Platts, an INDUSTRY publication, is full of interesting information about Chesapeake and royalty shenanigans.
Mediation talks in October failed so a contract violation lawsuit is in the works having to do with DFW Airport royalty payments. The players are CHK, DFW Airport, PAZ Energy, LLC and the cities of Dallas and Fort Worth support DFW in its claims.
Hedging is one way that Chesapeake and other companies cheat royalty owners out of money. In September, some royalty owners were paid $1.56-$2.54, yet look at what Chesapeake received in the past 2 months:
From Platts, January 8, 2010:
Over the past two months, CHESAPEAKE ENERGY has more than doubled the volume of gas production hedged in 2010, the company revealed Monday. Documents released by the Oklahoma City gas producer while announcing its $2.25 billion joint venture deal with French supermajor Total show the company increasing its gas and oil hedges from 22% of projected 2010 productin to 52% of this year’s volumes at a price of $8.16/Mcf equivalent.
Underpaying royalty owners is quite common and industry has many tricks to cheat royalty owners. Sometimes they get caught…
CHEVRON will pay more than $45 million to settle charges that it, Texaco and Unocal, two companies it now owns, underpaid roaylties for 20 years on natural gas they produced from federal and Indian lands.
Well, that’s nothing. Cross Timbers Oil Comany, now XTO, and many others did the same thing and I can tell you how if anyone is interested. Back then it was called Downstream Trading. Besides private royalty owners, parties involved were: BLM, Indian lands, State School lands…