What are the pros and cons of leasing different depths? It seems that in areas where landowners are more experienced this is a bit more common. The Eagle Ford is fairly deep in Lavaca County, 10,000’ or deeper. If an owner leases all depths of his tract then potentially shallower plays, like the Wilcox, Yegua, Jackson etc. may get locked up by operators who have no interest in developing them but tie up the land by production. A lot of little guys make their living out of playing the shallows. The fact that it is much cheaper to drill to those depths makes this the place where small independents can flourish. $1200/acre for leases kills that. So, what are the advantages and disadvantages to only leasing selective depths when negotiating terms?
In our case in Goliad County, Chisolm Oil and Gas said his permit is only for 7,000 ft. Our lease with them just ran out. He said he is trying to sell to another operator. His stuff on our lease, the pumps and whatever else he has there, he said if he is able to sell it would be to someone else that has a 7,000 ft permit. I have a question: when someone leases, is it for all the acres we have and no one else can lease on the same acres and put up another well with permits that are for a deeper footage? Or can multiple leases be on the same acres of land with more wells?
In our case in Goliad County, Chisolm Oil and Gas said his permit is only for 7,000 ft. Our lease with them just ran out. He said he is trying to sell to another operator. His stuff on our lease, the pumps and whatever else he has there, he said if he is able to sell it would be to someone else that has a 7,000 ft permit. I have a question: when someone leases, is it for all the acres we have and no one else can lease on the same acres and put up another well with permits that are for a deeper footage? Or can multiple leases be on the same acres of land with more wells?
Andy, generally you should put a clause in your lease that releases depths below a producing sand. Say you have a lease that is being held by production from 2,000’, without the release clause, as long as that sand is producing, the oil company can hold the lease for all depths as long as there is production. Many old leases did not have that clause and are still being held by the producer for all depths and are now only producing small amounts of oil or gas.
So, if the release clause gives back to you the right to re-lease the lower depths and a new formation, like the Eagle Ford, is found you can lease those lower depths to another company. More bonus money to you instead of the initial producer.
My thoughts on the subject and I am no lawyer, but mine always puts this in our leases.