Is it possible to deal with Chesapeake in a straight forward manner?

I have a lease that was originally with another company and was traded to chesapeake.

Not long ago, a landman representing chk contacted me and said they would like to change the max unit size from 640 to 1280. I said send me the amendment and i would look at it. What I received was an amendment that deletes my entire pooling and uniitization clause and substitutes theirs!

The landman just says well the reason they are rewriting my lease this way is to increase the unit size. Puleese ..... They took out all parts favorable to me of course. They could have just changed unit size by saying change 640 to 1280, all other provisions remain unchanged but what they sent me was a sweeping change. The landman wont even acknowledge this. Either he is the dumbest guy on the planet or he thinks i am.

My question is, is it possible to have an honest discussion with chesapeake about the lease or is it be run over by them or nothing? My inclination is to go for nothing then.

They are talking about an offer for the utica but i dont think i want to deal with them. I believe i have learned with them, you better get everything in the bonus because what the lease says means nothing. They will do what they want anyway and what are you going to do about it. Even after the lease is signed if they want a change, they say give us this change or we will never include you in a unit.

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Permalink Reply by ray schmidt on October 2, 2014 at 8:13am

i had the same situation last spring..i told them i would sign only if the numbers were changed..they sent it 3 times.prob. what they sent you.finally i talked to a boss and they got it right.they were supposed to drill last year and now not going to untill spring of 16 right before lease expires!

Permalink Reply by S S C on October 2, 2014 at 8:28am
Now that you mention it, my lease expires within 6 months. Maybe that is the motivation. Make the acreage and my neighbors acres hbp with a single well. In fact, the more i think of it, the more i suspect this is the case. I need to have a lawyer read this, but i dont want to pay by the hour for him to read all this bs which i know i will not sign.

The proposed verbage also lied in that it said, that the the change was made for valuable consideration made to lessor ... They offered me zilch for this.
Permalink Reply by James Foster on October 2, 2014 at 8:37am

If a lease is opened up it is opened up in it's entirety in my opinion.  How do you feel about a larger unit?  There are pros and cons.  I would allow no other changes if you are happy with your first lease.  They are trying to get some land held by production.  They have so much land leased that they can never drill it all in five years.  They can hold 1280 with one well if they can get these amendments and why not try to screw the landowner and change a few other items in the lease.  640 acre units are going to require them to drill two wells to hold the same amount of land.  They are trying to avoid as many renewal payments as possible which for them is good business.  I believe it is called a red line copy ... someone correct me if I am mistaken but they would provide you with a copy of the original lease and the new one showing in red anything that has been changed.  You should only see the 1280 in red if that is all you are willing to change.  One example of a plus is that a well near us has a lot more oil in one 640 acre unit.  The gas side wishes they had signed the amendment and the oil side is happy they did not.

Permalink Reply by S S C on October 2, 2014 at 8:42am
Yes, that is what i expected, a red line change so to speak. Instead they attempted to rewrite major important parts of my lease pretending it is only to change unit size. That is what i was steamed about. The nerve of it and the insincerity to put it politely.

What did you mean by this?

" The gas side wishes they had signed the amendment and the oil side is happy they did not."
Permalink Reply by James Foster on October 2, 2014 at 3:07pm

More oil better royalty payments. If those on the gas side had ammended to a 1280 lease they would get more money ...sharing in the oil money. Those on the oil side are happy this unit was not ammended because they are receiving more money in royalties.

Permalink Reply by S S C on October 2, 2014 at 3:13pm
Oh, i get it now, thanks.
Permalink Reply by jett on October 3, 2014 at 12:54am

It's always a gamble for the Lessor to be in a 640 or 1280 acre unit no matter how you look at it - who knows what's underneath your property until it's been drilled.

Permalink Reply by S S C on October 3, 2014 at 1:44am
Who knows where the gas and oil are pulled from? I dont have money to audit these things or the accounting for that matter. We need regulation to protect the lessors but we arent going to get it. So it is a business for the lessee but pretty much all a gamble for the lessor.
Permalink Reply by Jack Straw on October 3, 2014 at 4:22am

RE: "they attempted to rewrite major important parts of my lease pretending it is only to change unit size"

Makes one wonder what their TRUE primary intent is; increasing the unit size or changing the lease terms to  be more economically attractive to them ..... likely both.

JS

Permalink Reply by skittles on October 2, 2014 at 11:58am

No matter what you decide to do, you should never sign anything regarding gas & oil without having a gas & oil knowledgeable attorney review it. That would be money well spent. If you have the attorney do your negotiating, and you get some compensation for the amendments, they should do it on contingency.

Permalink Reply by S S C on October 2, 2014 at 12:05pm
Thanks, i agree. I will have the lawyer that read our lease look at anything i am considering signing. At this point, i am not considering signing this. I will wait for something i would consider before i pay a lawyer to look at it.
Permalink Reply by ray schmidt on October 3, 2014 at 1:42pm

i wouldnt sign it..they changed mine after sending 3 bogus ones prob. like they sent you.you can use my name if you wish.they think we are all  stupid and dont know what they are up to. i have the 4th one and the only thing changed was 640 to 1280. my neighbor did the same.good luck

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