Nearly 200 landowners in Douglas and Elbert counties signed mineral leases with Chesapeake Energy expecting thousands of dollars in signing bonuses only to have the company walk away without paying a cent.
After holding the leases for as much as 11 months, Oklahoma City-based Chesapeake filed forms releasing its claim to 55 properties in Douglas County and 133 in Elbert County, according to assessor’s office records.
The move comes as Chesapeake is facing a financing gap and, according to top executives, a waning interest in the Niobrara formation in Colorado.
The , which stretches from El Paso County north into Wyoming, set off Oil company offering leases.d.
There also are about, where oil and gas companies were buying up leases in the Collingwood shale, said William Schlecte, an attorney representing some of the landowners.
“The bonuses just soared — as much as $1,600 an acre — and then Chesapeake looked for excuses not to pay,” Schlecte said.
Chesapeake used “a whole range” of excuses, Schlecte said, but the main one was the failure to get an appropriate “subordination” on a landowner’s mortgage.
A subordination allows the oil and gas to be removed with the proceeds going to the driller and property owner rather than the mortgage company.
In its order of payment, which property owners must sign, Chesapeake cites a lack of subordination as a reason to break the lease. The document was provided to The Denver Post by the company.
“Our documents are clear and unambiguous,” said Chesapeake’s Dill, who declined to comment on the Texas and Michigan suits.
Tom Tripp, another Elbert County resident and Realtor, did get a mortgage subordination, but the surface rights were too limited.
“So that was their out on that deal,” Tripp said.
Some property owners have received their bonuses. Mark Adams’ neighbor Tom Koncilja signed a similar lease and got a $6,000 bonus.
“I was the only one of the 12 homes in our subdivision that got it,” Koncilja said.
In Douglas County, James Dudley signed a lease in May on his 8-acre lot in Homestead Hills that would have given him a nearly 18 percent royalty and a $5,600 signing bonus.
The bonus was supposed to be paid by the end of August.
“We didn’t hear anything until October and then were told they couldn’t get the subordination,” Dudley said.
Chesapeake is the second- largest U.S. natural-gas producer, behind Exxon Mobil. Natural-gas prices are at a 10-year low and creating financial challenges for the company, said Biju Perincheril, an analyst with financial adviser Jefferies & Co.
The company has an almost $8 billion gap between its planned expenditures and its cash flow in 2012, Perincheril said.
Chesapeake is selling assets to raise cash and idling rigs to cut costs. Still, the company is facing “a sizable gap,” Perincheril said.
At the same time, Chesapeake’s initial exploration in the Colorado Niobrara has not led to a big strike.
Anadarko Petroleum Corp. and Noble Energy Inc. both in the Wattenberg Field, a portion of the large Denver-Julesburg, or DJ, Basin in Adams and Weld counties.
In a February earnings call with analysts, Aubrey McClendon, Chesapeake’s chief executive, said the company’s results in Colorado “have been spotty.”
But the company has hit a Niobrara oil strike in Wyoming’s Powder River Basin.
“With the DJ, I wouldn’t say all is lost if you are outside the Great Wattenberg,” McLendon said. “But we have certainly shifted our focus in the Niobrara play to the Powder River Basin.”
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
