This is a cautionary story for all landowners considering joining a landowner group – Buyer beware. Just because the landowner group is attorney led does not guarantee that the landowners will be well represented.
Southern Ohio Energy Consultants (SOEC) led by Attorney John Wells, along with three other partners of SOEC, pushed landowners in Washington County, Ohio to sign leases with DUX Petroleum LLC in mid February, 2013. DUX did not pay any of the leases.
Before the leases were signed members of gomarcellusshale.com (GMS) worked together to research DUX and discovered that DUX was a paper company with no assets, and was run by a 30 year old part time real estate agent with no apparent oil and gas experience out of a modest $95,000 single family house in a residential neighborhood in Lubbock, Texas. This (and more) publicly available information was available to anyone who did their due diligence and researched DUX. John Well’s partner, Tim Neal (posting on GMS as drillBABY) defended the DUX deal – making it impossible for SOEC to claim that they were unaware of the problems with DUX prior to the signing of the DUX leases.
For more background on the DUX deal read the other posts on the topic
Big Al: you have a great sense of humor and I appreciate it! Just for the record let me state that I have no relationship with Garrison or any other landowner group. I have not encouraged any individuals to sign agreements, leases, or other documents with any O&G company or any landowner group or other entity directly or indirectly engaged in the business of O&G leasing or anything related thereto. I only say this because some readers might read your very very funny post and take it seriously. (If your post was not so obviously made in jest, you would perhaps not be amused by my response since you would be the one answering questions under oath!)
It is important for landowners to understand that unless they are careful with how the group is structured there can be an inherent conflict of interests between the attorneys negotiating the leases and the landowners. Especially if they are charging 4.5%.
Landowner1 says “The attorneys have no interest in negotiating hard to increase the royalty % or to get landowner protective leases – their compensation is not based on that. In fact, negotiating hard for those things makes it harder for them to get a deal and get paid. The attorneys do not care if the company is a flipper or is a legitimate O&G company with the financial, technical and operational ability to drill a lot of horizontal wells – the attorneys get paid the same.” Luckily Wells negotiated one of the best landowner friendly leases out there.
Landowner1 says “In contrast it is very much in the interest of landowners to get a strong, landowner protective lease (because they will have to live with it for generations), to get a higher bonus % (because the real money is in the royalties) and to sign with a legitimate O&G company (because they only get royalties when wells are drilled).” Again – they had a very good lease. But define legitimate company – O&G companies use shill companies all the time. Or say sign with a well known company like say Chesapeake, they wouldn’t flip your lease because they are legitimate, to say a Total for 15,000 per acre. Remember they are legitimate. It’s always a gamble.
Landowner1 says “It is in the attorneys’ interest to get a deal, any deal, as quickly as possible. In many cases this is because the landowners commitment to the group is about to expire or because the attorneys are concerned that landowners will do a deal with a different group.” Maybe with Garrison’s group. Wells still had half a year to look, they had what looked to be a good deal. They still have many groups to sign, they want to do what’s right. If they wanted to screw the landowner, maybe they should charge 4.5%. It makes no sense for Wells to screw over one of their groups when they have several more groups to negotiate for.
Landowner1 says “Wells and SOEC were desperate to do a deal, any deal, and chose DUX because DUX was the only company they knew of that would match the deal that a competing group had on the table.” You say they were desperate, what are you basing that on – heresay? $4050/acres does not sound desperate –best deal and lease the county has seen to date. $500/acre would look desperate. If they were only worried about the money, they would be charging 4.5%, why come up with some complicated scheme.
Landowner1 says “They probably figured that if they were lucky DUX would be able to flip the leases and therefore have the money to pay for the leases. If not the landowners would be tied up for 120 days with DUX, therefore Wells and SOEC would have another 120 days to find a real O&G company (which they were looking for anyway for their other Washington County landowners).”
You and Sam Orr sound like shills for Garrison’s group. You people act like there are deals all over the place and you just pick your company and go sign. Its not way in Washington county, people just need to be patient. Being part of a group I think is still in there best interest. Ask the folks who sign early in this deal for 50 bucks an acre, I bet they would have liked to have been in a group.
Big Al: You might have a point if only DUX were a real company! Remove DUX and substitute Gulfport and you would not see all the criticism of DUX and John Wells. I have denied all of your allegations and innuendoes about me which I took to be made in jest. Continuing to accuse me of being a shill for Garrison's group, any other landowner group, or any O&G company is libelous given that I have denied it, and that you have no evidence to support it. I note that you use a pseudonym whereas I use my own name. The DUX leases would pay the landowners $4050 / acre if any only if DUX was able to flip the leases. To the extent that DUX was able to flip the leases, DUX was entitled to keep the dollars/acre in excess of 4050/acre. I have suggested that Wells and his cronies may have had a deal with DUX to split any profits that DUX made on the flip. Mr. Wells has not denied that such a deal exists or existed. Again I note that DUX says it is a leader in the industry, has done business in 20 states, and yet it has no phone #. Can you provide any reason at all why John Wells would encourage or even allow landowners to sign leases in favor of DUX, an apparent one man corporation formed in October 2012, that appears to have no significant financial assets whatsoever? I have asked essentially the same question multiple times on this thread, and neither you nor John Wells has provided any credible answer or any answer whatsoever.
Samuel Orr are you defending Garrison? IMHO as Bob said she is profiteering off the backs of the land owner at 41/2% fee for doing not much of anything or at least no more than any landowner run group has done for their groups in most cases for free!
No I am not defending Garrison. I said I had no criticism of SEOLA about which I know nothing. The reason I said I had no criticism was because in one of my comments in this thread which started out being about DUX, I referred to SEOLA when I meant to write SOEC. One of the readers corrected me, which caused me to issue an apology to SEOLA. I do not know anything about Garrison or SEOLA except what others have posted. Nothing I have said should be considered an endorsement of SEOLA or Jennifer Garrison, even though Big Al has tried to infer that! I do know that Big Al seems to be a Newbie whose real identity is unknown to me. He for some unknown reason is defending Attorney John Wells. SOEC, and DUX. I see no merit in his posts. Perhaps if we knew who Big Al is, we might know why he is defending conduct that I see as indefensible. As for me, I own some property in western Pennsylvania which at this time is not leased! That is the extent of my connection to O&G leasing. I am a landowner who hopes at some time to get an acceptable lease. I try to learn from the successes and failures of others so that perhaps I will not make the same mistakes. The John Wells, SOEC, DUX fiasco has smelled like a kettle of rotten fish from the beginning! IMHO
Samuel Orr, Ok I got you I was confused. as I see it Garrison & John Wells are in the same boat, carpet baggers lining their pockets on the backs of the landowners
Tom Thanks for the question! Now if we can just figure out who Big Al is, we may understand why he is attacking me and defending John Wells, DUX, and SOEC.
My response to Big Al's above post is as follows: Attorney Wells negotiated a supposedly very landowner friendly lease with a virtual nonentity named DUX. These landowners might as well have signed a lease with Mickey Mouse or Donald Duck. What are "landowner friendly" lease terms worth when the lessee is a company like DUX with no assets, no history, no drilling experience, and no published telephone #??? The answer is that they are worth NOTHING!! DUX's website says it is a leader in the industry, has done business in 20 states, and yet it has no published telephone #!!. DUX is a joke!! I have said this over and over. Yet "Big Al The Landowners Pal" continues to defend DUX and Attorney John Wells?? Readers, I ask you this question....Who is "Big Al the Landowners' Pal" and what are his motives in defending DUX? "Big Al", you have just been called out!
Big Al makes so many unfounded accusations it is hard to know where to begin. Most of them revolve around his contention that I am a shill for Garrison’s group. Let me be clear. I have no association with Garrison’s group. I agree that the fees they charge are excessive and I am not recommending that anyone sign up with them.
My posting regarding the inherent conflict of interest between attorney led landowner groups and the landowners applies equally to Garrison and SEOLA as it does to John Wells and SOEC. People have wondered why Wells and SOEC would recommend DUX even though it was clearly identified as a scam by many posters on GMS prior to the lease signing - therefore some of the posting suggests possible reasons.
Now let’s turn to Big Al’s motivations. What do we know about him? We know that until two days ago he had never posted on GMS and his only posts are on this discussion. We know he is the only person who is defending John Wells and SOEC despite their status as the only attorney led group that signed Utica leases and NONE of the leases were paid.
In the previous DUX Petroleum discussions the only other time someone defended John Wells and SOEC so strongly it was drillBABY who turned out to be Tim Neal, one of John Well’s partners in SOEC. Makes you wonder who Big Al is and what his relationship is with John Wells and SOEC.
Anyone who has friends or relatives in Washington County or in any of the other counties in which John Wells or SOEC operates (including Morgan County) needs to make certain that their friends or relatives know what happened in the DUX deal so that they can make an informed decision regarding whether to be represented by John Wells or SOEC. If they feel comfortable using a computer, send them the links to the DUX discussions. If not, print out some of the pages from the discussions for them to read. This is a once in a lifetime opportunity – don’t let them make an uninformed decision.