445.883 acre lease has 3 vertical wells producing & paying royalties for years.
In 2012 they drill a horizontal well that shows to all be inside the producing vertical well lease. RRC records show that from 10/2012 through 04/2013 the horizontal well has produced 1,404,145 MCF of gas and 13,530 barrels of oil. Oil Co has not pad any royalties from the horizontal well, but seem to be up to date on the vertical wells.
Today, they tell me the lawyers are trying to get the mineral percentages correct before they start paying on the horizontal well.
Makes me wonder if their lawyers are trying to run up an expense bill to use up the well royalties?
If you leased, the legal expenses are almost certainly the operators expenses and not yours. Drilling and completing a horizontal well is expensive and I think that frequently the operator wants to hold on to the money a little longer, it's a loan that they can get automatically without even having to ask. Better yet, most people probably do not ask for interest on late royalty payments because many don't know that they can. I believe that the interest, even if you do get it for a well drilled in Texas would be less than say, Oklahoma or North Dakota so the interest may not be worth arguing over. I suppose you could send them your own division order. I just can't think of a cost effective motivator you could use at the present. Possibly someone with more experience in your area could help in that direction.
To answer the original question, I would sadly say yes, it has become normal.
Neal,
the operator may have added some acreage outside yours to the horizontal unit. They have good reasons to do so. The RRC Completion report should establish the total unit and/or portions of the original vertical units may have changed hands or be under dispute. In either case (and other reasons I can think of) a new Division Order Title Opinion may be required. I'd give the operator a break for now but since the operator knows what your share of the new unit will be (For that there is apparently no dispute) you should demand timely payment while they shake out the rest. If you haven't been paid in six months after the completion is filed, a good oil and gas attorney would know how to write a demand letter that should insure the payment of interest if in fact that is the law or regulation. That should keep the operator from dragging its feet as far as you are concerned.
If the operator suggests changing from an acreage base for payment to a linear foot of frac penetration, get some help before agreeing. (It is happening in Texas) It may seem fair but let geometric analysis help you determine what is best for you.
Thanks Gary & rw for the good info.
Couple weeks ago, we wrote a certified letter to oil co, asking royalty status on this well.
We also found another owner in this lease has already written a demand letter.
Yesterday, we got a phone call from oil co, saying they should have things straightened out in time to make end of August payments & they would be paying interest.
I think, maybe I should sit tight for a little while longer.
Neal
Dear Neal,
Your situation may be one of the now very classic situations where a horizontal well is drilled through existing units. Imagine 2 640 acre units and the well bore goes through both.
The lease forms at the time were not drafted to handle anything of the sort. So, what has been developed more recently than not is a "Production Sharing Agreement" that defines the sharing of the royalties based on percentages from first take point to terminus.
Let us know if this is the situation. I have only been involved in 3, so each one is so unique to me.
Hello Buddy,
Our plat shows our 445.883 acre lease with the horizontal well bore near the south end of the lease, passing inside the lease boundaries, and terminating near the north end of the lease. So, in my mind, it is all inside our existing lease.
Thanks,
Neal
Buddy Cotten said:
Dear Neal,
Your situation may be one of the now very classic situations where a horizontal well is drilled through existing units. Imagine 2 640 acre units and the well bore goes through both.
The lease forms at the time were not drafted to handle anything of the sort. So, what has been developed more recently than not is a "Production Sharing Agreement" that defines the sharing of the royalties based on percentages from first take point to terminus.
Let us know if this is the situation. I have only been involved in 3, so each one is so unique to me.
Thanks,
Buddy Cotten
Mineral Manager