Chesapeake sues landowners over old Anschutz Leases.

http://business-journal.com/chesapeake-sues-columbiana-carroll-land...

 

Interesting story. 

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Permalink Reply by Billy Park Whyde on February 7, 2012 at 1:59pm

if the lease was for three years as stated and expired and at that time Chesapeake made no move to renew at that time and the land owners made the first move I think the landowners might have a upper hand. but regardless the Public Relations of Chesapeake gets screwed as they sure as H can not say they want to work with land owners. 

Permalink Reply by dr j on February 7, 2012 at 2:20pm

I too think this is a case of crying over spilled milk.   Many of these properties have been leased for many years with the leases passing from company to company.   I am fairly sure Anschutz wasn't/isn't going to drill them so at least they now have a chance of royalties.    

On the other hand the current leasing climate would make the $10/acre lease a bit hard to swallow. 

 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on February 7, 2012 at 5:14pm

I just read this at the link you provided (and thank you for the info)...

According to the court papers, the leases remain in effect for three years and provide for a three-year extension option for the lessee.
Tscholl points to a preferential right to renew paragraph in the lease agreement that he says enables the landholders to terminate the leases and negotiate with another company.
"There were even several landmen who told them this could be used to get a better offer," he says.

 

Do you think that they were using the 'Right of First Refusal " clause that is actually on many contracts?

that clause does state that another offer from a company can be offered during the primary term and after..

 

hey, take a look at this also (from another discussion here)...

http://glasscityjungle.com/2011/04/fedor-calls-for-investigation-in...

(Karma?)     (well what else can we say....I would like to say GOD avenging as Christ stated)

 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on February 7, 2012 at 5:38pm

http://www.farmanddairy.com/news/chesapeake-files-lawsuit-against-9...

This link states the wording of the clause on the contract that the Lessors have...which is almost the same as the 'right of first refusal clause ' on my contract and on many of your contracts...so take a look.

 

Permalink Reply by Billy Park Whyde on February 7, 2012 at 5:59pm

I went ahead and copied it"

The language in question

Preferential Right to Renew. If, at any time during the primary term hereof, or within one (1) year from the expiration, cancellation or termination of this Lease, Lessor receives an acceptable, bona fide third-party offer to lease the Leasehold, in whole or part, Lessor shall promptly provide the Lessee, in writing, of all of the verifiable particulars of such offer. Lessee shall have thirty (30) days from the receipt thereof to advise Lessor, in writing, of its agreement to match said third-party offer as to all terms and consideration; immediately thereafter, Lessor and Lessee shall take all cooperative steps necessary to effectuate the consummation of said transaction and the survival of said transaction through any statutorily mandated right of cancellation thereof. Any lease or option to lease the Leasehold, in whole or part, granted by Lessor in contravention of the purposes of this paragraph shall be deemed null and void.

Source: 2008 landowner oil and gas lease with Anschutz Exploration Corporation

  Looks to me as perhaps Chesapeake screwed this up big time. If they had excepted it they could have tried to have modified the lease. Of course it might have cost them money but it would be a business expense. Now it looks like they will never ever get a chance to try and do it to terms they may like and have ruined  their reputation in the process and still loose the lease!  

Permalink Reply by Blindsquirell on February 8, 2012 at 2:17am
Right of first refusal is for the benefit of the lessee. IF..within a particular time frame AFTER the expire of primary or in this case the extension of primary (3 yrs) a legitimate offer (in writting) is made. The lessor notifies the lessee. The lessee has 30 days to match said offer. If the OGL was signed in 2008, the lease is still in effect. More than likely the extension has kicked in. This provision has been dissected many times on this site. I'm surprised the attorney is even attempting this case. Bottom line I'm surprised the landowners signed such a low ball OGL.
Permalink Reply by Blindsquirell on February 8, 2012 at 2:44am

Option to Renew works basically the same way...and again at the choice/disgression of the Lessee.   IF..within a particular time frame (possible 1 yr) AFTER the expire of the OGL, a legitimate offer (in writting) is made.  If during the term, the acres are part of a unit all beats are off, because now the acres are HBP.  OH landowners should all become knowledgeable with what the PA landowners have been dealing with for years.  Why would anyone sign a $10 OGL?  $10 x ac = Not Much.  The only thing worse would have been if it was a PAID-UP OGL. 

Permalink Reply by Finnbear on February 12, 2012 at 3:28pm

Lessor can't be paid for another offer by a new company until the primary term has expired and first lessee has refused to renew at the new offer terms. They can accept the new offer as a "top lease", contingent upon the first leases expiration, cancellation, or termination.

Lessor can shop for better offers and present them to lessee "at any time during the primary term hereof, or within one (1) year from the expiration, cancellation or termination of this Lease".

It is then up to the lessee to decide if they want to renew at these new terms or let the lease expire and then the lessor is free to sign with the new company. If the new company wants the acreage bad enough, they will offer the deal as a "top lease" which can be executed if and when the first lease expires or is cancelled, or terminated.

Permalink Reply by Billy Park Whyde on February 8, 2012 at 3:59am

If you will consider the intent of the Language it to me, looks pretty cut and dry that the lessor sought in the lease a avenue to terminate the lease upon a better option. It however gave the lessee the option to match the offer. If anything Chesapeake is showing that they never and are not willing to comply or aknowledge the clause. Primary term was 3 years 2008-2012 is 4 years. 

 Four years ago lease bonuses were not what they are today where people see bonuses jump by $1000 or more in a couple of months. 

Permalink Reply by Billy Park Whyde on February 8, 2012 at 3:54am

Here it say Lessor in part "Preferential Right to Renew. If, at any time during the primary term hereof, or within one (1) year from the expiration, cancellation or termination of this Lease, Lessor receives an acceptable, bona fide third-party offer to lease the Leasehold, in whole or part, Lessor shall promptly provide the Lessee, in writing, of all of the verifiable particulars of such offer. Lessee shall have thirty (30) days from the receipt thereof to advise Lessor,


Permalink Reply by Blindsquirell on February 8, 2012 at 4:09am

Do we know if Lessors provided a bona fide third party offer to Lessee in writting?  This is going to be interesting...maybe even set precident. 

Permalink Reply by Billy Park Whyde on February 8, 2012 at 4:18am

I would think so, or the case would have been dismissed without merit.  Possibly the company making the offer might even be involved with with the case as a party themselves.  Hmm can we try to bring up the court case as it will show the plaintiffs?

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