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Chesapeake Inks Second Deal With Ohio Landowners' Group

November 7, 2011
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Hundreds of landowners with the nonprofit Associated Landowners of the Ohio Valley (ALOV) have agreed to sign lease agreements with Chesapeake Energy Corp.

It is the second time this year that ALOV members and Oklahoma City-based Chesapeake have reached an agreement over leasing rights in eastern Ohio's coveted Marcellus and Utica shale region (see Shale Daily, May 11).

"They're a good company to deal with," ALOV board member and spokesman Bob Rea told NGI's Shale Daily on Wednesday. "They're approaching the development here in Ohio very seriously, and they have taken the negotiations with ALOV very seriously. They really work through with the execution [of their plans]."

Rea said approximately 900 landowners with about 25,000 acres -- located in Belmont, Carroll, Columbiana, Harrison, Jefferson and Mahoning counties -- have agreed to sign five-year leases made custom for them by Chesapeake. The company will have the option to extend the leases for another three years at a pre-determined price.

Rea said he could not disclose the financial terms of the deal, citing a confidentiality agreement with Chesapeake, but when asked if the terms were similar to those from the May deal -- $2,250 per acre in leasing bonuses, plus 17.5% in royalties -- Rea said, "They sure didn't go backwards. It's gone up."

Rea also declined to reveal how many companies ultimately bid on the leases, but he did say, "There were other bidders, and they had a good scramble. These acres were sought after." The Youngstown Vindicator said there were five other bidders besides Chesapeake but did not identify them.

The latest Chesapeake deal brings ALOV's total leased acreage to more than 100,000 acres. Rea said the group has between 3,000 and 3,500 individual landowner members.

Rex Energy Corp. announced in August that it had reached a deal with about 450 landowners from another nonprofit group, Standing United Really Excels (SURE), to lease about 11,000 net acres in Carroll County, OH, for $40 million (see Shale Daily, Sept. 12). Under the Rex deal, SURE landowners would receive an average price of $3,600 per acre, plus 20% royalties with no deductions.

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