Chesapeake wants to increase production unit

I am leased with Chesapeake and they just called to tell me that they want to increase my drilling unit size.  Currently my contract says it can't be more than 640 acres.  I have not been put into a drilling unit as of yet but it seems like they are trying to do that now.  I told the guy from Chesapeake that increasing my drilling unit would mean that royalties would be split by more people.  He agreed but then added that increasing the unit would also allow for more gas capture.  Does anyone have any insight into this??  The guy from Chesapeake told me that I would actually make more money in royalties but then again, what would you expect him to say.

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Permalink Reply by Finnbear on September 3, 2011 at 2:50pm

One reason they want to increase drilling units is that they have more land leased than they can possibly drill before the leases expire. If the double all their drilling units from 640 to 1280 acres, they only have to drill half as many wells to hold by production the leases they have already paid dearly for. just something to think about...

 

Permalink Reply by craig on September 3, 2011 at 4:06pm

You are absolutely right finnbear, and they are doing exactly that with the old leases here. With a small parcel of land I don't feel that it is a big deal because if they put you in a unit, you will most likely have all your acreage in the unit. Now with larger parcels you are looking to be taken to the cleaners, as my brother found out on one of his properties.... and he didn't even have a lease that they paid dearly for 6 yrs ago....it was a cheap lease now being held by 4/10 of one acre, out of 168 acres. Can you say goodbye to $2,000+/acre on 168 acres? That's what he will be missing in 9 months when his lease would have expired. In all fairness to CHK, they claim that they will be drilling on that property within the next 12 months anyhow,including most acreage into the unit.  Time will tell if they are truthful in what is being said.

I wouldn't sign a pooling clause on a large parcel without compensation. Period. 

Sometimes you gotta step up to the plate and play hardball...they want something, you need something in return. Plain and simple, and they don't seem to like it. 

I believe what we are seeing is the maturation of the leasing process. The oil/gas folks are not happy that the landowner can now get educated fairly quickly. This has been a game changer in the leasing business i believe and the longer they wait the more it is going to cost them.

 

 

 

 

 

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