Drilling activity

[Stanley_D_Sprinkel]

Ms. Barnes and Mr. Covey provided excellent advice to me in 2019 regarding Castlerock Resources’ offer to buy my 12.5 acres in Section 12-9N-11W, Caddo County. They have sent a new offer, double their last ($3500 per acre).

Peachridge is apparently drilling multi-well units on 12 and 13 as I write. We recently signed a division order with Peachridge that reflects 640 pooling but allows Section 12 owners only a 19.7% allocation (per OCC order no. 716491). Essentially that pays us twenty cents on the dollar compared to folks in Section 13. But Peachridge has been granted emergency authority to drill a second well in Section 12 (order no. 725639). They are required to report back to the Commission before going into production on the new well.

I am hoping that, pending successful drilling and new information, the Commission will adjust the Unit Allocation to be more favorable to us. Is this a reasonable assumption?

I’m not willing to sell my mineral rights unless it looks like I might be stuck with the 19.7% allocation. I suspect Castlerock is well aware of this situation.

Any advice?

[TODD_M_Baker]

The Allocation is based on the percentage of wellbore perforations in your Section as per the entire wellbore. So only 19.7% of the first wellbore had perforations in your Section. The other 80.3% of the perforations in the wellbore were in Section 13. The new multi-unit well will have a different allocation, based again on the percentage of wellbore perforations as to the whole, for each Section. The original allocation for the first well of 19.7% will not change.

[Stanley_D_Sprinkel]

Thank you Mr. Baker for explaining how the allocation process works. I have no idea how the allocation finally may work after the new drilling, but at least there is hope of another producing gas well. I’m thinking that if Castlrock is willing to pay a hefty sum for the mineral rights I’ll just assume the rights are a good bet and keep them for myself.