Replies to This Discussion

Permalink Reply by Dion Warr, CPL on December 22, 2008 at 16:41

Grice:

Excellent presentation and breakdown of the facts on the ground. My advice kind of falls along the lines of striking while the iron is hot, and while the costs to reassemble the unit are minimized (thus allowing more of a chance for linda to maximize her deal). There are other solutions, to be sure, as Randy and others have stated. A year gives CHK a shot at it, now. If they can't get their act together in a year, the lease dies, and you let them try again.

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Permalink Reply by linda on December 22, 2008 at 16:53

Thanks Grice for the info. My head is spinning right now with all this information!!! I thought I had some knowledge about leasing but after reading all of this I guess I dont know zip!!! The one thing I dont know is how bad CHK wants this lease. After hearing some of the stories about the offering of leases and how people turned down the offer and CHK said so long its kinda of scary. We turned down a top lease offer in May for $2500.00 an acre which right now looks pretty good compared to what CHK offered. I do keep in regular contact with the person who owns the 175 acres but I may get the other names from you.

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Permalink Reply by getoverit on December 22, 2008 at 17:35

I have a similar situation that I would appreciate some input on. Our lease on 40 acres in DeSoto Parish expires on the 28th of this month. A landman contacted us last month stating that Chesapeake had purchased the lease and was wanting to exercise the 2 yr option at $3000 per acre and 1/4 royalty. We told him that we would just wait until after the beginning of the year when the new budgets came in. We contacted him a couple of weeks ago and told him that we would be willing to accept $7500 per acre and he said he thought that was reasonable and he would take the offer back to Chesapeake. We received a notice in the mail a few days ago dated Dec 17 stating that Chesapeake was planning to unitize our section as well as 2 adjacent sections. The hearing is set of Jan 27. Do we have any room for negotiating since there are already plans to unitize and do we HAVE to accept their offer since our lease had a 2 yr option? Thanks in advance for any input.
P.S. We leased 38 acres in an adjacent section back in May to Petrohawk. Would Petrohawk compete against Chesapeake even if Chesapeake already has plans to form a unit in a certain section?

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Permalink Reply by Dion Warr, CPL on December 22, 2008 at 20:50

Getoverit:

Help me remember: does your lease contain a preferential right to lease in the event of a top lease? If it does, it wouldn't appear that you don't have any other market for leasing until after the scheduled expiration of the PT to see if the lessee or assignee picks up the option.

Either way, you need to wait for a reasonable period (prob. the first week of January) before sending a certified letter to the record owner of the lease stating that you have not received timely payment of your option, and requesting a release. If a letter comes from the lessee/assignee in the near future (usually this is a certified or registered letter): save the letter and check, copy the front of the envelope with the postmark visible, and then keep all of these for your records. If it does not appear that O&G sent your letter on or prior to the 28th, you are probably due a release, and the market has opened up again for you. It matters that O&G attempted to send you a payment by the due date, not whether you received the letter by the due date. If it's close, do not cash the check; depending upon wording in the lease and/or the letter, the act of cashing the check could very well serve as your acknowledgement of the extension of the lease.

If they properly and timely pay you for your option, you're leased for the next two years. If they commissioned actual drilling operations in your section prior to the expiration date, you're held by operations. Unitization alone would not hold your lease.

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Permalink Reply by getoverit on December 23, 2008 at 4:48

Actually, I was going back through the paperwork and it appears that we had the 2 yr option removed. I am looking at the first draft of the lease and it is dated Dec 2, 2005. The first draft had the 2 yr option listed in Exhibit "A". But, the final draft dated Dec 28, 2005 does NOT have a 2 yr option. I have in front of me a copy of the final draft (dated Dec 28, 2005) signed by my husband and Exhibit "A" does not contain a 2 yr option. So, I guess we are in the clear as long as they don't start drilling operations by the 28th....hopefully. lol

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Permalink Reply by Dion Warr, CPL on December 23, 2008 at 14:04

Getoverit:

To be sure, check the lease on file at the courthouse if you get a chance, and obtain a certified copy, usually $5 plus copy cost.

Check to see if anything is going on in your section or thereabouts (sometimes unit boundaries don't fall on section lines, occasionally on half-section lines or even rarely the unit is divided into contiguous quarter-sections of four adjacent sections) that could possibly hold your lease.

If what you say is true in that there is no option to extend the lease, on the 29th, send a certified letter to the record owner of your lease (from previous conversations, it sounds like either you, your husband, or immediate family know how to run the lessee forward in the courthouse records to check for assignments of your lease) stating that no drilling operations have occurred on your lease, or on lands pooled therewith, and that you are requesting a release of your lease to be placed of record. Go ahead and give them the lease information (lessor/lessee/date) and the recordation data (bk/pg/entry) of your lease so they need not work so hard to find it.

Good luck to you. Keep up that love for the shale.

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Permalink Reply by sesport on December 23, 2008 at 17:27

" ...run the lessee forward in the courthouse records to check for assignments of your lease"

Dion - in reading what you mentioned above, a question came to mind. If a lessee assigns a lease, is there no provision in LA law that lessee must notify the lessor? In other words, is it possible for a lessor not to actually know who their lease has been assigned to following the initial signing of a lease? If this is true, can it be included in the lease clauses that the original lessee must notify lessor of any assignments? Thanks for your help.

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Permalink Reply by getoverit on December 23, 2008 at 17:57

According to the landman that contacted us from Merlin Exploration, Chesapeake has purchased our lease. I'm not sure how recently the purchase took place, but we were just informed of this in November of this year. The original leaseholder, Rhumba, never informed us of the change in ownership. I will take your advice, Dion, and obtain a copy of the lease on file at the courthouse. I have been following the applications for new wells on Sonris as well as the hearings on the DNR. According to the DNR, there will be a hearing to form a unit in the 2 sections directly above ours and this is the first activity that I have seen in our township and range. This application is being made by SWEPI. Do you think that Chesapeake will challenge our request to release our lease? Also, is it really necessary to request the release if the lease has expired? Thanks, Dion!

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Permalink Reply by Dion Warr, CPL on December 26, 2008 at 3:51

Getoverit:

I would request the release anyway; if for any other reason, having a proper release filed of record clears the title to your property.

Permalink Reply by sesport on December 24, 2008 at 7:10

KB - Thanks, I thought I'd read somewhere before where someone had posted that, but unless I have it in front of me in black & white all that legalese gets jumbled for me.

When you say failure to give notice if that's all that's required wouldn't affect the assignment, is there then no recourse for the lessor? (I think you or Dion may have already discussed that. If so, I'd be happy to go to that discussion if you'll point me in the right direction.)

Permalink Reply by Jay Murrell on December 24, 2008 at 11:57

OK

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Permalink Reply by Christopher T. Jones and Kellie B. Jones on December 29, 2008 at 7:55

Do not do sign this lease, Some companies are paying as much as $15,000.00 an acre. My uncle just leased his property for $5800.00 an acre last month and he is kicking himself. Gasoline prices are low at the moment so there is no demand for alternative fuels, Natural Gas prices has dropped. I'd sit on the deal for a few months as you know Gasoline prices will be back up and the demand for natural gas will be active once again.

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