I just received a PAA from bhpbilliton to allow recapture of reserves from existing horizontal wells via “Horizontal Drainhole Area” in DeWitt County. I’m confused why there would be a need for this change to existing leases? Why can’t they use existing authority and why does the existing lease need modification? Does the existing Division Order allocations of royalties remain the same under a PAA? Any advice or information you can share will be greatly appreciated!!
Dear Mr. Faulkner,
I am penning a blog post on Production Sharing Agreements and i will send you a link when it is posted
The concept started some years back in east Texas by Devon. The problem was that Cotton Valley Units were already in existence and Devon wanted to drill cross unit horizontal Haynesville wells. The leases did not contemplate that concept or change in drilling technology.
Today, PSA are used the same way for the same reasons - to drill horizontal wells and create a document for the allocation of production revenue from those wells.
My blog post will be comprehensive in nature. There is both a good aspect and bad aspect conceptually.
Best
Buddy Cotten