Pooling existing well

I have an existing well on my land near Pecos. I had a clause entered into my leasing of mineral rights prohibiting pooling without my approval. I have been asked to allow pooling of my land to allow horizontal drilling in the Barilla Draw area. It is stated in the letter that signing the revision to the original agreement will "not affect your producion payments from existing or future vertical wells. This amendment will simply allow Oxy to drill horizontal wells whidh should increase the production in this area." Please bring me up to date on the pooling. I understand parts of it but am not sure if I allow pooling if my existing well can be pooled and the % of total production is down do I need to worry about my 160 acres being negatively affected. There may be no problems but trying to be sure things are done fairly for all.

John Sexton

Make sure your pooling language in the amendment (not just the letter) allows only pooling for a horizontal well drilled in a specific formation and/or depths and specifically excludes any and all existing and future vertical wells drilled on the land. As a double precaution be sure to have the language specifically state that it does not allow pooling of any existing producing wells located on the subject lands.

I encourage you to allow pooling on the horizontal wells as they require a certain length in lateral to make the well properly productive for all concerned.

It all depends on the exact terms of the DPU - such as the acreage and depths. Also, if you agree to pooling under a DPU which allows the operator unlimited rights to amend the terms, then you will be bound by those terms. You can limit your agreement to specific depths and acreage and make sure that any vertical wells (existing or future) are specifically excluded from the unit. The DPU will also specify how royalty DOI is to be calculated - generally be proportionate ownership of the unit acreage, but sometimes there are allocation formulas. I saw one recently which was going to allocate the royalties by the proportionate length of the horizontal wellbore under each tract. This means that if the well site is on your minerals so that the vertical wellbore and curve before the horizontal wellbore are mostly on your minerals, then you would receive proportionately less of the royalties. Similarly mineral owners at the end could be affected to the extent that the toe of the wellbore stops short of the lease line. Read the proposed DPU carefully and limit your ratification. You might want to have the DPU reviewed by a good oil and gas attorney.

John, et al, I got the same request to amend my lease, dated 8/14/14, from OXY today regarding drilling in the Barilla Draw area (Hasta La Vista 802H well recently permitted) and could not make heads or tails of the language, much less make a comparison to the existing paragraph in my lease which it is intended to amend. Thank God I had Wade Caldwell negotiate the lease for me in the beginning, so I have referred it to him to advise me on where to go from here. I’m just scared to sign anything these days without having it looked at first by someone that understand the lingo. Anyway, that’s my two cents. Linton