First royalty check has me baffled

So most of you know me from the site and some know me in person. I have been an active participant in these forums on this site for more than 2 years, probably more.

I have read everything I can read about the entire industry, not just on this site but up and down the internet and print publications.

Some of you know that I signed what I was sure is a very good lease, with Antero. Antero traded our acreage to Eclipse who traded 12.5 acres to Chesapeake who put us in the McClain unit here in eastern Guernsey county Ohio.

  • Production began in May, we should have started receiving oil royalties in July, I should have called on it but didn't because it didn't matter to me so much when we got the money as it did that we got what was right.

Virtually everything I read about Chesapeake was extremely negative and I was working on auditing and legal representation for what I considered would be the inevitable litigation.

Boy was I wrong.

My statement is two pages, front only. It shows production, pricing, unit gross and lease gross. There is a deduction column which shows only zero's, as in no deductions for anything.

We received $744 an acre per month.

I am totally relieved that at least at this point things appear to be very fair and proper. I have spoken with other landowners on the same matter who are in my unit, they report the same satisfaction. One landowner told me the production figures match the states figures found on the ODNR web site and the other tells me that his royalty is within $5 an acre of mine.

I am still going to go to a professional for help in verifying that there isn't anything I am overlooking, I admit that I don't know what I don't know and it could adversely affect me.

I also suppose that the figures could be fudged from the actual as I am told the state doesn't verify the numbers a producer reports, however that scenario, in my opinion, would require a conspiracy with too many players to risk someone becoming upset and spilling the beans.

I have to say and gladly do that I was incorrect in my guess as to how we would be badly mistreated by our producer but you get that way when everyone is singing the same tune. I even had an attorney assure me that Chesapeake would abuse me in every way possible and there would be no realistic remedy for us to get it right from the producer.

I sincerely hope that this is a harbinger of better landowner/producer relations as it pertains to royalty payments.

Please do not feel that I am trying to hurt anyone who has had a different experience, I am only trying to share an honest assessment of our experience.

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Permalink Reply by Guernsey 4Life on October 5, 2016 at 4:11am

Glad to hear it appears to be working out well for you!  Sounds like you negotiated a good lease for yourself.  One thing that I have noticed that you should take a look at is that the first check often includes several months' worth of royalties, whereas later checks will be one month each.  Also, production is usually at its highest when they first put the well online... I think.

Permalink Reply by David Allen Lilly on October 5, 2016 at 10:35am

I took the amount of the check and divided that by how many months were shown on my statement and then divided that by the acreage we have. And I believe you are correct in that production drops off, usually around the end of the first year although when verifying my statement versus the quantities on the ODNR web site I see some wells around us that are two years or older and still producing very well.

Permalink Reply by Lynn mudder on October 5, 2016 at 4:57am
You state 744 per month, per acre. Did your check include all back months? Good for you. Sounds like you have taken a pro active, educated, approach to this entire O&G situation. Wish you continued good luck.
Permalink Reply by Robert Matthews on October 5, 2016 at 5:54am

It is great to hear positive feedback since our well is being hooked up after almost 4 years of  being drilled, and Chesapeake holds my lease.  I can only pray for similar results.  Thanks David for sharing..

Permalink Reply by David Allen Lilly on October 5, 2016 at 10:37am

I divided the check total by the number of months shown on the statement and then divided that by the acreage we have in the unit to get a per acre per month figure that I believe is accurate.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on October 5, 2016 at 1:24pm

David,

     That's right, you had 4 or 5 months of production on the first check.

How does that change the $744 per month?

Permalink Reply by David Allen Lilly on October 5, 2016 at 10:44pm

No Ron, I did not.

My statement is very easy to read, it shows production from May, June and July, with May being a little less than half a month in production.

I divided my check total by 2.5 and then divided that by 12.5, which is the acreage we have in the unit.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on October 5, 2016 at 6:00am

I also suppose that the figures could be fudged from the actual as I am told the state doesn't verify the numbers a producer reports, however that scenario, in my opinion, would require a conspiracy with too many players to risk someone becoming upset and spilling the beans.

Check your Oil volumes (Product 1) picked up each month. If they are less than 200 barrels per Oil Pick Up, you are a victim of that conspiracy of ONE, CHK themselves. The Truckers know how much they pick up, ask them, they have no reason to hide the truth since they are disconnected from Landowners and Royalty Statements. I have a source that I won't reveal to protect the driver and company he hauls for.

Permalink Reply by David Allen Lilly on October 5, 2016 at 10:41am

There are 8 wells on the pad, I would assume that they would empty the tanks, I think there are 8 of them, until the container is full.

There would most probably be oil from several of the wells going into the same tanker.

Just a guess.

I can only chase this so far before I have to let it go and accept that I have done all I can.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on October 5, 2016 at 1:48pm

David,

     The plan was to have all of the wells producing on a pad so you would have a large check. Not what you were due, but who cares it would be good money for you and a Kings Ransom for CHKs ceo.

It's true that the Tanker Truck would fill up with 8 wells and tanks, but in my case the Buck Well has 2 wells on the Pad, the well I'm not on having a lateral 3,500 which is half the length of most well laterals, so Well 6H doesn't produce like a 1 mile lateral like Well 1H that I'm on.

Paige Well has 2 producing wells also, so again the oil pick ups are limited to 2 well tanks. With 10 Pick ups per month we have a gusher that doesn't pay much of a royalty for an average of 1000 barrels per month. I could count the barrels, but I'm sure their under 10% probably closer to 100 barrels taken per month.

I don't think Chesapeake has picked you out to carry the Carnival Teddy Bear around this website Midway telling everyone you can win a Bear if you pay the nice man at the counter for Soft Balls to throw at those aluminum milk bottles.

Don't make any large purchases David. Your Royalty unlike the well will dry up as Chesapeake gets down to the business of depriving you of other than a 2% maximum Royalty. This has happened too many times to change at this point in the theft.

Let us know when your ready to write some letters or emails to the gov, ag, tax commissioner, odnr director, odnr chief, Our legislators on CHK PAC funds, the President, the US ag, the FBI, and Ohio's diretor of appalachia..... I notified all of them by mid 2015.

Permalink Reply by David Allen Lilly on October 5, 2016 at 10:50pm

I am sorry it bothers you so much that my situation is different from yours. I have spoken with two other landowners in the unit and they are very pleased as well.

Just to bring you up to speed, there are 3 units and 8 wells drilled from the same pad. Our unit has 3 wells and around 460 acres if I recall correctly. 

And I definitely do not need your financial advice, but thanks anyhow.

I meet with an attorney later today, I will see what he says and get back to you.

Permalink Reply by G.H. on October 6, 2016 at 2:56am

Lol Ron can't stand it when he can't turn everyone else's posts into something about himself and something negative about o&g companies.  That is good that you are happy with your royalties, David.

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