We have a lease from 1983 with Anadarko and have 2400 acres,(4 sections in a square). This is more than enough to set several wells on.
Anadarko just sent new leases, that they want to pool. I don't feel like I need to pool, however, could this be a time to renegotate our lease and move up to a 1/4 from 3/16. I have heard that if I don;t sign, they can still pool with out my signature and take me to court over it. Do they have that much power. I normally would not not have a problem with pooling, but it seem to me that I am dilluting my share.
What is the consensus of everyone on pooling when you have enough area not to pool?
Another item is that they only want to pool two of my sections and not include the other two.
Thanks for any ideas.
David
David, if your acreage is in Oklahoma you either lease or pool. Forced pooling is used to round up the people who have not leased. I think the only way you could end up in court is if you sued them or you own the surface and refuse to let them drill. They don't need a court order to pool you and if you let it get that far you will get the least favorable terms. If you wait to be pooled you will be given several options some of which may be as good or better than leasing, just don't let the company decide for you. You might feel safer locking in a lease now rather than waiting to see if they pool. Pooling normally occurs when an operator is planning to drill in the near future. Most definitely go for the 1/4. Historically 1/4 with a bonus has been rare but recently more leases are offering 1/4 and a signing bonus. Even if you don't get a bonus 1/4 is a better deal in the long run providing you end up with a good producing well(s). But with that much acreage a bonus would be some substantial money. In Oklahoma the typical section is 640 acres and in some areas we are seeing as many as 10 wells in a section.
P.S that was a layman's opinion, there are some professionals on this forum who can give you a more educated answer.
You have not included sufficient information to really answer this question. What state and county are your minerals in and what is going on in the area? You refer to 1983 lease and so I assume that there are existing wells keeping it in force. Is there one lease on all the acreage or separate leases on the various sections? Do you (and relatives) own 100% of the minerals? Have you received a Amendment of Oil & Gas Lease or a Declaration of Pooled Unit? There should be a cover letter explaining Anadarko's intention. For example, it is to unitize existing shallow wells for a waterflood to increase volumes and extend the productive life of the wells? Or is it to pool with a neighboring property or properties to drill one or more horizontal wells? How much acreage will be pooled? You should ask Anadarko about plans for your other 2 sections. You may be able to negotiate an increased royalty on existing or new wells or you may be able to improve lease terms, such as receiving royalties cost-free. I do not know where your concern arises about Anadarko suing you, but that would depend on state law. If some landman is threatening you to get a signature, ask him for his statutory or case law basis for this threat.
I did not think about how important the location is. My property is in Loving County in Texas. In the permean basin. We have a gas well on each section that is tying up the lease. Collectively we own 100% of the minerals, but it is split into undivided interests of which I own 5% mineral and 10% surface.
Anadarko just completed our first oil well and it is flowing about 400bbl daily. It is all on our land and they originally planned to add 5 more across the northern border.
Now they want to change and pool.
What we have received is an Amendment of Oil and Gas lease that requires a signature.
The land man is telling us that we should just sign and collect the checks and get rich. That we are asking too many questions. He does not want to talk to us about renogitating any thing other than the 3/16. They are wanting to drill on the middle of one of the sections and go both north and south. North being into my other section and south into the adjouning section. We havent been sued or anything close to that, we just want to get the most we can and still work with Anadarko. I just don't know all the benefits of pooling, but I just don't see why they cannot just stay on our land.
You can never ask too many questions as that is the only way you can make an informed decision. No guarantee that you will get rich by signing a lease amendment so gather all the information that you can. Your negotiations will get the best result if your entire family presents a united front and acts together. There is definitely strength in 100% minerals. If none of you has a lot of oil and gas leasing experience, you should also consider jointly hiring a lawyer to give you more ideas and to review the legal implications of the lease language in the amendment.
Do not limit your negotiations to only the royalty rate, but include everything that you want. You can amend anything and everything in the lease to make it an updated form. Has the landman made a specific offer for your royalty rate to increase to 1/4 or is he waiting for you to ask and then negotiate you down to a lower rate, say 1/5?
From your answer, it appears that there is only one lease that covers all 4 sections, rather than a separate lease for each section. This is an important distinction because if there is only one lease, then any amendment will apply to all four sections. Let's call them Sections 1, 2, 3 & 4. You need to look at the exact wording. If you agree to allow the lessee general pooling power under your lease, it will not only apply to Section 1 with the adjacent section, but allow the lessee to pool any and all of the minerals. Or does the language state that it only applies to one-half of your Section 1 and the adjacent section? Is the pooling limited to specific depth and formation that is target for new wells and only for oil? Is there a ceiling on the number of acres which can be pooled? On the other hand, from Anadarko's view, it may have 3 sections in a row under lease and finds it to be more economic to drill two horizontal wells, each over 1 & 1/2 sections (1.5 mile lateral), than 3 one-mile wells. This will not hurt you financially in the long run as you will be paid on your percentage of the acreage in each unit.
Right now our landman is saying he will not listen to any offer other than what we have already agreed to back in 1983. That is 3/16. We do have a lease on each section. pooling is only offered on 2 of the 4 sections. Our landman really does not work with us very well or trys to talk to us about negotating. All we know to do is just hold out and wait until he calls us . If we don' sign, can they still pool?
The landman represents Anadarko in this negotiation. You can tell him that you are not interested unless there is some financial benefit to you, such as an increased royalty or cost-free royalties, and to come back when they are serious. Or tell him that you do not want a well drilled at these low oil prices and to come back when prices go back up. It would be best if your family works in concert.
Your leases are all HBP and so unless the production fails on any section, the leases will continue in effect and you will not have an opportunity to negotiate new leases.
With the drop in oil prices, many companies are scaling back their drilling programs. If you agree to amend your leases to allow pooling, then this change will be permanent. There is no time limit for the operator to drill a pooled well and there is no guarantee that any new wells will be drilled. Anadarko is making long-term plans. At the point where Anadarko wants to drill really soon, you will be more likely to get something.
Pooling without legal consent has become a hot topic in the industry. These are called "production allocation wells." You can read about this on John McFarland's Oil & Gas Lawyer Blog. McFarland is with Graves Dougherty Hearon & Moody in Austin. He posts a lot of good articles.