Replies to This Discussion

Permalink Reply by PLOVER on January 30, 2013 at 3:19am

CHK HAS NOT, AND IS NOT TAKING ANY DEDUCTIONS FROM OUR FRIENDSVILLE LEASE -   BUT THERE ARE THREE OTHER COMPANIES INVOLVED IN OUR WELLS - STATOIL - THEY  NEVER TOOK DEDUCTIONS - ANADARKO & MITSUI TOOK DEDUCTIONS - I APPRISED THEM THAT THIS WAS NOT IN COMPLIANCE WITH OUR LEASE TERMS AND THEY STOPPED TAKEN DEDUCTIONS AND REIMBURSETED US FOR THE TOTAL AMOUNT TAKEN OUT FOR DEDUCTIONS. 

ANADARKO & MITSUI ALSO WERE NOT PAYING THE MIDPOINT PRICE OF "PLATT'S GAS DAILY PUBLISHED INDEX"   TGP ZONE 4 - LINE 300 - APPALACHIA -  WHICH IS REQUIRED BY THE LEASE TERMS.  THEY ARE NOW IN THE PROCESS OF COMPLIANCE AND REIMBURSING US FOR THE ADJUSTED AMOUNTS.

Permalink Reply by Moldyoak on January 30, 2013 at 11:00am

John can you elaborate on this:

ANADARKO & MITSUI ALSO WERE NOT PAYING THE MIDPOINT PRICE OF "PLATT'S GAS DAILY PUBLISHED INDEX"   TGP ZONE 4 - LINE 300 - APPALACHIA -  WHICH IS REQUIRED BY THE LEASE TERMS.  THEY ARE NOW IN THE PROCESS OF COMPLIANCE AND REIMBURSING US FOR THE ADJUSTED AMOUNTS.

I would like to know where you are finding (without paying a fortune for a subscription) that zone 4 price daily, where in the lease terms it specifically states that price must be met at minimum, and how you notified them of this?  What has the reaction been - did you involve an attorney?  Thanks.

Permalink Reply by melissa humphrey on January 31, 2013 at 2:32pm

Moldyoak- good question, re where to get taht data with subscribing to Platts.

NO attorney here, definately not . But I have seen complaints: if you state your name, address, owner #,  the well and or units in qurestion, and type in the portion of the leasae that applies, page #, paragraph # etc and state you are due a correction, that probably will work.

 

Good luck in this,.

It is great the FVG doesn't have to fight for their deductions.

Permalink Reply by PLOVER on February 1, 2013 at 3:19am

?Sales Price,? shall mean the price received by Lessee for its Oil and Gas sold in an arms-length transaction.
In the event Lessee elects to sell gas produced from the Leasehold to an affiliated party, then for purposes
of computing royalty hereunder, the net proceeds after taxes shall be at least equivalent to the price paid for gas
entering the Tennessee Gas Pipeline (?TGP?) in North East Pennsylvania under a Zone 4 designation. Lessor and
Lessee acknowledge and agree that there is no published index price for TGP Zone 4 as of the effective date of this
Lease. Lessor and Lessee further agree to use a price proxy for the TGP Zone 4 index until such time as a published
index is established for TGP Zone 4, or any replacement zone, should TGP modify its description of such pipeline
Fortuna Energy FV Lease September 23, 2009
Page 16 of 18
zone. The price proxy to be utilized hereunder shall be the Dominion South Point, located in the pricing table
entitled ?Appalachia? under the column heading ?midpoint? as published in the ?Daily Price Survey? ($MMBtu)
portion of the McGraw-Hill publication, ?Platts Gas Daily.? Royalties shall continue to be paid on a monthly basis,
but for purposes of computing royalties, the sale price of gas shall be calculated on a daily basis by multiplying the
allocated daily sales volumes in MMBtu by the published gas index price per day.
Should the Platt Gas Daily index price used for royalty calculations hereunder no longer exist or no longer
reasonably reflect market price in TGP Zone 4, Lessee shall survey the gas market and establish a revised price
index. Royalty price index redeterminations shall occur no more than once every two (2) years. ?Solid Waste,?
shall have the meaning ascribed thereto in the applicable Environmental Laws.

In answer to your question the Index Posting by Platts for TGPL Zone 4 for the month of July 2012 was $1.99, but as Moldy has succinctly pointed out, that minimum price would only come into effect should gas sales have been made to affiliated parties.  Either way, your prices from all 4 companies exceeded the posted index.

I GOT THIS FIGURE $1.99 FROM A POST IN ANOTHER FORUM - ANADARKO -GAVE ME THIS FIGURE $ 1.492 FOR JULY - 2012 - I DON'T HAVE ACCESS TO PLATT'S GAS DAILY.

..... THIS IS A REPLY TO MOLDYOAK ..... WHAT YOU STATE IS TRUE ..."AFFILIATED PARTY" SEEMS TO BE WHAT THIS "SALES PRICE" REFERS 
      TO .... BUT I HAVE A LETTER FROM CHESAPEAKE'S DIVISION COUNSEL, EASTERN DIVISION THAT STATES THEY ARE IN COMPLIANCE WITH THE TERMS OF OUR FVL .... AND ARE USING TGP ZONE 4 PRICING

Permalink Reply by Pam S on February 7, 2013 at 1:54pm

I have the friendsville lease as well but chesapeake is not planning on drilling any time soon in our area.  How long ago did they drill the well that you are getting royalties from, did chesapeake try to change the terms of your lease at all, and where are you located?  The reason I ask is that chesapeake told us that they wanted to incease our unit size which we were OK with but also said that they wanted to make a bunch of other changes to our lease and if we did not change our current lease, they would not renew it after our primary term.  Did they do anything like that to you?  Thanks for your help.

Permalink Reply by PLOVER on February 9, 2013 at 3:04am

IT TOOK ABOUT - 2 - YEARS FOR ROYALTIES FROM WHEN THEY FIRST STARTED DRILLING THE WELLS  --  MAY - 2010 STARTED  DRILLING.

WE AGREED TO CHANGE TWO SECTIONS, ONE WAS UNITIZATION, SECTION 5 - WHICH CONTAINS TOTAL ACREAGE  - OUR CHANGE  ALLOWED -  FROM 640 TO 1280 ACRES - OUR UNIT SIZES ARE 733 AND 666 ACRES.

 THE OTHER SECTION WAS - 10 - OFFSET WELL PROVISION 

YES THEY WANTED OTHER CHANGES BUT WE DID NOT AGREE TO THEM - BUT THEY LEASED OUR PROPERTY ANYWAY - BUT THAT WAS BECAUSE WE WERE SURROUNDED BY CHESAPEAKE LEASES - AND THEY HAD ALREADY DRILLED THE WELLS - BUT HAD NOT FRACKED THEM YET.

IF THEY RENEW YOUR LEASE WILL YOU BE ENTITLED TO ANOTHER BONUS ?

IF NOT - AND YOU DON'T RENEW - WHEN THEY EVENTUALLY DO DRILL

WON'T THEY HAVE TO SIGN YOU AGAIN - WITH ANOTHER SIGNING BONUS ?

Permalink Reply by Pam S on February 28, 2013 at 12:10pm

yes we will be entitled to another bonus if they renew the lease.  Thanks for the reply

 

Permalink Reply by wyalusing jim on March 14, 2013 at 1:29pm

i was hoping that john paglia would follow up with the results of his new pricing formula.

has anyone else invoked the default pricing mechanism in the fvgl?

we know that chk is selling to c.e.m.i., an affiliate, at the wellhead.

what we do not yet know is what price c.e.m.i. is receiving at the tgp, nor how c.e.m.i. and chk are arriving at the reported sales price.

i have yet to see an advantageous price at tgp zone 4, making it worthwhile to invoke the clause, though that may change when the new tgp line is finished this fall and more capacity is available.

from time to time however the dominion south point price has been higher than nymex.

wj

Permalink Reply by PLOVER on March 15, 2013 at 1:25am

... it seems that, "i have yet to see an advantageous price at tgp zone 4, making it worthwhile to invoke the clause, though that may change when the new tgp line is finished this fall and more capacity is available" is correct. 

... i read in a forum that limited flow capacity into tgp zone 4 was holding - DOWN - the price - that increase flow would raise the price ? ?

Permalink Reply by wyalusing jim on March 15, 2013 at 2:10am

john, how did you make out?

have you compared with another fvgl lessor who still gets the wellhead price?

whether or not new capacity will help tgp z4 prices is yet to be seen. kinder morgan will be breaking ground on the new pipeline this spring and its a small project so it should be done fairly quickly.

since we do not know the details of the chk/c.e.m.i. deal, nor to whom or at what point c.e.m.i. is selling and at what price, it is all but impossible to determine which pricing method will make out better in the long run.

since we do know that at times the chk wellhead price is fairly close to the nymex, both above and below, i compare tgp z4 to it, to determine whether or not to invoke the clause. so far i have seen no reason to.

you, have invoked it though and can help others like myself if you share the results with us.

i gave you my phone number on that other forum and would greatly appreciate the opportunity to speak with you and compare notes. we will all do better if we all try to help each other in this game.

wj

Permalink Reply by PLOVER on March 15, 2013 at 3:57am

... CHK monthly price has been above the "midpoint" price of Platt's gas daily - so as you have stated - no reason to use it for CHK ...

... to me it seems that since CHK is selling to an affiliate - CEMI - the price they show on the royalty statement could be what ever they want ... our protection is if the price falls below the "midpoint" ... 

CHK'S Eastern Division Counsel stated in a letter that they are in compliance with TGP zone 4. (line 300) pricing.

Permalink Reply by wyalusing jim on March 15, 2013 at 4:04am

if i understand you correctly...nothing has changed regarding your royalties? still the same price as everyone else?

wj

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