Chesapeake Energy Corporation (NYSE:CHK), which has breached contracts with hundreds of people in oil and gas lease offers, has appealed to New Orleans Court to cancel a $19.7 million order to Peak Energy Corp., a Plano, Texas based lease owner.
A US District Court in Texas ruled last year that Chesapeake had wrongfully abandoned the deal to purchase energy rights held by Peak Energy. However, Chesapeake tells a different story. The natural gas company’s lawyers claim that the offer was non-binding and the deal was incomplete, so they will ask the court today to reverse the judgement.
The second-largest gas producer in USA also wants another order to be canceled. The order asks Chesapeake to pay the difference between the offer price and lease value of the land, which is $12,000 per acre. However, Chesapeake argued that Peak Energy didn’t own the rights to about 70 percent of the 5405 acres of land agreed in the contract.
“Peak cannot enforce a sale and assignment between the parties because, as a matter of law, Peak cannot demonstrate that it performed its obligations,” Chesapeake said in court papers. “In tendering only 1,645 acres, Peak failed to perform under the letter of intent.”
All the mineral rights holders who sued Chesapeake say that the company offered them record high prices, but it walked away from the contract when prices began to decline and the agreement was no longer economically advantageous to it. Peak Energy sued Chesapeake in 2009, stating that Chesapeake offered them $15,000 an acre and asked them to speed up the negotiations. It further added that CEO McClendon was personally involved in the negotiations.
“Because of the falling price of natural gas and tightening credit markets, the agreement between Chesapeake and sellers was no longer economically advantageous for Chesapeake in October 2008,” Clint Schumacher, the lawyer of Peak Energy said. “Rather than suffering the ill-effect of the changing market by fulfilling its contractual obligations to sellers, Chesapeake chose to repudiate the agreement.”
Chesapeake shares have fallen 35 percent since last year due to plummeting natural gas prices and a number of controversies involving CEO Aubry McClendon.