Have three wells that have been shut in for three years - no revenue at all. Any success stories out there on ending the lease (due to no production ~ HBP clause) and taking over operations of the well in Payne County or in Oklahoma in general?
Thomas: It is likely that your lease contains a shut-in royalty clause. Most leases pay $1 per acre per year that a well is capable of producing natural gas in paying quantities. This is a standard lease term that protects a company that drilled a well but is not capable to getting the product to market. Usually, this is the lack of a pipeline infrastructure. Many leases require the mineral owner to actually request payments and will not send them automatically. I like to impose a maximum shut-in period in leases.
So you may want to ask the operator for details, if it is not subject to a shut-in clause request a release of the lease.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.
Appreciate the discussion around shut-in clause. There is pipeline and facilities in place as the wells were producing prior to shut-in. Since there was no revenue there is no payment for shut-in clause for three years. I think there is potential in taking over the well, but this is new to me. Hence, my question on any success stories on taking over operations per failure to HBP?
IMHO, only a bored person with very deep pockets would attempt your musings. There is a reason the wells aren’t profitable & producing! Ask for a release of your lease outside of the wellbore. Then try & find someone that wants to lease you. Natural Gas at $2.00.
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In 2022 oil was > $90/stb, gas > $5/mcf, yet the wells weren’t temporarily put back on production (given the rates at the time of shut-in, these wells would have been wildly economical). Appreciate your insight to lease outside the wellbore. Leasing will be tough - drilling is not active in Payne County, rigs running in prolific Anadarko Basin. I’m actively trying to understand my options in managing my minerals in the face of my perceived neglect by the operator. Again, my specific question is: “any success stories on taking over operations per failure to HBP?”
I have wells in Payne county operated in pretty much the same manner. They are good, strong wells but when the tubing needs to be tripped for whatever other reason, the company struggles, shuts the wells in until they build up enough revenue to repair the well. These prudent operator concepts come into play here, however that would cost money.
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