Chesapeake in Jefferson County, Ohio, Offering One-Year Lease Renewal

Our five-year lease with Chesapeake is due to expire in June.  Chesapeake has the option to renew automatically for three years by repaying landowners in our group the signing bonus (the exact amount that covered the first five years of the lease).  One of the members of our group (not us) has been approached by Chesapeake to renew for one year only, and I am assuming it's at 1/3 the price/payment.  Has anyone else in Jefferson County, Ohio, been approached and offered the same deal?  I am wondering whether Chesapeake could be doing this because they don't anticipate getting back the results of the seismic survey in time, that is, before the majority of their local leases expire.  Please share any thoughts or additional info about renewal offers or seismic survey results in Jefferson County that you may have.  Thanks.

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Permalink Reply by bo boboski on April 1, 2016 at 9:37am

True, if you had timber on your land, and someone wanted to come in and cut it;sell it,then pay you almost nothing for it,what would you say?

Permalink Reply by Leo S on April 1, 2016 at 8:24am

To which company did Chesapeake sell its WV holdings?

Mike MurphyPermalink Reply by Mike Murphy on April 2, 2016 at 3:27am

Southwestern energy bought 400,000 acres in PA and West Virginia

Permalink Reply by Tom S on April 1, 2016 at 12:13pm

For what it's worth... In Belmont county, Ohio, many mineral rights owners, whose 5 year agreements are expiring, were approached by XTO/Ascent/Purple with bad extension deals, extending the current 5 year lease to 6 years with $500/acre/year extensions for the next 5 years.  Plus, some of the clauses were changed to benefit the O&G companies. People resisted, spread the word to their neighbors, held local meetings... and now many people, (maybe all) including me have received checks for the originally agreed upon, 3 year extension at the full amount, exactly as it was agreed to 5 years ago. Apparently, our minerals (AND YOURS) are still worth reasonable long term leases.

Don't give in to their fear tactics and excuses. If your current company won't pay you what it is worth, I'm sure someone else will, soon after the current agreement expires.

Permalink Reply by bo boboski on April 2, 2016 at 4:45am

That's good news pay attention,everyone,be patient,hold out as long as you can.Read Toms post again&again.

Permalink Reply by nc man on April 2, 2016 at 4:57am

You know it, Bo!

That is what my brother is doing for us!!

Solidarity is the key move for us all!

ncman

Permalink Reply by sldouglass on April 1, 2016 at 2:19pm

Budgets of producers are currently tight.

Prices for O&G and constituents are low for a while.

It is not the time to make decent oil and gas deals.

Just say no.

It is a long term thing with reserves that last over 100 years of drilling and producing.

At some point when they are really producing in your area from one of the multiple strata under under your property, they will pay what they pay Texans, Maybe $5000/acre bonus and 20% royalty.  Patience is rewarded.
Permalink Reply by Robert J. Smith on April 2, 2016 at 4:39am

Our leases expire April 15 and have not heard a thing from Chesapeake.  They finished seismic testing about a month ago and do not expect to have results until sometime in Summer according to the workers I talked to.  Two weeks will tell the tale for us as far as what Chesapeake will do.  The only leverage we have is to stick together in dealing with Chesapeake or any other company.  I think everybody has seen what happened in the past when everything was so secret.  I will let you know what happens as it happens, or not  The other ploy Chesapeake is trying is trying to get you to sign into a larger drilling unit.  Ours is 640 acres and they want to go to 1280, all for our benefit of course.  They say it opens up opportunity to benefit from a larger area that may hold more oil and gas. They forget to mention that you may well be sitting on the mother lode and will have to share it with more people if you go for the 1280 acres.  They sent us  a check for $10 with instructions to go to a notary and have the document signed that increases the drilling unit size.  It appears that they are looking for the gullible among us who just follow orders.  Our attorney sent them a letter stating that we will go into a bigger drilling unit for $1,600 an acre.  We received a smart ass answer back stating that nobody is being paid that much money and that the demand is ridiculous.  He did not mention how ridiculous his letter  asking us to sign for the  increased drilling unit for $10.00 was.  In checking we found that the guy recently graduated from law school and was awaiting the results of his bar exam.  Hope he flunked because we do not need any more lawyers like that.  Bottom line is that Chesapeake wants you to go to a bigger drilling unit so they can sink one well in 1280 acres and tie up  those 1280 acres as long as the well produces without paying additional lease money to the landowners. One well ties up 1280 acres instead of the 640 in the original agreement.  It cost 5-6 million to drill a well so they save 5-6 million up front or until they want to drill again when the gas/oil prices go up.  On top of that more landowners are going to share royalty income in that one well until Chesapeake determines to drill more wells.  Good luck out there          

Permalink Reply by D.C. Harris on April 4, 2016 at 9:40am

Robert,

Thanks for your post.  It's imperative that landowners understand that everything CHK or any other O&G company does is in the company's best interest, not the landowner's.

We have a Pugh clause that requires CHK to place 60%+ of our land in any given unit or forfeit lease rights to the rest of our land (that is included in that contract) after an automatic 2-year extension for including a-n-y of that land in a drilling unit.  When we signed, we thought that sounded fair enough, but CHK never plays fair.  They play dirty.  A year or two into our five-year lease, CHK included twelve one-thousandths of one acre of our land in a drilling unit:  yes, .012 acres, an area smaller than our living room.  Doing so has given them an automatic 2-year extension, as I mentioned above.  The reason I bring this up is that I believe most landowners assume that if they're included in a unit, it'll be a chunk of their acreage, not a sliver of an acre.  Allowing CHK to go from a 640-acre unit to a 1,280-acre unit gives them double the opportunity to "clip" you just like they clipped us.  And beware, a 1,280-acre unit does not lock up just 1,280 acres of land:  It can easily lock up 3,000 acres for at least a few extra years with just one well.  

We are lucky to have a Pugh clause, or we would be permanently stiffed and locked into a permanent relationship with CHK.  We are also lucky that we signed two separate contracts with CHK for parcels we own that are contiguous.  This is the only reason CHK hasn't locked up all of our land for a few extra years.  Regarding drilling units and contracts, I have a few pieces of advice to anyone new to this or anyone considering re-signing:  1) If you own separate parcels, insist upon separate contracts, each with its own Pugh clause better than ours; and 2) Never, ever agree to increasing your unit size.  

D.C.

Permalink Reply by Rick Heinzmann on April 4, 2016 at 3:54am

From what you have written, it does not appear that CHP has an option to renew the Lease for 1 year and is making the 'offer' to avoid paying the full amount, to the landowners, while preserving their leasehold in hopes things will change during that year.

By accepting this 1 year extension you are 'Amending' the original Lease Agreement and the 'Extension' document should be closely examined for other changes to the 'Terms & Conditions' of the original Lease Agreement.

If no other companies have expressed interest, in leasing your mineral interests, and the terms CHP is offering are acceptable you might consider accepting their 'Offer'. Alternatively, you advise them you will accept the 3 year renewal as provided in the Lease or a Termination of the Lease (include the termination in your letter).

Permalink Reply by Robert J. Smith on April 4, 2016 at 12:11pm

I will terminate the lease.

Permalink Reply by JWE on April 4, 2016 at 4:30am

My five year lease expired on February 2, 2016 and to date I have not heard a peep from either DPS Penn or Chesapeake who they were fronting for.....I have sent a request to Chesapeake via their on line service requesting a termination of lease.  They acknowledged receipt of my request and forwarded it to their land department.....have heard nothing since my early February request.

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