I just got my 1st royalty check and was disappointed.
I didn't expect a lot for several reasons but didn't think they would be taking so much out for "gathering" (34%), and also a little for "third party". Total deducts came to 37.5% which I thought was excessive.
Does this seem normal?
Tags:
the standard across the country and in PA historically is the royalty owner shares the post-prod costs proportionally. You need to have special language to prevent it. That changes the economics and in theory effects what R rate you might win when leasing, though that is inexact. .59 instead of looking at it as a %, you will find it is a per mcf fee, .59 in the Chesapeake areas of SE Bradford is what we see. Southwestern might be. 40ish?
Even with language stating otherwise it si a fight with Chesapeake though at least 2 companies recognize the mkt enhancement clause which many have.
BTW it is nit time to say they can just do what they wish that is expecting defeat. There are laws and legal history. The Kilmer case was expected to go as it did, industry standards , precedent is 100% that the 12.5 PA state min applies to value to the wellhead, not point of sale. did I say that correctly? Much if the barely profitable shallow gas industry could not exist if they paid 12.5% on gross, their margins are that thin..
Some of this comes down to laymen vs industry understanding.
maybe the 12.5 % min will be retried, here is hoping but we doubt it will change.
I'm curious if anyone has experience to share with regards to a CHK lease that is in a well unit that is being operated by Chief. I'm curious how if at all the deductions are affected given that Chief is the Operator but CHK is the lessee.
Background, CHK wanted me to renew @ $1k/acre a year ago. I refused citing the deductions issue and their general reputation as not being friendly to land owners. Once I refused they apparently made a deal with Chief to add a part of my property to a Chief unit which is supposedly now producing (though I have not received any royalties to this point).
Like many, the CHK lease now also has Statoil, Mitsui and one other involved just looking at what has been filed on Landex.
I'm expecting that the deductions will be crazy and I'm expecting to have to hire a lawyer to fight it.
calculate by cents per MCF
Get used to it ! Rally at the Courthouse Friday!
see the post I did on the "rally at the Courthouse" post.
Email the committee chair o help move the bill through
An interesting approach John, but there may be an even bigger way to get monies owed to the State and the municipalities. There is little oversight being maintained on the production figures claimed by the O/G companies, and little oversight on the actual market value received for the transactions.
We are expected to believe the O/G companies on what they say the wells produced, and on what they received for the sale of the products. Forgive me if I remain unconvinced that they are being accurate. I would feel far more comfortable with some type of oversight in place. I understand that the ODNR(Ohio) does this automatically. Why aren't we (Penn.) doing it as well?
Dan
The gas companies need to be monitored more strictly in every aspect. All they do is rip off the land owners.
That's good news and good information, John. Thanks. And it might offer some hope for Pennsylvanians, provided Chesapeake does not first go belly up, except:
Unfortunately most PA landowners do not have Bass Brothers money. We have to rely, instead, on our PA Attorney General to step forward on our behalf and do what needs done. I cannot comment on the future. But so far, at least, our reliance on our PA AG has not been working out.
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