I received a Production Sharing Agreement regarding my Loving Co., Block 28, Sec 8 interest. I’ve never received one of these forms with other mineral interests. Are there any precautions I should be aware of before signing? The request seems reasonable. The Agreement was drawn up by an O&G Landman regarding 2 new drills that Anadarko will begin sometime this year. Presently the are 2 extremely anemic gas wells (2009) producing for Felix Energy. I’m assuming Anadarko and Felix have something worked out where I’m not in the loop. I do have paying Anadarko royalties in neighboring sections however. There is no language attempting to alter the lease terms. Also, any insight as to the distinction between a sharing agreement and a pooling agreement is appreciated.
The production sharing agreement (PSA) is an agreement that a horizontal well may be drilled across a unit and non-unitized tracts / 2 units / or all non-unitized tracts and defines how the production will be allocated. Most often, the production is allocated by the proportion of the producing wellbore crossing each tract or unit. If your minerals are already in a unit being operated by Felix, then the production allocated to the unit will be paid be the same unit DOI. If your minerals are not in a unit, then you would be paid by the number of feet crossing your tract divided by the productive wellbore length (total distance from first take point to last takepoint). These are becoming more common as companies want to drill 2-mile laterals across sections which are each already in a unit. Your unit will remain unchanged for the existing unit wells with 1-mile laterals. Read the part about allocation of the production. Sometimes it may also be divided 50/50 between 2 units.
Thanks (again) TennisDaze. I can always count on you for valuable, well explained information.