Carter Co. Ok Proposed Plan of Unitization

[Myla]

I received a Proposed Plan of Unitization from Continental Resources re: Chelsea Unit. I’m really uneducated about royalties in general, other than just super thankful for them. They ask for a signed ratification. Can anyone help me understand this? Is there really a choice? Thanks!

[EnerScout]

So far I’ve received three of these.

1S-2W

Sec. 29,30,31&32 “Lexington Unit” to commence Q1 2020 - Complete by year end 2024

2S-3W

Sec. 1,2,11&12 “Chelsea Unit” to commence Q1 or Q2 2020 - Complete by year end 2024

Sec. 13,14,23&24 “Seaport Unit” to commence Q1 2020 - Complete by year end 2024

All cite increased recovery, prevent waste, facilitate cost savings and reduce surface disturbances as reasons for unitization and the same being for the common good and will provide substantial economic benefit to both royalty and working interest owners.

All state Continental anticipates drilling an estimated 9 to 17 Horizontal Woodford wells with approximate average lateral length of 9,800’.

All sections are allocated roughly 24% to 25% for each proposed 4 section unit. No mention of per well or project cost is made.

It would appear CLR intends to present these ratifications along with their leasehold to the OCC when it comes time to file development applications. Could this be the solution to warding off potential protesters the OCC?

Frankly, I’ve never seen HZ development purposed in this manner - especially in Carter Co… Can anyone provide an example?

[M_Barnes]

Continental is very experienced at drilling giant projects like these. Check out the SPRINGBOARD topic on the forum or go to the Continental website. Probably what they are planning to do in the Carter area.

[oilwell13]

I have the same 3 from Continental… in the letter it says “drilling section line wells, which would not be permitted under ordinary spacing”…that’s what they are doing…imnot signing anything until I see the order…what are you doing…I need on this too…thanks

[M_Barnes]

@M_Barnes

Personally, I would not sign it. Here is an example why.

The general formula for one section is: net acres/spacing acres (actual) x royalty x % perforations in your section.

For example: 10 acres net, 640 spacing, 20% royalty, well 50% in your section. 10/640 x .20 x .50= 0.0015625 decimal interest. For every horizontal well in that section, each one would have a certain split based upon the % of perforations in your section, so the decimal interest might vary slightly. They cannot drill within either 330 (or 660’) feet of the east or west edge. But that spacing only holds one section. You get paid on every well that lands in your section. If the well is totally within the section, the last term is 1.0. If the well is partially in another section, then the third term is according to the % perforations in your section.

if they space at 1280 (2 sections), then the equation is: net acres/spacing acres (actual) x royalty. 10/1280 x .20= 0.0015625. Same decimal, but you don’t include the last term since the well is 100% within the 1280. Again, I am assuming a north-south well and no drilling in the easements. You get paid on every well that lands in either/or both sections.

If the spacing becomes 2560 (4 sections), then the equation is: net acres/spacing acres (actual) x royalty. 10/2560 x .20=0.00078125. That means that you would have a smaller decimal with every increase in spacing. On the one hand, if they drill lots of wells, they do not have to abide by the 330’ spacing on the lease line and can add another well in. You would get paid on any well in the four section unit. That is the upside. The downside is that they can hold that entire 2560 acres with only one well and you would only get a small fraction of it. Personally, I would rather see them drill the original two section well in the east 1280 and another one on the west 1280 first to confirm the geology before I signed the unit agreement. Read the agreement and see how many wells they are proposing. You have to hope that they would actually drill them. But suggested wells are just that. They do not have to drill them.

This is my answer for a similar offer nearby…

[Claire_Melvin]

When is it advisable to hire an attorney to contest this updated unitization?

[TODD_M_Baker]

I wouldn’t do it unless you can convince 35% of the folks not to do it or you have a very sizable mineral interest. Good luck with that.

[Claire_Melvin]

That’s what I thought. Our Landman is recommending that we (family) hire an attorney to contest the unitization.