I am a member of a homeowners group in the Barnett Shale in Johnson County Texas. The size of the lease is approximately 350 acres. My tract is only 0.19 acres. Unfortunately, Chesapeake is leasing the property in the HOG. When production finally commenced in 2009 the royalty checks were pretty decent considering the size of my small tract. Then Chesapeake began deducting handling, transportation costs, and whatever else they could from the royalty checks. They also drilled another well, with two more wells planned for the lease. Needless to say, the checks were reduced significantly. Even with the additional well. The royalty checks barely trickle in.
I have considered retaining the McDonald Law Firm to see if they can recover any of the money that Chesapeake has been withholding, but the law firm wants 39% of the award if successful. I am also considering selling the mineral rights on my property. I have been offered about $4000.00 to sell my rights.
I just wonder if others have been in this situation, and what thoughts others have regarding this issue. I just don't know what direction to take.
Thank You for your input!
Frank, in your position I would not retain anyone. By yourself with 0.19 acres, I doubt there is a firm that would take your case on contingency. You might possibly join a class action suit if you hang on to the minerals and if there is a class action suit.
In a situation not totally dissimilar I was selling my home (in Johnson county) and the buyer wanted the mineral rights and was willing to pay for them, since Chesapeake was the operator, I let the minerals go with the house and I believe that I gained more in the sale than I would have in 20 years of royalty. The peace of mind and the lack of aggravation of having to deal with Chesapeake is priceless. The offer sounds reasonably good, in the absence of precise information in your particular pool. $ 4,000 for 0.19 acres would be more than $20,000 per acre. Of course if the offer is $4,000 per acre, it would be close to $800 for your 0.19. I know about the monster wells drilled in the city of Burleson behind the Walmart and my wells would have to be on that scale for me to want to hang on to 0.19 acre knowing you are going to be charged figuratively out of existence by Chesapeake with no cost effective means to fight back. Most wells in the Barnett shale and Johnson county are not of that quality.
$20,000 per acre is a good price for that size interest.
I agree. The offer sounds good, I'd be surprised if the firm wants to take the case, and 39% is within the realm of "market rate" for a contingency case.
Wade Caldwell said:
$20,000 per acre is a good price for that size interest.
This IS one of the monster wells you mentioned. The pad site is right next to Wal-Mart. If we were dealing with anyone else besides Chesapeake I wouldn’t’ even consider selling the rights. I have been contacted by McDonald Law Firm, and they have sent me a link to a website where I can sign a contract to retain their services. When I read that they want 39% if successful, I backed off.
Frank, if the law firm wins, it should be more than you are getting now. I keep remembering that Dairy farmer up in Pennsylvania with 200 acres, 4 wells and getting $0.10 checks each month. To Chesapeake, you are no different than him except Chesapeake's lawyers would cost more than they could expect to make off your less than 2/10ths of an acre.
You might need to review your lease contract & addendum if you haven't already, because most include statements that the oil company will be deducting usual costs before paying the royalty (types of costs should be listed in your contract), meaning Chesapeake is probably within their rights to do so. I'm pretty certain the large reduction in your royalty payments after an initial period of time would more likely be the result of a surprising typical decrease in production per well, 80-90% reduction over the first 12 months according to someone on another forum, although there is some variation to how wide open different companies leave their pump valves. Sometimes there are good reasons to sell rights, such as when someone won't live long enough to receive all the potential royalty income. $4,000 may seem like a lot, but that only means someone must have been doing some research and believes he or she can make a larger amount from the royalty income.