We recently received a letter from a local law firm regarding an application for public hearing to authorize the drilling of three alternate HA wells in Section 14-T15-11W.  I know that this is rather routine but I am wondering why Chk is using Larchmont Resources to apply for the wells.  Does anyone know why they may be doing this?

They also provided a plat of the wells to be drilled and it shows them to be spaced 1320 feet apart east to west with the laterals running in a north south orientation.  It appears that they will have room for 4 more wells in the future with a distance if 660 feet from each other.  I know some other companies are using 6 wells per section. Does anyone have an opinion whether CHK will try to develop the section with 8 wells or just the 4 wells they are proposing?

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Isn't Larchmont the portion that Aubrey was given by CHK as part of his bonus

 

Larchmont Resources, LLC is one of several entities Aubrey McClendon created to house his "Founder's Program" working interests which he was assigned by Chesapeake (other entities are Arcadia Resources, LP, Jamestown Resources, LLC and Pelican Energy, LLC) .  Assignments for these interests out of Chesapeake are recorded in the parish records.  Larchmont and the other entities are now managed separately from Chesapeake Energy.  WIth current relations  between Chesapeake and McClendon a bit strained, it makes no sense that Larchmont would apply for alternate unit wells on behalf of Chesapeake. The application will not be available on SONRIS until a hearing is set.

The last few alternate well plans Chesapeake has filed were all four well per unit plans.

 

 

I thought it was strange that Larchmont was applying for the alternate wells and CHK holds the lease. 

Today I received a letter from another law firm stating in a letter to the commissioner that Chesapeake operating, Inc. "intends to present evidence in opposition to the application by Larchmont Resources, LLC., and will seek an order denying that application". 

How could Larchmont even apply for the alternate wells if CHK holds the lease? It sounds like this could be a dirty mess. 

If a permit is denied CHK and Larchmont is declared operator, CHK must pay it's proportionate share of well costs within a specified time. If not, Larchmont can recover that amount from CHK's share of well proceeds plus that much again as sort of an encourager for leaseholders to pay their bills or take their dog out of the fight. I think it's still double, but this penalty may have been increased now to triple actual well costs. Double or triple, it's kind of a game killer. Hence, sometimes leases are dropped to escape the guillotine.

This isn't quite the same thing, but it shows how the game is played:http://www.reuters.com/article/2011/12/28/us-energy-giant-idUSTRE7B...

Where would this leave the royalty owner?  Would Larchmont assume the lease if CHK were to drop out or would we become UMI's?

cs,

Interesting article. Thanks!!!!!

John L,

Leased landowners would be left in a lurch for sure.

Someone else might come in and lease everybody up who got shafted, but I think more often than not  this happens once the prospect is found to be less prospective than previously thought. Or the lessee is just unable or reluctant to cough up the money. In any event, you would most likely remain unleased. The offending lessee escapes any and all obligations, of course, by simply dropping it's leases linked to the well or wells under consideration. It can be a dirty little business on the business end of things.

On the upside, in Louisiana anyway, the operator is now on the hook by statute to report and pay the unleased landowner for production above costs. And right there is where it starts to get sticky again.

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