Replies to This Discussion

Permalink Reply by Seeker on March 12, 2013 at 4:48pm

Joe makes a good point that a fairly new company can have experienced management and strong financial backing. That can apply to a privately held LLC. There is a big difference between a credible company like this and DUX

In an earlier post Michael Householder said: “Since they (DUX) are privately held, it is nearly impossible for you to find their financials without them actually giving them to you. That is one of the advantages of not going public; your business is your business.”

While it may not be possible to get the full financials of a private company it is frequently possible to get a good idea of the principles in the company and their experience, the company locations and telephone numbers, the number of employees and (particularly in the oil and gas business) who is backing them.

For example, it is possible to get that information about two other companies active in the area, EdgeMarc Energy and Reed Energy, just not about DUX.

I am not recommending that anyone sign with these companies. To the contrary, I would recommend that when ever possible landowners lease with an actual oil and gas company that has the financial and technical capability to quickly drill many horizontal wells. What landowners focused on the bonus money lose sight of is that the potential royalties are worth many times more than the bonus money – but only start when wells are drilled on their property.

EdgeMarc, in contrast to DUX Petroleum, appears to have experienced management, a functional website, an actual office and telephone and backing from Goldman Sachs (see article below),

http://www.bizjournals.com/pittsburgh/print-edition/2012/09/28/edge...

Many of us were skeptical when Reed Energy came to the area. We learned that it is a matter of public record (on the Washington County Recorders site) that Reed Energy is backed by Metropolitan Equity Partners for lease acquisitions up to $100 Million.

Unfortunately there is no direct link to this document. Go to landaccess.com, select OH Washington, and do a name search under Reed Energy. Click on the second (of 93) records, which is a Mtg. Click on the small blue tif image in the upper left corner to see the document.

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Permalink Reply by Samuel J. Orr on March 13, 2013 at 2:48am

: You are 100% correct. I still believe the big O&G companies are the best bet for landowners. Then there are some companies that may be flippers but at least have real financial assets to acquire  leases......and then you have DUX about whom, nobody seems to be able to learn anything about. They do now have a website that indicates they do business or have done business in 20 states, apparently all since October 2012 when the company  was formed??? Their website lists an e-mail address where you can inquire about your lease!! That  appears to be a Catch 22, because unless you have a lease they will not respond. I would suggest that persons reading this thread e-mail them and see if they get a response!

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Permalink Reply by Samuel J. Orr on March 15, 2013 at 10:23am

I am continuing to search for information about DUX without much success. The DUX website has a map stating that they have done business in 20 states. Rather amazing that they have been able to do so without any newspaper articles popping up or any press releases!!??  I am not the most computer literate person in the world. I therefore invite all the believers in DUX and all the skeptics to use their computer skills and any other talents they may have to search out information, positive or negative, about DUX! If   I lived in Washington County, Ohio, I would be calling Attorney John Wells for information. I would also be writing him an open letter posing the many questions raised on this thread. Finally I would send a copy of that letter to the local newspaper, and possibly a copy to my state representative and my state senator! Sometimes our elected representatives can be helpful in getting information, and applying some pressure to get information that might not otherwise be forthcoming! They sometimes have sources of information not readily available to the private citizen. They also know what if any governmental  investigatory tools may be available to get relevant information.

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Permalink Reply by Kathleen on March 15, 2013 at 10:40am

You touched on what bothers me, zero Internet chatter about this company and its leases. Even happy people post at times :0). That's a lot of land and nothing except this thread is out there. Oops sorry, I guess they do have a website.
When we started looking at leases I know I looked into DPS Penn and CHK to see who they were since honestly I didn't know them at the time. If DPS penn didn't come up as the landman for CHK I think I would have worried about signing with them.
I hope Im wrong about DUX and everyone gets paid and is happy and DUX adds a few pages to their website :0). If they started in late 12' than monies should be due now to early signers, if there were any.

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Permalink Reply by Samuel J. Orr on March 16, 2013 at 4:49am

Kathleen: Hope Springs Eternal! That being said, I wish those with better computer skills than I have would come up with more information about DUX.  I see little reason to be optimistic but many reasons to be skeptical.! Like you, I hope that DUX comes through and everybody gets paid. See my previous post for suggestions on what worried landowners might do to elicit more in formation about DUX.

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Permalink Reply by Seeker on March 17, 2013 at 9:15am

The DUX Game – Part 1 of 3 – The Landowner perspective

Heads the landowner looses. Tails the landowner loses (Twice). Why would any landowner place this bet if they understood the risks?

It is critical that landowners realize the potential dangers of signing a lease with a “paper” company with no apparent assets or experience. Landowners risk tying their acreage up for 120 days or more – when they could be signing leases with proven companies.

Several horizontal wells are scheduled to be drilled in Washington County this spring. While the results will not be immediately announced the activities of the company doing the drilling are likely to telegraph how pleased they are with the cores. For example, shortly after PDC cored the Palmer well in Morgan County PDC rushed to sign three lease deals in nearby parts of Washington County.

Heads the landowner looses - If the well results are good and DUX manages to flip the leases to a proven company the landowners will lose the difference between the $4,050 and 18% they got from DUX and what ever DUX is able to get for the leases.

A.  Bonus: If DUX gets paid $5,000 to $6,000 per acre that is $1,000 - $2,000 per acre in bonus that each landowner looses. 11,000 acres x $1,000 to $2,000 / acre = $11 Million to $22 Million in bonus taken from landowners pockets by DUX.

B.  Royalties: Landowners frequently do not understand how valuable the royalties can be. Industry experts have suggested that, very conservatively, royalties could be worth 5 times the signing bonus over the life of the well. 5 x $4,000 / acre = $20,000 / acre. (This assumes that the landowner’s acres are included in a drilling unit and that a significant percentage of the acres in the drilling unit are productively drained.)

To make the math easy, assume that DUX gets an overriding royalty of 2% making the total royalty 20%. $20,000 / acre divided by 20 means that each 1% in royalty DUX gets costs the landowner $1,000 / acre. With 2% going to DUX it costs the landowner $2,000 / acre in royalties. 11,000 acres x $2,000 / acre = $22 Million in royalties taken from landowners pockets by DUX.

Add them together and if DUX flips the leases to a real oil and gas company for $6,000 and 20% it ends up costing the landowner $4,000 / acre ($2,000 / acre in bonus and $2,000 / acre in royalties). Total taken from landowners by DUX = $44 Million.

Tails the landowner looses – If the results are not good it is unlikely that DUX will be able to flip the leases and therefore DUX will walk away and not pay for the leases.

Even DrillBABY (a partner in the Southern Ohio Energy Consultants that promoted the DUX deal) had to admit on GMS that according to the lease “If the lessee fails to pay then he has an unrecorded lease as specifically mentioned in the lease and I'm released on day 121.” That is the only remedy the landowner has. Suing a company with no assets is a waste of time.

Tails the landowner looses a second time - If the well results are not good and DUX is unable to flip the leases and walks away it is likely that the lease offers will dry up or that the bonus and royalties offered will go down.

The landowners will have lost the opportunity they currently have to sign legitimate leases in Washington County from companies with proven assets.

While it may be too late to save the landowners who signed leases with DUX, the lessons from the DUX deal may save other landowners. If you know other landowners in a similar situation, make sure they read this discussion.

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Permalink Reply by Landowner1 on March 18, 2013 at 1:03pm

To see how a deal similar to the DUX deal played out and hurt landowners go to the Athens County, Ohio - Cunningham Energy posting.

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Permalink Reply by Samuel J. Orr on March 17, 2013 at 3:24pm

I would sincerely pose the following questions to Attorney John Wells:

#1 If DUX is successful in flipping the leases, do you share in any monies that DUX may obtain via signing bonuses above the amount per acre promised by DUX to the landowners?

#2 If DUX is successful in flipping the leases and obtains a royalty percentage that exceeds by some percentage, the royalty percentage promised by DUX to the landowners, do you obtain a share of that so-called "royalty override"?

 #3 Have you been compensated by DUX or do you have some arrangement to be compensated by DUX in the event that DUX  is successful in flipping the leases?.

#4 Do you represent DUX or the landowners or both in relation to leases signed by Washington County landowners in favor of DUX? Have you led these landowners to believe that you were representing their interests when in fact you were representing DUX?...(if you were or are representing DUX?)

#5 How could you or any ethical or reasonably competent attorney in his or her right mind  advise any landowner to sign a lease with a company like DUX which from all appearances is a shell company with few if any assets? Please read the immediately preceding post by Seeker who has set forth in detail the potential for great loss that may result to any landowner who has signed with DUX or who may sign with DUX in the future? 

#6 DUX only recently has come up with a website which states that DUX has done business in 20 states. Please post some specifics about this "business" given that the company was only formed in late October 2012. These questions are pretty easy. There are a number that are harder. I think there is a reasonable possibility that you might at some time be asked in an appropriate forum to answer some of those harder questions under oath! But what to I know anyway? There are people who read this thread who are much smarter than I, so you might consider my questions as just some softballs to get your brain warmed up!

  

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Permalink Reply by Samuel J. Orr on March 21, 2013 at 6:35am

Anybody with any new news about DUX?? I continue to search but am finding virtually no new information!!

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Permalink Reply by Kathleen on March 21, 2013 at 7:52am

Hey I found something.
Use this link and scroll to page 8 of the copy. Read the right side than go to the left of page 9. You will see DUX oil and gas and the person listed as an incorporator (sp) for that DUX (or an older co named DUX with a guy working there with the same initial and last name as one that's working their now) being credited for a court ruling in Tulsa, concerning leases. As of now I cannot find a date of this posting. I haven't looked hard either.
This has to be the same people and co. IMO now the search should follow j.h. Larson. That could start more info on the other 2 other names listed for this co. I'm all for a positive outcome, I hope.
http://books.google.com/books?id=_OAcAQAAMAAJ&pg=RA5-PA8&lp...
I would like a prize please for finding this obscure filing. :0)

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Permalink Reply by Kathleen on March 21, 2013 at 7:58am

It's just a strange coincidence since that filing is from 1919. Same names and in the same business.

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Permalink Reply by Ron Webb on March 21, 2013 at 8:38am

Its hard to believe they are doing buisness in 18 states when you have to grasp at stralls to find any info on them.

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