Replies to This Discussion

Permalink Reply by Bacon on September 25, 2011 at 10:45

Just an update since this thread popped back up.  Shell did reimburse for the severance that they deducted.  On a thread related note, we are now getting checks from both QEP and CHK for one unit (50/50).  There was confusion on CHKs end in the beginning but it got worked out (I think).

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Permalink Reply by Henry on September 25, 2011 at 23:02

Bacon,

Do you receive similar prices from QEP and CHK?

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Permalink Reply by Bacon on September 26, 2011 at 3:19

I'll let you know in a couple days.

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Permalink Reply by Bacon on September 28, 2011 at 5:31

Ok, so I'm looking at the production / statements for June '11.  QEP pays $4.42 (MMBTU, BTU Factor 1.00)  CHK is paying $3.339 for the same well.  CHK statement has no details about BTU factor and such but they are supposed to pay 50% and the RI is the same on both companies statements, 50/50.  I suspect we'll just get the attorney involved from the start and will keep you posted.

 

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Permalink Reply by The_Baron on September 26, 2011 at 4:37

Its my understanding it takes some time to get a refund from LDR.

 

 

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Permalink Reply by Bill Mendenhall on September 26, 2011 at 5:54

Les, I realize that this is an old thread, but your particular comment above is right on point with a question that I have. I hope that you, or Skip, may have some insight here. We have leased to Petrohawk, but approximately half of our property is in sections operated by Chesapeake. We have been satisfied with Petrohawk's prices on our first well in the section operated by Petrohawk. However, our most recent check includes the first production from a new non-operated well (i.e. a Chesapeake well), and the production attibutable to this well is priced substantially lower. We've been told by a neighbor who is in the same situation that his checks show the same price (i.e. Petrohawk's higher price) for the wells that Chesapeake operates, but in which Petrohawk participates.

We understood, as you note above, that the non-operating company would sell its share of the gas independently of the operator (and thereby pay the royalty based on the higher price). I understand that the non-operating company could allow the operator to sell all of the gas, but why would Petrohawk allow its share of the gas to be sold at a lower price, resulting in less profit for Petrohawk?

Please let me know your thoughts on this and how I might get to the bottom of it.

Thanks.

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Permalink Reply by Skip Peel - Mineral Consultant on September 28, 2011 at 2:28

Bill, Chesapeake's price per MCF is consistently lower than other operators.  The reason for your neighbor's higher price may be related to their lease language particularly if they have a "no cost" royalty clause.  If you have the same clause in your lease then you need to point it out to CHK customer service.

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Permalink Reply by Les Bamburg on September 28, 2011 at 3:02

Bill, depending upon Petrohawk's ownership in the unit it may not be worth them marketing their share of gas production even if Chesapeake's sales price is lower.  It is possible Petrohawk has only a small amount of acreage leased in the section (unit).

 

Also, another problem with Chesapeake is the method they utilize for calculating royalty.  It appears the sales price shown on their royalty statements includes deductions resulting in a price that is much lower than the actual sales price Chesapeake is receiving for the natural gas.  Chesapeake must be handling the royalty payments for Petrohawk's share of production in the unit and applying their methodology.

 

Sorry I did not see your earlier post.    

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Permalink Reply by Bill Mendenhall on September 28, 2011 at 15:16

Thanks guys. This is consistent with what I've learned from Petrohawk over the past few days. They were inadvertently deducting treating and gathering costs, which they have agreed to reimburse. When you add those deductions back in, CHK's price for gas is only $0.10 less per thousand less than PHK's for the same month.

The folks at PHK tell me that they have an agreement with CHK to allow CHK to market all gas in the units that CHK operates. I'm not sure whether this is just in our area of south Bossier Parish, or in a broader area. They say that this arrangement sometimes results in a slightly lower price and other times in a higher price. But, I haven't seen any reports on this site where CHK is paying a higher price. Petrohawk seems to be consistently higher from what I can tell.

I appreciate your input on this.

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Permalink Reply by VSC DeSoto South on September 28, 2011 at 2:11

Checks from Shell and Encana have shown a variation in price between the 2 of them for the same well. Shell is the operator and Encana is the non-op. One mo is a .05 cent difference another month a .09 cent difference, Shell paying the higher amount in the 2 months I compared.

 

My question is, I noticed previous checks from Encana and all checks from Shell list one price, the Royalty Interest price. The last check from Encana included the RI price and an additional line titled MMBTU Price, which was a whopping .18 cents more than the Royalty Interest price! Should I assume the MMBTU Price is the retail price? Is something odd about the difference between the two? 

 

Can anyone shed alight on the new 'MMBTU price' on the check and why it is now on Encana's check? What does this price mean to me? Is it retail and is it now on the check for transparency of RI price vs retail?

 

Thank you

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Permalink Reply by Les Bamburg on September 28, 2011 at 3:17

VSC, most prices posted on royalty statements are quoted in $ per Mcf (thousand cubic feet).  The MMBtu price would be in $ per million Btu.

 

The difference between the two could be reflective of one or both of the following items:

 

1)  The gross heating value of the gas (ie Btu per cubic feet).  Example - a GHV of 952 Btu/Cf would convert a price of $3.78/MMBtu to $3.60/Mcf.

 

2)  Deductions for services that would reduce the (field) gas sales price for calculating royalty.

 

The location of the MMBtu price would not be retail (consumer) but could be at the delivery point into the interstate pipeline system.

 

If you post the gross heating value (Btu) from the statement it would help in the analysis along with the MMBtu price and RI price.

 

  

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Permalink Reply by VSC DeSoto South on September 28, 2011 at 15:24

Gross value = 418621.20

BTU Factor = 0.957

RI Price = 4.07

WH MMBTU = 95503.00

MMBTU Price = 4.250

 

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