BRINKER LANDOWNERS OFFERED 15%

The following was received by many people in the Brinker Storage field with the old dual purpose (storage & production leases)--
 
Dear Non-Litigating Brinker Field Landowners:

Hilcorp is increasing their royalty offer to 15% for OIL & GAS. This is most likely a GROSS Royalty because that's what was discussed. This is a significant increase from where we started. Again, many folks in Pennsylvania and West Virginia with similar leases to ours ended up with only 12.5% royalties (sometimes NET) when the oil and gas production privileges were farmed out. In a perfect world we would not have to go through Columbia Gas. At the same time neither would Hilcorp. Hilcorp continues to indicate they truly desire to develop the oil and gas resources. Hilcorp has been very gentlemen-like in their approach to the situation. The 15% royalty means you could be handsomely compensated for your resources, even though there is a dual interest in the Oil and Gas (Columbia Gas).
 
There are many online oil and gas calculators that can help you figure out your possible royalty income at 15%. Look up the production results from nearby counties (ie, Carroll) as potential example.
 
Columbia Gas’ arrangement with Hilcorp stipulates Columbia will have a 5% working interest plus a .7% overriding royalty in the wells. This arrangement along with our offered 15% royalty means Hilcorp’s overall payout will be right close to 20%. The business economic model that drillers strive to maintain is a 79 to 80% margin for themselves, after all they are doing all the work. This Hillcorp offer allows them to maximize their royalty offer while still staying within operator industry standards.

Again, Last Friday we met with Hilcorp’s Mr. Smith at Roth Blair’s law office. During our three hour discussion, Hilcorp offered to modify their Lease Amendment offer. The other possible changes they proposed in addition to those mentioned at the 9/12 & 9/13 open house include:
* adding well shut-in payments
* adding many additional landowner friendly provisions.
* a hold harmless and indemnification clause.
* they have indicated the soon to be finished draft is 16 pages long.
* According to Hilcorp, the changes would make the Lease Amendments binding upon the old manufacturers lease.
* Hilcorp stated they are willing to offer the Lease Amendment to all affected people Not In A Lawsuit Against Nisource/Columbia, so please make your decisions wisely. If you have sued Columbia & NiSource, Hilcorp cannot talk to you, and they will not make this offer to you.
*Hilcorp stated their Intention to Make the Offer to All Non-Litigants and They Will Not “Cherry Pick” Parcels.

It goes without saying- the best way to maximize drilling potential from one company is to combine inviting acreage.

Lease language is often not easy to understand. The Roth Blair law firm will have had the opportunity to review Hilcorp's Lease Amendment. Lawyers will be available to go over Hilcorp’s offer with interested parties when the Lease Amendment is prepared. This could be done in seminar format so folks can hear each other’s questions, and receive an answer. We recommend that you discuss any Lease Amendment with an experienced oil and gas attorney before you sign it.

We expect to have more news and additional details to disclose very soon. Please share this very important information with your neighbors.

Views: 5198

Replies to This Discussion

Permalink Reply by Inchworm antenna on October 4, 2012 at 5:22pm

Utica Shale,

I do not know the answer to your question -if that contingency were to be met. 

However, it was made quite clear the offer was not available to the litigators.

If I'm going to disseminate information I would not want to lead anyone on, and with Hilcorp making an offer and mentioning any exclusions then it is important for me to disclose.

 

 

 

Permalink Reply by dr j on October 4, 2012 at 3:22am
Hilcorp is technically NOT a party to the litigation so they are not addressing the litigants officially at all at this point. Approximately half of the available acreage is part of the litigation though so it's probably safe to assume there is communication happening.
Permalink Reply by Inchworm antenna on October 4, 2012 at 5:30pm

COURTVIEW online only shows names of what counts to approx 24 families in the litigation against Columbia Gas/NiSource. 

Permalink Reply by dr j on October 5, 2012 at 2:00am
Every litigant is not listed at this point as it has all been consolidated as one suit. It is patently untrue the "deal" is not available to the litigants if desired. The litigation has nothing to do with Hilcorp at this point.
Permalink Reply by Inchworm antenna on October 5, 2012 at 11:39am

OK I see what you mean.  Many people commonly think of a litigant as one who is suing.  But it seems litigant has other meanings as well.  So to clarify, if one is suing Columbia/Nisource to break their lease, then as I was told, Hilcorp cannot make the offer to them.  As for the reason to this, I will not disclose.  If Hilcorp has changed their perspective, then I am not purvey to that info. 

Permalink Reply by Inchworm antenna on October 5, 2012 at 12:34pm

BTW you wrote yesterday yourself....

"Hilcorp is technically NOT a party to the litigation so they are not addressing the litigants officially at all at this point."

Permalink Reply by dr j on October 5, 2012 at 2:36pm
"Officially" would be the key word in my previous response.
Permalink Reply by Inchworm antenna on October 14, 2012 at 5:17pm

If you compare the message I put at the top of this post, and then read the "Brinker" Morning Journal Article from 10/14/2012, it seems there is a disconnect as to what Hilcorp is offering.  Hilcorp's draft Lease Amendment offer is now up to 26 pages long and is for a very real 15% royalty with a very clear definition showing how the major expenses will not be deducted.  

Permalink Reply by dr j on October 14, 2012 at 5:42pm

You may want to take that up with the reporter.   I would estimate most articles of which I have intimate knowledge are at best 60-70% accurate.   I didn't speak to the reporter. 

Permalink Reply by dr j on October 14, 2012 at 5:44pm

I just scanned the article so far but I also think it's a bit inaccurate as to the what exactly the judge is deciding in the upcoming ruling. 

Permalink Reply by Inchworm antenna on October 3, 2012 at 4:57pm

Thanks to all the viewers who made this a feature post!!!!!

Permalink Reply by Utica Shale on October 16, 2012 at 4:08am

LISBON - A ruling in county Common Pleas Court later this month will determine whether complaints filed against Columbia Gas Transmission fall under state law or federal law.

The complaints are from those owning land in what is known as the Brinker Storage Field operated by Columbia Gas. They say the long-standing natural gas leases held by Columbia are blocking them from signing new leases with Chesapeake Energy LLC.

Columbia moved to have the suit sent to federal court this summer, but the court ruled the landowners' claims didn't fall under federal law and sent the suit back to the county.

According to court documents, Columbia requested the court reconsider the decision and said that if the landowners won it would mean the Brinker Storage Field would be "abandoned, partially and in piecemeal fashion, lease by lease and tract by tract."

The company also said the landowners' complaints are "garbed in state law" and a "de facto collateral attack" on its Federal Energy Regulatory Commission (FERC) certificate. The certificate was granted, the company said, based on the commission's holding that the storage field is "necessary and in the public interest."

"Plaintiffs' requested relief seeks to force Columbia to abandon portions of its Brinker Storage Field, something the Natural Gas Act does not empower a state court to do," the company said.


The company also argued the matter is federal since it operates and maintains an extensive interstate natural gas distribution and transportation system. The roughly 35,000-acre Brinker Storage Field is one of others the company uses to store gas under the ground in the Berea sandstone during the summer months. The excess gas is then pulled from storage during the winter when the market demand exceeds production.

Landowners and their lawyers claim the company has breached the existing leases as oil and gas has not been produced there for at least 30 years and landowners have not received any compensation from the company.

The leases date back to as early as 1940, and most offered $1 per acre and $200 annual royalty payment a far cry from the more than $5,000 per acre and sometimes upwards of 15 percent royalty offered by Chesapeake. The royalties are continually paid as long as oil and gas are recovered from a property.

The current landowners, and even Chesapeake, were unaware of the existing leases when they were discussing lease agreements. It wasn't until Chesapeake conducted a property search that the existing leases were discovered. The company then pulled back the offers since the property was already leased.

Sean Scullin, of Scullin and Cunning Law Offices in Boardman, the firm hired to represent the more than 80 land owners, said Columbia's recent efforts to bargain with them are falling short.

The company, along with Hilcorp Energy, held private meetings with landowners in Columbiana last month, and although officials won't reveal specifics of what was discussed, landowners claim they have offered an amendment to the existing leases that would include a 12.5 percent royalty. Whether the royalty is on the gross amount was not clear.

Scullin said the offer was "very ambiguous" and that roughly 30 landowners joined the already existing lawsuit shortly after the meetings. The suit now covers roughly 5,000 acres in Salem, Center, Fairfield and Elkrun townships.

"If Columbia wins, this money and minerals leave town. If landowners win, this money stays in the county," Scullin said.

Visiting Judge Richard Reinbold Jr. is expected to rule on the matter Oct. 24. The suit was originally put before judges C. Ashley Pike and Scott Washam, but the two removed themselves due to knowing most of the land owners involved.

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service