I’m just getting my feet wet in this industry as a recent landowner (by inheritance) in Webb Co. It appears our gas wells are producing very small amounts from the Olmos layer now compared to a couple years ago. There is no requirement in our lease for our operator to drill in the Eagle Ford layer. We have an older lease which has the evergreen or Habendum clause. We are told the wells are HBP (held by production). Has anyone else dealt with this challenge?
I own a decent amount of minerals in Webb County under the same scenario. Lease is HBP as to all depths but only producing from the shallow Olmos zone. Lewis is the operator for most of my wells. Nothing to do but wait for newer EF wells, unfortunately.
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Yes, our operator is Lewis as well. What do you mean by wait for newer EF wells? Do you mean to wait until Lewis decides it’s profitable to drill on our property? They have drilled all around the south side of our property and those wells are very productive in EF. I think we may have a case for an Implied Covenant to Prevent Drainage and/or Implied Covenant to Develop. I’m not sure how to find & download the production data. I think I need to do some homework before reaching out to an Oil & Gas attorney. Have you gone down that path and hit roadblocks, or have you not investigated production data surrounding your property?
Many mineral owners are stuck with very old leases which are HBP by shallow well(s) because the lease did not have a depth severance provision. As long as the adjacent wells are compliant with RRC field rules, the burden will be on you to prove drainage by hiring experts and likely ending up in litigation. Same for any requirement to develop as you will have the burden of proving that it will be profitable in light of drilling and operating costs and the anticipated oil and gas prices and revenues. Also, the shallow operator may not own the deep rights under the lease(s). The shallow wells keep the lease in effect, but the shallow operator may not have the right to the original lessee forward to date to determine who holds the deep rights, as there could be one or multiple companies for the varying depths.
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