Chesapeake Exploration

hide the ballThe result was like others we’ve seen. Lessors Win. These wells are in Johnson and Tarrant County, Texas. Lessee Chesapeake Exploration sells to affiliate Chesapeake Marketing through affiliate-operator Chesapeake Operating. Plaintiffs sued Exploration and Operating for underpayments of royalty and overrides.

The Takeways

  • This decision demonstrates the reason for special royalty clauses addressing sales

Co-author Travis Booher

Chesapeake Exploration, L.L.C. v. Hyder is another hair-splitting Texas decision about “cost-free royalties”

The Facts

The Hyder family executed a lease covering 1,037 acres. Chesapeake drilled 22 wells on the leased premises. The Hyders believed their lease provided for a “cost free” royalty; that is, no post-production deductions. Chesapeake deducted post-production