I received a Production Revenue Check from Chesapeake for March 2011 Production showing
Selling Price $3.76/mcf
Less Fuel .06
Less 3rd Party .22
Less Marketing .14
Less Gathering .44
Net $2.91/mcf
I participated in drilling a well in S Caddo Parish and am a Working Interest Owner. Even though I have notified CHK that their charges are unreasonable and requested an explanation, documentation, etc of them, they have not provided that information. Their Total Deductions are .85 per mcf and that is before Monthly Lease Operating Expenses.
Are these charges Unreasonable? If so, what is a Reasonable amount? Is there any way to challenge CHK and get them reduced?
Any and all comments, ideas, suggestions, etc will be appreciated.
Hush Puppy
Tags:
You might want to check out this discussion:
http://www.gohaynesvilleshale.com/forum/topics/what-price-are-you-g...
Henry is keeping spreadsheets on prices reported by members... with emphasis on Chesapeake, as I recall.
Hush Puppy,
Consider the fact that had you leased at 25% royalty you would be getting the equivalent of approx. 94 cents/thousand. Your joint operating agreement probaly will allow you to take your share of gas "in kind" and you would have to sell it yourself and pay to have facilities installed to take your share. I don't know if your costs are fair or not. With my WI I only pay for comprssion costs and my price for April production was $3.76/thousand. Additionally I am paid for liquids stripped from gas as it is "wet" gas.
Thanks -
Actually I acquired a Lease on a small tract and then participated in drilling. CHK never offerred the opportunity to sign a Joint Operating Agreement or Gas Balancing Agreement. Eventually I signed a Marketing Agreement but had no idea that they would be deducting as much as they are withholding. I know that I am obligated to pay fair and reasonable cost to market, transport, etc but $.85/mcf seems to be unreasonably high to me.
Hush Puppy,
I cannot answer your question as to whether or not this is a reasonable amount. What I can tell you is that this is fairly typical for people who have wells with CHK, in cases where the lease/agreement allows deductions. It seems that CHK'd deductions run higher than those of other companies. And yes, people are furious. Unless your agreement prohibits these deductions, I think you are out of luck.
In the Barnett Shale and in the Fayetteville Shale there are class-action suits against CHK for the overcharging of these items. The suits are Vanoven v. Chesapeake and Coffey v. Chesapeake. You can search for them on the internet and find the pleadings. I suspect attorneys are looking to file a similar suit in the Haynesville Shale, but that is a guess.
Henry,
Thanks for the heads-up. If CHK is making these kinds of deductions from their Royalty Payments (for the Leases that do not prohibit them), it seems that a good class action lawsuit is appropriate. I have been around this business for many years now and have never encountered this situation before. My problem is that I don't know when we cross the threshold from what is reasonable to what is unreasonable.
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