Discussion referring to 12-10-10 Caddo County, cause # 2026-000252.
-
Where can you find pooling orders if they have been issued? If it’s on the OCC new site, I’m still learning to navigate through it.
-
What exactly is the pro/con of a forced pool?
Here is the link.
0_The Pooling Process in Oklahoma.pdf (340.4 KB)
Pooling is a regulatory “lease” for a shorter period of time and is usually a gross proceeds royalty. It gives you options for a bonus/royalty pair. Most of us would prefer the higher royalty as it pays out better over the long run if the well(s) are successful. It has reservoir restrictions so functions as a depth clause.
The exhibits are out, so the order should be fairly soon.
I am very new at leasing the minerals I own in Oklahoma. Everything I own has been held by production for quite some time. We leased once in 2013 and they are approaching us now to lease the portions of the 2013 lease that is not held by production. They, Capstone Land/Charter Oak, are telling us that there is no bonus for a 3/16 royalty, so I am thinking about letting them force pool me, but I am unsure if I will get the same protections through the force pooling process as I would get if I were to sign a lease with them.
I have a couple of questions about the force pooling process. You mentioned that it has reservoir restrictions. Can you explain further how this works? Will it just hold by production the producing formation or will it hold by production from the surface to the base of the deepest formation drilled?
Also I was wondering if it would have a Pugh clause as well?
It is likely that there is not bonus for the 3/16ths given the location. That is not a problem for me. I want the higher royalty because over the long run, higher royalty on one or more wells will far outweigh a one time bonus for 1/8th.
When they pool, the operator has to ask for a certain set of reservoirs and that acts as a sort of depth clause. Everything above is open to lease and everything below is open to lease (if not already held by production). The well from a force pooling can only hold the reservoirs requested in the pooling. That also acts as a Pugh clause.
The draft lease that comes from operators is rarely in the mineral owner’s favor and needs significant edits by a professional. If affording an attorney is not an option, them pooling is a excellent plan B. Pooling has protections by OK statute.
OK, last questions. When you say that it also acts as a Pugh clause, do you mean that any acreage outside of the producing unit would be released as well as the formations above and below the target formations?
They are wanting a three-year lease term if I lease with them. How long is the term of the force pool?
The pooling will be for a specific spacing, usually 640 acres if the well is going to be horizontal. So the producing unit will be the whole section. It will only be for the horizons designated in the pooling, so above and below horizons will be open for leasing or pooling unless otherwise held by production. The pooling is only for a certain number of months, usually twelve, so shorter than a three year lease. I have been pleasantly surprised to get multiple bonus amounts when the well was not drilled in the 12 month time frame and they had to pool again. Doesn’t happen all the time, but I had one with four bonus payments.
Both the pooling and a lease have a primary term and a secondary term. The primary term is the time frame in which they “can” drill, but are not obligated to drill. Three years or so for a lease and about one year for a pool. The secondary term is the term that commences once a productive well is drilled. It will continue as long as there is production. Our family has one well that has been online for over 100 years, so a LONG secondary term.
I highly encourage legal help if you are going to lease. The draft lease is not usually in the mineral owner’s favor and needs significant professional edits. Certain operators will not budge on their lease terms, so I prefer to pool if that is the case. You especially do not want post production charges as they will eat into your royalties-significantly.
Mrs. Barnes,
Would one be included in pooling if an existing lease is in place that is expiring in 63 days? The company that has the lease is persistent on releasing. I had asked for 22% and 1/4 options to be included; so far they have only come back with 1500@ 3/16 and 1000 @ 1/5, no 3-year, no extension. Like you have recommended many times, I would prefer higher % vs bonus.
Some areas are not going to get a 1/4 lease or even a 22%. As to the 63 days, ask to be listed in the pooling if you cannot get a reasonable lease. The clauses are more important than fussing about a bonus.
How do you ask to be pooled and to whom?
The operator is in charge of the pooling. Are you talking about 12-10N-10W are another section?
12-10-10
Is your name on the pooling case in the respondents list? If not, and you have no intention to lease, then contact the attorney that sent the pooling case and ask to be included.
I’ve not seen any pooling as of yet, only the application with the cause number. My name is listed in it. I guess I’m confused since I’m still currently leased.
Then they have included you since the lease is probably going to expire before the well is drilled. If you don’t like their new lease offer and if they just want to use the old wording on the old lease, then sit back and wait for the pooling order. Or they may be after a zone that you are not leased in.
Thanks again for all your help; it is very much appreciated.