Horizontal Drilling - Leasing Strategy

Oklahoma Mineral Rights McClain County, OK
1

I have two questions about leasing strategies with respect to modern horizontal drilling/fracking:

  1. Because the geologic risk is (usually) lower than in traditional wells, does it make sense to negotiate for the highest royalty (which comes with a lower bonus payment than if I were to accept a lower royalty)? Or have the O&G companies figured out that various combinations of bonus/royalty will end up costing them about the same?
  2. Given the large unit spacing, does forced pooling always occur, and if so, does it make sense just to wait for that to happen (even though lease terms are then not subject to negotiation)?

[I'm new on this forum and apologize if these questions have been asked and answered many times before.]

2

1. It depends on your cash situation, and whether the unit will actually be developed. If you don't need the money, gamble on the higher royalty. But, that gamble also is subject to the risk that a well or wells will not be drilled.

2. Hard to say. If you own minerals in multiple units and do a "multi-section" deal, you can sometimes get a higher value than what they will offer at the pooling.

3

Thank you, Frank.

John Keys