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Monday, July 16, 2012

Chesapeake Employs Strong Tactics Against Ohio Landowners

From the Wall Street Journal:
Chesapeake Energy Corp. CHK +0.89% is pushing Ohio landowners to accept revised lease contracts that would help the cash-strapped driller save money while holding on to its prized oil and gas fields.
The company's actions, documented in scores of property and court records, aren't the first time that Chesapeake has tried to change the terms of lease deals, or walked away from them. Since 2008, more than 100 lawsuits have been filed across the country by landowners, who claim the company breached contracts. In some cases, settlements have been reached, in other cases the litigation continues.
Chesapeake, the country's second-largest natural-gas producer, has spent about $2 billion to lease the mineral rights to more than a million acres—about 5% of Ohio's land mass—in a bet that Ohio's Utica Shale fields will become a major oil producer. The leases contain deadlines by which the company must drill wells costing millions of dollars apiece or give up rights to the property.The company doesn't dispute that it has sought to renegotiate leases in Ohio. In cases in other states where Chesapeake has walked away from deals, it contends that it had the contractual right to do so.
Facing a cash crunch and mounting pressure from activist shareholders to trim spending, Chesapeake is seeking contract changes that would allow it to drill fewer wells while keeping the leases. It is generally required to drill at least one well on a specified group of properties known as a unit; it is trying to bundle leases into much bigger units, which will allow it to drill fewer wells but retain rights to more acreage.
Chesapeake's agents tell landowners that they will be shut out of the oil and gas boom if they don't agree to the changes, according to landowners interviewed by The Wall Street Journal, which reviewed more than 100 property records in Ohio filed over the past year detailing the changes.The bigger units mean that each landowner's stake of any oil or gas produced is smaller, but they could potentially share in production from more wells.
Another excerpt:
"They've brought some industry to an area that's definitely needed it," said Byron Shankel, a farmer in Carroll County, southeast of Akron.
Others, though, are rankled.
"It kind of makes you mad," said Karen Hampton, who owns about 10 acres in Carroll County and refused to be part of a larger unit. She is one of eight landowners who last month sued Chesapeake to cancel their leases, alleging the company's agents, known as land men, warned them their property would become a "hole on the map" if they didn't agree to change their leases.
Read the rest of the article here.

Have you had an agent or agents threaten to shut you out of the picture if you won't sign an amended lease?  Post your story in the comments.

Here is some exclusive footage of Chesapeake preparing one of their agents to call on a landowner whose lease they'd like to amend.



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