Replies to This Discussion

Permalink Reply by kfly on July 9, 2008 at 8:13

I'm not an expert, by any means, but I think you're on target with your reasoning.

• ▶ Reply

Permalink Reply by Grillin' - MmmMmm on July 9, 2008 at 8:15

Depends on the lease terms. Some of the older leases allow the deep rights to be held by shallow rights for the life of production. Other leases have terms that "free up" the deeper rights when production is shallower.

And yes, the small company could go out and sign a deal to farm out the deep rights to another company interested in the Haynesville. You wouldn't get a bonus, but you would get the royalty payments, which may actually be much much bigger than the bonus anyway.

• ▶ Reply

Permalink Reply by insomniacnla on July 9, 2008 at 8:24

It is my understanding that some of the smaller, independent companies have already sold deep rights to Chesapeake on some of the leases that did not have a Pugh Clause. If your lease does not mention a depth restriction or a Pugh Clause, then your land may be "held by production". It would be a great idea to have someone with experience review your lease to see if you are held by production or not. It could be good news.

• ▶ Reply

Permalink Reply by Mit on July 9, 2008 at 9:17

Most of the land currently held by shallower production will eventually be drilled at the greater HS depths. Not only will these landowners forgo the lucrative HS bonus payments, but most of these leases were signed with royalties less than 25%.

• ▶ Reply

Permalink Reply by Ladyoaks on July 9, 2008 at 21:58

That's exactly right. One parcel that we own was signed up and has been "held by production" for almost 30 years. The production amounts result in royalties at some months less than $10/month. In addition, the royalty amount was at 1/8. But, we are looking to speak to a lawyer in S'port to figure out all possible options on this....may be that production stopped at some point during the 30 years and we can claim the lease is no longer valid??? Or, we might try and present a demand request...Not sure if any of it will have any bearing or hold up...but I think it is worth the investigations.

• ▶ Reply

Permalink Reply by Ladyoaks on July 9, 2008 at 22:38

Certainly will post with any helpful updates.

• ▶ Reply

Permalink Reply by Brenton Spence on July 10, 2008 at 4:03

Most leases have clauses that allow the operator to continue to hold the lease as long as it's producing in "paying quantities", which is sometimes very nebulous.....however, a key point in any argument is whether you continued to accept the payments during the "lean years" when prices were low and whether there was any continuous interuption for longer than 90 days without payment of "shut-in royalties"....an option the operator has in the event there is a need for "workover" on the well to bring the well back to better producing levels. If you are now receiving higher royalty payments due to price increases in the past 2-3 years, and have been accepting those payments, it will be hard to win in a courthouse. We had the same thing happen on some of our property around the Shreveport area, and no lawyer would touch it. This was before the Haynesville Hype started.

• ▶ Reply

Permalink Reply by shelby on July 10, 2008 at 7:52

Ladyoaks,
Could you explain your understanding of a "demand request" in this regards.
Thanks,
Shelby

• ▶ Reply

Permalink Reply by Ladyoaks on July 10, 2008 at 10:43

Shelby,

I have spoken to a lawyer at one of the prominent firms in Shreveport. His advice, and experience, has been that you may be able to deliver a "demand" request to the operating company to use reasonable efforts to develop the production under the leased property. The demand would be to develop the deeper levels of land, or release the lease at those levels. The attorney we spoke with said that he had some success with this, however it was all prior to the Haynesville blew up.

I expect, as others have stated, that this lease will be sold to one of the larger operators, and that it will be kept "under production" as long as they do not have to do anything on it. We shall see.

As my cousin says, we didn't earn any of this and it is all simply a blessing! So, that is how we are trying to (wisely) approach the situation(s) that we are faced with.

• ▶ Reply

Permalink Reply by shelby on July 10, 2008 at 11:02

I agree with your cousin that it is a "blessing" in every regard, but, counting those blessings seems to be a lot of hard work.
Thank you for explaining the "demand" request in regards to force expand production efforts.
Shelby

• ▶ Reply

Permalink Reply by Ladyoaks on July 10, 2008 at 11:09

Indeed it is. Indeed it is!

• ▶ Reply

Permalink Reply by Grillin' - MmmMmm on July 21, 2008 at 9:17

You may also find that the person with the most opportunity to make money is the lawyer suggesting you pursue a weak case. Better get a second opinion before he starts up the meter.

• ▶ Reply

• ‹ Previous
• 1
• 2
• Next ›
• Page