Chesapeake Energy Corp. has agreed to settle claims with thousands of landowners in Oklahoma that it failed to pay interest on overdue royalty payments.
The U.S. District Court for the Western District of Oklahoma granted preliminary approval to a $6.1 million settlement fund to resolve the claims against subsidiaries Chesapeake Operating LLC and Chesapeake Energy Marketing LLC. Royalty owner CEOG LLC was named class representative.
The court said the settlement class consists of royalty owners that had interest in oil and gas wells in the state during the claim period from November 2009 to March 2018. CEOG filed the lawsuit in a state court in 2014, and it was transferred to federal court two years later.
The complaint alleged that the Chesapeake subsidiaries repeatedly delayed making royalty payments and had failed to pay interest, in violation of the state’s Production Revenue Standards Act, which provides for interest on overdue royalties.
Chesapeake did not admit guilt in the settlement. A final hearing on the agreement is scheduled for August 25.
The latest deal comes after the company reported an $8.3 billion net loss in 1Q2020 that resulted from a steep impairment of oil and gas properties. The company also acknowledged that Chapter 11 bankruptcy is a distinct possibility given its high debt load.
While the company has whittled down its asset base in recent years, Chesapeake still holds properties in Oklahoma, along with the Eagle Ford, Haynesville and Marcellus shales, and the Powder River Basin.
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