I was wondering if anybody has been in a similar situation.
My wife has rights in 2-09N-06W that are leased to Citizen Energy II. The initial lease term was due to expire this summer if drilling activity had not commenced, so she received a check last week to re-up the lease. However, the company had to stop payment because, per Citizen, Leon 1H-2-35 was spud on May 5th. That particular well is to be drilled in 11-09N-06W with spacing extending into 2-09N-06W. Seems simple enough so far.
However, there is still a pending case on the docket relating to 2-09N-06W. There is some matter on the docket to be addressed this month I believe? The drilling permit even included a note (**S/B X144013 MSSP 2-9N-6W; TO BE CORRECTED AT HEARING FOR FINAL ORDER PER OPERATOR). Is that just considered a formality, or could the status of that hearing affect whether Citizen can legally consider activity to have begun in section 2?
I don't see a notification of well spud, but the pooling order was granted on 5/5 so maybe that's what they're talking about. That's not enough to HBP you under normal circumstances. It's likely they spud a well soon though because they will be running into lease expirations starting in August.
They sent a certified letter informing us of the "mistake" and stated that the well was spud on May 5th. Do the notifications of well spud normally come through quickly? Any chance it's just a BS tactic to avoid paying additional bonuses on lapsed leases?
A 45 day lag would be unusual. The operator is required to file a Form 1000 with the OCC for their permit and then a form 1001A for notification of well spud. Neither has been filed on this section which leads me to believe that the well hasn't been spud because they don't have a permit best I can tell.
Hard to say whether it's a tactic or not, but it would a poor one since this is public record. I would just call the landman and ask if the well has spud how come they don't have a permit filed of record.
Permit to Drill
Notification of Well Spud
As far as the note in the drilling permit goes, "**S/B X144013 MSSP 2-9N-6W; TO BE CORRECTED AT HEARING FOR FINAL ORDER PER OPERATOR", I believe it is related to paragraph 10 in the interim order that says, "10. Reopening of Cause and Final Allocation: This cause shall be reopened on the 10th day of April, 2017 for the final determination of the allocation of costs, production and proceeds for the multi-unit horizontal well involved herein and submission of the bottomhole survey and evidence of the actual completion interval and its location in each of the affected units." This is normal language for multi-unit wells.
Interim Order of the Commission
Good find. Oversight on my part.
"To be corrected at hearing for final order" usually means an adjustment for the final percentage split for a well covering two or more drilling units. In this case, the well seems to cover two sections and the final percentage split will usually be based on a survey taken after the well is drilled to determine how much of the "gross perforated interval" is one each side.