Unit Size

Shales Cana Woodford Shale (AKA Anadarko Woodford)
1

I’m wondering what the other folks on this forum think about the increased unit sizes the state of Oklahoma has recently approved. Is this a good or bad deal for royalty owners?

I understand you are paid in proportion to the number of feet drilled in your unit. Does this mean that if 5,000 ft is drilled in your unit and only 1,000 ft in mine, that your proportionate royalty is 5x mine? Or are the units combined and everyone gets a smaller piece of the pie, with the theory being that over time the pie will become larger due to more wells being drilled?

The state says this will be a good deal for all parties. What do y’all think?

2

I think that instead of a 640-acre unit, the oil company will have a 1280-acre unit. So, hopefully if they drill 2 miles horizontally, the well will produce twice as much so you will get the same royalty as if they had drilled 1 mile through a 640-acre unit. Hope this makes sense.