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…
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As the old story goes–if you are getting paid royalties, you are getting cheated–it's just a matter of how much. And then, sometimes they just steal the minerals (without a lease) and don't pay any royalties at all!! Welcome to Tx.
Tim Ruggiero says
Wait a minute…are you sure this is what's going on? You mean to tell me that LIARS, CHEATS, THIEVES and other dirty rotten scoundrels with the ethics of Flower Mound Mayor……would cheat royalty owners? This is a joke, right? I can't imagine why GREED is the driving factor here…….
I'm thinking there a few more additions to my 'dictionary'.
The fact that you all think that E&P companies hedging their gas has ANYTHING AT ALL to do with cheating royalty owners is hilarious. It really is.
At least as funny as at-war communities, cancer, decreased property values, eminent domain, bad air, bad water, waste water sites, pipelines, unoderized gas, eyesores, noise, land which can't be developed, decreased taxable value on said land to municipalities…..etc, etc. Ad nauseam…or maybe the better term would be nausea. Hedge this.
CHK should follow the lead of those kids living on Carter Ave. and just change their name to CHEAT-sapeake. It would help everyone involved–and just plain honest (might have to explain and draw pictures to help CTK with this word and concept, though).
Reviewing my latest Chesapeake production statement, I can only believe one thing from this statement; Chesapeake figures me a fool, paying me only 0.049Mcf.
That is correct; less than a nickel per thousand.
Woa is me.
Well, how many acres do you have? You have to take that number and divide it, usually by 640 acres to come up with your interest, then take that number times your royalty…besides, what good are the minerals to you in the ground? You are literally getting something for doing nothing, so what is to complain about?
PO'd in Austin says
YEP, CHK has done some clever legal maneuvering to cheat us out of what IS rightfully ours. I was told that they are deducting .80-1.00 per mcf for production costs. Worse, we are not “entitled” to see the full itemized statement as a non-participating royalty owner; so, you just have to take the statement as is and accept it….
I think in years to come (sadly, it will probably take that long) someone will get a clue and find a way to make this right for all of us who ARE being cheated. OH, I forgot to mention the ongoing reverse and re-booking of revenue….WOW! You should have heard CHK’s explanation for THAT! Basically, they said they can change the volume and amounts as they see fit. Does anyone really think that because they are doing business with their own company (CEMI) that they would give each other a bad deal? Of course not! They are using their fuzzy math to help each other, hide the truth, cheat us and someday, if anything is left there, we “might” be what is ours and past due. Sadly, our courts in Texas are influenced as are our legislators. HMMMM….none of them must be royalty owners, huh?