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Update

October 20, 2009
Three Dallas law firms have combined to represent Tarrant County homeowners in actions against gas companies which defaulted upon promises to lease made through respective coalitions. The firms are directly representing individual property owners, not the coalitions. If you are interested, you can visit their web site at www.NTXLL.com.

Additionally, the firms will be conducting a "Know Your Rights" conference at the Fort Worth Convention Center, Exhibit Hall A, 1201 Houston Street, Fort Worth, TX 76102, on Saturday November 7, to provide organizational and legal details. Schedule and program is available here. They also plan informational meetings every Tuesday from 4-7pm at Cordovan Business Park, 5850 West I-20, Suite 240-B, Arlington, Texas 76017.

If you are unable to access any of the above links, you may contact the firms at cmclimon@NTXLeaseLitigation.com or call 866-466-8955

Thursday, March 19, 2009
Since the time of our last communications in the fall, the natural gas market has weakened dramatically, along with the national and world economies. Where natural gas prices at one point last summer reached nearly $14/mcf in the futures markets, they are now below $4/mcf.

Leasing efforts by all companies have essentially ground to a halt in the Barnett Shale except for identified drillsites within areas already leased. Wellhead natural gas prices, which reflect costs of transportation and regional differences when compared to futures prices, are now approximately $2.50/mcf locally, which makes most drilling uneconomic.

We are aware of targeted, small scale offers being made by Caffey (on behalf of Titan) to certain neighborhoods within BC-MRC, generally to those owners who may be included in one or more potential Titan drillsites acquired through their CAMRA leasing -- including one near Hall-Johnson and Pool Roads. These offers are evidently for $5,000 per acre with a 20% royalty and a 5 year term.

No "blanket" offer has been made to BC-MRC, nor have there been any discussions between Titan/Caffey and the coalition. At this point, Caffey is the only company soliciting leases in the area, to our knowledge, and Titan is still the most likely company to begin drilling here due to their existing leasehold position and investment. Such drilling would most likely occur before mid-2011, at which point their existing leases expire.

While we cannot say that the existing offers are not fair in today's market, it is likely the case that they are being made to gauge owners' interest in leasing in today's weak economy, and they are certainly being made in a non-competitive market. By the time the offer is netted down to a 1/4 or 1/2 acre lot and taxes are paid on the bonus, most owners would find that they are essentially leasing for next to nothing, in our opinion. The 5 year proposed term of the new offer obviously would give Titan an extended period in which to evaluate any recovery in gas prices.

In order to get approval for a drillsite, any company must submit a plan for approval to the Texas Railroad Commission, showing the acreage they have leased and propose to include within the unit. If they obtain leases from less than 100% of owners within that unit, they can either exclude those areas from the unit or petition the TRC for an exception, which is the more likely option in any urban drilling scenario. They must then show that they have made "reasonable offers" to owners within the units, and recent decisions have allowed drilling companies to include ("force pool") owners into the unit on terms established by the TRC. So far there has been no specific guidance on what percentage can be unleased, but the most recent case had approximately 10% of owners in that category.

Proposed drilling units and acreage within those is not publicly available until the permit is requested, so there is always a disadvantage to individual owners in negotiating terms or determining at what point, if ever, is a good time to lease. If the natural gas market improves and prices increase, it will still be in the best interests of a drilling company to offer fair terms once drilling must commence, and in theory that means that sometime between now and a drilling date in 2010-2011 might be a better, if not optimum, time to consider leases. Many observers believe that the 50% reduction in rigs currently drilling will lead to renewed tightness in the market by the end of the 2009.

Of course, there is no certainty that leases will be solicited at any time in the future, particularly on a broad scale such as was seen last year. BC-MRC will continue to monitor the market and let members know what is happening, but it is certainly up to each individual to make their own leasing decision in light of their own circumstances and desires.

If you DID sign a lease and deposit your bank draft
Most members who signed leases should have already received the funds from their bank drafts. If you have not, read the instructions below.

If this is your first time visiting this site, read the October 23 news first, and then everything else will make more sense.

The payment of drafts by Caffey Group, Titan's leasing agent, is unaffected by the status of the new offer. Allowing a minimum of 5 business days from the date of deposit by a member for delivery of the draft to Compass Bank (Frost), 30 business days from that date for payment, and another 5 business days for delivery of draft payments back to a member's bank means that most members should have received funds in their accounts by 12/19/2008.

Members who wish to inquire about their payment status should first check with their own bank to obtain a date when the draft was actually sent to Caffey Group's bank. By using the calculation method above, the date of estimated receipt into a member's account can be calculated.

After allowing sufficient time to account for delays in delivery service, the Thanksgiving holiday, etc., members may contact The Caffey Group direct by accessing the Caffey Group web site at www.caffeygroup.com and selecting the "Contact" link followed by the drafts@caffeygroup.com link, or by sending an E-Mail directly to drafts@caffeygroup.com.

Sunday, December 7
As we communicated previously, Titan made a new proposal to BC-MRC recently. This proposal called for the BC-MRC committee to endorse a bonus offer of $7,500 per net mineral acre, with a 25% royalty and a three year term (or alternatively, a $10,000 bonus per net mineral acre, with a 22.5% royalty). The proposal also included several other terms and conditions.

We reviewed Titan's proposal shortly after its receipt, and made several suggestions for items to include that might make it more attractive to at least a portion of our members. Titan declined to incorporate any of these proposed modifications into the proposal. They also stated that the proposal was being made to BC-MRC as a coalition, and would not be made available to BC-MRC members individually unless the committee endorsed the offer.

The BC-MRC committee notified Titan on Friday that it would not endorse the new proposal. The proposal was rejected for the following reasons, among other considerations:

1) It contained significantly reduced financial terms.
a) The lease bonus proposed was fully 70% below the bonus amount specified in the original agreement with Titan.
b) The vast majority of people who have communicated with members of the committee since Titan terminated the original agreement have indicated to us that they would not be willing to consider a new offer that differs so substantially from the financial terms of that agreement.

2) It was highly conditional.
a) Titan would not assure us that all unsigned members would receive the new offer
b) The plan would have allowed Titan to select which homeowners would receive offers, if any, and to decide to suspend or terminate offers at any time.
c) The offer could have resulted in a heavily fragmented acreage position for BC-MRC, thus significantly diminishing its attractiveness in any future negotiations.

3) It might have negatively impacted members' potential legal rights under the original offer.
a) An acceptance of the new offer by BC-MRC could in fact jeopardize an individual's or a group's potential legal options in seeking to enforce the terms of the original offer, if in fact they decide to do so.

4) The proposal reflects adverse market conditions which may not be long term in nature.
a) World economic markets in recent weeks have been volatile and uncertain. Titan's new lease proposal likely reflects those same conditions.
b) Leasing a long term asset based on the short term direction of markets may not be an optimum investment strategy
c) Many of our members have communicated both a willingness and a desire to wait for market improvements on any offer that differs substantially from the original.

Nobody has a crystal ball to tell what the market for oil and gas lease terms in the Barnett Shale will be in the future. At the present time, Titan is the only company active in our area, and they enjoy a monopolistic position with respect to dictating terms and pricing. Competition may return once economic conditions improve, but predictions about when or if that will happen vary widely.

We will continue to monitor the lease market on a regular basis, and stand ready to negotiate with gas companies and solicit new proposals once the market stabilizes. Any member of BC-MRC who feels it is necessary or desirable to sign a lease now certainly has the right to do so, whether with Titan/Caffey or any other company who may be willing to offer a lease. That has always been your right.

If you receive an offer of a lease from any gas company, be advised that it is not endorsed by BC-MRC. We will notify you on the website and through email of any acceptable proposals received, and we will update you with further information and detail about the market, gas companies and prospects for leasing as they come available.

Thanks again for your continued support of the coalition.

Wednesday, November 26
Titan has confirmed to BC-MRC that members who signed leases and were issued drafts on or before Oct. 18 will be paid in accordance with the terms of those drafts. As members may recall, drafts are required to be paid within 30 business days of receipt of the drafts at Frost National Bank's draft processing center. Based on the timing of each member's bank's transmittal of the drafts to Frost, and with the holiday's impact on mail deliveries, we do not expect that credits will begin to show up in members' bank accounts until early December. We will keep you updated as more information becomes available.
Friday, November 14
Reports are coming from various members of the Glade Road Neighborhood Alliance (GRNA represents homeowners west of Hwy 26 off Glade Rd in Colleyville), that XTO/Holland has rejected their signed leases and is bouncing bank drafts. Keep watching the Star Telegram blog because surely this story will create some waves.
Thursday, November 13
We have received a new proposal from Titan outlining several options they might be willing to consider in leasing oil and gas rights from BC-MRC members. This proposal may also be viewed as implying and/or reconfirming Titan's position that it does not plan to proceed with the previous BC-MRC offer and terms.

The leadership group met this morning along with BC-MRC's lease negotiation counsel, Mark Nastri, to discuss the proposal and the alternatives available to BC-MRC and/or its members going forward. We will be requesting more information and clarification from Titan about its position and proposal, and subsequent leadership meetings will likely be necessary before the full range of future options and actions can be identified and communicated to members.

We appreciate the support members have shown for the coalition, and also appreciate your continued patience in an economic environment that continues to be very challenging, volatile and uncertain.

Friday, November 7
Quote for the day from Aubrey McClendon, Chesapeake Chairman: "I really believe that every lease we buy today has an embedded resale value of somewhere between 3 and 10 to 1." October 15 Business Update

(Something to keep in mind when considering why ABC gas company is offering $X for a lease.)

Wednesday, November 5
Twelve members of our Leadership group (including our attorney Mark Nastri) got together tonight. It is encouraging to us that the overwhelming majority of the email messages we receive from our members express solidarity with the coalition. Some of us have been putting in 10 to 12 hour days non-stop since July for the coalition. Many of the leadership did not get a chance to sign leases either. We know how it feels, and we're in this together with all of you. Hang in there.
Monday, November 3
Read the article in the Fort Worth Business Press today about gas leasing and the BC-MRC.

Or, read what Aubrey McClendon, CEO of Chesapeake, had to say about how to make money in his 3rd Quarter Business Update Call.

Saturday, November 1
On Friday, Oct. 31, Titan informed us that while they had concluded a meeting with their financial partner, Riverstone, they have not been able to meet with all of their management team yet. Therefore, they indicated their response to BC-MRC would be forthcoming sometime before Nov. 7. Our position that a binding agreement with them was in place remains unchanged, and we have been willing to give them time to formulate a position and respond to us in the hope that they will come forward to do what they committed to do and/or to continue to work with us. At the same time, we will continue to consider all options which are open to us going forward.
Wednesday, October 29
"It ain't over 'til it's over." - Yogi Berra

Simply stated, the BC-MRC's mission to negotiate the best oil and gas lease for its members is ongoing now and will continue into the future. It is probably more important than ever for BC-MRC members to stand together and present a united front to any group wishing to lease our acreage, and that is what we plan to do.

When we were notified by Titan that they were suspending their efforts to lease BC-MRC members' minerals, our first steps were to notify members that the signing schedules could no longer be relied upon. We also tried to make clear to anyone coming to the website that the information previously provided there might not be an accurate depiction of the current situation. While many members have emailed us wanting to know more about what was going on "behind the scenes", we have been advised that posting such information on a public forum might damage the legal or business position of BC-MRC or its members, so we will err on the side of caution until we know much more than we do now.

First, a recap of the facts is in order. Titan Operating LLC ("Titan") was proceeding under an agreement to enter into oil and gas leases with the members of BC-MRC. Titan had conducted 4 signing sessions, thereby leasing acreage from approximately 1,500 members (out of approximately 10,000 owners within the BC-MRC footprint), representing an estimated 500 acres (out of the approximately 5,000 total acres). Titan informed the BC-MRC negotiating committee on October 19, 2008 that they were suspending lease signing sessions effective immediately, and indicated that they planned to honor all leases for which drafts had been issued prior to that date.

On October 21, 2008, the Colleyville City Council approved an oil and gas lease of 280 acres of City-owned properties to Titan, thereby accepting an offer (of approx. $7 million) previously submitted by Titan. The City-owned properties are widely scattered, do not permit any surface use and do not encompass enough land to form a drilling unit. City Council members were instructed by the City Attorney that they could not consider private transactions such as the BC-MRC deal with Titan in voting whether the lease was in the best interests of the City itself, and that any council member doing so might be subject to criminal sanctions.

On October 22, 2008, Titan announced that they were terminating its agreement with BC-MRC, in large part due to attempts by BC-MRC members to accept lease offers subsequent to the suspension date. Titan indicated that they would be having one or more meetings with their management group and with their financial partner, Riverstone LLC, this week to review their leasing strategy.

On October 28, 2008, Titan informed BC-MRC that the meeting(s) with its management group and its financial partner had been moved back a couple of days and are now scheduled to be held later this week. Although Titan has indicated its desire to continue leasing in our area, there is no assurance that they will agree to do so, or as to what terms they would propose if they did so. Our position remains that the agreement called for them to make leases available to all members on the terms previously disclosed.

BC-MRC continues to review all of its available legal and business options. Also, we are aware that several individual members of the coalition have had discussions with one or more well-respected Dallas/Ft. Worth area law firms about their legal options. It is premature to speculate what the position of Titan will be going forward, or what the position of BC-MRC or any of its members will be in response to that position.

Rest assured, though, that with over 8,000 unsigned members and unleased acreage exceeding 4,000 acres, our mission continues. No drilling permits have yet been filed in Colleyville or Bedford, and the acreage leased within BC-MRC does not give Titan or any other company control of enough acreage to form a drilling unit. Also, we are aware of no drillsite agreements that have been finalized in our footprint.

Titan has invested over $100 million in our area to date, so it has a sizable investment to protect, which would seem to require and benefit from future acreage and cooperation from BC-MRC members. The Barnett Shale oil and gas are not going anywhere, and our acreage does and will have value in the future. Even with all the economic turmoil in world markets, the front month of the natural gas futures price today is almost unchanged from a year ago-- in the $6.85/mmbtu range.

Further updates will occur when we have additional information to report. Any comments can still be addressed to us.

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.

Full text of this, including the Titan announcement is available in PDF format here

Further information will be provided here when is becomes available.

Wednesday, October 22
Read the article about the October 21 Colleyville City Council meeting.
Tuesday, October 21
Read the article about Titan in the Fort Worth Star-Telegram. Here's a quote: "I held on as long as I could. It's a new world," said Mark Schumacher, president of Fort Worth-based Titan, a relatively new player in the Barnett Shale. "We did not rescind or revise our terms. All we did was suspend signings. I want to talk to the neighborhood leadership, and that, hopefully, will come this week."
Sunday, October 19, 2008
Titan Operating today informed BC-MRC that it plans to re-examine its leasing strategy given the recent turmoil in world economic markets. Therefore, effective immediately, all signing sessions previously scheduled by BC-MRC have been suspended.

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.

According to Titan, it plans to suspend leasing on a temporary basis pending an executive management meeting and possible discussions with its financial partner(s). Titan has indicated they will communicate the results of their discussions to BC-MRC at the conclusion of its review process.

More details will be furnished via the BC-MRC website (www.bc-mrc.org) and/or by email as they become available.

[PDF format version]

August 19, 2008
Riverstone Holdings Announces Commitment to Titan Operating LLC