Lease offer for horizontal drilling

I have a telephone offer for lease to do horizontal drilling in western KS where we have an existing vertical well. There is no horizontal wells at present, that we know about.

-- The existing well is at 4000 ft. depth. Can there be 2 leases on same land if the new lease offer is to drill to 6000-7000 ft. with horizontal?

-- Are there any landowner considerations for horizontal drilling that are different from vertical drilling? We have had very good land restoration by our existing operator.

-- The lease offer person will not reveal the drilling company name. We are very concerned that it be a company that is operating in the area and not leases that will never be exercised.

-- We have 5 quarters available for lease but will not lease all to one company? Is that the right approach. We know to lease each quarter separately.

Anything else? thanks, Ron

Sounds like to me he is just a broker wanting to release it to a oil company.

You may want to reconsider ( not leasing all to one company.) In North Dakota companies are drilling more than one well from the same pad.

Zoom in on this map. You will see most of the horizontal drilling are two miles long.
Oil Pump rig (24816 bytes)

Are you in Lane County? If you don’t mind me asking which company approached you? My family has some land out in SE Lane and they have received several mail out offers, but haven’t accepted anything.

Sorry I see now they won’t reveal there name. What service company does the landman work for?

Yes, SE Lane county. The lady is working for Capital Land Services. Their lease offer is for any or all land in Lane county or southern Gove county. The offer is $40/acre then $26.67/acre if they extend beyond 3 year lease. Royalty is at 1/6.

John Jameson said:

Are you in Lane County? If you don't mind me asking which company approached you? My family has some land out in SE Lane and they have received several mail out offers, but haven't accepted anything.


Check with the KGS or other regulatory body to see what horizontal APD's (Application for Permit to Drill) have been made in your county and surrounding counties. That will give you some idea of the size and shape of horizontal permit drilling situations contemplated.

Also read your lease to find out how much acreage the vertical well is holding. If all your land is HBP (held by production) and past the primary term, you should get the land released that is not in the existing production unit for both lateral and formation before considering leasing.

Most of Kansas is located away from the popular shale deposits that are being developed with horizontal drilling and fracturing technologies. Kansas producing deposits are generally a little older and formed on a very stable platform or erosional plain compared to the areas east of the Rockies so I suspect that the phone call came from a speculator wanting to get on the publicity band wagon to take leases. However, there are some "tight" gas deposits in the depth range you are talking about that could be targets. If they exist in your area, the big boys will be there in time. Be patient.

Capital Land is leasing for Sandridge they have been out in that area for a while. My family has been round and round with them, they make a lease offer then don’t follow through with it. My cousin didn’t think too highly of their landmen either. I was told by a family friend that they nearly were ran out of the court house as well for not following the rules when researching deeds. That tells me all I need to know about whether they are full of it or not.

There appears to be a lot of speculation and a push for leasing right now. Make sure you know who you are dealing with and what they are offering. There are a number of issues for horizontal leasing that you may not have experienced for vertical leasing. Pooling and unitization terms are some area's different than the old vertical wells. They are also going to have issues with water disposal wells and if they can use your well for a disposal well later. Subsurface transpass are issues. What are the shut in clauses and how that relates to where the hole is poked or where the bore ends up. Will you ever know where the bore is and where it ends up? If they drill hole on your land but get oil/gas on someone elses land that they have the bore, how is the royalty interest going to be figured on that? Is the well going to produce both gas and oil and is oil unitized as that will greatly impact your royalty income. The KCC is currently working on their regulations and proceedures to update them on horizontal drilling as those applications to drill have just taken off in the past 18 months.

And yes you can have leasing to one depth and then another lease to a different depth. These depts usually correspond to the various geological formations. You can also have unitization to one depth or to all depths. The oil/gas company usually wants to claim it is to all depths but as a royalty owner you want some say to that. You also should have some say as to what formation or depth they are leasing and intend to drill in. If you just give blanket control to everything you have lost all future potential control.

If these folks are serious there are usually a lot better terms out there on rates, royalty interest and usually nothing over a 3 year term.

Contact your local royalty owners association and see what they say.

Does anybody know what pices are going for In Lane County? My has some land out in Lane County and has been approached with an offer. To my knowledge there isnt that much unleased acreage in Lane County, Or is there? it was somewhere in the neighborhood of $20 per acre.