We inherited oil and gas production royalties for various wells in Leon County, TX. All of the wells are approximately 5800ft depth. What will happen to our royalties if wells are drilled below our existing wells? Do we renegotiate or are they automatically considered as pooling? Or something else? Curious how this will impact our royalties.
It all depends upon the lease you have and the locations. I hope yours are not located in the “Alabama Ferry Field” water flood mess! 5,800 ft. production is not considered deep.
It would be wise to find the original leases to see what they say. Hard to comment without specifics.
Your royalties are currently tied to the current wells controlled by their leases. Those royalties will likely decline over time as the volumes of the well production decline. (holding prices equal). If new reservoirs are successfully drilled and completed below you, then you have a chance for increased royalties from those new zones. If you had no depth clause on the original leases, then as long as there is production under the terms of the older leases, those leases hold to the center of the earth (unless you have certain wording in the lease or by statute that releases other zones).
If the old leases had a depth clause, then depending upon the wording, you may be able to negotiate different terms for deeper horizons.
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