Nonconsent Check in the Bank

Has anybody out there actually received a royalty check as a "nonconsent" property owner? If so, please provide some details about the time frame from drilling to check and how the check amount compares to a signed owner.

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Permalink Reply by The_Baron on January 28, 2011 at 8:36

You have to remember that when gas is hedged, its not gas from a specific well, but gas from many wells sold in blocks.

 

For exaple, say I operate 10 wells making 100 mcf/day, so I am making about 1000mcf total a day. I know that my production will decline without any new wells, and I could have a well be shut-infor a short time for repairs, reworking etc. Therefore I wouldn't hedge all my gas because if I sign a contract to deliver gas and fall short, the penelties on my contract will bury me.

 

So I might hedge 1/2 my gas. What wells does it come from... doesn't matter I am not selling specific gas, just garunteeing delivery of a set amount at a set price.

 

To further insulate myself, I will set up a marketing company, like CHK does. I will sell my gas to the marketing co. at the wellhead for a set price, probally based on an accepted standard. So lets say its the Henry Hub - 10%. Then the markketing co can hedge the gas for more. As an Operator I have fufilled my obligation to my mineral owners. Yes, they may not benifit from the hedging, but they arent hurt either should I be locked into a low price when prices spike.

Permalink Reply by P.G. on January 28, 2011 at 9:11
Can a mineral owner take his share of the gas physically? Sure that wouldn't be likely but if he did, couldn't he sell it to his own buyers as it came from the well without physically taking possession of it?
Permalink Reply by FXEF on January 28, 2011 at 9:29

PG,

 

That would be in kind royalty. It would kinda be like a dog chasing a car... what are you going to do with it after you get it?

Permalink Reply by P.G. on January 28, 2011 at 11:42

Yes I understand that. But what about arrangements with a buyer to take it as it come from the well? Perhaps MOs could do a little hedging themselves if that were possible..

Isn't that what the producer is doing?

Permalink Reply by Kat Bloomfield on January 28, 2011 at 13:00

According to the La. S. Ct.ruling that ALL benefits obtained from a well must be shared proportionately with MIO, then, for each well from which gas is hedged, there is a mineral interest owner and an operator or several operators.  to the extent the operators benefit from a well or multiple wells, a viable argument remains that they must share those benefits with the MIO

 

It is not a viable defense to an obligation to claim gee, I don'[t know which well(s) my gas and derivative benefits derived.  This is because there is a presumption in the law that he in charge knows what he's in charge of (to paraphrase).  Moreover, it would be a relatively simple calculation as there are records of quantum produced from each well as well as records of each hedge.

 

To attempt to "insulate" oneself from obligations to market and obtain best price via inserting a marketing company, that marketing company had better be a legitimate distinct entity and that transaction best be reasonably prudent.  Moreover, if say the operator does sell the gas to a marketing company at the wellhead, then that operator has nothing to hedge.  But, if the operator is using the marketing company as a foil to its efforts to increase its profits w/o sharing proportionately with landowner, there is a problemo if the La. S. Ct. pronouncement applies, which it appears precisely to do just that.

 

I propose this simply as legitimate debate. 

Permalink Reply by Henry on January 28, 2011 at 13:26
Oh, it's so good to have you back!  Things get more interesting.  Now if we could just get Earlene, Kassi, and Snake Stewart back too....
Permalink Reply by Linda Whatley on January 28, 2011 at 14:52
Problemo indeed!!!!!
Permalink Reply by b garrett on January 27, 2011 at 7:10
Terry, could that really be true?? All these wells are drilled with no hope of paying off for YEARS??
Permalink Reply by P.G. on January 28, 2011 at 5:45
Sounds like the wells can be anything they want with the right accountants working the books, huh?
Permalink Reply by Crystal on January 28, 2011 at 14:41
I would like to know this to. I am a npo in keithville and my neighbors have been receiving checks for over a year now from two wells. I have called Chesapeake to find out whats going on but my calls keep going to a full voicemail box or it gets disconnected. Just wondering if I should hire a lawyer. I'm just not sure what steps to take. Someone told me to write them a demand letter but where do I send it? Who knows, I thought I was being smart by not signing but I am getting so frustrated. My neighbors received 20,000 upfront and now there bring in hundreds a month but for me I haven't seen a dime. I have to listen to all the noise, traffic, dodge sink holes in the road from the trucks, and I am not a happy camper! A check would Def. make it better!

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