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Oil/Gas/Subordination Agreement


Hi Marsha,

I ran across another answer you'd given someone in regard to a request for a subordination agreement from Chesapeake.  It was very helpful, but I have a few more questions please.  I have a gas lease with Chesapeake in Tarrant County, TX.  I have been receiving tax bills that led me to contact Chesapeake, who wasn't sending me the royalty checks.  A division order cleared that up, but there was still a large check they had not sent me, so I contacted them again and found out that the second producing well royalties had been put into trust, because that pipe is within 350 feet of my property line and they are either requiring a subordination order or because I have re-financed my home, they are now requesting the entire re-finance packet of documents!  I told them that is a ridiculous request and a privacy issue.  They can not seem to tell me what specific document it is that they need.  I would be happy to send a copy of that, but refuse to send the entire 2 inch stack of papers.  I believe the deed of trust would be what that want.  It has the legal property description, our names as owners, signatures and lienholder information.  As with other people, I was told that I would be responsible for any filing fees.  After reading one of your answers, I understand that it is 100% Chesapeake's interest of protection and responsibility for any fees.  If I have to take this further and threaten termination of the lease, what will that do exactly?  Also, you had mentioned in that answer to invoke the "Texas statutory interest rate".  What is this statute exactly?  I am really hoping the deed of trust will satisfy them and make this easy.  Do you know which re-finance documents they would specifically need?  Thank you so much for your time to answer my questions.



A Subordination Agreement normally is requested by a division order analyst to "subordinate" a lease to a mortgage, and then usually because a title opinion recommends that one be obtained.  A mortgage company signs the subordination agreement if one is needed. IF the oil & gas lease covering your land was signed after you refinanced your house, or IF your loan terms require any income from the property to be paid to the bank (and not to you) to help pay off the loan, then a subordination agreement is usually required by a title opinion.

Since they are asking you to provide documents to them, I'm taking that to mean they are willing to prepare the Subordination Agreement for your mortgage company to sign.

Most likely, the information they need in order to prepare the Subordination Agreement is (1) name and address of your mortgage company, (2) the effective date of the re-financing of your home, and (3) legal description of the property refinanced.  Yes, they should already have that information because a copy was obtained by them from the courthouse and it was turned over to the title attorney who wrote this requirement, but loan agreements are not filed into public records, only a "financing statement" so the attorney is requiring this as a precaution.  And Chesapeake is a huge company, so if you require them to go find what they already have, your payment will be delayed for who knows how much longer.

What you can do right now is to contact your mortgage company by phone to find out verbally if there is a possibility that your loan agreement requires any oil company to pay your royalties to them instead of to you.  THAT is the reason Chesapeake is withholding your money.  There is a bona fide question of who they are required legally to pay it to: you or your mortgage company.

After you call your mortgage company, and if they tell you, "oh, no, we never do that--it would mess up the amortization schedules on our loans" (the most common answer) get the full name of the person telling you that, AND the address where you can send correspondence to that person directly.  Then I would suggest that you find one document in your stack that provides those three pieces of information above without divulging any other private information you would not like for them to have.  That should suffice for Chesapeake to match up your document to the title requirement and use it.  Send it along with a letter to Chesapeake (attention of the person who is requiring this), by certified mail return receipt requested.  The letter should state that you have contacted your lender (and give his/her name and phone number), and that the terms of your loan do not require subordination, and request that they prepare a Subordination Agreement using the information in the document enclosed, and forward it to your lender to the attention of the person with whom you spoke.  That should expedite getting the agreement signed and returned by your mortgage company.

Please feel free to submit any follow up, especially if you want to let me know the progress.


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Marsha Breazeale, M.Ed., CDOA, CPLTA


All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.


Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration

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