Sometimes, they send a courtesy letter to everyone in the sections to let them know about a new well.
But make sure and check your lease to see if you have a depth clause. If you don’t and there is current production, then you are HBP (held by production). If you do have a depth clause and the current production is shallow, then you may be able to lease again.
On the cost question, it is more of a timing issue. Oil companies think long term, not short term. They are thinking complete life cycle of well, not today’s price (although it is considered). Also, they are thinking price of oil and price of gas. They have predicted price decks that go on for years (bet those changed a good deal over the last couple of months). Based upon the 25-30 year lifetime of these wells, the rate of production and rate of decline, costs to drill, complete and produce , they will decide what Rate Of Return they can stomach and then decide whether or not to drill. I expect that given where they are in the permitting process, time to drill and complete a well, etc, they expect prices to already be going up by the time they are finished. Since they sent out the proposal letter, they have decided they will make money, so are going ahead. Payout just will take a while longer at lower prices than at higher prices.
4N-4W is in the condensate zone of the SCOOP, so that is more stable in price since gas prices have not changed so much recently. The first four years of the well will be the most critical to their payout time frame as about 50% of the well’s production will be recovered during that time. They are more interested in the balance of the mcf/day and the bbls/day. Another factor to consider is the improved drilling and completion techniques. A better (but more expensive) frac job will enable better production for longer, so the payout is worth it. They are actually saving about $3MM by drilling a multi-unit long lateral instead of drilling two single unit wells.
My parents own 80 acres at 13 1N 1W. We have the minerals and are currently leased (5,000ft and deeper) to Continental until April. The lease from Ground to 5,000’ expired on 9/14. 4 wells have been drilled just South of us. One is at 29 1N 1E, (we can see this one from our house), one is a mile East of there and the two others are 2 miles West and 3 miles West of there. All 4 of these have hit and have full production equipment on each site (6 large tanks, gas pipeline, separator, burn off, etc. Has any permit been filed to cover our property?
There are two shallow old well sites (filled with cement now) that were shut down in the late 50’s early 60’s because they were only making 10-12 bbl/day.
M Barnes, Thanks again. The permit in 2012 was for our farm. The landman is a “low budget” operation. He paid the lease for 2 years and damages, but didn’t drill. He poked 4 other shallow holes in 25 and hit a little oil and gas. I think he ran out of money. Been receiving royalty checks for them.
Phil, I replied to your email and M Barnes is right about the permits. Continental was still actively leasing within that Section as recently as late November and just completed an acquisition of interests with that section included which was filed last week. So it appears as though it is still an area of interest and they may be willing to offer you a new lease if and when your lease expires.
Could someone remind me who gets royalty checks? There was a well drilled in section 23, 1N1W, but it had horizontal wells into section 26. My lease is in sec 23 but a little west of this well site. I guess my question is: Is royalty paid in section where well site is or where oil/gas is coming from? Just curious since I have not heard a word. Thanks for any info to help this blonde.
Hi Loretta, that well is the one the hauler said was making 5 tanker trucks of oil per day. It has a gas pipeline run over to the Hennepin area to that big compressor station.