Replies to This Discussion

Permalink Reply by Randy on July 5, 2008 at 16:55

Typically the company with the most leasehold will purchase the leases from the other company. For this reason if one operator knows another has a large leasehold, he will try to shy away from there, and vice versa.

Randy

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Permalink Reply by RAY on July 9, 2008 at 8:23

do anyone know what co. is doing the most leasing in T18 R15

I would hate to sign with the low % co.

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Permalink Reply by SharonB T18N R15W S8 on July 9, 2008 at 15:04

My money would be CHK is the answer since Pangea (the leasing agent fired by PK) closed the doors several weeks ago and twin cities and manna have kept on leasing. Just an educated guess though.

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Permalink Reply by SBossierGuy on July 9, 2008 at 10:06

Randy (or anyone else),

If a company "unitizes" an area, and another company has a lease inside of it, does the the lease have to be bought out / transferred?

Example CHK creates a 640 unit and has 85% of the leases, but HK has 15% of the leases.

What happens to those HK leases?

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Permalink Reply by Randy on July 9, 2008 at 12:38

No HK can agree to foot their portion of the bill to drill. CHK would be the driller, and they would bill HK for their portion of the land. Then HK would get their share of the royalties.

Randy

It's more complicated than that, but for easys sake....

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Permalink Reply by Les Bamburg on July 10, 2008 at 4:05

SBG, just to clarify Randy's response. CHK & HK would have an operating agreement that governs the joint operation. HK would be entitled to sell 15% of the natural gas production (revenue) and would pay 15% of all development and operating costs. The mineral owners for HK's leases would receive royalty payments based on 15% of the unit's production. The operating agreement specifies whether HK pays this royalty or CHK pays and then bills HK.

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Permalink Reply by insomniacnla on July 10, 2008 at 4:11

Les B,

Thank you for trying to explain this to all of us. But I think you lost me on the part if HK only had 15% of the leases in the in 640 unit, then the landowners that leased to HK would only receive their royalties based on their pro-rata share of 15% of the unit? Wouldn't royalties have to be paid on the pro-rata share of the 640 unit? Or did I get it screwed up?

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Permalink Reply by Les Bamburg on July 10, 2008 at 4:36

Yes, you are right. For example if you leased 32 acres to HK then your tract % would be 5% (32/640). So your royalty payments would be based on 5% of the total unit production.

Just understand if HK is separately marketing their 15% share of gas production, then your royalty payment may be tied to their gas sales price.

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Permalink Reply by insomniacnla on July 10, 2008 at 4:54

Thank you very much.

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