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E- Newsletters & Emails>
Mineral/Gas Rights Lease Update & Info:
July 23, 2008
As you are aware, as a coalition of 1100 members with 14 neighborhoods, we participated in a final closed bid offer with Chesapeake (CHK) and XTO and WCC announced our endorsement of CHK. Two other coalitions endorsed CHK that same week. Our signing events started yesterday.
XTO, who claimed not to be outbid throughput this process (but were) is now blanketing the city with a $1500/per acre higher signing bonus with their STANDARD lease. As a committee, we had no allegiance to any company but wanted to attain the best lease and terms. After the months and hours invested, we provided this FINAL drop dead deadline and asked both companies to present their best and final bid. CHK was overwhelmingly the winner.
Ultimately, our role is done and you will need to make an informed decision at your own free will. To assist you, I am providing our attorney's comparison of significant issues in the leases submitted by Chesapeake and XTO. The following is a breakdown of the substantive differences for purposes of explaining in layman's terms: As you review, you will need to understand and assess the whole picture (versus getting caught up in just the signing bonus)
On a side note, based on commitment that was invested by all the volunteers, it is disheartening that XTO has now come in with offer that most people who have not been intricately involved would not understand. It devalues the process and is a typical tactic by the losing company. It's the nature of the beast. Neighbors are being pitted against each other now and essentially starting the process over. Individually you will not be able to obtain better provisions with either company. You will also not have the benefit of the protections that were negotiated by the WCC with the CHK lease if you choose otherwise.
Good luck and best regards.
1. Primary Term/Option (years and bonus)
Chesapeake: $22,500 per acre for 3 years; $18,000 for 2 year option
XTO: $24,000 per acre for 3 years $19,000 for 2 year option *
Grant:
Ches: to the Barnett Shale *
XTO: everything below 1,000 feet *
2. Royalty
XTO: "Market value" on this gas processed in facilities not owned by lessee.
Ches.: "Gross proceeds" paid on gas. Pays to middle of the street *
3. Interest on royalties
Ches.: Maximum lawful rate *
XTO: 12%
4. Split stream gas sales
XTO: If lessee splits the working interest, lessee remains liable for all royalty payments to lessor. *
Ches.: N/A
5. Shut-in royalty
Ches.: Must have a well capable of production "in paying quantities." *
XTO: A well drilled and awaiting a frac job is also considered a well capable of commercial production.
6. Continuous Development
Ches.: Includes a density provision of 40 acres or what a reasonably prudent operator would drill. *
XTO: N/A
7. Pooling
Ches.: Lessee must have written permission from lessor before shrinkage of a unit.
XTO: N/A
8. Offset wells
Ches.: 467 feet offset well is conclusively draining a well. *
XTO: 330 feet is conclusively draining a well.
9. Surface Operations
Ches.: 600 feet minimum from land to the drillsite. *
XTO: 500 feet
10. Assignments
Ches.: Full liability of lessee if assigns an interest in the lease. *
XTO: Divisible liability
11. Force Majeure
Ches.: 18 months total time allowed to be down. *
XTO: 36 months total time allowed.
12. Indemnity
Ches.: Expanded version *
XTO: Somewhat condensed
13. Depth Severance
Ches.: yes *
XTO: no
14. Environmental constraints
Ches.: 1000 feet obligation triggers all provisions *
XTO: 600 feet
15. Road usage
Ches.: No local street usage *
XTO: N/A
16. Temporary Dwellings
Ches.: No temporary housing on drillsite tracts. *
XTO: N/A
17. Mud Pits
XTO: Not within 600 feet of the lease land. *
Ches.: N/A
Email questions & concerns to:
Customer Service Toll Free Phone: 1-866-473-2573
Customer Service Email: service@RealManage.com
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