He's BACK! Look out Ohio. Aubrey is back.

From Upstream Online (link)

Controversial former Chesapeake Energy chief executive Aubrey McClendon is getting back into the oil and gas business and is staking his comeback on the US play he described as the best thing to happen to Ohio since the plough — the Utica shale.

Sources suggested McClendon is close to buying at least one major acreage package and may have wrapped up another, and is already deploying his signature army of landmen leasing under the names of shell companies to hide their tracks.

The co-founder of shale giant Chesapeake was ousted from his own company by activist investors, but has reportedly raised $1 billion in a matter of weeks to back his new privately held operator American Energy Partners (AEP).

Offset and legacy operators, landowners, leasing agents and industry sources painted a picture of McClendon lodging high bids for major parcels to put together a strong position in counties such as Guernsey, Belmont, Harrison and Noble — an area south of Chesapeake’s focal point that has boasted some of the best wells in the play.

McClendon won the bidding for about 50,000 acres put on the market by Shell, which appears to be unloading most of its acreage in Ohio to concentrate its efforts on the Marcellus and the Utica in western Pennsylvania, where the Anglo-Dutch supermajor has looked at building an ethylene cracker to process production.

Sources who screened the Shell package, which included parcels in Jefferson, Guernsey, Harrison and Belmont counties, characterised the acreage as fragmented and trending toward the still unproven oil window of the play and said the supermajor was unwilling to piecemeal out the more prospective blocks.

Those sources suggested McClendon had reached an agreement to buy the entire package but had not closed the deal yet.

Shell declined to comment, other than to say its Appalachian basin “portfolio and strategy is unchanged” and it did not comment on ongoing commercial matters.

 

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Permalink Reply by bruce c on August 17, 2013 at 3:35am

I'm not so sure that having Aubrey back is such a bad thing for Ohio Landowner, let's not forget he is the guy that drove Lease Values up to $6,000/Ac and 20% Royalties levels while at CHK. These kind of numbers have been hard to come by since he has been on the sidelines!!

Permalink Reply by bo boboski on August 17, 2013 at 4:30am

Agreed.  plus, he may be wanting to drill a lot faster than Swepi would.

Permalink Reply by wyalusing jim on August 19, 2013 at 4:17am

agreed 100%.

without chk here in nepa, I am quite sure that offers would have languished in the $3000/15% range. it was chk that broke us out and stepped up royalty offers to 20% in response to growing competition. and it was chk that topped all other street offers at $5750/acre, which is where the other companies quit.

chk also paid negotiated bonus offers well in excess of that $5750 number too. no other company would match them at those levels.

even if you choose not to lease with him, his presence can work in your favor.

wj

Permalink Reply by Renee E. Dorsey on August 18, 2013 at 10:18am

OK, so NEXT IMPORTANT QUESTION:    And maybe Donna needs to jump in here - if McClendon is backing the Great River LLC deal from Des, but that lease stinks, what does a landowner do?  

Permalink Reply by Cindy Loy on August 19, 2013 at 3:32am

Okay, I'm an almost complete noob on this subject and didn't really think I'd ever have to be anything else. Now it appears I and my neighbors are going to need a crash course.

 

Twenty-some years ago I moved to Guernsey County from NE Ohio because my formerly rural county had been overrun by Cleveland and become a literal anthill. The first thing I asked the real estate agent was about mineral rights - thinking mostly about coal outfits coming in to dig up the place. I was told I owned "everything but the gas." The gas had been leased back in the sixties, as best he knew, and there was a well on top of the hill behind me. My neighbors and I would receive royalties based on our portion of the original 60-70 acre farm. I was also told that these checks wouldn't make us rich, but would buy a nice dinner out.

 

Ever since then things have been just as advertised. We all get a modest check once or twice a year depending on who held the lease.

 

Now the kicker. Maybe this was stupid, but I never thought about it until all this fracking business started. I'd never seen the gas lease on this land. I had no idea what it said, what the holder was permitted to do, nothing. A few calls to my neighbors revealed that they'd never seen it either. I called and asked for a copy - five times, and I was promised they'd send one out - five times. Still ain't seen the lease. I know I can get a copy at the Recorder's office. I just haven't had the time to brave the gauntlet down there.

 

Last Friday I read that Enervest - the current holder of the lease - has apparently sold the deep drilling rights to Aubrey McClendon. And it appears Aubrey intends to drill.

 

Now I've been advised that as long as we're held by production there's no way we can re-negotiate the lease. ie: no bonus money, no reworking of percentages etc. Basically - we're stuck with what we've got and are screwed profit-wise. For reasons I won't go into just now though, I came across a technicality that sounds like it may give us a toehold for minor tinkering of the terms. It has to do with Enervest essentially subletting the drilling rights. I hear we will be approached with some sort of waiver or something that we'll need to sign.

 

So, my question is - anybody have any advice or knowledge on this?

Permalink Reply by Philip Brutz on August 19, 2013 at 4:49am

This is the number of my attorney David Bennet in Cambrige.  740-439-2719 

Permalink Reply by Cindy Loy on August 19, 2013 at 5:15am

Thanks Philip,

Does Dave specialize in oil and gas? I've heard his name, but don't think I've ever met him.

Permalink Reply by Philip Brutz on August 19, 2013 at 5:45am

Yes, he reviewed my MarkWest ROW.  I was very satisfed with his work.

Permalink Reply by Paul Martinelli on August 19, 2013 at 6:29am

Yes.

 

Get a Atty.

 

If they need something from you.....you need something in return, higher royalties, signing bonus, surface protection......the list goes on......everything is on the table.

Permalink Reply by Jim Litwinowicz on August 19, 2013 at 7:40am

Cindy;  It all depends on what the lease says.  You really need to have a copy. There may be depth restricts, unitization limits, unit size limits, any number of things that they will need your approval to change. If so, and depending on what you find and how badly they need your parcel, you may be able to negotiate some substantial improvements in the lease.

But don't get your hopes too high as most of these old leases were vague enough to allow them to do pretty much any thing. You need the lease and a good attorney schooled and experienced in modern drilling techniques and leases.

Even if you have no options, these new wells should provide you with substantially higher royalties when once they are drilled. You didn't state you acreage but you should also find a good account/CPA/tax attorney/financial planner/estate attorney.

As accountants like to say, "its not what you make that counts but what you get to keep."

Good luck

Permalink Reply by Cindy Loy on August 19, 2013 at 9:43am

Thanks guys. Yeah, step one is get a copy of that lease. Right now all I know about that well is that it's round and painted orange.

And, yes, Jim, I was told the royalties from the new wells would be substantially more. I was given a ballpark figure, but don't intend to get too excited yet. I have a little over five acres of the original farm. The farm was split into six or seven parcels with the largest being ten acres and the smallest being two and a quarter.

I was told Friday that most of those old leases say something to the effect of "from the surface to the center of the earth," in which case they have the right to drill as deep as they want, any way they want. But Most isn't necessarily All. For all we know that lease agreement was between two neighbors, one of whom started a gas business. It could say anything. The statements I get with the checks might as well be written in Latvian, so there's no clue there. I'm not even sure what percentage we're getting!

I don't want to reveal too much of my thinking on this 'cause you never know who's reading here. It appears to me though that this deal could significantly alter the original lease agreement - no matter what it says. Or so I hope.

Permalink Reply by Garfield on August 20, 2013 at 6:37am

Don't be taken!

No Ad Valorem!

No Compression Stations!

No Foreign Gas!

No Gas Storage!

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