The following was received by many people in the Brinker Storage field with the old dual purpose (storage & production leases)--
Dear Non-Litigating Brinker Field Landowners:
Hilcorp is increasing their royalty offer to 15% for OIL & GAS. This is most likely a GROSS Royalty because that's what was discussed. This is a significant increase from where we started. Again, many folks in Pennsylvania and West Virginia with similar leases to ours ended up with only 12.5% royalties (sometimes NET) when the oil and gas production privileges were farmed out. In a perfect world we would not have to go through Columbia Gas. At the same time neither would Hilcorp. Hilcorp continues to indicate they truly desire to develop the oil and gas resources. Hilcorp has been very gentlemen-like in their approach to the situation. The 15% royalty means you could be handsomely compensated for your resources, even though there is a dual interest in the Oil and Gas (Columbia Gas).
There are many online oil and gas calculators that can help you figure out your possible royalty income at 15%. Look up the production results from nearby counties (ie, Carroll) as potential example.
Columbia Gas’ arrangement with Hilcorp stipulates Columbia will have a 5% working interest plus a .7% overriding royalty in the wells. This arrangement along with our offered 15% royalty means Hilcorp’s overall payout will be right close to 20%. The business economic model that drillers strive to maintain is a 79 to 80% margin for themselves, after all they are doing all the work. This Hillcorp offer allows them to maximize their royalty offer while still staying within operator industry standards.
Again, Last Friday we met with Hilcorp’s Mr. Smith at Roth Blair’s law office. During our three hour discussion, Hilcorp offered to modify their Lease Amendment offer. The other possible changes they proposed in addition to those mentioned at the 9/12 & 9/13 open house include:
* adding well shut-in payments
* adding many additional landowner friendly provisions.
* a hold harmless and indemnification clause.
* they have indicated the soon to be finished draft is 16 pages long.
* According to Hilcorp, the changes would make the Lease Amendments binding upon the old manufacturers lease.
* Hilcorp stated they are willing to offer the Lease Amendment to all affected people Not In A Lawsuit Against Nisource/Columbia, so please make your decisions wisely. If you have sued Columbia & NiSource, Hilcorp cannot talk to you, and they will not make this offer to you.
*Hilcorp stated their Intention to Make the Offer to All Non-Litigants and They Will Not “Cherry Pick” Parcels.
It goes without saying- the best way to maximize drilling potential from one company is to combine inviting acreage.
Lease language is often not easy to understand. The Roth Blair law firm will have had the opportunity to review Hilcorp's Lease Amendment. Lawyers will be available to go over Hilcorp’s offer with interested parties when the Lease Amendment is prepared. This could be done in seminar format so folks can hear each other’s questions, and receive an answer. We recommend that you discuss any Lease Amendment with an experienced oil and gas attorney before you sign it.
We expect to have more news and additional details to disclose very soon. Please share this very important information with your neighbors.