Chesapeake sues landowners over old Anschutz Leases.

http://business-journal.com/chesapeake-sues-columbiana-carroll-land...

 

Interesting story. 

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Permalink Reply by Blindsquirell on February 8, 2012 at 10:25am

Id think even the original Lessee would be in on this too as defendents.  How did Anshutlz acquire leasehold, was it via a broker of theirs? Are either of these 2 OH counties online?

Permalink Reply by Paul Martinelli on February 8, 2012 at 10:20am

Would a third party want to provide a bona fide offer....putting itself "at war" with CHK?

 

That is another discussion point.

 

 

 

Permalink Reply by Billy Park Whyde on February 8, 2012 at 11:40am

Here is a list of the defendants in the case http://dockets.justia.com/docket/ohio/ohndce/5:2012cv00188/184758/ if anyone has a PACER ACCOUNT they can dig deeper into the case the case number is 5-12CV188

Permalink Reply by Billy Park Whyde on February 8, 2012 at 10:37am

On a WHOLE DIFFERENT TOPIC HERE BUT I FOUND THIS!

http://thedailyreview.com/news/chesapeake-energy-describes-adjustme... 

Chesapeake Energy describes adjustment in royalty payments 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on February 8, 2012 at 11:57pm

If, at any time during the primary term hereof, or within one (1) year from the expiration,

that states AT ANY TIME DURING  ...not just after the primary term.   The contract I have with  "Right of First Refusal" is practically word for word like the one Billy copied and pasted in his post even if it has a different title with the word Renew.  

It seems to me that the lawyer is acting upon what it says..why else was that clause put in all these contracts? Except it be for the Lessor to be able to entertain better offers and then the Lessee reserves the right to match the offer.  That's what it states.

 

now some of the people who have been procuring NG leases are not necessarily those that intend to drill as they may just be purchasing to flip the lease...so that clause could hold some merit if the Lessor has land that isn't being in any kind of production and other oil companies see a benefit to make an offer...so it is a good clause for the Lessor for such a situation.   Regardless of what the oil company is doing on your property if another oil company gives you a better deal then with that clause you have the right to negotiate the new amt. with the existing Lessee....however there may be other clauses in contradiction (yet this clause is in the addendum not the main body of the contract).  And the addendum typically states that it is precedent and upholding over any other parts of the contract so that there is not a contradiction to the addendum's provision. 

 And you all know that there are those kind of companies out there...so it would behoove the Lessor to have  a lawyer to utilize that clause if need be.

Permalink Reply by Billy Park Whyde on February 9, 2012 at 12:11am

The original leasee did flip the lease The defendants sold their mineral rights to Denver-based Anschutz Exploration Corp. between 2008 and 2010. Then, the rights were commanding between $10 and $50 an acre for signing bonuses, and 12.5% royalties on net production returns, he says. 

Anshutz sold the leases to Chesapeake in 2010. 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on February 9, 2012 at 12:20am

I guess what I am learning is that if the contract addendum has a 'right of first refusal ' clause then if another oil company makes an offer and it is better for the Lessor then the Lessor must notify the Lessee in 30 days time and the Lessee can either match it, up it, or lose the lease.   If there are production clauses (such as unitizing) in the primary lease terms but the addendum clauses supercede any other clauses that would contradict...then it appears to me that a Lessor could possibly take a better offer whether they are in a unit or not.   It would merit obtaining a lawyer to do that...but if your land is in a unit already and you have a decent royalty there really shouldn't be a desire to change it....but clearly a fine lawyer could review the contract and confirm whether they have a legitimate right to put that clause to work.   I know that while waiting for any news from the onception of the lease there was a call from another oil company wanting to lease (and the price was almost 7k per acre so he said) whle the existing lease was already paid at under 3k....so really that oil company could have went ahead and made the offer but when he asked his boss if that clause was any good to proceed...his boss didn't want to mess with it.   But that clause was put there to help in such a situation...if the oil companies don't want to participate against their competition then the Lessor cannot use that clause properly.

 Addendum clause GENERAL..

In the event of a conflict between a provision contained in this Addendum and a provision contained in the Lease, the provision contained in this Addendum provails.

I could have entertained that 6500-7k offer after all...but it would have behooved the boss at Chesapeake to want to utilize the clause as it considered it a regular 'top lease clause' but my contract clause does not mention when the top lease would take affect.  Just states the granting of an additional lease (top lease) covering all or part...and not a time frame as to when.  I don't feel happy now that I understand this better.

 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on February 9, 2012 at 12:39am

Paul stated in his post above...

Would a third party want to provide a bona fide offer....putting itself "at war" with CHK?


Why not?   They already do so among each other...it is just with this clause they can go directly to the Lessor instead of neg. with the oil company. And it gives the Lessor the opportunity to get the better pricing of today.   If they weren't trying to lease land and flipping for more profit I would say that this clause wouldn't really do much.   But these oil companies are bundling as many acres that they can come up with for profit with investors...so if an oil company comes across those leases with the right of first refusal they should include them in their offers to purchase..esp. when most lessors would jump at a new bonus offer at much higher than the under 3k they got several years ago.

Any land agents reading this...many landgroups that signed leases group wise have this clause.   I would add that list to your calls as most of these people would sign eagerly to make up for the bonus loss and royalty difference as many feel cheated...and if your offer gets matched then howbeit...you have made a Lessor happy.   The land agent I talked with at Chesapeake last year stated that he agreed with me that the clause can work to get the better offer..but his boss didn't want to mess with it and maybe because he clearly wanted drilling land asap and possibly he would have to wait to actually take over the lease at the end of the primary term (hey but the pricing per acre would most likely only go up..so it would be a good deal for them and if the lessor got about 5k more per acre up front..they might want to wait on the royalties.).  something to think about.

Permalink Reply by Billy Park Whyde on February 9, 2012 at 12:51am

interesting http://www.bizjournals.com/denver/news/2010/11/04/anschutz-mineral.htm

it might be the fight is that Ck wanted to flip the lease/l

Permalink Reply by Billy Park Whyde on February 9, 2012 at 12:52am

Perhaps Ck was to greedy and a buyer saw he could get it cheaper through the landowners. 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on February 9, 2012 at 12:56am

that's probably it.

YOu know from this discussion I would say that having that clause of 'right of first refusal' is a very important strategic tool for the Lessor.   especially the Lessor who feels cheated already in this NG rush for leasing.   Now if the other oil company sees that it could use the acreage that is next to them but leased to another oil company it would behoove them to find out if that Top lease clause is in the neighbor's lease....as they could most likely give the Lessor better but even less than their competition as the oil companies really know what they have and the Lessors are not that informed.   I am so happy to discover that the GENERAL addendum clause would place that clause of Right of First Refusal (a top lease clause) as precedent over all the provisions of the lease...meaning it wouldn't matter if they even had a well on the property!       Oh for an offer to see if my attorney would agree...I think he would.  You see I thought when I read that clause that it was a way to get better prices in the future if prices went up substantially...and it is....we Lessors need to understand the power of that clause.

Permalink Reply by Billy Park Whyde on February 9, 2012 at 1:18am

However if a well was drilled during the lease without any contention then  the leasee would hold it regardless as they would have complied with the terms and terminating the clause as the well would then be impossible for them to produce if the lease was to be changed. 

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