Chesapeake Energy slashing royalty checks of about 75 percent of Barnett Shale leaseholders

Approximately 20,000 royalty owners who have Barnett Shale natural gas leases with Chesapeake Energy likely will see their royalty checks slashed by roughly 25 percent as a result of the company deducting expenses associated with post-production costs such as gas gathering, compression and transportation.

That means a monthly royalty check that would have been $100 could now be cut to $75.

The percentage and dollar amount of the decreases in royalty checks will vary month to month based on the level of natural gas prices, how high post-production costs are and the varying volumes of production from wells.

Affected royalty owners were notified of the new company policy in recent letters. The changes took effect with July royalty checks that were based on May production, according to Julie Wilson, Chesapeake vice president for urban development and the top executive in its Fort Worth regional office.

Henry Hood, senior vice president and general counsel for Oklahoma City-based Chesapeake, said the post-production costs that will be deducted generally run anywhere from 70 cents to $1 per 1,000 cubic feet of gas produced. Natural gas prices recently have been in the general range of $4 per 1,000 cubic feet.

With the current level of gas prices, royalty checks will be “about 25 percent lower,” Hood said.

Chesapeake is the No. 2 producer in the natural gas-rich Barnett Shale, which underlies more than 20 North Texas counties.

Wilson said about 75 percent of Barnett Shale royalty owners with Chesapeake leases were sent the letters advising them that the assessment of post-production costs subjects them to reductions in their royalty checks.

The approximately 25 percent of royalty owners who won’t see their monthly checks affected are those who have lease provisions precluding assessments for the post-production costs, Hood said.

--Jack Z. Smith

Comments

[bugger]

I hate to say it but just another way to rip off the royalty owners by charging fees that should just be part of the gas companies business. Maybe the land owners should charge the gas companies a fee for traveling across their property every day to collect salt water. Make it a tollroad. Kind of like the airlines charging a luggage fee when luggage is just part of traveling.

[Joe Neugebauer, SR]

I was one of those who received their letter. The BIG problem I have here is, I have a letter in my personal files from Chesapeake date April 2011 stating that these EXACT costs are included as deducts in the gross price reported on royalty checks.
SO, they are going to deduct it AGAIN?
NOT WITHOUT A FIGHT......FROM ME!

[Glenda Ramsey]

Why should royalty owners be held liable for costs incurred by Chesapeake when they decided to hook up with the French oil company, Total? Since this basically changes our leases, why did Chesapeake not at least give us the courtesy of a "vote" in this matter? How do royalty owners benefit from this deal? All we get out of it is a significant reduction in our royalty checks. What does Chesapeake gain from this deal? My guess is a substantial gain in their profits.

[Glenda Ramsey]

Did we royalty owners get to vote on the business deal that Chesapeake struck with the French oil company, Total? This apparently increased some of their charges from Total; hence, their rationale for dumping this new charge onto royalty owners. We realize a significant reduction in our royalty checks as a result of their decision to enter this deal with Total. Since this action basically changes our leases, shouldn't we at least have been given the courtesy of a vote on this major decision? Chesapeake gained from this deal; royalty owners were "used."

[roger sommerfield]

Chesapeake was involved in payback of 377 mil to royalty owners in Carolina, and also Kentucky about 230 mil I'm told.any body how to check them out?