Do you need to be in the proration unit before the well is spudded?

Own 30 acres in Howard county, block 32, T2N. Have turned down lease offers for years, waiting for somebody who intends to drill. Now, out of the blue last week got several hits from landmen wishing to lease for a production unit with a well spudding-in next week, giving me less than a week to consider their offer, consult an attorney, etc.

BTW, the well was just permitted a week ago. Must be some sort of record— maybe they found something out about the location…

The bonus offered is significantly less than I have turned down previously with the standard-excuse that “the front office won’t allow us more”. The implication is that we had better sign the lease before drilling starts or we can’t be included in the pooled unit. Similarly, our property is surrounded by leases and we are being progressively orphaned. So “take it or leave it”.

While the deal appears OK wrt royalties, etc, the penny-pinching bonus and the pressure to sign “right now” trigger alarms. The permitted well is north to south, with our long-skinny property at the terminal south end. In order to legally fit 4 wells on the unit, the first well must go right under our property. However, if we do not sign, this lateral will be significantly truncated. I figure a $7-9 millon well that loses 20%+ of its length at the key terminal end because somebody wants to nickle and dime a bonus payment is not good bidness.

The same company has a good-producing well (rated 1K BPD) the minimum legal distance directly to our south, with several more wells permitted to its east. So they know the oil is there.

My questions are

  1. Is the landman correct that if my property is not included in the production unit before the well is spudded, this cannot be fixed?

  2. Any idea what the going rate for lease acreage is in North-central Howard county in the close presence of producing wells?

You would likely get more informed answers if you post the section and well name. One factor is whether you own 100% of the acres or only a fraction of the acres. If you do not own 100% and other owners are leased, then the operator can still frac, but may need to leave 200 foot frac-free zones at the 2 ends. You will be an unleased mineral owner. If you own 100% and are in the middle, the operator may be able to drill through your minerals and leave it all without fracs. Then you will not be able to participate in the well. Was your name on a notification list at RRC (look at permit documents). As to bonus, again it all depends on whether your lease is essential and what the production expectations are in the immediate area - more specific than the north-central part of an entire county.