Ovintiv Mid Continent spacing request

I received 3, 640 acre spacing applications for the above areas. I own in the 28-6N-4W and there are three multi Horizontal well drilling requests. The document shows 50% royalty payment to my section and 50% for the other section. The drilling contractor is not who drilled in 28-6N-4W, nor have been paying me for the royalties.

Does my agreement with my current lease holder stand with the new contractor`s proposed wells, or will I be sent a proposal from them that I can deny if it I do not agree with the terms of the lease proposal?

You will not get new lease offers from Ovintiv. Your original lease is still in effect due to current production.

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Will the new lease be identical to my current lease, or will I need to choose options, such as the percentage of my royalty pay out?

It’s likely that your current lease will also be the lease in effect for the new well unless (1) your current lease was for a specific wellbore only (unusual), or (2) the new well is drilled to formations that have expired from your current lease due to operation of a depth clause.

If neither (1) or (2) above apply, you will not be able to negotiate a new lease agreement.

The 50% / 50% allocation factor is likely just a placeholder for now. The operator will file for a final multi-unit order after the well is drilled to set out the final allocation factors which are often close to 50 / 50 but never exactly that. For example, the completed length of the horizontal bore might lie 42.5% in Section 21 and 57.5% in Section 28. In that case, owners in Section 28 will split 57.5% of the proceeds according to their interests in that section.

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James, you will not get to lease again.

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James- I should have said that unless you have some kind of horizontal depth clause, chances are your current lease will hold your interest for the new wells. It looks like Ovintiv & Casillas are planning an additional Mississippi well & 2 deeper Woodford wells. Maybe you can lease your Woodford rights if you have a depth clause.

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Thanks Todd, that is great information. I do have a depth clause, and as you mentioned I have received multiple Relief requests filed by at least two operators. The Ovintiv is explicit with it`s intention to only drain the Woodford geological feature. One thing I noticed is that there is a very obvious depth difference of the Woodford feature in 21 and 28. It seems section 21 is deeper than 28. How would I go about negotiating a new lease? I am actually happy with my current lease and would want very similar terms in any new lease.

Indultado 1-28-21MXH produces from the Mississippian reservoir. Casillas was the operator. They sold to CPRC Services in May 2020. (Short for Casillas Petroleum Resource Partners). If you have the Woodford open due to your depth clause (the Miss is higher than the Woodford), then you will be sent a lease offer or a pooling offer when the time comes. If your depth clause is not worded correctly, then you may be held by the lease.

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Thank you Rachel, excellent information you provided for my question. I do have a depth clause, and I also noticed that to tap the Woodford formation, the angle of the drilling would slope toward section 21. My ownership is in 28. Does the slope of the drilling have anything to do with how the Woodford structure is drained? Also the original operator has sent its intention to the courts to drill a couple of more wells. How does this play out when there are competing operators? I know that Newfield sought relief as Casillas did for the same reasons, but Casillas won the battle.

James, Geologist here. Generally, the angle of the drilling in OK is N-S or S-N to take advantage of the natural fracture patterns set up by the ancient structural folding of the reservoirs. One wants perpendicular fractures to the well bore as much as possible for better drainage. The fracking enhances those fractures. Also, it is better for the toe (end) of the well to be higher than the heel (where the horizontal portion begins). Gravity helps with the drainage from high to low. Not all wells are done that way, but most are. (A few areas have E-W or W-E wells depending upon their structural grain.) Sometimes the surface location is based upon the best topography for the well pad or deal with the surface owner. Just depends.

The OCC will decide who will be the best operator for that section based upon many factors that will be presented at the hearings. I do have a few sections where there are two horizontal operators. One in particular has an important EW fault, so one operator on north side and another operator on the south side. The idea is to drain the acreage in the most effective way and get it to market.

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