Received a letter in the mail concerning the Amsterdam Unit in sections 25, 26, 35, 36-T1S-R3W in Carter County. They are wanting to sign a document agreeing to the unitization of this area.
How is signing this going to benefit me?
In my opinion it won’t benefit you (as a mineral owner in the proposed unit) very much at all. The benefits of such a unit (outside of allowing an additional lateral or two along the middle of the proposed unit) are all skewed in favor of the operator. They can drill one horizontal well in that unit and hold by production all of their leasehold in those 4 sections, while your interest in that one well will be diluted. So, in my opinion, until they fully develop the proposed 4 section unit with laterals down the center that otherwise couldn’t have been drilled if they had 2 separate 1280 acre units they are no benefits for the mineral owners at all.
That being said, I’d love to hear if somebody disagrees and I’m missing something here - by no means an expert on the above subject.
Me too, need to know the same
They are drilling in all four sections 9 -17 wells. I asked them if I had to sign the ratification…they said no but it would help. This goes to OCC in 3 weeks and they need the signatures as ammo that everyone is in agreement. I’m not sure what to do. It has not gone to the occ yet so it is not required to be signed. I received 3 of these plans each Containing 4 sections each and I have Wells on some of those sections so I’m trying to figure out whether I should sign it or not and what it’s gonna do to my existing Wells… Help anybody?
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.
M Barnes, thank you for your opinion. I was thinking it would not benefit me for this action but think it will benefit operator. You just reaffirmed my decision.
Thank you, Laura McMurtry
It may happen anyway if about 63% (or whatever the agreement says) sign it. Time will tell.
M Barnes, that’s what I was thinking…they need 63% and then they go to OCC. I’m not going to sign since they havent gone to OCC yet, I’m not sure what the plan is. They say they will leave my existing wells alone and they would not be part of plan but I guess if ordered they can unitize the rest. They are doing 3 of these and there are 4 sections in each. They plan on drilling 9 - 17 horizontal wells on each 4 section area in the Woodford. They have to pay me if anything produces right? They are the Seaport Woodford Unit Sec 13, 14, 23 and ,24, the Amsterdam Woodford Unit Sec 25, 26, 35 and 36 and the Lexintgon Woodford Unit sec 29, 30, 31, 32 all Carter. So I own parts of Sec 13, 14, 24, 25, 26 30, and 35. Tract participation is 25% for each section of 4 section unit. I’m very skiddish about what to do…what’s the advantage or disadvantage? I think I should wait til the actual order comes out from OCC…thanks for any advice!