First, I apologize if this question has already been asked and answered. I'm new to this site and haven't run across this topic yet.
My Mom has 160 acres in 29N/58E/20 and 29N/58E/29. In section 20, Continenal set up a well and began drilling in March. As of May, it shows that the well is "spudded". Her lease with Continental ends in May 2015. Once you have a company actively drilling on your land...do they dictate what you can get for a lease/bonus for renewal? I see where people wait to see if they can get a better lease, but when there is already a well there, I'm not sure how that works. What if a different company was willing to pay more? Are we stuck with Continental?
Not unhappy with Continental, just wondering how this all works. Thanks for any insight!!
Christine:
If you have not signed a lease and the operator is currently drilling a well on your acreage, you will participate in the well unless a lease is negotiated. Be sure to study up in regards to these options and the best route for your family to pursue.
If your leased acres are presently being drilled, even if your lease expired today, you would most likely be held by continuing operations clause in the lease.
If the well is a dry hole, there will probably be language in the lease that the lessee has a period of 60-90-180 days between the abandonment of one well before he must begin reworking the well or begin another well in an attempt to gain production.
The operator can start and stop work and the date of each stoppage resets the grace period. If they are drilling right now, it's unlikely that you will lease again. You will most likely be held by production.
They could theoretically bring in a less capable rig in the last day of your lease, drill to about 2,000 feet and have that rig leave and have up to 180 days to bring in a rig capable of drilling to full depth. Then the lessee could have up to 180 days to frack your well and that would reset the clock again before the lessee must have production, which has little to do with when you are paid. You may not be paid for a year or more after production is sold.
If you have drilling now and your lease expiration is 9-10 months away, most likely you need not worry about leasing again. If you don't receive a division order in the next year, I would suggest you look into the matter more closely.
Christine:
Mr Kennedy offers great information and advice. I apologize for my response as I didn't read your post carefully. I was responding as if you were not currently leased. Good luck on your new well.
Thank you Charles and RW! It does make sense that if you are producing, you wouldn’t necessarily re-lease. This is all so new to us. My mom received a “Division Order” in the mail today, so now I need to figure out what that means. On the original lease paperwork, it mentions 3/16 royalty. On this Division Order, it says “Royalty Int 0.00878906”.
I’m thinking it might be in Mom’s best interest to find a lawyer that specializes in oil leases.
Thanks again for your insight! It is much appreciated!
It is called "Held by production" HBP, Continental has exclusive rights to it now that it is spudded; my best well is a Continental; hope your area is producing well. It may be up to 6 months before you get a check from them as they have "Confidential" rights to what is producing to protect their investment of up to 7 ;million in a well.
Thank you, Dctex99! Good information to know!
Christine, you may be able to work out your royalty interest with a little study here on the forums. I believe your royalty interest is your net acres multiplied by your royalty interest .xx and divided by the acres in the spacing to arrive at 0.00878906. Usually I see it called a decimal interest.
Thank you, RW! I’ve been kind of messing around with the royalty calculator! So much to learn!
Christine, I was fishing around looking for information for my wife and found this site. Your parcels seemed very familiar and I had a suspicion that we might be related somehow. I asked Lori if she knew who this was and she said "how in the world did you find that?" She's my cousin. Anyway, thanks for asking all the questions since it has now saved me the time of doing some research. BTW, Since we live in another hotbed of production (Eagleford Shale) I did have an oil and gas atty look at the contracts last year and everything was legit. The royalties aren't quite what they are in Texas as most of them are 1/4% but not bad contracts.
Hi Mark! Yea, just trying to learn all I can about this. Thanks for having your attorney look into it! Too bad all this didn’t come about when Grandma was still alive! She really deserved to be a part of this!
Mark Roberts said:
Christine, I was fishing around looking for information for my wife and found this site. Your parcels seemed very familiar and I had a suspicion that we might be related somehow. I asked Lori if she knew who this was and she said “how in the world did you find that?” She’s my cousin. Anyway, thanks for asking all the questions since it has now saved me the time of doing some research. BTW, Since we live in another hotbed of production (Eagleford Shale) I did have an oil and gas atty look at the contracts last year and everything was legit. The royalties aren’t quite what they are in Texas as most of them are 1/4% but not bad contracts.