Hi All, I just got offered $1500 an acre and 20% for Sec 10, 146, 98. Has anyone heard any other current offers? My last offers were last year so I’m just getting info. I had them add a Pugh Clause but the just agreed to quick. Thanks, Rick Tatum
Rick, would that have been a depth severance pugh clause?
Yes
Rick, they won't fight on that because they already have a legal end run around the pugh/depth severance clause. The operator just gets the NDIC to declare all the formations they want as a common source of supply, and to drain a drop of oil from any of them is to produce oil from all of them, therefore 1 well holds all of the formations they want. I think you could make a depth severance clause that they could not weasel out of, by using absolute numbers of depth regardless of formations, say 100 feet above the highest perforation and 100 feet below the lowest perforation. If they are drilling the bakken and you want to reserve the three forks and you were to do the reservation by name, the Bakken and three forks have been combined into the pool "Bakken" for legal purposes.
Just today I was looking at a well completion report from a well drilled 3 years ago and it stated Three Forks as the pool it was completed in, when I went back to the production history page, the pool is Bakken, because it's all legally Bakken now. A good pugh depth severance clause will have to be creative to still be effective. If you demand such a modification for an effective depth severance clause, they are not going to be happy.
Thanks Mr Kennedy, every time I think I have clauses wrapped they throw a curve. Luckily I have not signed yet. I have questions about other things too. As always, I appreciate your input.
Rick, the thing I find horrifying is that there must have been many hundreds of leases with depth clauses that mentioned the formation to be released by name, and the clauses were rendered worthless by a bureaucrat declaring multiple formations to be a common source of supply, not a judge, not an elected official.
It is horrifying but I don’t know if a judge would be better in this day.
Too true.