Why is the 640 vs. 1280 a giant new hot topic?

Hi all,


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... 

Views: 6134

Replies to This Discussion

Permalink Reply by Jim Lawrence on June 22, 2012 at 3:17pm

If there hbp then they will also be held to the royalty percentage that is in their lease, most likely 12.5%.  Smaller than 640 ac units will be drilled but I believe they will be drilled later rather than sooner unless it is acreage that was leased and the lease is about to expire. 

Permalink Reply by Billy Park Whyde on June 22, 2012 at 4:23pm

If they are held by production and the lease does not allow pooling or unitization a modification to the lease opens up a whole new lease if the landowner wants to push it, after all they need his signature! 

Permalink Reply by H. Allison on June 23, 2012 at 12:10am

This is the situation in our neighborhood. CHK is drilling SE lateral. Neighbors to the NW are all hoping to receive royalties from this well. They have 640 leases which traditionally may mean they will only receive royalties from the NW laterals. They want to be included in the whole 1280 acres so their royalty checks start sooner.    The twist I see is that the leases I have seen give the company the ultimate decision as to how to put your property in their unit. They are permitting individual legs at this time.  The state currently only requires the individual lateral be permitted, they do not have to declare or record your unit with the Division that permits oil/gas drilling. That is what people need to push for.

Permalink Reply by bo boboski on June 23, 2012 at 4:22am

If everyone in the 1280 acres isnt included,then they cant hold by production all of it. those leases will expire if they dont drill more wells in the allotted time.It would pay them to include all 1280 acres if they want to keep it. Maybe they are just wanting indiv. leg units now to see if they even want to drill any more? They can change the prod. unit to a 1280  in the future at any time,as long as the original lease does'nt expire. Maybe the state should require that whatever they declare as the production unit size is,should stay that way. If they want to tie up all that acreage,then they ought to have plans to attempt to drain it all

Permalink Reply by Kathleen on June 23, 2012 at 4:41am
This is where I get confused. How can they change it later since if they start drilling and parcels 1-10 have been receiving royalties and than they add 11-20 wouldn't the second group lose out on the first royalties given but the first ones benefited. I hope I said that right.
Or when people say they can change it they mean right up until someone starts receiving royalties?

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