Complex question I know, but this is the 2nd time since the new year where I own 40+ acres in a section in Oklahoma and get hit with a multi-unit horizontal well and my section’s allocated values are less than 25%. I can’t even sell my minerals at market value if I tried due to the allocation values. I still hold my bar card, but I am 78, retired, never read law updates and would love some fresh input as it’s starting to really tick me off and wouldn’t mind taking on one more court case to satisfy the itch and maybe help out others if there’s a path.
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OK calculates the splits by net mineral acres/actual spacing acres x royalty x % perforations in your section. If you want to share the well, I can show you what is going on in the section. Most sections are spaced at 640, so if you have room for more wells in your section, then you probably will get interest from buyers. It is slightly different than the way Texas does it.
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I understand all of that and I’m quite familiar with the equations and spacings. The most recent well proposal that has really ticked me off is a 3-section unit. I own 40 mineral acres in the NE/4 and its allocation value is only 24.75%. Meaning, out of my 40 acres, it’s as if I only own 9.9 acres, so the remaining acres are useless for their lifetime. Those minerals will be held by production for years and the probability of a company coming in to drill the other 74.25% of the mineral acres is zero. I’m trying to think of ways to avoid this problem but it seems there isn’t one that I can think of, which is why I’m asking the board if they have any ideas?
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If they are drilling multi unit horizontals in OK, then it is highly likely that they will drill more infill wells if the first well is good and the economics work. Your acreage does not have to have the well bore actually cross it since the multiunits are usually spaced at 640 acres. Your 40 acres belong to the whole spacing unit, so more wells will also benefit you even if drilled on the other side of the section. If you want to share the section, township and range, I can illustrate.
24.75% for a 640 ac. unit doesn’t sound too bad when compared to the 33.33% for 1,280 ac. (effectively 16.67% for a 640 ac. unit) that are being approved in Caddo County. One wellbore holding 3,840 acres. Absurd.
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I understand what you and Bob are saying. But it is possible that your acreage doesn’t have any gas underneath it. Therefore, the multi-unit is like a mutual fund. You may only own a small part in the unit. It is similar to being a small fish in a large pond of natural gas vs. a large fish in a small pond.
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This is why you make separate agreements besides the basic lease agreement. This is exactly why. Details available. Be careful; they try to buffalo you and you end with devalued mineral assets.
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