I invite other members to weigh in on the following view:
When Oil & Gas companies are trying to obtain leases for the purpose of horizontal drilling and fracking in the Cline Shale Play, which I understand is between about 5 and 7 thousand feet in depth in Scurry County, it seems reasonable to me to assume that the companies would have an interest in avoiding competition among themselves. Since drilling multiple horizontal fracking bores from a single drill rig site (with those bores reaching out like spokes on a wheel as viewed from above) would be the most economical method to undertake, it seems likely that a company would seek to obtain multiple contiguous leases comprising an area of at least a Section at minimum. So any competing company could seriously undermine the original company's profitability by purchasing just a few small areas within that Section of leases and thereby blocking some of the directions that the boreholes could take.
Hence it would appear reasonable to assume that the various oil & gas companies acquiring leases in Scurry County would find it in their mutual interests to cooperate and not infringe on each other's plans, for fear that if they did not cooperate in this manner, then none of the companies could profitably prospect for shale gas (and perhaps oil).
Evidence to disprove this reasoning could be experiences by any of you members, of oil & gas companies doing competitive bidding. Have any of you had direct or indirect knowledge of competitive bidding for leases? I would appreciate any light you may shed on the view I have presented. Thanks.
Generally, if one company has leased the majority of the acreage needed to drill horizontally, it scares off competitors from trying to sign up the infill parcels. At least, that is what I have seen.
Mr. Tipton, the operator need not lease all parcels and likely could not be blocked because of one minority holdout. There are people/companies that would lease small portions to either assign to the well operator at a profit or participate for their small portion of someone elses well. Companies have gross and net wells. Net wells is adding all of the % of their minority ownership in several wells that add up to a well. There are those with the main desire to lease in some operators spacing, I believe the term is Block Buster. You may not have 15 million dollars to lease acreage, run title and drill/complete a well but you might have 1 million and the desire to participate and if you can spread your million between 4 or more wells, you have spread your risk. I believe that the operators do not like having these minority partners, that usually the slightly less expensive well isn't as desirable because it is also less profitable. Operators need to have the lease to make the profit. The lease is actually the sale of the oil/gas with only the chance of reverting to the mineral owner. So the lessee has "bought" the oil and gas for the lease bonus and the lessor only has a royalty interest in the production. If a producing well is drilled the mineral "owner" doesn't actually own any of the oil and gas, only a royalty interest in the production, unless production ceases and can't be re-established and attempts to re-establish production cease. By the time that your oil and gas reverts back to you under the terms of the lease, it will be because the current operator doesn't believe that production can be had profitably and he can't find anyone to sell your lease to who thinks so either. Large operators may not try to break off a chunk of another operators well as a courtesy but that doesn't mean that nobody will.
Thank you, gentlemen, for your information. It has helped me gain a better perspective.