Replies to This Discussion

Permalink Reply by Penny J McCarl on September 29, 2012 at 6:38am

I would contact a lawyer asap CHK does not do anything unless it benifits them. Do they have a right to first refusal? Because if you do you can contact another company and see if you can can get an offer from them if you can and its better than  CHK they have to match it. The reason behind the 10 days or else is what really makes me not trust them

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Permalink Reply by Lea on September 29, 2012 at 9:35am

CHK likes to threaten people like that. Do not sign anything without a lawyer and don't let them intimidate you. They did that to my neighbor 5 months ago and pulled their offer. Now they are back in offering again. CHK is just a big bully. Research, research, research!

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Permalink Reply by PHILIP ANGELO on September 29, 2012 at 11:42am

RRI, $500 is way to cheap ,18% "no deductions" might be good .call a lawyer to add some language to protect your self. DONT TRUST CHESAPEAKE!!!! they are telling you you are in a proposed unit this means nothing. I would shop it ask another company to give you a price. Tell them toput everything in a e-mail to you so you have documention.   

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Permalink Reply by 0ym9x5ag7ury2 on September 29, 2012 at 12:02pm

RRI,   All of the deadlines used by companies in Ohio turned out to be bogus. Its a ploy to get you to sign something without consulting a lawyer. In my opinion you have something someone else wants. Make sure you know who "They" are. Sometimes DPS Penn representatives try to convince people that they represent Chessapeake, they don't. DPS Penn is a middle man who will help themseleves to your bonus money. Take your time and you'll find you would have been taken advantage of if you had gotten in a hurry to meet the bogus deadline. 

If you make a decision on your own without consulting a lawyer, you'll have the rest of your life to think about the time you were taken advantage of by a company who used a bogus deadline to steal from you.   "Money Brings Out The Worst In People". 

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Permalink Reply by john on September 30, 2012 at 12:11pm

They may be telling you that you are in a projected unit design.  Most likely they haven't started any activity or your lease would be considered hbp.  They may have put in for permit or something alon those lines.  Also, if your acreage is outside the wet gas window than you won't be offered that much.  $500.00 is cheap but don't get too greedy becuase if you are going to be included in 2 units than your money will come in due time.  Unfortunately the company has the upper hand no matter what way you look at your situation.  I'm going to assume if Chesapeake is forming units in and around your holdings than they probably have the majority of the leases in your area therefore blocking any opportunity to shop around your acreage to competitors.  I work for Chevron in Fayette, PA and we offer $500 per acer because Fayette is outside the wet gas window and we have no competition.

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Permalink Reply by scott brion on October 5, 2012 at 2:03am

Have to say the offer sounds a bit fishy to me.   In general, anytime there is a short "take it or leave it" date with an offer it is a risky/bad deal.   It is rarely a good idea to rush a lease decision.   Also the 7 year term is a major concern and at $500/ acre you are leasing for $71/acre per year.  The range of leases I have seen in neighboring counties over the last year has been $4,000 to $2,500 per acre for a five year lease or from $800 to $500/acre per year.   Its hard to give advice without all the information and facts, but this lease bonus seems to be well below fair.   In regard to Chesapeake or any other operator, they are always making an offer to you that is good for them and the challenge is to see if it is good for you.  You can not put any faith in the landman's statements about drilling units or anything else that they do not put specifically in the lease.  

I am not sure your age or objectives, but unless you have a very short term perspective or need the bonus money, you may want to decline the offer or try to negotiate.   If you do decide to lease now, I would shorten the term to 1 or 2 years.   Then your lease bonus is $500-250/acre each yr (still low) and CHK has to put you in a drilling unit soon or lose your lease.  If they are not willing to do that then they lied to you about the drilling unit and you may want to wait until you have better leverage.   Also if you lease, I would suggest definitely get a good lawyer and also find someone to help you understand the business and operating parts of the picture.   My experience is that as this is all still so new, lawyers do not really know what they are negotiating as they do not fully understand the development.  This would be very important given the fact Chesapeake is offering you so little cash up front and will be attempting to lock you into a lease for a very long time.

Feel free to contact me 570-404-5664 if you need help determining where the drilling units are near you.  I have some of them mapped and can help you figure out those that are near you.  Good Luck! 

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Permalink Reply by scott brion on October 5, 2012 at 4:47am

Sorry, my power went out while editing the above.  I suspect what is happening is that Chesapeake is offering you a top lease.   This can be a tricky situation and may be mutually beneficial to you and Chesapeake but there will be terms to negotiate.  For instance a landowner always wants a shorter term and for a top lease in your situation I would insist on a short term - say 1 year.  Also you would want to amend your current lease to reflect the higher royalty and other new terms beneficial to you.  Operators will often surrender top leases to avoid paying the higher royalty if they can begin operations in your drilling unit before your current lease expires.  They may also try to avoid paying you the agreed bonus.    I know a landowner who in 2011 was offered a top lease similar to yours and we ended up negotiating it to receive 3 1/2 times as much bonus money and a 50% better royalty.   Feel free to give me a call if you would like to discuss.

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