NEEPO

TITAN TERMINATES BC-MRC AGREEMENT

Thursday, October 23

Titan Operating has informed BC-MRC that it has terminated all leasing efforts with coalition members. Titan informed BC-MRC that it felt it necessary to terminate its agreement due to attempted acceptances by BC-MRC members of the previous lease offer which was recently suspended, and has notified BC-MRC that it considers such acceptances ineffective.

Titan has indicated that it will honor all executed lease agreements for which a bank draft has already been issued, including those signed Saturday, October 18 at a scheduled signing session in Euless.

Titan has indicated to BC-MRC that further leasing efforts may resume after a management meeting and a meeting with its financial partner(s) scheduled for next week. Titan expects to present a revised proposal to BC-MRC, the terms of which are currently unknown. Such proposal is expected to include a different bonus amount and possibly other changes from the existing or previous offer.

BC-MRC is extremely disappointed and strongly disagrees with this unilateral decision by Titan. It plans to consider all options at its disposal to seek to enforce the agreement which Titan has now repudiated, as should all individual members.

BC-MRC will continue to function as a coalition going forward. Titan has signed leases with approximately 15% of BC-MRC members, but needs far more acreage within BC-MRC boundaries to form effective drilling units. Therefore, BC-MRC retains significant economic power, and can also function as a source of political power if necessary.

We urge all of our members to stay united in what has developed into an extremely unfortunate situation for all of us. The Barnett Shale is not going away, our acreage still has potentially significant value and we should not feel pressured to accept something less than what has already been offered and accepted just because of claims that competitive conditions have subsequently changed.

Further information will be provided here when is becomes available.

NEEPO Update – 13 Oct 2008

What A Difference A Month Makes!

Just over a month ago, your negotiating team held an all-NEEPO meeting to inform our coalition members about the progress being made to secure a lease agreement with one of several drillers. Hopes were high as the Barnett Shale drew new competition from entrants like Vantage Energy (SW Ft. Worth) and Titan Operating (CAMRA; NAN; etc.).  At the end of September we saw the BC-MRC (Bedford Colleyville-Mineral Rights Coalition), just west of NEEPO, reach an outstanding arrangement with Titan! Then came September 29th; day 1 of a 10 day free fall in the financial world, the worst such period in the history of the market. News in the Star-Telegram has recently pointed out that many drillers have cut back or stopped exploration because of falling gas prices and a general uneasiness about the world economy and availability of advanced loans! So now we ask, “Where does that leave NEEPO?”

There is no simple answer. I have been in discussion with our negotiators as we continue to see what options, if any, are available to our coalition members. Although many of the drillers like XTO and Chesapeake appear to have no plans to curtail their  production, there are reports that they will be reducing their leasing activities outside, and possible inside, the Barnett Shale.  In part, this is a function of their having possibly over-extended their inventories of leased acreage and realizing that it will be a daunting task to drill it all before lease expirations.  Vantage and Titan may do likewise, although they have given no public indication of that. With that said, let me address some questions that are on the mind of many folks.

1. Q: Why didn’t we just make our deal like 360NW and BC-MRC?

A: We cannot “force” a driller into an agreement. They are the “buyer,” and to date no company has made an offer to NEEPO as a whole. The best we can do is to be prepared by being organized and unified, which we have done quite well! In fact, we are so well organized, we hired an attorney almost six weeks ago and initiated talks with several drillers to obtain a lease!

2. Q: NEEPO started organizing months before BC-MRC, how come they got a deal and we didn’t?

A:  The simplest reason was the number of potential drill sites. Along with being almost 4 times the size of NEEPO, BC-MRC has at least seven (7) potential  drill sites which can reach inside their footprint, including into Bedford, which is no easy task.  NEEPO has very limited open property that would qualify as a drill site. That’s not to say NEEPO is of no value to a driller, it just means that we have to excel in the other factors of importance.  It is still possible that one or more of these “potential drill sites” surrounding NEEPO may arise from this present activity and that would be to our advantage. 

3. Q: So what’s our next step? Where do we go from here?

A:  Patience is still the operative word. As you’ve seen on TV, the Barnett Shale is not going away and the millions of dollars worth of natural gas under the homes in NEEPO is not going away either! Our day will come, but no doubt the present market is not in our favor for a quick deal. Remember, the driller signs a lease that gives them three years to begin drilling! Who knows what the market will look like next month, or thereafter, but one or more of them will want our lease.

4. Q: What about the offers made by Cimarron to folks east of North Main St?  Should we just take that offer now?

A:  We understand why people might be tempted to try to accept a lease offer that may have looked attractive to them.  Remember, you can sign with any company at any time as you see fit. The MOI with NEEPO is just that, a memorandum of “intent” with no legally binding power. It may be likely that the companies who had offers outstanding will reduce or eliminate their offers in the current environment until things clear up a bit.  There is probably no better example of how surprised companies were with the severity of this recent decline than the fact that, Chesapeake’s chairman sold all his holdings in the company last week due to forced margin calls.    

To repeat, the recent turmoil in the markets has created much uncertainty about the direction of many things, including oil and gas prices and the terms companies may be offering for leases.  Additionally, please let me make this point very clear: NEEPO has not in any way stalled or delayed our negotiations. We approached the drillers in anticipation of striking a deal over four weeks ago and we will continue to position NEEPO to the best of our ability to take advantage of the best deal available in the market. But we have to caution everyone that, at least for now, things may have changed just within the past week – all of which was beyond our control. However, the long term resource beneath our land has not changed.

Having been out of the country for three weeks, I take personal responsibility for the delay in providing this update. It will be my goal to provide information on a more regular basis in the days ahead. Please know that your negotiating team is doing all that is possible to provide as good a deal as possible as soon as possible! 

Thanks for your patience and understanding,

Dale Turns

Director - NEEPO