHK "owner #"  has multiple "leases" attached to that number...but each "lease" per this Lessor's CHK "property #" is less than $100...No check will be issued for that Lessor's CHK "owner #"????

As in the following scenario:  ONE CHK Royalty Owner's Leases add up as $75, $75, $75, $75 (four separate leases totaling royalties of $300 for ONE Lessor's CHK "owner #") But another CHK Lessor's lease royalty is $100 on just ONE CHK "property #"...

CHK will issue a royalty check to the CHK Lessor with that $100 royalty/ONE lease "property #"... But CHK won't issue royalty check for the $300... The 4 leases under ONE CHK "owner #, but under more than ONE CHK "property #?"  

CHK will w-a-i-t  till EACH "property #" reaches that $100 threshold?  $100 gets a CHK check...  $300 Doesn't...

I apologize if I'm not interpreting this right. 

Maybe I need another cup of java this morning...LOL

DrWAVeSport Cd1 2/25/2012 

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Permalink Reply by Larry L on February 25, 2012 at 8:30

First of all I am clear as to how they are combining the the Units and having us participate in the royalties across those Units. Actually they had "forgot" to include a third Unit for our participation in royalties, which then accounted for the "missing" 2%.

So now we will have DOs for three sections (30, 31, 32). My acreage for participating proportionately in all three  is EXACTLY the same as if I had only participated proportionately in only section 30.

 

So why is CHK doing this? PetroHawk in the same section is not doing this!

We know that CHK is working with their best interest in mind, even as we the owners should be working with our best interest in mind. What are the Pros and Cons.

 

Lets take these three sections. In my opinion I believe that 30 and 32 have the well bore better positioned for LONGER LATERALS than 31.

When CHK comes back to drill additional wells what wells are their priority? Right! The ones with the longer more productive laterals. So they may choose to bypass 31, which is now HBP and drill just in 30. Had I just participated in 30 then I would be getting my maximum royalty, because I was participating proportionatly with all my acreage. However, with this "Community Lease" half my acreage is tied to one increasing unproductive well in 31.

 

Intially you won't see any difference. Both scenarios will produce almost the identical royalties for the first year or so.

BUT when they come back to add more wells 31 will have tapered off considerable, but 30 could have up to eight wells at full production.

At that time the comparison between the two wells would be not "equal" but maybe 1:20 ratio??

So under this scenario CHK in the long run will get about 1/2 of my royalties over the life of the lease,

Bravo for CHK. Who would have guessed?

 

Regarding the details of whether it will be one or three checks? I won't know till I get my first check next month. 

 

 

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Permalink Reply by DrWAVeSport Cd1 on February 25, 2012 at 8:52

Larry L,

Thanks for the explanation/reply.

Will keep GHS tabs with you and others.

Very Interesting Indeed.

DrWAVeSport Cd1 2/25/2012

 

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Permalink Reply by RJ on February 25, 2012 at 15:37

Like I said a few post back its not their first rodeo. IM sure this is not the first or last time this will happen. Land owners with small amounts of land are almost at CHKs mercy. With this Company I feel lucky even to be getting what I am from them. Thanks again Larry for figuring this mess out!

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Permalink Reply by Larry L on February 25, 2012 at 16:32

Hedge your bets and buy their stock!

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Permalink Reply by RJ on February 22, 2012 at 6:03

ONE would think CHK knows what they are doing. I also e mailed them about the division order vs lease acres. Mine is also about 2% low side. Can anyone on here tell me if the Division order should match your lease acres Exact?? 2% here and there on every lease and its a big chunk after a few years saved by CHK. IM not sure most people are even paying attention or checking there Division orders with thier lease. IM still Not clear on the Community lease deal though. Hope someone sees this and can help clear it up.

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Permalink Reply by Larry L on February 22, 2012 at 8:12

I got a response from CHK and their position regarding doing the Community Lease is Paragraph 14???

14.          It is expressly understood and agreed that the premises leased herein shall, for all the purposes of this lease, be considered and treated as owned in indivision by the Lessor and shall be developed and operated as one lease, and there shall be no obligation on the part of Lessee to offset wells on separate tracts into which the land covered by this lease may be now or hereafter divided by sale, or otherwise, or to furnish separate measuring, or receiving tanks, and all rentals, royalties and other payments accruing hereunder shall be treated as an entirety and shall be divided among and paid to Lessor in the proportion that the acreage (mineral rights) owned by each bears to the entire leased acreage.  Lessee may at any time or times pay or tender all sums accruing hereunder to the joint credit of Lessor.

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Permalink Reply by Larry L on February 22, 2012 at 8:21

That still doesn't answer the question regarding 2% SHORT. It is just math! So where did it go?

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