Held by Production - Martin County

Hello! I have mineral rights in Martin County, N/2 and SE/4 Section 18, Block 36 T2N. Currently, we have 7 vertical wells drilled by Pioneer. Very low production, as they are 10 ish years old. A family friend long-time in oil and gas said we should be pursuing legal avenues with Pioneer to drill horizontal since so much activity is all around us. Any advice? I thought we should just be patient, but friend says we have rights. We get offers daily to sell and don’t want to, but would love to see horizontal activity. Thank you for any advice!

There are quite a few horizontals and permitted locations to your west, but they don’t belong to Pioneer. I’m not sure what legal remedies your friend is talking about. So long as your wells are producing under your lease I’m not sure how you could force their hand to drill horizontally.

I would not sell minerals until I had them appraised, especially with the price of oil on the rise. Generally speaking, when you receive offers to buy it is because people are putting together plays in that area. Pioneer is doing a lot of expanding in the Permian and just bought another company.

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I agree with Lana. I’m not sure what avenues your friend is referring to. The only option you have is to look over your lease with a fine-toothed comb, but the options you may have will be entirely dependent on how your individual lease was written. You’d be looking for any item that could allow your acreage, or some of your acreage, to be leased with another operator. This is where you you have some leverage since companies hate to lose acreage (but even then it would probably just get you more lease bonuses rather than pressuring a billion dollar oil company to drill a several million dollar well).

Examples of possible items in your lease that could help you:

  • The amount of acreage held by a well. After the primary term, sometimes only the acreage determined by field rules is held by a well. Horizontal wells usually hold all or 1/2 a section, but verticals sometimes only hold 40 acres.
  • A continuous development clause (if they don’t keep developing the acreage, the undeveloped acreage is not held and only the acreage drilled is held, somewhat like above)
  • A pugh clause, which would keep the verticals from holding certain non-producing depths
  • Any other depth clause
  • The amount of royalty needed to maintain producing status. Any production, or economic production? Economic for whom? What happens when the lease does not produce in paying quantities? This likely isn’t an option if you’re getting a monthly royalty check.

Thank you both for your insight! I have read a lot of your posts and can tell you both are quite knowledgeable. I know these leases are complex and I didn’t want to pursue if there is no legal basis. I realize we can’t listen to everyone who offers us advice! Thank you both for your input!