One Operator frac'd into another Operator's wells

Landman Discussion
1

Hi Buddy,

Me again! It's easier to get to talk to you through this forum! Hope you don't mind!

Last February, B Company was bring in a well nearby our wells and they told our operator they were fracing and our wells were shut in then they said they were through fracing and our wells were brought online again only to find out that B Company was not through fracing yet - and yes, we do know for a fact it happened, we were told and my sister spoke with the A Company area manager, my question is for knowledge purposes only - we are just thankful the wells are coming up to speed again, but is this a lease negotiable issue? These are my thoughts:

Again, it's all about the learning process - that is why I ask questions - I just want to know if anyone out there has dealt with this and what took place. I'm not looking at this from a legal stand point, but a business one - A Company took a hit and so did all the royalty owners, so I am thinking that if this is a hazard of the business that can and probably does happen quite often, how can the companies cope with their losses, and if they do recover their losses, does that mean that the royalty owners will also? If they recoup do they let the royalty owners recoup too? Or how do we know? Is this something that should be written into a lease as well? I look at it this way - if there is a pesky little mole running around like a loose canon doing his little horizontal tunneling thing and he repeatedly keeps digging through the big gopher's horizontal tunneling, wouldn't the gopher eventually get mad at the mole and put some kind of word out that if he doesn't get his engineering routine down a little better, he's going to have to cough up some of the expenses to repair the damages he's done? Really, only so much losses can be tolerated before a process has to be put into place to prevent loss - and if it does, how do the royalty owners protect themselves as well?

2

I forgot to say that all four wells were damaged, lost production during the time oil was over $100 per barrel and are only coming up to a good production level again - so if there is anything you are willing to share, I would appreciate it!

3

Susan,

You asked interesting questions.

1. Are you entitle to participate in a suit or settlement for damage to recover your losses? Sure, if you know about the suit and where it was filed. To more protect yourself by lease agreement on suits

2. Lost production is an interesting accounting term. Lost production can never be recovered by definition. Just ask the offshore operators who had to shut in because of TS Lee.

4

Unless there was a large class action lawsuit brought up, and depending on what it is about, I am never in favor of suing for any reason - I am a paralegal and the lawyers are usually the only ones who benefit from lawsuits. Class action suits are often very frivolous - unless it is a life and death situation - like Erin Brokovitch - and even those who participate in those kinds of actions usually come out on the short end unless they are offered free life-time medical and that is worth more than any dollar amount.

I am interested in knowing who is responsible for repairing the damaged wells - who would bear that cost? The A Company area manager told my sister they weren't about to let the wells go because it cost about $3Million per well - as usual, I am just curious - part of the learning curve here.

Buddy, really appreciate everything you do to help all of us!

5

Group,

In Houston County, Texas about 5 or 6 year's ago a company was drilling 3 horizontal wells from the same location, with the same drilling rig. They drilled the first and second, both were completed and producing. The 3rd well was being drilled and and they some how drilled in the the #2 well bore as it was producing, then the 3rd well began producing from the #2 well bore! True story, Winn Exploration was the owner and operator. Winn sold to Chesapeake.

Maybe when surface owners and mineral owners lease we should be thinking about the cost of surface damages per well bore drilled from the same location as the rig is skidded along in the location. Say if they drill 3 they pay more damages than is if just one is going to be drilled on the same location. Pass the operators savings using the same site along to the surface owner also. It is going to be in my next leases!

6

VEERY interesting indeed!