I have a mineral interest in Brazos county that goes back to a lease in the early eighties for the Austin Chalk. It has been producing a minimal amount for the past 10 years. I realize that it is held by production but my lease does have a Pugh clause in it that I thought carved out the deeper rights. It basically states that after a four year period, from the initial lease, any zones separated by 100 feet from the Austin Chalk would revert back to the lessor. A well has been drilled and completed in the Eagle Ford and I got division orders as if this zone was also held by the Austin Chalk production. The royalty on the old lease is 1/6 and I know the market is more like 1/4 now. Also, am I wrong in assuming that there should be a lease bonus for the Eagle Ford? Shouldn't I be able to negotiate a new lease for the Eagle Ford?
What you are describing is a situation that is present across much of the Eagle Ford trend where there was originally AC production.
Key here as I see it is the exact wording of the Pugh clause. Since the Eagle Ford is technically directly below the Austin Chalk and the section between the Base of the Austin Chalk and Buda (which technically includes the Sub Clarksville, Woodbine, Eagle Ford and Maness sections) can range from 100' to over 400' , the Pugh clause wording is critical.
Is it 100' below the AC producing level? Or 100' below the Base of the AC? Or covers any formation that includes the 100' below the AC? Or any other variation?
This is definitely an issue where I would get an experienced O&G attorney involved to determine exactly what is HBP and what was released back to you via Pugh clause.
The wording is " lease shall automatically terminate as to all formations and horizons deeper than 100 feet below the deepest depth from which lease shall then be producing". The lease was written in '83 so no thought was given to the Eagle Ford. I think the key may be the definition of "deepest depth". I figured I'd have to spend some money to have it reviewed. I didn't get any notification of the well so I'm pretty sure that's how the operator looked at it. Thanks for your reply Rock Man.
I have seen this sort of wording interpreted to include ALL the Eagle Ford HBP even if 300' of the EF is below the 100' limit. And other companies go out to lease the section below the 100' limit to just be on the safe side.
A good lawyer will help you here. I am sure that this is a common theme with old leases that attorneys are working with
I think you are right Rock Man. I'm sure I can find an attorney in College Station that's had exposure to this. Do I need access to logs and engineering on the old wells plus the new one to determine exactly where the zones are being produced from? As a royalty owner is the operator obligated to provide this to me if I request the information needed to verify their position or establish support for mine? Thank you very much for your knowledgeable input.
Unless your lease stipulated that the operator had to give you such info, the odds of you getting something from the present operator is slim.
To save legal time (I am sure a lawyer can get you anything you need - at their hourly rate), you can do some research to get as much info as possible (completion info, logs, etc.). Tx RRC commission is a good source or there are other sources (DrillingInfo.com).
Do you have well name? API number? Abstract name and number? I can probably help you find some info if you want.
Thanks for the offer. The mineral interest came to me via inheritance. I don't have an API number on the older wells. I do know the abstract they are in but that's about all I know. The wells have only produced enough over the past few years for Apache to hold the leases. I honestly didn't know anything was going on down there until I got what appeared to be a legitimate offer for my interest. Now I know the offer came after a drilling permit was issued for the new well. I didn't know Apache had farmed the wells out to Marlin Energy. I'll need to do some more research. The older well unit names are Vince Court (A) #1 in Abstract 232, I J Thompson survey and Vince Court unit #1 in the Wm Mathis survey Abstract 37, both Apache Corp, subsequently farmed out to Marlin Energy. The new well is the Brazos Farm Ltd #1 Unit, Marlin Energy Resources, LLC in the James Curtis survey, Abstract 12 and extends into the Wm Mathis survey, Abstract 37. Thanks again, you've been very helpful and I really appreciate it.
John
Let me do some digging on this - I am familiar with the area / these may be old Amoco wells based on the lease names.
May take me a day or two
Wow, thank you so much
Dug up some info on the two historical wells that you mentioned plus the Marlin Energy well.
The historical wells are still operated by Apache. Vince Court 1 (42-041-31198 API / Abstract 37) is a Woodbine producer that made 67 BO & 23 MCF in Dec 2014. It has been producing from the Woodbine since 2007 and it produced from the Buda and Austin Chalk prior to the Woodbine completion.
The Vince Court A 1 (42-041-31250 / Abstract 232) is an Eagle Ford producer that made 57 BO and 37 MCF in Dec 2014. Prior to being completed in the Eagle Ford, it produced from the Buda Lime.
I pulled the log on this well - the completion interval is definitely in the Eagle Ford.
With these two wells producing in the Woodbine and the Eagle Ford, there is a good chance that the deep rights have not Pugh'd out and reverted back to the royalty owners, i.e. the original lease and terms are still in force.
The Marlin Energy well appears to be a pretty good completion based on IP info and partial first month production. I have attached the permit, completion form and production graph (one month only) for this well.
They appeared to have had a lot of problems on this well - note says that it was side tracked twice.
As you indicated, Apache must have farmed the Eagle Ford rights out to Marlin for this unit.
All this info can be accessed on the Tx RRC site / best to use the GIS mapping site to find well points and access related files.
1416-MarlinBrazosFarmspermitandplat.pdf (2.64 MB) 1417-MarlinEnergyBrazosFarmsProduciton_Dec2014.pdf (38.7 KB)Here is the completion report on the Marlin well - too big to include in previous email. Note API info for Marlin well on these forms.
1415-MarlinEnergyBrazosFarmsTXCompletionsb17c3fd34e304048812607b32c471b7a.pdf (3.46 MB)Here are the completion reports on the two Vince Court wells for the intervals that are still active (Woodbine and Eagle Ford). I could only find them in TIFF files so you will need a TIF File reader to view. Note the perforation intervals on both reports.
You can probably view these in PDF format on Tx RRC site
Thank you for your research. This is above my pay grade. I can get around he RRC website OK but skills are still lacking. I saw the term side tracking when researching the new well. I'm curious as to what that is. It does appear to be a good well. Is there a good history of production from this interval? I've read where these wells have a fairly short economic half-life. I wish there was some way to return the favor. Your input is invaluable.
Sidetracking is basically drilling a new hole because the original hole that was being drilling had some sort of irreparable mechanical problem.
Stuck drill pipe, collapsed hole, catastrophic down hole problems, but never a good thing - and very expensive as you can imagine since you are basically having to go back and re-drill part of the well that you already drilled.
The Eagle Ford (or Maness) is a good producer in this area. If you google Halcon, Anadarko, Apache, Clayton Williams, Comstock, you will find presentations that address this interval in this area. Google EOG and you will see their Eagle Ford effort in Kenedy / Gonzales area as one of the best in the play.
These wells are known to have very steep initial decline, i.e. after 12 months, the production be only about 20 to 40% of what it was when the well started producing on Day 1. Estimates vary, but about half of the production is made in first 18-36 months - then the well should produce at lower rates for up to 25-30 years (pending no mechanical problems).
I would suggest you take a look at the Eagle Ford forum (www.eaglefordforum.com). This is a long lived (about 3-4 years old) blog with some really good historical information on the Eagle Ford. You can "search" for various topics and get a lot of info. I would suggest your search terms like EUR and decline to get started.
Glad I could shed some light on your situation.
Thanks again. Great information and I really appreciate your effort. Not man people would do what you have done. I've seen some of the investor presentations and some of the wells are quite prolific producers but I do understand the decline curves are pretty dramatic. We'll hope for a quick recovery in the price although I personally don't see that in the immediate future. Money's still cheap and investment, via debt, will be quick to come back into the market if prices trend up. It will be a learning experience this time around. We've never had this technology in times past and when we got hurt on the supply side, it took a long time to recover. I think this will be cat and mouse with the Arabs for a while. JMO. Take care.