Greetings all,
We just received a letter from our landman telling us that they are petitioning to make the spacing unit into a permanent spacing unit. Should we have any concerns about this or this is simply the next step in the production, etc...
THANKS
Dave
You have given practically no information with which to judge if there is a problem or not. The spacing may be too large to be drained by the one well.
This is a 1280 acre (two sections) "temporary spacing unit" that now has, to quote, "the (well name) has been succesfuuly completed as a commercial producer of oil and associated natural gas from the Bakken/Three Forks formation there under." It then goes on to state "to efficiently and economically devlop the reservoir, and to protect the correlative rights of all owners, all of these sections (1280 unit) should be designated a permanetn spacing unit for the production of oi and associated natural gas from the B/TTF formation."
Thus, it appears to be a routine procedure ...moving from a temporary spacing unit to a permanent one. However, this is the first time this has happened for us...thus checking out others experience with this movement...if there are any concerns we need to be aware of.
Thanks...and...have a Blessed Thanksgiving!!!
Dave
Mr. Peterson, I'm not a fan of the 1 well per 1280. Unless the spacing is naturally fractured to a great extent or very porous, one well probably isn't going to efficiently drain the spacing and will leave oil in the ground "waste". I consider this to be a simple land grab, holding non-producing acres with royalty from the acres that are producing. Now would be your time to speak up. It probably wouldn't make any difference but you have the right to be heard.
Mr. Kennedy....thus, if I understand you correctly, to designate this as a permanent spacing unit means that there will be only ONE well allowed on this spacing unit? Or, does it mean that any and all other wells placed in either of these sections will be contained to these sections only as a permanent spacing unit?
I ask this as in phone conversations with the landman, it was suggested that they would most probably drilling up to 4-6 wells in these sections over the course of the next few years. However, this conversation was 5-6 weeks ago.
Dave
It may mean that they can delay drilling any more wells until the first well goes dry and that acres and formations that are not now producing will be held with royalty from the acres that are producing and you have no guarantee that the other wells will ever be drilled. It's the huge flaw in the smaller piece of the bigger pie theory. Suppose they hold my unproductive acres with royalty from your productive acres for 20 years before they drill a second well. It could take 20 years from the date the second well is drilled for you just to get your money back (break even) for holding my acres. Since you are leased you don't really profit from holding my acres, you are giving me free royalty (thank you, I didn't know you cared) and that is 20 years after they drill the second well that they may not start for 20 years, so we are up to 40 years for you to break even. Just so the operator does not have to lease acres again in those two sections and so the operator can delay drilling more wells. All done by giving away part, possibly the greater part, of your royalty and you have no guarantee that the other wells will ever be drilled. The operator can produce your well slower than necessary also so that well could have a very long life and keep alot of productive acres on the shelf for a very long time. I have some 4 year old wells, 1 well per 1280 that the operator has not put pumps on, those wells will probably hold those spacings for a very long time. These spacings are on the shelf and I could well be dead before they drill another well in these spacings and I think I may have another 30 years in me. I will certainly be dead before they drill another well and I am paid back for what was taken from my royalty to hold the non-productive acres. Your landman that you have spoken to may or may not know what the plan is, probably doesn't. A landmans job is to acquire leases and or run title, most have never read forced pooling laws for the state they are operating in (I assume because I don't want to automatically call them liars) but they have told me the most amazingly inacurate things about the pooling laws because they wanted me to lease, after all, it's their job to get me to lease. After having spoken to several landmen, I am of the impression they will tell you whatever they think you want to hear, especially if it isn't in writing. I suggest that you verify with another source anything your landman tells you. I would be thrilled if you didn't take me at my word and verify what I have told you. I find that if I tell someone something it doesn't make it real to them but it becomes real when they look it up. Unfortunately so few people look things up these days. Happy Thanksgiving.
David Peterson said:
Mr. Kennedy....thus, if I understand you correctly, to designate this as a permanent spacing unit means that there will be only ONE well allowed on this spacing unit? Or, does it mean that any and all other wells placed in either of these sections will be contained to these sections only as a permanent spacing unit?
I ask this as in phone conversations with the landman, it was suggested that they would most probably drilling up to 4-6 wells in these sections over the course of the next few years. However, this conversation was 5-6 weeks ago.
Dave