I am new to the site, and just want to say thank you to everyone for all your incredibly helpful information. This is my first post so I hope that someone can help me out.
We signed an ALOV lease last April. We were pleased with our lease. When we heard that CHK would no longer entertain a lease like ALOV's, we felt that we did a responsible job on research, and getting a protective lease.
Now, a little over a year later, CHK is back knocking on several of my neighbor's doors stating that they need to do an addendum to their lease (which we pretty much all stuck together and signed the ALOV lease together) or they will not be included in a unit, and they will go around their land and as one landman stated "we will just cut you out". What they told my neighbor is that "all the neighbors" are signing and it isn't a big deal. But, yet they have not spoke to me or other ajoining properties that I have checked with. So I feel they are just using a tactic to hit every other property or so, so that we don't get together and compare notes.
What they are wanting to amend is that our lease has a pugh clause and a 640 max. unit size. They want to change it to 1280... and then they informed my neighbor that only part of her property would be in a unit of 1280, and then the other part will be put into another unit at a later date.
So I have spent many countless hours trying to find this out, but the bottom line is..... Does switching to a 1280 when you have a 640 affect your future royalties? The landman seems to evade the question and give some mumbo-jumbo answer, that doesn't hit... The bottom line... does it benefit us as a landowner to switch? or does it benefit CHK? I can't image they are here wanting us all to switch because it is going to help us in the long run. Especially because I know a neighbor down the road that did not sign with us last April. They would not even look at giving him a 640 max... it was a 1280 or nothing. So he ended up signing the 1280 just recently... And wouldn't we be smart to just wait for awhile till some wells go in? Why such a big rush on getting this amendment signed?
I guess I am just kind of looking for a black/white answer, to help me out when they come knocking on my door again. Actually, my neighbor called and informed me, that he said he was coming here next to work on us....
Thanks everyone for any insight...
Would you please expand on the phrase, "you also give up your pugh clause" ? Why would a lessor
give up the clause? Your response to the discussion makes good sense to me, except for this phrase.
They are drilling much longer laterals then before, over one mile, and they need a larger unit to contain these wells within the units boundary. It is cheaper for them to drill one 5000 foot lateral as compared to two 2500 foot laterals. Your ultimate long term royalties won't change (short term they will), but it drops their cost of production. That is why they want it.
So, is it common for O & G to put guarantee's into a lease, or do you think I will get the "drop jaw reaction " like you got Kathleen when asking for some type of compensation for changing the lease. Don't you think it is still early in the game? What about those folks that signed years ago when they thought 50 - 75 an acre was great.... So now they are telling us, no compensation... But, what if things don't go their way... I would think that they would start doing something to make the pot a little sweeter to get more to amend...
That is exactly what is going on here in Stark. Talking with a co-worker who has an old Belden & Blake lease that is max size of 160. He was approached by CHK and they were like his best college buddy.... Dropping all the neighbors names like this landman has been around the town for years and knows everyone. My coworker took his addendum in hand and told him he would look it over. We talked, I shared this website, and some other info that I had come across, and he decided he was not going to be in a hurry and see an attorney. They are offering him nothing in exchange for the switch, other than only 6 of his 7 acres will be in the 1280.
So the landman showed up a week later to get the signed amendment. When my coworker told him he was not signing it and taking it along with his original lease to see an attorney next week, my coworker said his whole demeanor changed. He was upset, short, and threatening him that his was making a huge mistake. They won't be back. They are cutting him out. They will go around him... Blah blah blah.. So him immediately thought that if this was such a good deal for all party's (as CHK put it) then why on earth would he be so upset about him wanting to get it reviewed by an attorney. So right there, tells you something is shady... But, as I am saying.. You begin to second guess yourself because of all this being so new and an unknown future for us all. You wonder can they really cut you out? So maybe you better just sign... So, that is why I am thankful for this site that we can share personal experiences.... And it is so funny to hear how it is going on in other counties... But, again, I just feel that we are at their mercy because we don't really know what is going on..
A lot of leases have a full developement clause in it, in NY it is state law (if there is nothing in the lease the state law provides a minimun number of years or else the lease terminates on the undrained acreage)
A full developement clause and pugh clause are MUCH more important then royalty rates or unit sizes, most landowners don't understand that, and gas companies take advantage of that.
This is what my lease in the Clinton Formation looks like that was done in 1980
Thanks for sharing!!!