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Chesapeake Energy Settles $52.5 Million In Royalty Lawsuits

Chesapeake Energy is making a sincere effort to put its troubles in its Barnett Shale property behind it. It has now settled hundreds of lawsuits that accuse it of cheating thousands of property owners out of millions of dollars in natural gas royalties.

Chesapeake Energy Settles $52.5 Million In Royalty Lawsuits

Biggest settlement for Chesapeake

For Chesapeake, this $52.5 million settlement covering more than 400 lawsuits or 13,000 clients is the biggest. Fort Worth’s McDonald Law Firm and the Circelli, Walter & Young law firm filed these lawsuits. They were primarily filed in Tarrant and Johnson counties in Texas.

Chesapeake is required to pay $29.4 million, and its partner in the Barnett Shale property, Total E&P USA Inc., will pay $13.1 million in cash under the terms of the deal it reached with the two law firms. For the remaining amount of $10 million, the energy firm will be required to issue a promissory note payable in three years.

Chesapeake confirmed that it reached a settlement with the city of Fort Worth over its royalty lawsuit. The Fort Worth City Council will have a meeting on Tuesday. The settlement agreement is on the agenda, but the details of the out-of-court deal are not included in it, and Chesapeake will not disclose them either.

In March, the city entered into a settlement over a royalty lawsuit with Total E&P for $6 million.

Approval from clients required

In a joint statement, Chesapeake and the law firms said their clients will get statements explaining the deal and will be given time to ask questions. Attorney George Parker Young issued a statement, according to which it took three weeks of good faith meditation led by a former federal judge for the settlement to reach finalization.

A spokesman for Chesapeake in Oklahoma City, Gordon Pennoyer, said, “We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners.”

The Fort Worth law firms need to get written approval from 90% of their clients by July 11. The language in each landowner’s lease will determine the amount to be paid to each plaintiff, which will vary widely. The joint statement said that the settlement covers 13,000 individuals, but a large majority of them have small-acreage leases that allowed post-production deductions, unlike many of the other royalty underpayment lawsuits.

In pre-market trading today, Chesapeake shares were in the green. Year to date, the stock is down almost 17%, while in the last year, it is down almost 76%.