Pooling Order hearing tomorrow

Apparently a pooling order doesn't apply to my inherited mineral rights even though notice was sent, as they have been leased since 1975, though for long have been just barely producing. Newfield Landman said they will operate under the old lease terms (1/8) (unless they see something like depth clause.)

They're sending me a copy of the old lease but probably won't see it before the hearing. Am going to call in to listen to the pooling hearing to see what I can learn. Sounds like they'll start drilling in Sept. regardless.

Was looking for a formula that M Barnes had presented in the forum about calculating royalties.

Is there a way to look out for excessive deductions?

Any advice would be welcome. I've learned a lot from this forum. Really appreciate all the great info !

Terri, friend me with the blue icon and I can help you with the formula.

Looking at a diagram of wells, labeled as 1H-27X or 1H-2E

What does the 1H, 27X and the 2E mean?

Also there are numbers like 800 BOEPD (50% oil)

Would this mean only 400 barrels of oil would be on a production report?

Just reading this http://oilprice.com/Latest-Energy-News/World-News/Between-SCOOP-And-STACK-What-Drives-Drillers-To-Oklahoma.html

The H means a horizontal well. The 27 probably means a section number. The E probably means East. Sometimes they have multiple wells from the same pad. If there is an X it means multi unit.
BOEPD means Barrels of oil Equivalent per day. (Marketing hype so it sounds higher). 5800 cubic feet (usually rounded to 6000) is equivalent to one barrel of oil. So in the 50% case, it means 400 bbls of oil and about 2400 mcf (thousand cubic feet) per day.

Thank you, M Barnes! Very helpful!

In looking for the definition of HBP (Held By Production), came across this article. I would be interested in comments. I will get no bonus and 1/8th, apparently. Not complaining, of course. Just curious and learning.


"...a number of landowners have been cut out of the lease-bonus windfall. This is because their mineral rights already were controlled by small producing companies through old leases held through an oil and gas industry custom called “held by production,” or “HBP.”
"Historically, under American leases, oil and gas companies can control the entire leasehold for the life of production, as long as one well on that property is producing in “paying quantities.” So a small well ... could conceivably hold an entire lease for 50 years, as long as the value of production exceeds operating costs.
"Many Ohio leases were granted at a time when bonus payments were trivial — often less than $50 per acre. What's more, royalties were relatively small — usually 1/8 of the production. Now, when producers are offering bonuses of $5,000 per acre and royalties approaching 20%, those whose mineral rights may be held by shallow Clinton production are missing out on the shale gas windfall."

This was where I read HBP but couldn't find definition.

Does this 50 year hold by one small well apply in Oklahoma? I just found out that an old well has ruined plans for a horizontal well on my leases. This well was drilled in 69.

Yes, this rule applies in Oklahoma. I have production back to 1922 in shallow horizons held by old leases with old language. It is a contract and it is legal. Just the way it is as it was perfectly normal back then. Since those old leases did not often have depth clauses, they hold to the center of the earth. However, it does not usually prevent any new wells from being drilled, especially horizontal wells since they are deeper than the shallower production. I suspect there are other reasons for no horizontal on your acreage-Economics being the main one. If you are HBP (held by production), then they do not have to be in any hurry to "save your lease" since it is already saved. Actually, in a way, it is a good thing. The oil and gas are still there in the ground. I would rather have it safely stored there waiting for good prices than "wasted" by hurry up drilling when they do not need to at low prices.

This is a long term business. Companies are going to drill where their best inventories are now that make the greatest return on investment and save the new leases they have that are expiring. They will save their "savings account" ones (HBP leases) until the time is right. That is one reason estate planning is important to include your mineral rights. We are on our fifth generation now thanks to wise planning by earlier generations.

Another good thing is that many of those old leases had "gross production" in the lease, so you cannot be charged post production charges. In a gas play, that can be very important. So a 1/8th lease with no production charges can end up being better than a 3/16ths lease with production charges. In the long run, the royalty is usually more important than the bonus in certain plays.

Very interesting and helpful!
Do you know if it has to specify "gross production" or if "free of cost" covers that?

"To deliver to the credit of lessor free of cost, in the pipe line to which he may connect his wells, the equal one-eighth 1/8 part of all oil produced and saved from the leased premises"

I also wonder about this in my old lease regarding pooling: "Lessee is given the right to pool the acreage with other land lease or leases in the immediate vicinity, such pooling to be of tracts contiguous to one another and to be into a unit not exceeding 40 acres in the event of an oil well, or unit not exceeding 640 acres in the event of a gas well."

Do horizontal wells sometime produce both gas and oil? Our existing was gas.

Great article. Thanks for sharing.

"all oil" is gross. The clause about the gas right after that is the important one, does it say gross or net?

Standard pooling clause.

Yes, depending upon the horizon, horizontal wells can have both. Either an oil well with gas, a gas well with condensate (a light crude-almost like kerosene), or all gas. Depends upon a lot of factors.

Ah, thanks!

"To pay lessor for gas of whatever nature or kind produced and sold or used off the premises, or in the manufacture of products therefrom, said payments to be made monthly. Where gas from a well producing gas only is not sold or used, lessee may pay or tender a royalty One Dollar per year net royalty acre retained hereunder, such payment or tender to be made, on or before the anniversary date of this lease next ensuing after the expiration of 90 days from the date such well is shut in and thereafter on anniversary date of this lease during the period such well is shut in. If such payment or tender is made it will be considered that gas is being produced within the meaning of the preceding paragraph."

This sounds exactly like the lease I have that is being force pooled. I thought that the section did not have a lease since the well was plugged and abandoned in 1967 . So what are you going to do? I am torn since my siblings are selling and my 1/8 is now 1/32. Is it still worth holding on? Chaparal is going to drill in sec 14 16N 06W. The hearing is tomorrow for the force pool I am not a respondent.

Did you get notice of pooling hearing? Is there a landman listed to ask questions?

I think you still get 1/8, but if siblings are selling, the acres will be divided and you get less in that way. Personally, I would hold on until you know more. Some of the new wells are much bigger than what was capped, and they seem to get them drilled quickly. They start drilling Sept 29 and said they would have results by November.

My relative, who was also listed on the pooling hearing for a well to start Sept. 29, just got a call from

"Bowery " - who "made an offer and suggested that they would pay better than the pool @ 3750/ac + royalties."

Newfield, as I'd understood it, still held a lease open, according to the landman listed on the pooling hearing.

Should I call Newfield or call Bowery, or someone else, to learn if our lease is really active, or whether we could or should look at this offer?

If you are held by a currently producing well, you will not be listed on the hearing. Even if barely producing. The terms of your old lease will continue. Sometimes, an old 1/8th gross proceeds lease can end up being better than a new 3/16ths with post production charges, so all is not lost.

Call both companies and see what their stories are. Be watchful for new companies who promise to break a lease-pretty tough to do. What is your section, township and range?

It's Section
29, Township 15N Range 7 W

I'm very grateful for this forum and especially reading your comments, M Barnes! After years of seeing the mineral rights produce next to nothing, it would have been tempting to sell a couple years ago when a landman called.

The landman from Newfield said we were held by an old lease from 1975, barely producing for many years, and he said the notice of hearing was sent to my brother and I (and a deceased ancestor) just because they had not finished researching all the owners.

The person from Bowery left a message for me offering $10K per acre to buy mineral rights, or $3K+ bonus for lease. He's on LinkedIn as a "debt sourcing intern" "Sourcing investment opportunities in trade claims by researching court dockets."

Bowery has this description on LinkedIn:
"Bowery Investment Management, LLC is a distressed debt hedge fund focused primarily on highly differentiated and niche special situation credit opportunities, such as trade claims, private obligations and overlooked or underfollowed capital structures."

They have 11-50 employees, according to their entry in Linked In.