We are setting times, dates and venues for upcoming Educational focused meetings. We will need lessor/royalty owners to step forward and be willing to share their experience and results. The lease language is being argued throughout the Basin as to its meaning pertaining to DEDUCTIONS, what the actual cost of so-called deductions really are, verses the ability to even take any deductions on a Gross, cost free royalty. We are also looking hard at the term "market enhancement".....huge issue.
as many readers know, we have successfully audited and challenged companies, both current and historically.
The accountability factor will surprise as to out of court settlements.
Class action suits, across the Nation have proven results.
[POINT OF SALE] what does your lease say?.............At the well head?
Does the lessee consider liquids as part of the marketing, or do they simply report Gas or Oil sales, this is a problem also...legit concerns we face daily at our office and we continue to fight for the royalty owner.
How about transparency on the statement? Can you understand, the format of your royalty check? Would it not be expected that we demand a basis reporting standard, that all lessee/producers must follow?
WHAT SAY U?
Now you've got my attention! I will be looking into this ASAP...
You may not be aware of what is going on in Ohio regarding royalties. From what I have been hearing from landowners around the region, all of the producers have been ramping up deductions on royalties to anywhere from 60 to 100 percent of the amount of royalties, regardless of lease language. Everyone is being treated the same; there may be exceptions, but I'm not hearing from any of them. I have a market enhancement clause that enumerates what additional deductions may be made and forbids others, and requiring the landowner be paid the actual sales price of the enhanced product, all of which is being ignored. Encino recently purchased Chesapeake's assets, and are taking deductions that would have made Chesapeake's worst vultures blush with shame. What is going on in Ohio is not the usual complaining about deductions from royalties.
I have been experiencing this myself. There are exceptions, but they have a lot to do with getting a lease the length of a novel to cover every detail. It's bad enough they play dirty during the bust cycles, but now they're squeezing every red cent they can get despite the reasonable rebound in the industry. Encino has been terrible so far. I've heard their strategy is take it all and let the courts sort it out.
Thanks for the input! I have negotiated a number of leases myself, although those with Antero preceded my ownership of the property. Every company takes deductions, but, by comparison, Antero's are astronomically high. The fact that they get around the post production language tells me they take their agreements in bad faith, as the landmen negotiating that language allow (or even create) the impression that this is the same as 100% gross language. For anybody out there reading this, I would suggest never signing anything with this company that isn't completely bulletproof.
Great points and great discussion. Marcus - while it may be different in Texas, I believe that your generalization of landowners' attorneys underhandedly signing NDAs with operators is likely a gross exaggeration. What you described is explicit violation of the rules of professional conduct in any state, and would result in suspension if not disbarment. If an attorney if under a retainer, or any other representative agreement with a client, they are conflicted from representing an opposing client.
Dave -- You are absolutely correct that special attention needs to be made to each and every provision in the negotiation of the lease. Once executed, the landowner is stuck with what they signed. The only choice for landowners is to take what they are given, or push the envelop and see what kind of leverage they may have given their land position (at this very moment, there isn't much landowner leverage). That being said, any generalized/ambiguous language in the payment provisions will likely be taken advantage of. In the leases that I've negotiated, blanket terms such as "transportation fees" and "metering" need to be defined, or deducts are liable to increase exponentially. Operators are at the mercy of their agreements that largely favor the transport midstream companies and often have commodity pricing/margin provisions that will then be passed on to the landowner if not prohibited.
Hope any of this helps, though it is likely too late as most on here are the mercy of the agreements they've already entered into.
Best of luck, all.
It may be different here, definitely not an exaggeration though, happens all the time.
Agree on it being a professional and ethical rule violation.
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