I have recently received notice that QEP Energy is asking to unitize 2 sections in Mckenzie county- 149-95 and 150-95. They have sent me a very legal looking packet and asking me to approve it and send them back my notarized signature saying so by the end of October. I can't say I understand it. It seems to say they will be able to extract more oil by not having as many boundaries to deal with, and that each owner will have a percentage of the total unit. I hate to ask any lawyer because my royalties I have received do not justify paying one. If the majority of owners are for this maybe it doesn't matter what my family and I choose. I am hoping to get some feedback as to whether it is a good idea to sign such an agreement.
In this case, I think it is a good idea to unitize. It enables QEP to drill extra wells because they do not have to leave a strip of undrained reservoir at each section boundary. (The picture in the brochure did not explain it very well.) They can re-space the wells and put in more holes leading to better efficiency. Since one operator is running the whole field, they can capitalize on efficiencies of scale, common geologic and engineering knowledge, drilling and frac crews, etc. Often, unitization will allow you to get payments long after your particular well may have declined. In my opinion it is a good way to manage resources, so signed my piece and sent it in last week. For your heirs sake, it would be a good idea to download the CD and print copies of the pages that pertain to your tracts, so that it will be easy to identify them later. Print the map, highlight your acres and record which tract number or name goes with them and what percentage you own. 30 years from now, it may be hard to find out what J-2 or some code means. You don't need to print all 500 pages, but keep the CD with your mineral records. My grandfather bought into some units in OK decades ago, kept excellent records and several generations later, we are still reaping the benefits. I am a geologist as well, worked mostly offshore where just about everything is unitized, so I am generally a fan. Other folks may have their own opinion.
We own interests in the Northern part of the proposed section and we do not necessarily agree with the unitization. The reason being that much of our acreage is drilled and producing already. Thus, our acreage is derisked and paying us now. A unitization will normalize our interests across the field, reducing our payments and pushing out the time we would get paid. Thus, we take a hit on present value. Also, the additional recovery around the lease lines can be accomplished by applying for DSU's that cross multiple section lines and doesn't have to be done on a 25,000 acre basis. We will be objecting at the hearing.