I’d like to know the implications of a “form P-17 application to surface commingle the subject leases” I received from Pioneer. No action is required on my part. I actually assumed that production was combined before this notice but want to be sure this is “an industry standard method of measurement and allocation” that will not negatively affect my royalty revenue.
Hi Susan, Just received my 1st. letter (second letter at Post offc) from Pioneer. Any response on this issue ? All in District 07C. Is this the same ? Seems like many red flags upon light research. For example, accuracy of semi-annual well test measurement, “Special field Rules” at play, where Royalty is measured, any “Allocation wells” on property, etc…
Generally speaking, commingling would be acceptable when the production profile of the wells in question is fairly stable and predictable, i.e. older wells. The frequency of testing should be more frequent in newer wells where the production is more variable. While it’s not perfect, remember that any inaccuracies are just as likely to be in your favor as not.
Commingling will reduce the operating costs of the wells, therefore extending their productive life, which will benefit you in the long run.
Steve, thanks for your help ! Your spot on, in that the 2 wells are older ones, and the commingling is not being sought for the newer, horizontal ones. Easy decision to let Pioneer go forward w/o protest on these. However, a semi-annual well test only on the other 7 might be another story ! Thanks again.
Pioneer requested a commingling permit in May that included all 12 of my horizontal wells (ages 2.5 to less than a year old) along with 9 others. They’ve recently sent 2 more permit requests that don’t include any wells on my interests. As far as I can tell every one of the wells listed is horizontal. I don’t see much downside to commingling unless oil quality varies markedly within a very limited geographical area - anybody know? Perhaps different depts/formations produce varying grades - and would they commingle production from different depts/formations if that were the case? I think all of my horizontal wells target the Wolfcamp but I’m not sure how specific that is in terms of depth/formation consistency.
Susan,
There really shouldn’t be an issue with variations in oil quality if all of your wells are producing from the same formation. The only potential downside is an inaccurate allocation based on periodic testing rather than individual tanks for each well. If done carefully, the error won’t be much.
Another benefit to you will be more regularity in your payments. Oil is sold by the truckload and as wells decline in production, a month may go by without enough production to fill a truck so nothing gets sold. With multiple wells producing, you will get checks for your share of the combined production every month.
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