I have a discussion on the main board, in which I've collected data on what price are royalty owners getting for their gas. At first glance, it appears that Chesapeake is paying its royalty owners less than other operators. However, it may be that Chesapeake is making deductions to the gross price, before they post the price on your monthly statement. In order to get to the bottom of this, I need your help. Also, you should check and protect yourself to ensure you are getting a fair market price.

I would greatly appreciate it if each of you would contact Chesapeake, and ask for an explanation of the price you are getting on your monthly statement. Ask them what is the gross price for which they sell the gas, to whom did they sell it, and ask for a breakout of each and every deduction they took. If you could pass that onto me, I'll compile the data. I will keep your name private so no one knows who you are.

Thanks in advance.

Tags: Chesapeake, fair, gas, market, sales, value

Views: 536

Replies to This Discussion

We have several mineral tracts in DeSoto and Sabine parishes that we have leased to Chesapeake, and I have found on average that Chesapeake is paying on average 25% LESS than other gas operators in the area.   I am sending a letter to Chesapeake to provide us an explanation/justification of their gas prices. 

 

Have you or anyone else recieved a reply from Chesapeake as to why they are substantially lower than everyone else?

Thanks,

Doug Torr

Doug,

Many royalty owners on this site are asking the exact same question.  Chesapeake offers an explanation on their web site of how they sell the gas.  But it doesn't explain why their royalty owners consistently receive less.  Here's the explanation, for what it is worth:

 

http://www.askchesapeake.com/Haynesville-Shale/LA/Royalty-Owners/Pa...

 

This same problem has been observed in both the Barnett and Fayetteville Shales.  In those shales, there have been class action suits filed.  See the links below.

 

http://robinetteslaw.blogspot.com/2010/10/class-action-royalty-unde...

 

http://www.gohaynesvilleshale.com/forum/topics/this-doesnt-sound-go...

 

(On this second link, scroll down the page until you see the link to Vanoven v. Chesapeake)

 

If you can get a good explanation as to why your prices are lower than what the other producers paid, please share your answer, because no one has been able to get an explanation to date.  Good luck.___

 

Since we have several tracts of land, I have 5 different operators and have compiled gas prices into a spreadsheet, comparing Haynesville wells between operators and comparing Chesapeake to operators in same section but different intervals.  Each comparison, Chesapeake is about 25% lower.

 

I'm petroleum engineer w/ 30 years experience and have seen how gas purchasers will screw operators and royalty owners around.  I've put together a letter to Chesapeake to explain the pricing and will mail out this week.  Our leases also have clauses that prohibit fees for transportation and treating.

 

Doug

Doug,

If your lease has the provisions to prevent the deduction of all the transportation, treating, compression, marketing, etc. fees, then you will likely be able to get CHK to fix things.  I've heard from several CHK royalty owners who had the so-called "cost-free royalties," and every one of them noted that CHK, did not honor the clause in the initial royalty payments.  Only after the people figured this out, and contacted CHK, did they find the problem would be corrected.  And yes, I know of at least one case, in which back payments were made promptly.

 

Based on the stories I hear, the ease of fixing this varied all over the place.  In one case, it took only a few phone calls and about a week.  In another, it is taking forever, and is still not resolved. 

 I AM A LAND OWNER IN DESOTO PARISH, AND I THINK THAT CHESAPEAKE HAS BEEN RIPPING ALL OF US OFF TO THE TUNE OF 25%. WE SHOULD ORGANIZE AND FILE A CLASS ACTION LAWSUIT AGAINST THEM TO ENSURE THAT WE ARE FAIRLY COMPENSATED. THEY HAVE BEEN IN THE NEWS RECENTLY FOR SOME QUESTIONABLE BUSINESS DEALINGS IN THE MARKET PLACE. SO MUCH SO THAT THE CEO HAS BEEN ASKED TO STEP DOWN! THEIR INTEGRITY HAS BEEN BROUGHT INTO QUESTION AND I THINK THAT THEIR NUMBERS NEED TO BE  LOOKED AT CLOSELY!

Brain:

A lot of folks agree with you.

Also, it seems (as far as I can understand it) -- that a few "mineral" lawyers have (more or less) stated that such a class-action suit isn't too practical for some reason vis-a-vis these particular type of situations.

Of course, they could be wrong (I guess).

Now, if it was me -- and knowing what I know -- I'd be all for a class-action against the CHK crooks.  Hey, it's a no-brainer.

Finally, if your land is in La. -- it's recommended that you contact the La. Attorney General's office and explain your thoughts.

The lawyer to touch base with at the AG's office is Ryan Seidemann @ 225-326-6085.

His e-mail is:  SeidemannR@ag.state.la.us

So, the best of luck with it, and please let us know what happens.

GD

 

 

 

 

 

Brian,
I believe that the Louisiana courts have not been favorable to class action suits of this type. If you are too small of a landowner to bring such a case, you must find other landowners who have signed similar leases, and go together as a group and sue. The legal distinction is that your group would not be a "class" in the legal definition -- i.e., you will not advertise in the newspaper for other members of the class, and you will not negotiate on the behalf of a gazillion people out there. Rather, your lawsuit would be applicable only to the people who are named as plaintiffs. I have seen one case where 50 people banded together and sued CHK. But they were 50 people who worked together, had an agreed-upon method of paying the attorneys as they went along, and had to negotiate together to a single settlement. It took a lot of compromise and good will among the group members to hold together over the two years that CHK dragged this suit out. It is not easy, but it can be done.

we have acreage in DeSoto and have leased with CHK and SWEPI.  Shell/Encana is a breeze to work with and their prices are pretty close to Henry Hub.  I too have been keeping track of prices monthly using Excel and have noticed, as have others, that CHK pays 20-25% under Shell/Encana/Henry Hub.  They have also made very slight adjustments to the royalty percentage.  I have reviewed the lease and we are supposed to get "market value" for our gas, which I assume means Henry Hub.   But they are never close.  We have not yet written letters, but we will.  We are all due an explanation. 

We have also had our production cut through "voluntary restriction" at CHK's whim with no word or warning before.  I'm not sure if they can do this.

They say the fish stinks from the head.  Given the problems Aubrey has had, I would say we have a big problem with them.

Let's get it resolved soon.

I'd love to participate in a class action suit agaisnst Chesapeake.

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