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Hey guys,


My camp in Bradford county has recently been contacted by a landman from chesapeake. He wants our current drilling unit to be increased from 640 acres to 1280 acres. We receive royalties on only 10 of our 126 acres but this new unit will include the rest of our acreage to be producing royalties. He made it sound as if we would become a "hole in the donut" that they would just go around if we do not sign a new division order. Have any of you guys come into this situation, and if so what did you do? I'm thinking we should receive something out of this as I'm sure they are only doing this to benefit themselves.
 

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There are a lot of positives and negatives to going to a larger unit. I do not see how they can make you a doughnut if you are currently leased with them. Sounds like they are trying to stiff arm you into doing as they want. Be careful of Chesapeake and their landsmen, they do not have a good reputation in Bradford county right now. The best advise I have ever gotten about our properties is to never sign or agree to anything without giving it to your attorney to review. Most of the time the addendum they want you to sign only or mainly benefits the gas company. A good attorney will not charge you too much to review and make the agreement more in your favor. Make them put it in writing so you can hold them to it. Any questions please feel free to PM me and I would be happy to give you my phone number or email. I was born and raised in Bradford County, still live there and own businesses there. Good luck.
 

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I agree with the above, get a good lawyer before you sign anything. What you pay him will likely be a drop in the bucket compared to what you gain with his knowledge or lose by not consulting one.

You can bet Chesapeake has a team of lawyers advising them on every move they make...
 

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manfromshunk said:
There are a lot of positives and negatives to going to a larger unit. I do not see how they can make you a doughnut if you are currently leased with them. Sounds like they are trying to stiff arm you into doing as they want. Be careful of Chesapeake and their landsmen, they do not have a good reputation in Bradford county right now. The best advise I have ever gotten about our properties is to never sign or agree to anything without giving it to your attorney to review. Most of the time the addendum they want you to sign only or mainly benefits the gas company. A good attorney will not charge you too much to review and make the agreement more in your favor. Make them put it in writing so you can hold them to it. Any questions please feel free to PM me and I would be happy to give you my phone number or email. I was born and raised in Bradford County, still live there and own businesses there. Good luck.
Born and still live in Bradford County as well, and I agree 100% with manfromshunk
 

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Not just an attorney, one that specializes in the gas industry. Many a landowner hired a lawyer, but the gas lawyers have decades of specialized experience and every word is there for them.
Yes, they can doughnut hole you from a royalty perspective. They can work to establish the unit in a configuration that works around you. The 1280 acre units allow them to HBP more acres with less actual development. Allows them to work inexpensively to their schedule.
You should be aware of what your neighbors are being asked to do. If they all agree you have limited leverage. If you all disagree then there isn't much they can do. You need to act as a group and respond accordingly.
Also, do you have a pugh clause?
 

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Basically a Pugh clause requires a certain portion of your land to be under a production unit before the whole parcel can be declared held by production.

In other words if you have one acre in a declared unit out of 150 acre tract; the whole 150 acres is held by production because of that one acre, even though it will not receive any royalties, nor can it be re- leased. A Pugh clause prevents this to some extent...
 

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What's a Pugh clause?
Learn something every day. I thought a Pugh Clause was upon review of your contract after signing, you realize how many things you SHOULD have had in the contract, and your reaction is...... PEWWWWWWWWWW !!!
At least that was my experience.
 

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One bad thing about the bigger units. Lets say your in a 640 acre unit and getting royalitys. Then the gas comp wants to make it a 1280 unit, they do this so they hold more land without having to drill the next well a half mile away, that would have held the additional land. Obviously good for them as it saves them the cost and holds the land until they are ready to drill the next well.
When they do drill the next well. they can then re-arrange the unit again, and put the additional 640 acres over in the new unit, making your unit a 640 unit again.
Sounds simple, but keep in mind, you are sharing your royalty's with a additional 640 acres until they drill the next well, at which time those 640 get put on a new well.
It actually cost you 50% of your royalty for that period of time, just to benefit the gas company.
So it truly depends on your situation, if it is a benefit, or a loss to you.
 

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I used lawyer Warren Trainor when Talisman sent a list of amendments they wanted me to sign. He is very knowledgeable with gas/oil contracts. look him up, his office is in Philly but can do business via email/phone calls also.
 
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