I have recently been involved as a royalty owner on a Multi Unit Drilling Order in Oklahoma. I am wondering how that effects royalty payment. Are they figured like it would be 1280 acre spacing, (shared with royalty owers as in the 640 acre spacing) or is it figured on percentage by the horizontal length of the well bore, as I have been told, ie 46% to the well pad section and 54% to the addition section?
What happens when the drilling stops, for whatever reason, short in the additional unit? Let say they only drilled 1000 ft into the additional unit. So one unit gets 80 % of production and the other only get the remaining 20%? Does that hold the additional unit lease, even though it is only paying 20% or can the minerial owners release the remaining 80% that is not being produced?
Is this "MULTI UNIT DRILLING" going to open a whole can of worms for the mineral owners to have to fight?
Richard:
I think that you will paid the % royalty per your lease agreement on all production where you are in the spacing unit. If a well was drilled on a 640 spacing unit and your minerals lie in the section say, above or below, then you would not participate in that 640 acre spacing unit. I was of the opinion that most multi-well spacing units were being drilled on a 1280 acre spacing unit. Maybe someone can clarify this further but this is my opinion. I have yet to experience this in my dealings.
Charles,
Thanks for your reply. I have read that this is the first Multi Unit Order in Oklahoma.
The spacing in my section is 640 acres set by the coproration commission. The unit below is also 640 acre spacing. The oil company filed for a Multi Unit permit to drill from one section into another, even though the spacing is still 640 acres. In the permit they applied and received permission to basicly drill both units (sections) with one well and combined the production. The well is in the south side of section 21. They horizontally drilled north across section 21 and into and across section 16 (this is the section that I have interest in), and are producing from the entire lenght of the bore hole. That is 4000 plus feet in section 21, and 5000 plus feet in section 16. According to the application i think it says that they will split the royalty by precentage of the feet of bore that is in the said section. My section has 5000 plus feet so it will pay more than the section that has 4000 plus feet even though that is were the well pad is. I have been told they are doing this because the spacing is still 640 acres and not 1280. So they are producing from two 640 acre units not a 1280 acre unit, therefor both units can not share equally on the production, and must be divided by percentage.
I thought that the reason for declaring unit spacing was to keep the problems of who shares, and deserves payment for production to a minimum. If they are going to drill and produce 1280 acre unit, why not declare 1280 acre spacing and mineral owers share production equally rather than assuming that a percentage of the production come from one unit or another. What if for some reason a well is just drilled into a unit only a few hundred feet and the precentage is 2 or 3 percent, can they can still hold that unit by production when the lease should expire, or can the mineral owner shop the remaining percentage to a new company that wants to drill on thier section? Is that not what spacing rules were supposed to determine? It makes me think that alot of problems and legal battles are going to come from these Multi Unit wells. If I am not seeing this correctly can someone clear this up for me?
Richard:
I have never heard of this type setup in regards to drilling 640's as opposed to a 1280. I can see your points and I'm unclear why this type situation would be approved. I would contact the State regulatory agency and get a further clarification on why these permits were issued as the minutes of the hearing would be available to the public. Maybe someone else on this forum has dealt with this same type scenerio in the past and can shed further light on the matter.
Thanks Charles,
It was a new law passed last fall that allows the multi units. Continetal Resources (CLR) uses a simular law in the Dakotas to do the same there. I think it give them the opportunity to hold leases without having to drill them. It would also allow them to produce two units at a cost slightly higher than drilling one, thus saving them money and time. Don't blame them "CLR"for doing it if allowed, just blame OK law makers for allowing it.
Richard:
My dealings are in North Dakota and Montana as that is where my mineral interests are located. In that area, the only drilling that I am familiar with is normally a 1280 spacing unit where all parties holding acreage in the spacing unit is a party to the well based on the terms of the lease. Again, I have never heard of this but I agree that problems could arise from this type activity. I will try and reasearch this matter in the future.
Richard, You must be talking about the Toms X etc. I remember seeing the pooling order on this and what you said sounds about right. They have allocated %s based on the footage of perforations in each section instead of making it a 1280 section. I agree that it may cause a lot of confusion but if you look at the Operators point of view he is not going to stop short for no reason. With the millions of dollars invested up to that point why stop if there is still production to be had by continuing. Also keep in mind that these horizonals have a pretty narrow pay zone, the fractures are only going out a hundred feet or so from the bore. It's not like they can stop and then suck out all the oil from the rest of the section. I'm not defending the oil companies in any way because I think they write their own rules, but I also don't think they have anything to gain by screwing the royalty owners, at least not in this case. If you are not already a member of the Blaine County group you should join and get some opinions from folks that are in the same boat as you.
Thanks Michael,
I agree with most of what you said. What makes me nervous about the way it is set up, is that they can drill into the combined section just a few feet and hold that lease for an undetermine amount of time and the mineral owner doesn't get a percentage worth much. 5% percent of a well is not alot when there are other operators willing to lease and drill on that unit. I am afraid that some operators will take advantage of a situation like this and hold leases until they can return in serveral years to maybe drill again. Why don't they just apply for 1280 spacing so all mineral owners share equally in the well. Laws and rules like these only benifit oil and gas producers, not mineral owners.
Thanks again for your input.
Michael Hutchison said:
Richard, You must be talking about the Toms X etc. I remember seeing the pooling order on this and what you said sounds about right. They have allocated %s based on the footage of perforations in each section instead of making it a 1280 section. I agree that it may cause a lot of confusion but if you look at the Operators point of view he is not going to stop short for no reason. With the millions of dollars invested up to that point why stop if there is still production to be had by continuing. Also keep in mind that these horizonals have a pretty narrow pay zone, the fractures are only going out a hundred feet or so from the bore. It's not like they can stop and then suck out all the oil from the rest of the section. I'm not defending the oil companies in any way because I think they write their own rules, but I also don't think they have anything to gain by screwing the royalty owners, at least not in this case. If you are not already a member of the Blaine County group you should join and get some opinions from folks that are in the same boat as you.
We leased our royalty in Stephen's Co., Sec. 16 to Newfield and Sec. 29 and Sec. 34 to Continental. With my dad owning a Well Servicing Business with work over rigs for 35 years and my husband manageing it the last 15 years before both of their retirements in '91 we did a lot of business for both of these companies. We feel very confident that they didn't get to be the oil companies they are today by cheating the royalty holders. Although we aren't very familiar with the horizonal drilling our friends who are still in the business tell us it's the way they do nearly all wells now. We are very excited about the prospects of getting wells drilled and have no fear about being cheated out of anything. LET'S GET IT ON!! "BABY, EERR~~GRANDBABY NEEDS A NEW PAIR OF SHOES" LOL
Cick this link to see the entire HB 1909 on Multi-Unit Drilling. In a nutshell it says the Bill covers all the bases and will protect the interests of all parties....Draw your own conclusions!
http://www.oklegislature.gov/cf_pdf/2011-12%20ENR/hb/hb1909%20enr.pdf
lol Just teasing about the "needs new shoes" thing. (they'd rather go barefooted. lol ) The Lord has blessed me with a Great husband who has made us a good living for 43 yrs. and a wonderful family. I know whether we get a well or not we have our mansions reserved in heaven. It WOULD be nice to be able to help some family and friends before we check in, though, (or check out as they say) and help our church with a building project we have going on. Either way (well or no well) we win!!
Thanks for the link on Multi-Unit Drilling Bill. Sound Good!
Michael Hutchison said:
Good attitude Linda! We adopted a child late in life so we are hoping for college money!
That's a HUGE expense alright! Our boys went on Golf Scholarships and it was still really expensive! A friend of ours has 3 in college at the same time. He's thankful for the boom in the oil business at this time (he sells tubing for wells). Best Wishes for raising your child in the way he/she should go and some oil money to help there!
Linda,
Hope your wells are good ones. Being that said, I am not saying we are being cheated. What I am saying is that oil companies have a legal advantage over minerial owners in most cases. Now, that is not always a bad thing, but it is what it is. I realize that oil and gas production is a vital resource that must be brought to the market for the benifit all, but it still is a product that is the property of the owner that holds the mineral interest and is for sale buy the owner not the oil company or the State or Federal government. I would like to see all mineral owners treated equally by everyone involved. I have also been in the oil field service business for 30+ years and can tell you first hand that it is not always equal. Not because the oil companies are cheating or breaking the law, but because of the way the laws are written allows them to have an advantage over the mineral owners. What I have said in this discussion was just that, not anyone cheating someone, just everyone treated the same. I have seen and been involved with one owner threated well, while his neighbor is taken advantage of. I just would like to see standardized, well written laws and rules that is reasonable and just for everyone.
Hope you have a great retirement. I hope to have one myself in a few years.
Linda Keck said:
We leased our royalty in Stephen's Co., Sec. 16 to Newfield and Sec. 29 and Sec. 34 to Continental. With my dad owning a Well Servicing Business with work over rigs for 35 years and my husband manageing it the last 15 years before both of their retirements in '91 we did a lot of business for both of these companies. We feel very confident that they didn't get to be the oil companies they are today by cheating the royalty holders. Although we aren't very familiar with the horizonal drilling our friends who are still in the business tell us it's the way they do nearly all wells now. We are very excited about the prospects of getting wells drilled and have no fear about being cheated out of anything. LET'S GET IT ON!! "BABY, EERR~~GRANDBABY NEEDS A NEW PAIR OF SHOES" LOL
Sorry, Richard, if I spoke out of turn and about misunderstandng what you said. I was only trying to calm your fears about these companies. Please forgive me. I'll bail out of something I know nothing about and wish you the best!
Richard said:
Linda,
Hope your wells are good ones. Being that said, I am not saying we are being cheated. What I am saying is that oil companies have a legal advantage over minerial owners in most cases. Now, that is not always a bad thing, but it is what it is. I realize that oil and gas production is a vital resource that must be brought to the market for the benifit all, but it still is a product that is the property of the owner that holds the mineral interest and is for sale buy the owner not the oil company or the State or Federal government. I would like to see all mineral owners treated equally by everyone involved. I have also been in the oil field service business for 30+ years and can tell you first hand that it is not always equal. Not because the oil companies are cheating or breaking the law, but because of the way the laws are written allows them to have an advantage over the mineral owners. What I have said in this discussion was just that, not anyone cheating someone, just everyone treated the same. I have seen and been involved with one owner threated well, while his neighbor is taken advantage of. I just would like to see standardized, well written laws and rules that is reasonable and just for everyone.
Hope you have a great retirement. I hope to have one myself in a few years.
Linda Keck said:
We leased our royalty in Stephen's Co., Sec. 16 to Newfield and Sec. 29 and Sec. 34 to Continental. With my dad owning a Well Servicing Business with work over rigs for 35 years and my husband manageing it the last 15 years before both of their retirements in '91 we did a lot of business for both of these companies. We feel very confident that they didn't get to be the oil companies they are today by cheating the royalty holders. Although we aren't very familiar with the horizonal drilling our friends who are still in the business tell us it's the way they do nearly all wells now. We are very excited about the prospects of getting wells drilled and have no fear about being cheated out of anything. LET'S GET IT ON!! "BABY, EERR~~GRANDBABY NEEDS A NEW PAIR OF SHOES" LOL
I just got an Multiunit horizontal spacing for some of my land in Garfield Co., OK. I'm a little confussed as why it's being spaced that way. First the #1 order spacing is a 640 A. then #2 spacing is a multiunit tying 2 section together. The length isn't long enough to go a mile if they were only wanting to hold half of each section. This is new to me.
Virginia, what is the location? Maybe this is a way to HBP by only drilling a short lateral on each section or maybe there are geological considerations that limit the length. I would think any length that produces marketable quantities is sufficient to legally hold by production.
Michael,
The location is section 23 & 26, 21N-3W, Garfield co.
I know that OK had a H B 1909 that give oil companies rights to drill Multiunit. But, I don't know why in this area. I haven't seen a log of the well that is in section 26, so I don't know if there is a fault or some realize for the multiunit spacing. Guess I will research it tomorrow and see why.
Anyone who is getting multiunit spacing I would suggest they call the phone # on the spacing order and make sure you understand what is taking place.
This is something fairly new and does cover 1280 A (2 miles), but not like a person would think. If they perforate (create holes) in the first section with only 6 perforation and the 2nd section with 12 perforation, then the 2nd 640 would get 50% more than the 1st section. Lots of exception to this. But, when they are drill V, if they perforate any of the sands and they produce, only the 640 with the well site would share. Again, check each multiunit spacing out.