We were notified we have mineral rights to a section that has two producing wells. Apparently it has been pooled with another section.
Our unleased portion is being approached to lease by PRI (Delaware Basin LLC)
My question is how does pooling affect us? The good? The bad? Does this change anything? How does this work when it comes the operator offering us a lease amount? Tips? Thanks!
If you have leasing rights, then pooling means that your interest in production will be reduced by multiplying it by a fraction the numerator of which is the gross acres covered by your lease - the denominator is total acres in the pool. If you own 1/4 leasing rights in 100 acres which is pooled with another lease in a different tract of land of 100 acres in which you own no mineral rights your 1/4 would be multiplied by 100/200, so that you would received 1/2 of 1/4 or 1/8 of total production, rather than 1/4 of production if your 100 acres had not been pooled.
If LDetter only owns a fractional interest in the minerals the acreage and the other mineral owners in the same tract are under lease, then the oil company as lessee has the right to drill and operate wells. For example, if LDetter owns 1/10 minerals and the other 9/10 are under lease, then the oil company may drill and carry LDetter as an uneased mineral owner in the tract. In that situation, LDetter will come into the well once it reaches payout (100% of drilling costs and operating costs are covered by the revenues to date). Oil companies generally do this when the unleased percentage is small. Some mineral owners prefer to be carried as unleased mineral owners rather than to lease.
With regards to your answer for L/Detter as pertaining to being carried as an unleased mineral owner. When you refer to ( 100 % of drilling costs and production cost are covered by revenues to date, are you saying that as an owner of unleased mineral rights that my pay out %, will not have deductions of production, drilling or any other related cost to producing (which would probably give me a better payout) rather than those deductions which are normally deducted from any royalties i would receive if I were to have leased my mineral rights under a traditional lease agreement of 3yrs?
In fact I spoke to the individual that is offering to lease my mineral rights today, and brought up those very things. Of course he told me no changes could be made to the mineral lease in that way; the same was said when I mentioned the Shut In well stipulations of 90 consecutive days not working for me, I would want that time to be cummulative days, over a period of 1 year ( thinking maybe he would counter and offer it on a 2 yr) but he again said it just wasnt possible that the owner wouldnt agree to red line or change anything. I mentioned about carrying me as an unleased mineral owner and that it may be the best thing for me to do. He told me about a past case scenario where everyone had signed, except for a few, and they were force pooled, which in turn only yeilded them 3/16% from RRC. If I didnt sign my lease, the owner has already had to expand in another area and the owner would do that with my property if he needed to. Well I understand everything he has said and I know that if someone wants something bad enough they will make a few exceptions. So I am putting him off, to give him time to think about what he can get done to close this deal, and so I can look a little more, make more side notes as to what I would accept. Then he will have to decide what to do for me. As you suggested I will seek advice from an Oil and Gas Attorney before I sign anything, if I sign at all. Thank you very much for your suggestions, advice and sharing your expeirence.
Jet, You are “Spot On” . . . . . . don’t let them “bluff” you but I suggest you investigate “Forced Pooling” to educate yourself on what you are actually looking at.
Your ability to negotiate lease provisions is affected by the net mineral acres which you own. Tell the landman to put all his claims and statements in writing in an email. Phone discussions can be too easily misconstrued. Texas does not have forced pooling in the sense of Oklahoma and New Mexico. Ask the landman to cite the exact well, operator and location about this past case scenario. He may be referencing the Mineral Interest Pooling Act which is almost exclusively used with respect to cities with small house lots in order to enable drilling. Colgate Energy has used this for its units underlying City of Pecos in Reeves County. If you post information about the location of your minerals, then you can get better responses. As to being an unleased mineral owner, be aware that some wells never payout and in other cases, payout is reached only after several years when production has severely declined. Some oil companies are very difficult to work with and will not provide information readily. There are mineral owners who like to be unleased, but they are generally fairly sophisticated.
We are section 25 block c-1. Section 25 and section 6 are pooled apparently. All I know is its Wolfcamp A and B.