Hello,
an operator hit oil last week on our lease. they are completing the well this week. What does completing the well mean?
Also, what is an Initial production report? at what point do they actually start selling the oil and gas? in other words, at what point will my royalties and minerals generate money in these early stages of a well.
Thanks
Completing basically means getting the well ready to produce. How a well is completed depends on the well. If it's a gusher, the completion might be a frantic rush to get some trucks and tanks. But most likely , the operator would probably run a wire log to determine what formation(s) would be best to complete the well in. They really don't know exactly what they drilled for until they do this first. After that, they would perforate., acidize, frack, set the tubing, tanks, lay pipeline, run a pump and rods, set a pump jack and such. They file reports to the state, mineral owners, find a gatherer, and other things.
An IP Report is a required state (Texas) document showing the results of how much the well produced in oil, gas, and water in a 24 hour period. It also has other information about the well on it like how much oil was produced before the test.
At this point, anything could happen. You might be getting royalty checks for the rest of your life, or the operator might plug and abandon next month. Unless there is a rule that says otherwise, you should be getting paid your percentage for whatever the Operator sold.
Thank you very much. your reply was very helpful.