Replies to This Discussion

Permalink Reply by HBP on May 24, 2014 at 9:11

While I agree that companies should show their math on the stubs, including deducts (and I believe the La. code supports that they should show their math), the 1.25 difference for February is only 22% which is in line with what some of the other companies charge on a non-cost free lease.

Its different in every field - I'm just mentioning that 22% is not obscene.  Not letting CHK off the hook.  4.815 is net back pricing for february, meaning it is not market and was apparently burdened by costs, then they applied further costs to get it down to the full net back of 4.315.  

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Permalink Reply by w.r. frank on May 24, 2014 at 17:30

Henry,

I agree on CHK, but please double check the royalty statements on severance. Was your aunt's gross $4.815/mcf and then $.50 of expenses and then $.118 of severance; or did the $.50 INCLUDE severance. I also am surprised you have February royalty from CHK since it would normally be in the May 31 check. BHP pays around May 20 so you would have their check for February royalty. Are you sure that you are comparing CHK February prices with BHP February prices?  Can you detail each (i.e.., gross/mcf - expenses/mcf - severance/mcf = net price/mcf and make sure both are for February.

Thanks.

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Permalink Reply by Henry on May 25, 2014 at 0:18

wrf,

There was a separate $0.118 for severance tax.  That was NOT included in the deductions I mentioned.  Yes, this was a February to February comparison.  

I note that I did not adjust for the pressure differentials, and should have.  So rather than noting a difference of $1.25, I should have adjusted the differential downward, so maybe it is something like $1.20, instead.

But my main point is that CHK leads the royalty owner to think that they are only taking about $0.50 in deductions - a fairly small amount.  But there is something else hidden, that the royalty owner will never see, in that low, low price they give for the gas.  Most royalty owners will never know that CHK appears to sell their gas for way below market value.

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Permalink Reply by w.r. frank on May 24, 2014 at 18:06

Henry, here is the same info for a BHP royalty for February and a CHK:

                                             BHP                CHK               ∆

Gross Revenue/mcf             $5.658            $4.930         ($.728)

Expenses                                  0                    .517          ($.517)

Severance                                .118                .115          ($.003)

Net Royalty/mcf                    $5.54              $4.298         ($1.242)

These numbers are off royalty statements and do not correct for the fact that BHP reports volume at the LDNR pressure of 15.025 psi and CHK reports volume at OK pressure of 14.65 psi. Apples to apples, the CHK net at 15.025 psi would be $4.408, and the ∆ would be $1.131/mcf.

On our leases, YOU ARE CORRECT, CHK screws the royalty owner on price AND then violates the" no cost" lease by unlawfully deducting post production expenses. Severance is the same after adjusting volume for the different pressure bases.    

       

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Permalink Reply by HBP on May 25, 2014 at 1:22

If w.r.'s comparison is based on 2 no-cost leases, then yes, CHK is doing their usual creative interpretation of no cost by providing a net back price w/o showing that it was burdened by costs.  Plenty of litigation on that.

But remember that in Henry's situation, the CHK lease did not have no-cost, so in that situation we are back to 20-22% deducts.  

I agree with Henry that all checks should show the math, and I support any legislative clarification to achieve that.  I interpret La. R.S. 31:212.31 to provide for this but there are valid interpretations on the other side which is why La. may need to clarify so the royalty owner may actually know the extent of their deductions.  

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Permalink Reply by w.r. frank on May 26, 2014 at 0:49

CHK screws on BOTH price and then by wrongful deducts. Both leases have "no cost" clauses. At 15.025 psi, the CHK price is $5.056, or ($.594) less than BHP. Then, on the royalty statements (adjusted to volume at 15.025 psi) CHK shows deductions for fuel and gathering of ($.53). NYNEX February Expiration price (bid week) was $5.557, so BHP's price was 10.1¢ better than NYMEX and CHK's price (adjusted to volume at 15.025 psi) was (50.1¢) LESS than NYMEX. The important thing is that the battle is NOT just that CHK is violating the lease agreement by deducting post production expenses (now disclosed on the royalty statement), but it is cheating the landowner by not paying a competitive price relative to BHP and NYMEX. I think this was Henry's original point that her aunt did not have a no cost clause, but was not receiving a fair price for her NG.

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Permalink Reply by Henry on May 26, 2014 at 13:52

Yes,  My point is that the statement leads you to believe that CHK is not so bad -- heck, the deductions are only about $0.50.  Unless the royalty owner knows to look at NYMEX or statements from another company, the royalty owner would never know that the price he/she is receiving for the gas is $0.50 below a fair value.

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Permalink Reply by Sam on May 28, 2014 at 10:41

Ok, now we have known that Chk was pulling the wool over folks eyes on the sale of gas by either charging for something NOT in a lease or just flat not giving the correct price each month.  We challenged them on ours when we saw transportation charges which were not in our lease & they refunded (what they wanted to) some...then, we quit seeing it noted; which of course doesn't mean they quit charging it! As for the correct price WHAT CAN WE DO ABOUT IT? WE KNOW they are cheating folks, but TELL US WHAT TO DO? A lawsuit is prob more than anyone wants to go thru. Thanks. SAM

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Permalink Reply by Skip Peel - Mineral Consultant on May 28, 2014 at 10:50

There are multiple law suits ongoing in a several states on this issue.  The wheels of justice turn slowly and the details of each suit vary.  The greatest impediment to seeking legal redress for this in Louisiana is the very strict requirements to certify a class action.  Mineral owners should keep this in mind when they vote for district, appellate and Supreme Court judge candidates.  District courts often have a tendency to look more favorably on the pleadings of mineral owners.  Unfortunately successful verdicts in mineral related cases at the district level are often over turned on appeal.  Voters don't pay much attention to races for judicial seats and the higher the court the more the industry supports their chosen candidates.

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Permalink Reply by jim weyland on May 28, 2014 at 11:44

a long time ago (and against my will), i found myself as 'respondent' in a family court matter.

and, i think i must have paid for as good of a lay person's family code education as money could then buy.

one takeaway or do-over from the experience was that once the court system has made its random assignment of a case to a particular district court, the next and best thing one could do to preserve his/her chances in the system was to 'beat feet' over to where the county/parish campaign finance records are kept. 

imo, its just human nature that folks, even jurists, might just be more comfortable dealing with folks they already know.

so, with that in mind, scour the assigned court's jurist's campaign contributors' records/history. and, if there's a 'clear winner' vis-a-vis donation history, hire that one, if not for first chair then for second.

my point in all of the above is that skip's spot on. people are just people and w/o suggesting anything nefarious, as we learned in baseball, a tie goes to the runner. its just the way that it goes.

p.s. stay out of family court.

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