There is an Unleased Mineral Owner ("holdout") - in a non-drillsite tract in a Unit that has been producing for over a year. The horizontal drainhole runs through this tract. There are "No Perf. Zones" on both sides of the drainhole surrounding this tract. I gathered this means the oil co successfully obtained an exception to Rule 37 and the holdout will be drained and not get paid. The oil co leased all other interest owners (8 other family members) for this tract. Holdout's attorney will no longer return ph. calls. Several months ago, the attorney claimed holdout leased to another oil co but, if true, the lease was never filed.
1) What is the motivation for this holdout? 2) Is it true that the holdout and the 8 other family members will not be compensated for this tract in the No Perf Zone even though the drainhole runs through it? Your assistance is greatly appreciated.
It sounds like MAD, mutual assured destruction. The mineral owners don't get paid because their part of the wellbore was not perforated and they suffer some drainage, maybe alot of drainage over time as the oil slowly migrates to lower pressure areas but I doubt the operator is going to be making an immediate fortune off the unperforated area. If there is another well in the future there may be more of the same. I have no idea of how the negotiations went, the lessees offer may have been insulting or the holdout mineral owner could have had unreasonable demands, possibly both. The 7/8ths mineral owners could have made a side deal offering the holdout part of their royalty to get on board. It might be that the 7/8ths signed the fist lease they were sent and the operator with 7/8th tied up already would not negotiate the other 1/8th and the holdout was unhappy with the other 7/8th owners. I just don't know. There must be some back story to this.
That's crazy. I've heard of tough negotiations before, but if the Company was actually willing to spend the money to drill through the unleased tract and not produce from it, then the asking terms from the holdout must be really over the top. Maybe they have an environmental bias against oil and are simply philosophically opposed to the whole project. I've seen that before. However as Mr. Kennedy points out, the 7/8th owners should be able to cut their own deal, unless the ownership is held in some kind of undivided entity that requires unanimous consent. I hate to see families fight, but maybe an attorney should be consulted if the 7 can't convince the 1.
The tract is currently not being produced directly as it is isolated behind casing i.e. the "no-perf zone". The surrounding lands are being produced and, over time, the oil will migrate onto the surrounding tracts. That happens all the time when wells are drilled on one side of the fence but not the other. That's why there are rules regarding the setback distance a well must be from a property line. Even with that setback, some drainage will eventually occur, as it will here, but if a deal can be made, it shouldn't be too hard for the Company to go back into the well and open up the zone.
Mr. Goode did say that 7 of 8 were leased. I have heard like stories of situations where the lessee had leased a large majority and would not negotiate, made a take it or leave it offer. If that were the case, I might leave it too. Money is not the center of my life and I never asked anyone to develop my minerals and a take it or leave it offer would not sit well with me. I don't know the particulars in this case and I won't assign blame to either side, blame could reside with either side or both.
You will never know if the "no-perforation zones" were perforated and they are draining you.
Welcome to the oil and gas industry.
Really? In ND there is a well survey by independant firms. I imagine the bribe would have to be substantial for them to not report accurately and take on such a huge liability.
Robert P. Malone said:
You will never know if the "no-perforation zones" were perforated and they are draining you.
Welcome to the oil and gas industry.
Keep in mind there is little risk for an individual. The only thing you can do is sue the very rich companies with large, legal staffs - if you happen to magically have the proof and lots of money to risk in a questionable legal system.
Are you saying that there is not a well survey by an independent firm on wells in the state of Texas which would note where the perforations are?
I could recommend some lawyers who would gladly take such a case on contingency, if there is a well survey saying your your minerals were being produced from perforations where there were not supposed to be any.
Robert P. Malone said:
Keep in mind there is little risk for an individual. The only thing you can do is sue the very rich companies with large, legal staffs - if you happen to magically have the proof and lots of money to risk in a questionable legal system.
There is absolutely an independent report of where the perforations are.
Thanks, I was pretty sure there would be a survey for state regulatory purposes.
Steve Durrett said:
There is absolutely an independent report of where the perforations are.