Can anyone tell me what this means? It is on ND Oil and Gas website, on the hearing docket.
*Application of Continental Resources, Inc. for an order pursuant to NDAC
§ 43-02-03-88.1 pooling all interests for wells drilled on the overlapping
spacing unit described as Sections 13, 24, 25 and 36, T.161N., R.96W.,
Upland-Bakken Pool, Divide County, ND, as provided by NDCC § 38-08-
08 but not reallocating production for wells producing on other spacing
units and such other relief as is appropriate.
Rockhills, it means they are going to make a 2560 acre spacing out of two 1280 acre spacings. The decimal interest and royalty for the existing wells will be unchanged, but all new XXL horizontal wells will be on the 2560 acre spacing. Basically a mini field. Of course, the overlarge 1280 spacings were already micro fields because they were far larger than necessary and larger than one well could effectively drain. A drill spacing should literally be the space that one well could be reasonably expected to drain. Everything else is just land grab. In case you are wondering, to my knowledge an operator has never been denied in such a petition in the last 5 years or more. I hope this helps.
okay so if I have production on the one well on 1280 on sec 25/36 will also get the production from the other wells in sec. 13/24. All mineral acres will be divided on all wells in the 2560?
For new wells drilled after the two 1280's were combined into a 2560 acre spacing, yes.
Rockhills,
Mr Kennedy is usually correct but in this case, you should read and understand the application language that pertains to measurement and payment of production revenue. This could be more than a "land grab" it could be a diversion of production revenue that will be fair to Continental but may be considered unfair to other lessees. Compare the pooling application language rights to the pooling rights in your lease and focus on the measurement for payment of production revenue. The major working interests owners will make sure they are treated fairly but the lessors are on their own.
Pooling the Bakken by zone is probably a good idea for the mineral owners if it is done on an acreage only basis. As time goes on, the operators will become more efficient at completing these expensive wells and one would not want to be limited to a poorly completed first well and miss out on recovery of mineral values in a pool from more efficiently completed wells. The acreage distribution concept is not always a good one. Vertical wells into a sandstone reservoir pool for oil or gas may demand a distribution calculation that includes sand thickness above water table and formation pressure applied to acreage on a weighted basis. (I doubt you will find that in the leases you signed)
If other operator/lessees are noticed in the application, you will have some protection of fairness to the mineral owner. If you went non-consent on a specific well bore, you better take a look at your position as a working interest owner in the proposed pool. Keep in mind that these early Bakken development pooling orders will provide some presidents for future pooling orders. (Remember the 1280 drilling unit hearings? Now it is a norm.) Pooling for development is highly profitable to operators. It is what they live for. It is not childs play in this business and never has been.
Not to conflict with Mr. Hutchinson in any way, just to clarify, the 2560 spacing is far from the end of pooling, the operator could request to downspace in the future to 40-80-160 acre spacings if they use/recomplete the verticle part of a depleted Bakken long lateral well for a short lateral or verticle completion.
I agree with Gary that anything is possible when it comes to royalty distribution between sections, in my opinion though, North Dakota long ago went for convenience and as close as they could get to equality of outcome, on an acre per acre basis, whether merited or not, for all mineral owners in a legal drill spacing. That is why by law any acre is the equal of any other acre in a legal spacing whether each acre has a well on it or not or whether it's being drained or not. Once the state embarked on this path of being unfair to all mineral owners, fair, or more than fair to the operators with allowing them to hold small fields, and not to mention that the state wanted the huge amount of taxes that can exceed the amount of your royalty that you get to keep from your drilled lease. I don't believe that they will change their unfair to all mineral owner stance, because the state has too much invested in it and I would expect literal murder to be done if they tried to change it now.
Pugh clause language in North Dakota [ and possibly anywhere ] should not contain formation language, which is too vague and subject to interpretation, especially since the Oil and Gas regulators can at will declare that from the top of the Bakken to the lowest bench of the Three Forks are a common source of supply, never minding that there may be a impermeable layer of Dolomite between them. You can't depend on vague language for pugh/depth severance clauses. I would use the perforations, highest and lowest, and give them xxx feet above and below because the perforations locations are determinable fact, reported in the well logs, and if the operator wants to hold a formation hundreds of feet lower he had better drill and produce it or expect to have to pay you again for rights to that formation later on.
Gary is absolutely correct about pooling, which I am not expert on but I know enough to at least see which direction trouble is coming from. You want to be included in the pool, it's how they decide who gets paid and how much. It's about the only action I think you would likely prevail in against the operator in North Dakota because the legislature handed the mineral owners over to the oil companies but tried to set things up so nobody could be excluded. If an operator wanted to exclude you through pooling in ND, I think he would have to have a very compelling reason, whether you signed a lease or not, as long as you didn't sign a lease with a pooling clause that gives the operator carte blanche.
Do pay close attention to the pooling clause, something as simple as giving the operator the right to pool during the primary term of the lease, without giving them the recurring right to pool however they please, without permission or hindrance decades into the future could be vital to receiving your share of production. If the operator wants to assign some formation that is not in production to some other operator but you would have to ratify pooling, you will be a player in that future deal, instead of standing on the sideline and wathching your operator collect a fat check for your minerals he never developed.
Does the pooling of interest in these dockets give any leading indication that a company is pursuing actual drilling in the near future?