got a letter from chesapeake

they want to amend my contract for unit size from 640 acres to 1200 acres for a consideration of $10.also total in named in contract.property is in nottingham twp.was wondering if anyone else recieved a letter and what are your thoughts.does this mean they are drilling close by?what are the pros and cons?any input will be appreciated! thanks all!

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Permalink Reply by AJones on January 27, 2013 at 12:40pm
Pro-bigger area = better chance of a producing well in your "plot"= you get royalty.
Con- your deviding royalties with more land owners.
Permalink Reply by mark o on January 27, 2013 at 12:44pm

was in same situation...got good advice and did not take offer.  would not do it!!!

Permalink Reply by Bluflame on January 28, 2013 at 4:24am

Ray,

  It's a craps shoot. With shale wells, dry holes are a rarity regardless of drilling unit size. Yes, one well will HBP the whole 1200 acres (are you sure it's not 1280 acres?).  You have the likelihood of many more wells drilled within the unit, but your share of each well diminishes.  With CHK's tenuous cash position and Utica midstream processing facilities nearing completion, they are incentivized to drill wells quickly, and it's less costly for them to drill as many wells as possible from one pad. This seems to have become standard practice in the Marcellus.

  BluFlame

  

Permalink Reply by Kathi Albertson on January 27, 2013 at 3:31pm
How many acres are involved in your lease? Are they offering $10 per acre? How old is your lease? What is your current royalty rate? I'm interested because I might be in the same situation some day.
Permalink Reply by ray schmidt on January 27, 2013 at 4:24pm

sorry i should have included more info.i have 20 acres in harrison county nottingham twp.it doesnt say per acre just" in consideration of ten dollars and other good and valuable consideration".lease was signed april of 2011 with alov group.royalty is 17.5% gross.does anyone know if total bought my lease or do they work for chesapeake? i dont live there so i dont know if maybe they are drilling there already or not.i do know gulfport drilled at boyscout camp which is only a few miles away.thanks for all replies!

Permalink Reply by Jack Straw on January 27, 2013 at 3:46pm

Right now, Chesapeake can tie up a total of 640 acres (including your acreage) with only one well.

If you sign, Chesapeake can tie up a total of 1200 acres (including your acreage) with only one well.

Maybe it is just me, but I question Chesapeake's motives in asking for the change.

 

All IMHO,

                   JS

Permalink Reply by LW on January 28, 2013 at 12:31am

I agree, and I think you should be compensated for more that $10 or $10 an acre.  Perhaps a higher royalty percentage or  an agreement of more than 1 well to be drilled and produced right away.  Maybe 4 wells?  If that is not practical, then some kind of compensation for seeing less money for a longer time period.  I don't know how you calculate fair in this case, but it must be more than what they are offering. 

Permalink Reply by Kathleen on January 28, 2013 at 3:42am
Since you do not live in the area call the customer service # for CHK. One hand has no idea what the other is doing IMO so the drilling division won't know you called. Have your parcel number ready and the name of your county and ask them if you are in an up coming well. I know this works real well if you received papers to test your water. This way at least you know if they are planning to put your minerals in a unit within say 6-12 months. This info is just good to know anyway.
I did not receive a letter, I received a phone call and another and another... With them honestly begging me to go bigger. During this time I already knew part of my minerals were going into a unit (water tested, confirmation from customer service I was, than ODNR unit drawing) but only one well was permitted for the pad.
I called my atty and he said its really a personal decision but after reading this site for a year I realized I would be making a bet if I said yes hoping they developed all the 1280 acres in my lifetime. I knew if they did not than I would just be diluting my royalties. If you use the royalty calculator on this site you see unless they drill all wells your roaylities go right in half while the co.'s costs drop in half.
I decided to test the waters and see what they would give me for opening up my lease (they said that's not what's happening, but that exactly what's happening) and asked for some strata release which was a no, of course zero extra dollars, and no royalty % bump. My atty felt he could have gotten me the strata release, so I may regret not looking further into that but CHK said no to me concerning every request. They don't even offer me 10 bucks :0)
I do feel its a decent deal if they drill all 1280 but than I look to PA and other dry gas areas', and I see if anything better comes along or the prices of the hydrocarbons they want drop they just move on and I'm stuck with diluted roaylities.
I am at the very end of the unit so they could have just shortened it in retaliation but they did not. I know the unit still can be changed since the rig just showed up but I think I'm good.
Just remember its a bet on your part and a plus on the O/G co.'s part.
Permalink Reply by Tom R on January 28, 2013 at 5:08am

 I went to a meeting CHK held this past March for local lease holders. They said that with more experience of local conditions and better technology, they were finding they could drill much longer laterals and future units in the area would be larger acreage. I am in PA where the leases do not specify a unit size and lease language gives them the right to change unit size at their discretion.

Permalink Reply by LW on January 28, 2013 at 7:00am
Is there anyway of learning that the laterals are longer or the plans for the proposed unit? I have seen units expand wider instead, so that there is a potential of more wells eventually, but when? Some leases in Pa prohibit units larger than 640. I assume this one does or they would not have been contacted.
Permalink Reply by Tom R on January 28, 2013 at 7:57am

 I think Ray Schmidt is in Ohio, which may have state standards for unit size. I know NY has a default standard of 640 acres for "old style" vertical wells (still under moratorium for frack well development and reg's may change). Some PA leases may include unit size limits but the CHK "boilerplate" lease leaves it open ended. As for finding lateral lengths, that can be difficult and methods depend on where you are. I am in Bradford County, PA. A member of the Bradford County group discussion posts a very good resource of declared unit maps, with frequent updates, on this site. You can use the measuring tool in Google Earth to find the length of the unit and divide in half to get approximate length of lateral. If the well in a unit is very near your land (3,000' or less) you will get a plat map and full copy of the application form as part of the permitting process. This includes full details of length and orientation of the well. It used to be within 1,000' feet to get a copy but the law changed in 2012. Does not matter if you are part of the unit, or even leased, just based on distance to the wellhead.

  I am no expert and not very experienced, so someone else may be able to give you a better way to go about it, but this may provide at least a start.

Permalink Reply by Frank Nesmith on January 28, 2013 at 8:38am

Don't do it. They are just doing it to Hold By Production. If gas prices were higher, I might consider it, but not worth it now.

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