Hi All,
I’m wondering about how a horizontal well and economic issues. With a horizontal well if it is drilled from an adjacent property, but the leg goes onto our minerals clearly. Could that be considered a lease well ( preferably) , or is that considered a unit well?
I know the directions of the predominant natural fractures (NE-SW) in the Spraberry Formation the main formation of unrest
so I believe the horizontals will go perpendicular to the fractures (NW-SE) to maximize recoverable HCs. Hoping for lease well terms… With half a section to deal with in terms of acreage - any advice would be appreciated!
A horizontal well can be part of 320 A or 640 A, or whatever it's spaced at. Check with the rail road commission or go on line to see what it's spaced at if you are in TX.
So, it is a unit. Everyone in the space unit get there percentage of the amount they own. Let say, it's on 320 acres, you own 1/6 of 160, that would make you get 1/12 of the whole. A horizontal well will hold the lease even if it's not drilled on you property. Lets say, it's 640 A spacing, you own 100 % of the mineral on 160, you get 1/4 of the total at what ever percentage you signed a lease for. So if you signed for 3/16, you would get 1/4 of 3/16% of the total.
Thanks for your reply - let me re-phrase my question. I’m wondering if a horizontal well is a lease well, if it is in the minerals but not on the surface. If the land is held by production ( HBP), and a well is drilled - not on our minerals, but within the Unit. Does it make sense to not sign a Division Order, to go for a higher lease well royalty vs. Unit well royalty? If one signs a Division Order at the Unit Rate Royalty - does that apply to any/all future Lease Wells on our minerals?
Regards,
Ralpr
Virginia Pflum said:
Ralpr,
I think I know what you are asking.
A horizontal well can be part of 320 A or 640 A, or whatever it’s spaced at. Check with the rail road commission or go on line to see what it’s spaced at if you are in TX.
So, it is a unit. Everyone in the space unit get there percentage of the amount they own. Let say, it’s on 320 acres, you own 1/6 of 160, that would make you get 1/12 of the whole. A horizontal well will hold the lease even if it’s not drilled on you property. Lets say, it’s 640 A spacing, you own 100 % of the mineral on 160, you get 1/4 of the total at what ever percentage you signed a lease for. So if you signed for 3/16, you would get 1/4 of 3/16% of the total.
I hope this is what you mean. First, if they sent you a division order, you won't have a choice. This is not like a water flood unit or pooling unit if that is what you are thinking. This is like a well being drilled on your farm and you had all the mineral. You will be paid according to your lease. So if your lease say, 3/16% that is what you get, but it will be on the % you own. If your neighbor has a 1/5% he will get paid at that rate for his percentage that he owns.
Now on the division it won't be 3/16 as you don't own the whole thing, so it will be your percentage of the whole at 3/16. Not sure how they figure it now, but it used to be this way. Your take the whole, say 320 A spacing. Your farm has 160 A interest, so your group will be 1/2 of the total at what ever % your lease says, now you divide your group by the # Acres each person owns. That will give you your percentage that you will get.
Example: Where I live in Arlington, TX, we own 1/2 A and the Horizontal well is space on 316A. We signed a lease for 25%, so they take the amount of acres I have divide it by the number of acres the well is spaced at and then they take that at 25% to get my amount. So, the decimal has a lot of zero in front of it and the checks are small even though the well is good.
In Texas you do not have to sign a division order to get paid, although it is usually customary. Unless the rules have changed, a lease well is one that is drilled only on your mineral tract and not pooled with anyone else. If you have a 640 acre mineral interest and the well is drilled on your mineral tract and not pooled, this would be a lease well and you would receive all the royalty designated in your lease. If a well is drilled on another mineral owner's tract and you are pooled in their well, this would be a pooled unit. Your royalty will be in proportion to the whole x the royalty percent in your lease.
Thanks very much for the comments. I’m not cconcerning myself with pooling at this time, just production units or unit wells vs. lease wells.
So, a horizontal well in the minerals, but not on the surface, is considered a lease well for clarification purposes?
Thanks again for the insights 6th Generation and everyone!
please weigh in Mr. Cotten!
Regards,
Ralpr
Regards
6th Generation Texan said:
Ralpr,
In Texas you do not have to sign a division order to get paid, although it is usually customary. Unless the rules have changed, a lease well is one that is drilled only on your mineral tract and not pooled with anyone else. If you have a 640 acre mineral interest and the well is drilled on your mineral tract and not pooled, this would be a lease well and you would receive all the royalty designated in your lease. If a well is drilled on another mineral owner’s tract and you are pooled in their well, this would be a pooled unit. Your royalty will be in proportion to the whole x the royalty percent in your lease.
Unless you own the whole unit acres that a hortizontal well is under it will probably be a pooled spaced unit. The only way I can see that it would be considered a "lease well" is if you own all the acres of the hortizontal well. Most lease wells are Vertical well and will be spaced on 40 to 80 acres for oil and 640 for gas, but one well can hold the total leased acres. On a Hortizontal well, one H well will hold all the acres that are leased in that spaced unit unless that has changed recently. They can still come in and drill some Vertical "lease wells" in differnt sand unless the H spaced unit covers those sands.
I don't know if you can bring this up, but there is a good article regarding hortizontal well cases. It's under
Thanks a bunch! It was fun while it lasted. We're looking at oil/NGL well/s, a little bird told me 14,000-ft deep, with 5,000 foot laterals. So that got me off on this tangent. I thought it might be a geometry issue and that maybe I could hope for Lease well rates. As you know, the lease has all the terms nailed down - not in our favor, of course. So, I thought maybe it would be advantageous to not sign a Division Order at such time.
You are welcome. Let me give you the best example I know to describe a lease well as I understand the concept, which I hope will clarify your understanding (maybe mine too if I am incorrect about anything. Buddy, please chime in if I have missed anything).
A 640 acre estate was divided into three shares, with each child receiving their own 213.33 acre tract of land but an undivided 1/3 mineral interest under one another's surface. All of the mineral owners' oil and gas leases specified that only 640 acres can be included in a gas production unit and all of Lessors' minerals must be included in such production unit. The oil company sets up a drilling rig on one of the children's surface and completes a successful gas well. All three children will share equally as they each own an undivided 1/3 of the minerals. Since the well bore did not extend past 467 feet from any one of their property lines onto another neighbor's property outside of their 640 acres, this well can be classified as a lease well. However, if the oil and gas leases allowed for the oil company to pool at their discretion and didn't state a minimum number of acres of the Lessors' minerals to go into a unit, the oil company is not likely to designate this well as a lease well.
From what I have personally seen and read, the oil companies want to hold as many leases as they can with one well and would opt for a pooled unit to do this. That being said, I also understand they are "supposed" to determine the amount of acres they can successfully drain with their horizontal well. They may want to come back and drill a second well or more on nearby properties, which may be a year or two later. I imagine it depends how much money they have and want to spend, and whether they believe another well or more will be successful.
Ralpr said:
Thanks very much for the comments. I'm not cconcerning myself with pooling at this time, just production units or unit wells vs. lease wells.
So, a horizontal well in the minerals, but not on the surface, is considered a lease well for clarification purposes?
Thanks again for the insights 6th Generation and everyone!
please weigh in Mr. Cotten!
Regards,
Ralpr
Regards
6th Generation Texan said:
Ralpr,
In Texas you do not have to sign a division order to get paid, although it is usually customary. Unless the rules have changed, a lease well is one that is drilled only on your mineral tract and not pooled with anyone else. If you have a 640 acre mineral interest and the well is drilled on your mineral tract and not pooled, this would be a lease well and you would receive all the royalty designated in your lease. If a well is drilled on another mineral owner's tract and you are pooled in their well, this would be a pooled unit. Your royalty will be in proportion to the whole x the royalty percent in your lease.