Reconfigured Oil-Gas Unit - What's Fair?

Looking for input (legal and/or logic) or advice on how to handle the following situation: Oil and gas company drills an eagle ford well in a unit comprised of nearby leased properties. I have nearby acreage leased by the same company but was not included in this particular unit. The well was drilled over three years ago.

The O&G company has now drilled two additional wells in the same unit but now has also reconfigured the unit to include my acreage as well. I have no issues with the two new wells just drilled as I would begin to receive royalty beginning with first production.

The first well drilled three years ago is the one I have questions about. Should I expect to receive back royalties on the first well? My concern here is I missed out on over three years of royalty payments from the first well by not being included in the unit from the start. Or, should I just expect to receive royalty from the first well starting now? In the new unit my acreage is about one fourth of the total unit acreage so we are potentially talking some serious monies here. Consulting with an O&G attorney is financially justified

Other details....they did rename the unit now that my acreage has been included. Another royalty owner also got some acreage cut out in the newly configured unit. They will drill more wells beyond the three here already mentioned. I see no language in my lease that addresses this type of an issue.

I will consult with my O&G attorney as I do on all my oil and gas dealing. I also am holding up signing my division orders pending answers from the O&G company. But this situation is atypical to me given the circumstances noted above. I would value any input (legal or advice) from forum members, especially from anyone who may have had a similar situation.



You may be assuming that the reconfigured units are all from the same source of supply. May be they are and maybe not. Regardless, each unit change must be approved by the RRC using engineering data supplied by the applicant. The RRC is there to protect correlative rights (what you are talking about) as well as conservation of the reserves in the ground. Your first need may be some Petroleum engineer research of the units and bars for change. Unless your attorney is also a petroleum engineer, he will most likely have to hire one in order to protect your rights.

I suspect that the adjustment of reserve application from the first well became a part of the application to change the subsequent well units. The upstart of it all will most likely allow the operator to drill more wells over a longer period of time there by benefiting you in the long run.

Take another look at the cost effectiveness of legal action until you know more about the redistribution of reserves in the units.

Gary L Hutchinson

Minerals Managment


Thank you for your reply to my question. This past weekend I did talk with a neighbor and learned from him there are now two different units. They simply did not rename/reconfigure the old unit. The original unit still exists. I feel the oil company was not forthright with me by neglecting to tell me this. I agree with you that the first well drilled over three years ago is probably what's driving the split into the two units. However, the splits make no real sense to me as my acreage is shared with one unit but I get left out of the other. I informed the oil company that I will not sign their division orders given the unequal sharing of acreage between the two somewhat overlapping units. I actually think they were hoping I would just sign the division orders and not challenge them on their unit logic.

At this point I'll just turn it over to my oil and gas attorney and let the lawyers figure it out. Again, thank you for taking the time to reply. Your use of the terms correlative rights as well conservation of resources were especially useful. I looked up their legal defintions and did research on same. Take care.

Bob S.