Why the H*#4@ did I sign a mineral lease?

Being part of a 640 unit is crap for the folks with small acreage. Its all a pyramid scheme. We all joined in this thing together to make money together...at least that's what the feeling WAS. I remember when the first checks were given out, many Shreveport natives boosted the economy for this area by shopping for big ticket items like cars, houses, etc. in hopes of getting more and better checks. But what did Chesapeake do? Send out Div Orders with stupid decimal points in the writings, such as .00003 for example. A lease in the beginning stated that the mineral owners would receive 25% of monies made. The Div Order to be signed states different rhetoric with that decimal crap. When I asked Chesapeake where did they get those numbers from, they answered me back with, "It's something we made up."  Mineral owners are treated like the enemy. What if Walmart was in this situation? They own the merchandise, but the only folks who make the real money are everyone except Walmart, (except mineral owners). Doesn't make sense. Try doing the math with screwed up numbers such as .0003 and see what you come up with. A bunch of zeros after a decimal point adds up to horrific under payments made to the mineral owner, the ones who own the product. And where are the guys in my 640 unit who own tons of acres and made nearly a million dollars? would be nice if they shared their profits with us guys making 80 dollars to 500 dollars a year. I signed up because I knew it would benefit those with small acreage as well as those who own large acreage. My neighbors are in shock and most folks are embarrassed that their checks aren't more lucrative  after receiving their initial payments of thousands of dollars, now we all get hardly anything. So much for boosting the economy for Shreveport. 

Tags: 640, chesapeake, division, law, mineral, order, owners, payments, pyramid, rights, More…scam, scheme, suit, unit

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Replies to This Discussion

Permalink Reply by Aubrey C. Sanders, Jr. on July 3, 2013 at 9:23

Dion, the best response yet,IMO

Permalink Reply by Gale on July 1, 2013 at 7:59
Seem Lee has gotten really quiet!
Permalink Reply by lee on July 1, 2013 at 22:41

Haven't been on. Patience. Good Lord. Where are all these cute women coming from who talk ugly to me?

Permalink Reply by Rick Jackson on July 2, 2013 at 4:53

I can understand where you are coming from about the lease. I have about 15 acres that is divided 3 ways, with 3 wells. We did the 640 acreage lease as well and was suppose to recieve 25% royalty. Our checks are very small as well, but the checks only show the money that receive. I would much rather see  a detail amount of how much money was actually made and then show any deductions that were taking out. I really have know way of knowing if I'm actually receiving 25% or not.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on July 2, 2013 at 5:32

The current President go into the White House on the votes of those who can't do the math. The result of that miscalculation?

FORWARD__Barak Obama

FORWARD TO WHAT?__Pogo

Permalink Reply by Spring Branch,mineral owner on July 2, 2013 at 10:11

RJ, most companies show the deductions.  Chesapeake does not, if they are your Operator.

NO, RJ you didn't do a 640 acre Lease...........you did a 15 acre Lease in a 640 acre Unit.  There is a huge difference.......AND you agreed to accept a 1/4 (25%) royalty on your 15 acres.  Now apparently you don't really own 15 acres, but rather an undivided 1/3 of the 15 acres which equals 5 acres; so actually you didn't do a lease on 640 acres; you didn't do a lease on 15 acres..........you did a lease on a NET 5 (five) acres.  Am I right so far?  If so your calculation is as follows ( assuming your royalty rate was 25% and your section (unit) was an even 640 acres):

5 acres divided by 640 acres equals .0078125; which expressed as a fraction, means you own 7.8125 tenths of one (1) percent.  In other words, you own .0078125 of the section and on that .0078125 you agreed to a 25 % royalty rate...........SO..... you multiply .0078125 times .25 (.0078125 X .25) and that equals .001953125, which should approximate what shows up on both the Division Order and the royalty check stub as your ownership interest.  If that is close to what shows up under the column titled "Payment Decimal" then you are, in fact receiving a 25 % royalty.

Glad to be of help.

 

 

Permalink Reply by Rick Jackson on July 2, 2013 at 10:58

Thanks SP, Chesapeake is the Operator, and I think you are probably right about the percent. Mine is 0.00175724. This is a different question I have. Is it common for the unit price to vary on each well?  I'm getting royalty from three wells, and one price is 3.16, and another one is 3.20 and one is 2.31. Is it common for the price to always vary like they do.

I really appreciate this information, this is so helpful.

Permalink Reply by Spring Branch,mineral owner on July 2, 2013 at 11:45

Yes, it is common.  The 3.16 and 3.20 difference seems totally normal.  Keep in mind that the BTU content of the gas varies all around the play.  You are taking a serious beating on the 2.31 and I have to scratch my head when I see something like that, though I must admit this past month with Chesapeake I had a 3.46, 3.35, 3.02, 2.89, and a 2.56.

Could it be that your 3.16 and 3.20 were from wells that had leases with cost-free royalty and the 2.31 did not?

Permalink Reply by richard v. simmons on July 3, 2013 at 2:02

Talking about discrepancies, my neighbor and I have wells in ajoining sections both drilled by Chesapeake less than a half -mile apart and my price for April was $3.29 and his was $2.95.   I have another well same field about a mile from my well and shared by Encana $3.91 & Shell $3.86. Seems like the type of shale and BTU should be similar but,  I really like the BTU content of the Shell and Ecana well much better.  What does cost-free royalty have to do with the price MMBTU company should not sell for less because of cost? MY neighbor and I are both cost-free. 

Permalink Reply by Rick Jackson on July 3, 2013 at 5:03

Thanks again for the information, I will have to check to find out about the cost-free royalty. I just sort of wrote the discrepancies off as being bad luck for me. Here is the issue. The well that is 2.31, is the well that I have the largest interest in.  The other two are wells are wells that I have very miminum interest in, in terms of acres.

I will check to find out about the cost-free. Its been difficult for me to get information from PDS Energy. I'm really not fimilar with all of the terms. I inherited these wells after my fathers death. I'm asking a lot of questions so I can be a little bit more knowledgeable about what is going on. I'm not trying to just get something from nothing or turn this into a quick rich scheme. However, I dont want to be taking advantage of either.

So I really appreciate all the information that you are giving me. I will review the lease and the division oreder to find out about the  cost-free lease. Thank you again for all of your help.

Permalink Reply by MJS on July 2, 2013 at 7:14

I own an acre in Greenwood and we were the last 640 acre unit to receive big sign-ons with 25% royalties. However Greenwood landowners had to fight to the point of becoming a large crowd protesting in front of Chesapeake HQ as seen on the evening news. Chesapeake tried to weasel out of the deal when they concocted a plan to have those with mortgages obtain an agreement with their mortgage company for drilling all within a 30 day deadline. Try doing that with a stick in the mud mortgage company or an out of state mortgage company. So to assume in an ah-shucks manner that gas companies are a bunch of goody-two-shoes-mathematicians who put the interest of the little people above themselves is silly. I was told to expect $1,100 to $1,400 a month and that ain't happening even though the price of gasoline and everything else is through the roof and higher than the time of the 2007-2008 natural gas price hike. For the people on the short end of the stick with the bumps and bruises left from the battle with Chesapeake it's a different perspective and they do have justified skepticism and something to complain about whereas those like the ho-hum individual with 150 acres who responded to this topic obviously have enough royality income to reside in an ivory tower.
 

Permalink Reply by Skip Peel - Mineral Consultant on July 2, 2013 at 8:30

MJS, who told you to expect $1100 to $1400 a month?  Did they explain what that figure was based on?  Or did they use an online royalty calculator?  Do you think that the price of natural gas dropping from $13 in the summer of '08 to $3.63 in April '09 might have an effect on the amount of a royalty check?  The price of gasoline has nothing to do with the price of natural gas.  Not one person in this discussion is defending Chesapeake.  What they are attempting to do is point out that those with unrealistic expectations will always be disappointed.  And that those who wish to complain should have some reasonable point on which to complain.

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