Assignment of old Lease EnerVest Sale of Eastern Utica acreage

I have a lease with Enervest (EV Energy Partners) which is held by production. This lease was initially with NorthCoast Energy and an addendum stipulates that in order for the lease to be reassigned approval must be granted by the lessors. This occurred as the lease transferred from NorthCoast to Enervest. I am reading that EnerVest is probably going to sell all their Utica acreage in Eastern Ohio by the end of this year at perhaps $15,000 per acre. Does this legally entitle me to negotiate with Enervest for a reasonable bonus payment since at 53 acres they can realize about $800,000 and also what about renegotiating percent royalty.

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Permalink Reply by Jack Straw on November 13, 2012 at 3:22pm

These are the types of questions best answered by a competent Attorney with Oil & Gas experience.

While waiting to discuss the matter with a qualified Attorney, it might be of value to send a registered letter (signed return receipt) to EnerVest (attn.: Land & Lease) detailing your rights as granted by virtue of the Lease Addendum.

It could simplify future matters were you to assert your rights prior to any (unauthorized?) reassignment.

 

All in my humble opinion.

Nothing I have stated should substitute for competent legal assistance.

 

JS

Permalink Reply by hopeforoil on November 13, 2012 at 4:01pm
Jack,

I do not see any situation wherein the landowner is due anymore bonus or royalty if the lessee abides by the terms of the current lease. Do you?
Permalink Reply by Sage59 on November 13, 2012 at 4:46pm

If we abide by the terms of the current leases, horizontal wells can not be drilled on most of those properties. They are non functional leases. I still do not understand how Enervest can sell these constricted leases to other companies. The majority of these old leases do not have adequate unitization acreage to allow the drilling of horizontal wells. The old leases they own only have acreage for conventional vertical wells to be drilled. People are realizing this, and beginning to form serious groups to negotiate proper terms for the new conditions. That is a situation where we are due a bonus and a better royalty percentage. Soon, I think Enervest will not be able to coerce people into signing an addendum that we have no legal reason to grant. They bought obsolete leases, and at some point, there will be a serious legal discussion. I hope it is sooner than later, but good things can take time and patience. 

Permalink Reply by Jimbo49 on November 15, 2012 at 10:14am
Is there a group of landowners already formed or a lawyer to represent landowners held by production on old leases?
Permalink Reply by Anastasia on November 13, 2012 at 4:48pm

Does your lease include the language that your consent cannot be "unreasonably withheld"? 

Permalink Reply by JREwing on November 14, 2012 at 3:01am

NorthCoast either has or will get any "Bonus" money for your lease from Enervest.  If you want to spend thousands on lawyers to try and get it back, more power to you.  Lawyer up and good luck.  In my particular situation, fighting for the bonus money in court would have meant not getting a Utica well.  We chose to sign the Assigment Clause and have the opportunity to get a well.  Again, good luck. 

Permalink Reply by Billy Park Whyde on November 14, 2012 at 3:48am

  Just a guess here but older leases pretty much were pretty much in line with very little rights given to landowners. The old leases often contained  allowances for pooling or unitization of the property in the lease.  

  If however unitization or pooling clauses rights to the lessee  were not included in those leases then I would  be inclined to seek an attorney ONLY AFTER a answer of NO I WILL NOT SIGN OFF TO ALLOW UNITIZATION OR POOLING of a existing old lease and see if they counter offer. They can not force your signature. 

 A 12.5% royalty in old leases  is  ancient history .

Permalink Reply by JREwing on November 14, 2012 at 4:12am

The gas co's. can't force a signature, but they can walk away and drill on a landowner who's not causing them "problems."  If push comes to shove, they will do just that.  All the big bonus money and high royalty %'s is great for those who weren't already leased and/or HBP, but they will be the last ones drilled on.  The gas companies are going to drill on the properties that will give them the highest profit margins first; the old leases with the 12.5% royalties less expenses. 

Permalink Reply by Sage59 on November 14, 2012 at 6:07am

That is the idea behind a group of landowners bargaining with the companies. If you are HBP now, Chesapeake has no reason to drill soon either. They can do it at their leisure, as there is no particular hurry. The old leases were written for smaller drilling footprints also. Most of the old leases give you little or no control over what is done to your property. I have heard that Johnson and Johnson in Canfield are beginning to develop groups to negotiate under these new conditions. If Chesapeake thinks that a small bonus and better royalties are "too much trouble" I am sure other companies would find it simply a necessary cost of doing business in this Gas and Oil rich area. If you are sitting over a desirable amount of O&G, the idea of being drilled around or left out of a unit is questionable. Look at what area wells are producing. It would be a small cost to them in comparison.

Permalink Reply by Billy Park Whyde on November 14, 2012 at 8:24am

With so much land being tied up with HBP  it is not easy to just go out and grab 640 acres here in Ohio. Out in Tx, Ok, or Nd larger ranches are the norm but here in Ohio in the eastern side of the state  a farm of 300 acres is a hefty size.  Sure you can make a turn with a horizontal but every time you move off a straight path it cost more, risk more than simply  being honest with a land owner. The leasing and royalty is a expenditure deduction that reduces overall taxes. Simply the consumer pays for it like any other product where cost to produce it controls the market price.

Permalink Reply by Sage59 on November 14, 2012 at 12:15pm

That makes sense Billy. I would also like to add that I attended the recent ALOV meeting at the Covelli Center. Speakers there said that it was highly recommended that if you are being approached (manipulated) by Chesapeake, at the very least have a knowledgeable G&O attorney look over the amendment language before you give up your rights. A subtle change in language along side the unitization amendment they demand can leave you with even fewer rights than you started with. It is just business, but some businesses are less honorable than others. Chesapeake has earned the latter rating, as they seem to prefer the steamroller approach, and must be carefully monitored. There is nothing wrong with being careful, and understanding clearly what will be changed in your original, and essentially inoperable, lease to benefit Chesapeake. If you are told to "sign now or else" reason should be energetically poking you in the ribs.

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