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At the beginning of the fourth quarter of 2015, the price of crude oil fell below $50 a barrel. Natural gas prices were similarly low. At the same time, the price per share of Chesapeake Energy Corporation (“Chesapeake Energy”), a natural gas and oil exploration and production company based in Oklahoma City, was approximately $8, a share price decline of over 70% for the year. Chesapeake Energy is currently embroiled in litigation brought by thousands of mineral estate owners/lessors regarding, among other issues, alleged underpayment of royalties. If the mineral estate owners/lessors prevail, Chesapeake Energy may be required to pay plaintiffs more than $1 billion.

The Chesapeake Energy royalty litigation is a prime example of how an extended period of low oil and gas prices may lead to increased litigation commenced by landowners/lessors. Distressed and bankrupt companies are the prime targets of such litigation.

This article discusses the oil and gas royalty in general; the pending Chesapeake Energy litigation; and reported royalty disputes in bankruptcy.

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Camisha is the Founder and Managing Member of Simmons Legal. She is dedicated to assisting parties in protecting their interests in corporate restructuring, creditors’ rights, real estate transactions, other business transactions, and litigation matters.

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