Pooled Lease

Could someone tell me how a pooled lease is decided in Texas? I had one Lease on 27 acres in Karnes County, and it was pooled with five others to make up two leases on 600 acres. The company never gave me any information about it. They have drilled horizontal wells using the fracking method. Thanks for any information.

Review the terms of your lease. Most likely it gives the lessee / oil company the right to pool your minerals. Many leases contain few, if any, restrictions on pooling. Few oil companies will contact a mineral owner unless they need consent for pooling etc. So you will only hear from them when you get a division order. Keep in mind that 27 acres are too small for even most vertical wells and your minerals had to be pooled for any horizontal drilling. It is your responsibility to check to be sure that your royalties are paid accurately and on time. Make a separate file for every well. Go to RRC site and pull the permits (including plats), completion reports and annual production reports. Ask oil company for copy of Unit Agreement (s) or buy it from online Web site of county deed records. Ask questions and learn how your royalty decimal is calculated. Go to a NARO conference and seminars and meet other mineral owners. All wells are fracked these days in order to open the zones and obtain maximum production.

Thank you for responding. But how geologically is a pooled lease determined in Texas? For 50 years my lease was with other people on adjoining properties. It was a vertical well. Now, the lease has new names with people on the other side of my 27 Acres. I don’t know how this was decided. I have asked the oil company in writing for an explanation of the calculations, and have not heard from them yet. I have seen on the RRC as the plat permits, and have seen the directions of the wells with the bottom wells being right under my property. I just don’t know how this was decided. I did review the lease from 1955 and the company could pool it.

Finally, I did not get my revenues from the five new wells that were drilled in 2014 for 17 months. In May of 2016, I got a letter from the oil company for me to sign papers. I did not understand the paperwork, so I called them. They explained that it was an error by the attorney who could not find me, even though my Dad gave me the well lease 25 years earlier, and I had been receiving small monthly royalty checks from this vertical well for the past 25 years. But, in 2011 they stopped, and I called the company who told me the well was dry and was capped. They never mentioned they were going to do horizontal drilling and I was never notified of anything. During 2015 I received four offers for to buy my mineral rights. After they found me, I have not received any. I am now receiving monthly royalty checks for the new wells. Does anyone understand what could have happened or had a similar experience?

The good news is that you did not sell before finding out about the new wells. Vertical wells are most frequently on 'squares' to maximize development over an area. RRC sets minimum acreage dpacing for a weel, depending on depth and expected drainage. Shallow wells may be on 40 or 80 acres. Horizontal wells are long rectangles, from 1 to 2 miles long. So oil company may have 40 acre square for a vertical well, but now needs 160 acres minimum for a 1 mile horizontal lateral. So the unit is a different size and shape. By pooling 600 acres, oil company has more flexibility for well placement and can drill multiple horizontal wells. Your royalty decimal is smaller when acreage is increased, but you get to share in more wells. Also, your operator has multiple oil leases covering various acreage, including your 27 acres. It wanted to drill the most wells possible on the all the acreage. So it laid out the units so all the acreage gets into some well (s) and no mineral owner is left out. If your 27 acres had been surrounded by horizontal units, it would be too small to ever get drilled.

I am concerned that you your 1955 lease actually expired in 2011 when the well ceased producing, if yhat was the one and only well. Did you signa new lease and get a bonus and higher royalty or were you asked to revive a dead lease? It would not be enough just to send division orders. Can you look at those new papers and see what they are? Title at top and some of the language inside, particularly the first couple paragraphs.

I looked at the original lease from 1955. There is no expiration date put forth on the lease. It states "provisions hereof shall extend to their heirs, successors; but no change or division in ownership of the land" etc. etc.

What the oil company had me sign in May, 2016, was "Division or Transfer Order". It had renamed the wells and lease, gave the five new property numbers of the wells, and stated "this agreement does not amend any lease or operating agreement between the interest owners and the lessee or operator or any other contracts for the purchase of oil or gas". I did not get any bonus or higher royalty, or asked to revive a dead lease. Was this all proper the way it was handled?

Do you have any similar cases that you have heard of that they could not find someone even though I had been receiving royalty checks for the last 25 years? Any thoughts on this?

Once again, thank you so much for your help.

Look for reference to primary term of X years and continue thereafter as long as oil or gas is produced from the leased premises. Or similar phrase

"2. Subject to the other provisions herein contained, this lease shall be for a term of five years from this date ( called "primary term") and as long thereafter as oil, gas or other mineral is produced from said land hereunder."

This is what the lease said, and was signed by my father in 1955. Royalty checks have been received since then. Not large, but there always was a small production going on.

The question is whether there was production between 2011 and 2014. Above you indicated that there was only one vertical well which ceased producing in 2011 and that the horizontal wells did not start producing until 2014. You also mention that there was always small production going on since 1955 which may or may not include 2011-2014. I am also uncertain what you mean by the wells being renamed. Are these the same wellbores or new wells on the acreage in a differently named unit? Did you get any checks with production and sales for months during the 3 years? It would help if you post legal description (section, block, survet, county), well names and operator.

The old well my dad had since 1955 was capped in 2011. It did not produce since then. In mid 2014 new wells were drilled and the 27 acres that my dad had were pooled with approximate 550. These five new wells were given a two new lease names. The wells were producing since the end of 2014. My lease was included in January 2015, and I was not notified until May of 2016 when they found me. I did not receive any royalty checks for 17 months when I should have.

Was the 1955 well shut-in, or was it plugged? If it was plugged, why was the lease not terminated? How many acres comprised the 1955 well unit? If there were other mineral owners who received royalties from that well and you can learn their names, attempt to see if any of them signed new leases after 2011. You can use a service like www.texasfile.com to remotely view recorded documents, including oil and gas leases. Did the document you signed in May 2016 include a lease or does it act as a de facto lease? Have you attempted to contact the company and ask about possibly being due back payments?

Look at your checks and see if they included the production from the dates of first production. It is likely that your first checks included multiple months.

The company told me that the 1955 well was plugged in 2011. The document that I signed in May, 2016 was a Division Order/Transfer Order. I never signed any new leases. I assume that the drilling company had the right to continue drilling without my signature. Yes, when I received my royalty check in June, 2016, it included all of the payments for all of the 17 months that I did not receive my net distribution.

Thank you for your help.

Yes, I did get my royalty check in June, 2016 with all the back net distribution payments that they owed me for the 17 months of them not being able to find me.

The five new wells were under a a new pooled unit, given a new name. My old well that was plugged on the 27 acres was included in this new pooled unit.

Thank you.

Likely, the old wells were played out. The new wells are in fact likely horizontal. Generally in Texas a vertical well needed 40 acres of surface so your previous wells would have been a 27th divided by total acres in the pool (say, 40 acres). Then your interest would have been 27/40 x royalty % The newer horizontal wells generally get 160 acres per well and they’ll pool 320 to get at least 2 wells side by side. Now the wells can be several sections long so the pool can be very big. TennisDaze is correct. In order to check the companies math (and they do make lots of mistakes), look at the RRC site and look for your section to see what is there. The online map is pretty good and you’re looking for the API or well number. Leases and names change, but the API never changes for a well bore. There should be a play map and the application to drill on the RRC site and sometimes, the pooling acreages are shown. It’s an excellent resource for mineral owners. What you’re describing is very common. I have a lot of older, deep horizontal wells ranging from 6000 to 20000 foot depths. Seems most of the shale plays in west Texas are around 9500 to 13000 foot depths, so the older wells can co exist in the same place (but not generally the same depths) as newer ones. And to avoid being over-simplistic, older wells generally were pumping from a “reservois” of trapped oil and gas. Newer ones are drilled horizontally into shale sands and fracked to remove non reservois of oil & gas trapped in the shale itself. I hope this helps you understand what is probably happening with your property. One really smart guy told me that if there is oil and gas there, they’ll never get it all. One technology works to a point and then you have to wait for a newer technology to get more out and then another technology. Could be years apart. Some of my earlier wells were dry non producers and in the same property, new technology like fracking, is making lots of money for the company. Good luck.

Thank you, James, for taking the time to share your information. I looked on the RRC site, and got the appropriate numbers. I am still waiting (it's been three or four weeks) for the company to give me the calculations for the net distribution.