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Permalink Reply by Landowner1 on June 26, 2013 at 12:35pm

Markus, sorry for the delay in responding to your questions but at the time of your posting, the results were not available.

The DUX Petroleum LLC deal was negotiated by and promoted by Southern Ohio Energy Consultants (SOEC) which has four founders, John Wells, Dave Burt, Tim Neal and Jeremy Gaul.

The promoters of the DUX deal have been very quiet, hoping that word would not get out regarding the complete failure of the DUX deal. Landowners have largely been kept in the dark regarding what is going on.

Anyone who has additional information about the DUX deal or what is going on with the Watertown group or any of SOEC’s other groups in Washington County, please post it. Landowners need this information in order to make informed decisions.

According to the Southern Ohio Energy Consultant’s (SOEC) website the signings for the DUX Petroleum LLC deal were held February 18 – 22.

From SOEC’s February 6. 2013 update:

“The Watertown Group has grown to over 8,500 acres since our deal was announced.  Due to this increase we are moving the lease signing dates back one week.  Lease signings will now occur Monday, February 18 through Friday, February 22 at the Watertown Volunteer Fire Department from Noon to 8 p.m. each day.”

According to subsequent SOEC information a total of 11,000 acres were involved in the deal at $4,050 / acre  = $44,550,000. On this deal SOEC was due to make 1% = $445.500.

From the SOEC Watertown Group News Release “The company will have 120 days to verify title and pay the landowners after the leases are signed.”

From this information the 120 days to make payment expired beginning Tuesday, June 18^th through Saturday June 22^th.

Based on conversations with a number of landowners it appears that DUX was not able to pay any of the landowners.

Supposedly this complete failure to pay for the leases was because the company behind DUX backed out of the deal. This makes little sense.

1.  No legitimate oil and gas company with the resources to pay the $44,550,000 commits to backing lease purchases at $4,050 / acre and then backs out, particularly because all the new data about this part of the Utica since the lease signings has been positive, making the acreage more valuable not less valuable.

2.  It proves what GMS posters researched and posted long before the leases were signed – that DUX was a flipper with no assets and that it could only pay for the leases if it was able to flip the leases for more than the $4,050 / acre.

If that had occurred DUX would have pocketed the difference between the $4,050 and what ever they were able to flip the acreage for as well as an overriding royalty (the difference between 18% and the common 19% - 20%), all of which belonged to the landowners.

On GMS DrillBABY (John Wells’ SOEC partner – Tim Neal) claimed that DUX had the money to pay for the leases – as expected this was false.

SOEC and John Wells reportedly told landowners that DUX’s new offer of $3,000 / acre is the best that landowners can get and that if they do not accept it they will get left out (sounds like a landman, not someone representing landowners). DUX also wanted an additional 90 days to clear title.

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Permalink Reply by Samuel J. Orr on June 26, 2013 at 1:25pm

I would like to see John Wells, Tim Neal, Dave Burt, and Jeremy Gaul placed under oath and asked a number of questions. This Dux deal has had a nasty stench to it from the very beginning. I was highly suspicious that the above individuals had a deal with Dux such that when Dux flipped the leases, they would  share in the proceeds. To the extent that this is true, it is classic double dealing. I am gratified that DrillBABY's true identity has been unmasked and that he has been revealed to be one of four persons who has perpetrated this nasty scheme against unsuspecting honest hardworking landowners in Washington County. Why has the local newspaper not covered this? A newspaper's job is among other things to protect unsuspecting members of the public. I e-mailed the paper months ago of my suspicions and did not even get a reply. DrillBABY, I now understand why you never replied to my e-mail to you! 

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Permalink Reply by WLW on June 27, 2013 at 3:03am

Sam, if everyone could only be as perfect as you, wouldn't the world be a wonderful place.

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Permalink Reply by jb379 on June 28, 2013 at 4:41am

Seems like you sniffed that one out pretty early Sam....I am not sure why anyone would have issue with you for calling it like you saw it, which appears to have been spot on (unless we are missing something here). 

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Permalink Reply by Donald on June 27, 2013 at 3:08am

IF the trurh hurts don"t kill the messagener

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Permalink Reply by Kathleen on June 28, 2013 at 12:25pm

So everything we thought months ago was true I guess. I was hoping we were wrong, and somehow these landowners would be paid.
Sam, I fully agree with you, the local newspapers should have picked up this story months ago and should still now.
Where are all the landowners that haven't been paid? You would think a few would have googled DUX the last few months while waiting to be paid, and found GMS to ask questions or at least say what wasn't happening.
This whole thing has been a little strange.
I hope all those landowners benefit from the decent drilling results and receive, real, better leases in time.

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Permalink Reply by Samuel J. Orr on June 28, 2013 at 1:56pm

Kathleen, I agree with you 100%. If I were presented with a lease, I would want to know that the the O&G company was for real, had some experience, a lot of capital, a track record of drilling wells and assuredly a phone number. I have challenged Attorney John Wells on this website to answer a number of questions. He has remained silent. That is his right but he assuredly owes an explanation to the landowners. To the best of my knowledge they have received no answers either. How a supposedly reputable attorney could advise or even permit landowners that he represented to sign with  DUX  is beyond my ability to comprehend. I think he knew DUX was a shell company with no assets. I suspect the plan was probably for DUX to flip the leases for more money to a real O&G company and then have Wells and his 3 cronies get a portion of the difference between what DUX would receive and what DUX would  owe the landowners. It appears that DUX has been unable to flip the leases. The landowners have no remedy because DUX is only a shell and has no money. I, like you, hope all the landowners get good leases from a real O&G company.  

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Permalink Reply by James Brink, Esq. on July 1, 2013 at 3:45am

All good questions.  One must carefully read the lease to determine whether there is a notice requirement regarding a breach.  Most leases contain a clause that before a lease can be terminated for a breach, including a failure to pay, the lessee must be given notice of the apparent breach and then it will have a certain number of days to either remedy the breach or terminate the lease.  

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Permalink Reply by Landowner1 on July 1, 2013 at 1:24pm

For those of you who are not familiar with the DUX Petroleum LLC deal perhaps some context would be helpful so that the importance of what happened can become clearer.

In the history of the Utica this appears to be the ONLY attorney led landowner group that signed leases and NONE of the landowners were paid.

Just because a landowner group is lead by an attorney does not guarantee that

1.  the attorney did their due diligence regarding the company

2.  the attorney is acting in the landowners best interest

3.  the negotiators are good negotiators or that

4.  the lease is a good deal for the landowners.

At the end of January 2013 Southern Ohio Energy Consultants (SOEC) announced a deal with DUX Petroleum LLC for landowners in SOEC’s Watertown landowner group.

In meetings with SOEC several landowners raised questions regarding DUX and asked whether SOEC had thoroughly investigated DUX and their ability to pay for the leases only to be curtly dismissed by John Wells (an attorney and one of four founders of SOEC) who said that of course they had researched DUX and that DUX had the money to pay.

When landowners tried to research DUX they could find out very little about DUX. On February 11, 1 – 2 weeks before the DUX lease signings Landowner1 reached out to the GMS community and asked for help in researching DUX.

The link to that thread is: http://gomarcellusshale.com/forum/topics/help-research-dux-petroleu...

Members of GMS from many different states all pitched in and worked hard researching DUX and posting what ever they learned. The clues that one GMS member found and posted helped other GMS members carry the research farther.

Within days GMS members discovered a great deal about DUX and what they found was both shocking and very troubling. The following is a quick summary. For more detailed information go to the original link.

1.  DUX Petroleum LLC was founded October 25, 2012 in Lubbock Texas and had only one member, Adam Popejoy who turned out to be a 30 year old part time real estate agent with no apparent oil and gas experience.

2.  DUX Petroleum LLC had a one page website http://duxpetro.com/ with no “about us” link, list of officers, physical location, mailing address, telephone number or any other information.

3.  DUX was being run by Popejoy out of a modest, one story $95,000 house in a residential neighborhood along with several other paper companies none of which had telephone numbers or employees.

4.  John Wells told landowners that the founders were “from old Texas oil and gas money”. GMS members found that the only real estate that Adam Popejoy owned was a small one floor student rental that he owned along with two other partners. For someone from “old Texas oil and gas money” it made no sense that he owned no house, no office buildings, no commercial property or any other real estate.

When landowners tried to raise some of these concerns in meetings their concerns were just dismissed by John Wells.

One of the other partners in SOEC, Tim Neal, defended the deal on GMS, posting as DrillBABY. Tim Neal’s most over the top postings have been deleted by him as have some of the postings of other DUX and SOEC defenders.

There is no way that Tim Neal, John Wells and other partners of SOEC could have been unaware of the numerous serious concerns and red flags about DUX that were exposed by members on GMS, prior to the signing of the leases.

Despite al the red flags, warning signs and serious concerns about DUX John Wells and SOEC still recommended that landowners sign leases with DUX. Makes you wonder why.

As the members of GMS predicted, DUX failed to pay any of the landowners. Many landowners were hurt by this.

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Permalink Reply by James Brink, Esq. on July 2, 2013 at 2:26am

Friend me and maybe we can talk.  I would be interested in hearing the whole story. 

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Permalink Reply by Seeker on July 4, 2013 at 5:29am

Samuel, there is another possible explanation why John Wells and other members of Southern Ohio Energy Consultants (SOEC) promoted the DUX deal. Prior to the DUX deal a competing attorney lead group was offering landowners leases with a company backed by Goldman Sachs (so there was no question that the company had the funds to pay for the leases).

It is likely that John Wells and SOEC were very concerned that members from their group would be pulled away and therefore that Wells and SOEC would lose the 1% that they hoped to gain from having their members sign a lease. Apparently, in desperation, Wells and SOEC agreed to do a deal with DUX which was the only company they had contact with that was willing to match the bonus amounts offered by a company promoted by the competing attorney lead group.

Wells and SOEC may have calculated that: a) heads they win, DUX manages to flip the leases to a real Oil and Gas company and pay for the leases (SOEC gets their 1% = $445,500) or b) tails they may not lose, DUX fails to flip the leases but Wells and SOEC have bought themselves an extra 120 days to find a real Oil and Gas company.

As SOEC had other landowner groups in Washington County they would be looking for other companies anyway so this would require no additional effort by SOEC. This assumes that the Watertown Group landowners would be unwise enough to give Wells and SOEC a second chance to bring them another deal.

It is critical that landowners in Washington County understand that their bargaining position is getting stronger. Since the DUX lease signing Triad Hunter has drilled one well in Washington County and PDC has drilled two. All indications are that the companies are pleased with the preliminary results. The President of Magnum Hunter commented positively regarding the Farley well and PDC was happy enough with the Garvin well to drill the second well (Neil) and to commit to drilling two more wells in their southern acreage (Washington County) this year.

The bargaining position of John Wells and SOEC has weakened significantly. First they had the DUX disaster and second many of the commitments landowners made to SOEC run out at the end of July. Third, the competing attorney lead landowner group has leases available with a company that has a track record of paying on the leases. This will make Wells and SOEC even more desperate to do another deal before they lose the landowners at the end of July or before landowners sign leases with the other attorney lead group.

Companies know Wells and SOEC have a weak bargaining position and will use it to the company’s advantage. The result is that any deal Wells and SOEC are able to come up with will be much weaker than necessary. The landowners' position is growing stronger – it is only Wells’ and SOEC’s position that is growing weaker.

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