I was looking for insight on calculating my decimal interest of a proposed well that falls within the Big Eddy Unit.
An example of this would be if I owned in 27-20S-31E. In this section there are several wells that have spud. Would my calculation be NRA / Spacing Unit / 8. Is there a Tract or Participation Factor that this would need to be multiplied by since it lies in the Big Eddy Unit.
In Oklahoma I can easily find the Unit Agreement that lists participation factors for each specific tract within the unit. Is there a way to find something similar for New Mexico if needed? I have found an old Plan of Development as well as a more recent Plan of Development using google but did not see anything in regards to a participation factors.
BLM units in SE NM are a mess. They aren’t really a unit per se, more just a license to operate within those borders given to a company if you happen to be friends with LBJ in the 60s (hi Bass bros). Within those borders, as you prove areas to be commercial, they will start get added together piece by piece to form a unit in the normal sense. Which happens to be called a “Participating Area” by the BLM. Unfortunately this happens in steps.
They will originally pay you on a producing area or spacing unit basis, so if for example you own in LC 0070220 in the SW4 of Sec 27….and they are drilling wells that cover the Sw4 of 27 and the S2 of 28 and the S2 of 29 (i.e. 800 gross acres) then your interest will be whatever your ORRI is in SW4 of 27 times 1/5th or your NRA/800 * 1/8th. More or less like you said. Simple and makes sense.
HOWEVER, as they drill up and prove additional areas of BEU productive, they will add that acreage into a PARTICIPATING AREA. By Formation (i.e. BoneSpring, Delaware, Wolfcamp,etc). To be included into a PA XOM will have to submit docs to the BLM saying that they have proved the reservoir is commercial in these new tracts and then that will get added to the existing PA in that formation. At which point, XOM will go back and redistribute ALL REVENUES for all the wells in that formation as if the whole PA was a giant unit.
In theory it should all work out in the long run, but can lead to big positive/negative adjustments in the short term and you are 10000% guaranteed at some point in the future to look at your check and throw up your hands as you will suddenly have 100s of wells on it at some much smaller decimal and a whole boatload of negative and positive revisions. Which is beyond the scope of a normal human being to figure out. At that point, just pour yourself and drink and call it a day.
Sorry currently in the process of getting horribly screwed by Poker Lake unit PAs.
Short term, take your NRA, divide by the dedicated area on the permit. Multiply by 1/8. That is what you will get paid to begin with. It’ll take a few years for the PA thing to happen.