I have been in Oil business for years, but I can't figure how Chesapeake figures their payments.
They have a lease on my property in Arlington, TX and put a H well under my property 2 years ago. When I leased, I marked out all the deduction like transportation, etc. and was suppose to get 25% of gross.
But, when I get my check it has 9 different payment decimal. So I called and they tell me that the foreign investor's have decided to sell their own gas, etc. So, that is why the deminal is different. Then they tell me it has something to do with price. When I ask why, because they list the price for that day and I should get my % of the gas sold at that day's price and the same demical , they can't tell me except that it is the way they figure it. Also, they go back 2 years to take things away from my check. I find it hard to believe it takes 2 years to correct a mistake as I have worked in the accountant field and we had to balance each day, not each year.
I have several oil companies that I get checks from each month and no one figures it this way.
Has anyone had this problem with Chespeake and have you figured it out? Or does anyone know how this is figured?
Geez, I don't have a clue. Please let us know if you figure things out.
We went through that with Devon. They would add in items, and then subtract them because the previous owner did not charge us for compression, transportation and a bunch of other miscellaneous things. Worse, when they deducted those charges, they always rounded up in their favor.
My feeling is that it is best not to deal with Devon or Chesapeake.
Robert V. Gill
Robert,
My lease states they can't take anything out for compression, transportation, etc. And sometimes they do have to add and subtract things, but that doesn't change the demical payment. That is what I can't figure out. Sure wish someone could tell me.
Virginia,
Sounds like your dealing with a 'sneaky snake'.
"My feeling is that it is best not to deal with Devon or Chesapeake." I agree with Robert.
Clint Liles
Virginia, our leases were crafted by some of the best oil and gas lawyers in Texas. We thought we were protected, but it looks like we weren't. They still deduct those charges. You cannot argue with them, all I get back is "the law allows us to do that." It is like talking to a marshmellow.
Read this before you sign a lease. http://www.oilandgaslawyerblog.com/postproduction-costs/
Again, it is my feeling that it is best to avoid doing business with companies that indulge in this dodgy business practice.
Robert Gill
Robert,
Thank you so much for this information. I have never seen this before and I have been in the oil business for many years. I just thought oil companies did dirty things. Presently I don't have anything to lease, but I will watch for this next time. Now I understand why they can give a person 27% of nothing. This works like the Wind companies method.
Again, Thanks.
Robert V. Gill said:
Virginia, our leases were crafted by some of the best oil and gas lawyers in Texas. We thought we were protected, but it looks like we weren't. They still deduct those charges. You cannot argue with them, all I get back is "the law allows us to do that." It is like talking to a marshmellow.
Read this before you sign a lease. http://www.oilandgaslawyerblog.com/postproduction-costs/
Again, it is my feeling that it is best to avoid doing business with companies that indulge in this dodgy business practice.
Robert Gill
Virginia, our original leases were with Marsh, but were sold seven or eight times to other operators. We were never quite sure who we were doing business with; we were passed around like an old maid at a barn dance.
Now, we are with Devon. Life is like a box of chocolates, you never know what you are getting.
Robert Gill
Robert,
I am lucky that Chesapeake only has our lot in town which is just a little less than an Acre. So, I'm not hurting to bad, but we did lease to Chesapeake after they sent an invitation to our HOA for a lovely dinner and a signing meeting. We didn't lease that night, but most of our neighbors did, some never leased. We did get a great bonus and 27%, but I never thought about how they could get out of that. That is the way the Wind co. do their leases. When I ask what was gross, they just laughed, one guy even told me he guess I had figured that one out. What crooks we have to deal with todays. I just thought oil business was bad from what my family told me about the 30.
Mr. Pickens was going to put a wind farm on our family's ranch, but the market collapsed in 2008 and he folded it up. I saw him on television, and he said that we would have to see $6 natural gas before a wind farm would be economical.
We received two offers for wind farm leases after that. We read the contracts carefully, and then declined their offers. There were so many potential problems in the contracts. It appeared to me that they were basically just interested in federal subsidies.
There are a lot of flim flam artist out there.
Robert Gill
Robert,
First, most if not all are foreign owned companies. Foreign companies don't write their contracts the same as we do.
Second, no company needs 40 paper contract with 2000 loop holes to put a wind turbine on your land.
I know Mr. Pickens was for wind till he got the pipeline in from his wells in west TX. Not sure the wind turbine are so important to him now that the government pulled the money.
They also took the investor big time.
I had 3 companies that wanted to put wind farm on my land and I never read a good lease that they had.
We all need to watch what the oil companies are doing now with drilling pads. Some of these contracts are like a snake in the grass. So people, read, read and understand what you are signing or they will have your land.
The people involved in one of those wind farm companies had real impressive credentials, until it dawned on me that if they actually did what they said they did, they would be about sixty years old, not 29.
The name of one company was very similar to a reputable company that develops wind farms in Wyoming and Idaho, but not the same company
I trusted Mr. Pickens based upon the recommendations of my cousins. Their ranches are neighbors with his Mesa View ranch.
When it comes to wind farms, we have a lot of time to think about it. That wind is not going to stop blowing.
Robert Gill
Since we are on the subject of how we can get took, figure this one out. I just got this off another oil site.
Oil coming out of a well is measured in 42 gallon barrels. That is the old US barrel volumetric unit. However when oil leaves the oil fields in trucks, it is packaged in 55 gallon drums (English imperial barrel volumetric unit).
Suppose your well outputs 1,000 barrels of oil per day. That's 42,000 gallons of oil. The truck (or train rather) leaving the gate has 764 barrels of oil in it. Still you just sold 1,000 barrels.
This is because the barrel used to measure oil production (42 gal) and the barrel used to transport oil (55 gal) are different.
Then we can add the temperature in the pipeline to get taken even more.
Now we know how to be taken by oil companies. Wonder why they are getting rich?
Chesapeake has a very bad reputation of having a "sharp" pencil....The best hope is that a class action succeeds in breaking them entirely. SEECO lost a huge case years ago over much the same issues when the "Take or Pay" issue was the hot one. It nearly broke the company. Nevertheless, it didn't break them of sucking eggs because they tacted on that post-production malarky on everything and fight to the courthouse steps.
Well, not all of them are getting rich. It looks like McClendon is trying real hard to sell Chesapeake to the Chinese.
I believe that the BOE (barrel of oil equivelent) is 42 gallons. The stuff coming off of our place is mostly gas. We had some oil wells, but those were plugged and abandoned in the 1980's when the price of oil sank.
Hopefully, the place will be reworked soon. The price of gas is now so low, it is more to our advantage to leave it in the ground until the price improves.
Robert Gill
The standard for a class action law suit is pretty high now. That suit that was filed in the Oklahoma courts was dismissed due to a lack of "communality." The court felt that since all of the plaintiffs had different contracts with different details, there was not grounds for class action.
Robert Gill
believe that the BOE (barrel of oil equivelent) is 42 gallons
BOE by that I mean Barrels of OIl Equivalent. On a BTU (British Thermal Units) basis a bbl. (42 gal. US) of oil = about 8 - 10 thousand Cu. ft. of natural gas. So the multiple most commonly used now is 8 or 12. Mostly 12 because the actual price ratio is much higher, historically much higher. Natural gas tended to trend with oil when we did not import so much oil.
That means $92 a bbl oil รท 12 = $7.67/MCF ...the price gas SHOULD be. Obviously is is less than half that. I agree than natural gas in the ground is probably best left there for the meantime.
What really hurts you is a new well. New wells produce up to 50% of their total reserves in the first 18 months or so. If you are paid low prices then, the remaining gas price is a moot point. You've already lost a huge chunk of value. PS - if you had old oil wells, then the prospect is high that you will see a wave of horizontal drilling under you in the future. I hope any lease you have includes clauses that released all zones that are not producing.