I have a lease that’s HBP by a single well completed in 2008 and producing from the Mississippian formation. Although this well has been shut-in since 2012.
My lease has the following depth clause: “This lease shall expire two (2) years after the expiration of the primary term as to all depths from one hundred (100) feet below the stratigraphic equivalent of the deepest depth drilled and producing from any well drilled during the term of the lease or any extensions thereto, on the lands described herein or in any land that was spaced, unitized or pooled during the primary term.”
A new well is now planned and I am listed on the pooling application which includes the Mississippian, Woodford & Hunton formations. I questioned the Operator’s Landman about why I’m being pooled and was told that they are drilling a target Mississippian well and I am HBP down to the base of the Mississippian with no rights open to lease or pool in their target formation. However, I am being included in the pooling because they are also pooling the Woodford formation (just below the Mississippian), “for inadvertent penetration only”, but no bonus is allocated to the Woodford and no pooling election is needed on my part.
Is this normal procedure to pool the deeper formations for “inadvertent penetration” with no bonus paid or pooling election to be made? The Hunton formation is also being pooled along with the Mississippian and Woodford.
Yes. Drilling a horizontal well is sophisticated, but not perfect, so they may accidentally dip into it while drilling. If you can lease ahead of time, you may be able to get some bonus.
They are saying that because their target is the Mississippian they have no need to lease the deeper Woodford and Hunton, even though they may inadvertently penetrate the Woodford. They’re also saying I won’t be able to make an election under the pooling. It seems to me like that would mean my deeper rights will have been pooled with nothing to show for it. I guess I’m just at their mercy.
I have received shut-in payments over the past 7 years, however I believe they missed at least 1 or 2 of those years. The new operator was originally questioning whether the old well was even viable, but now they’ve acquired the old leases and say it is viable and the leases have been maintained. It just seems strange to me that they would pool my deeper rights, but there would not be any bonus allocated to it. I was just wondering if that is normal.
There may be an argument that even if they can tender shut ins they still have to show the lease is capable of producing in paying quantities. As with most issues, depends on the facts and what the lease says.
If it were me, I would be fussing for proof that the well is viable and I would want pooling bonus. Especially if payments were missed. Check your lease to see if you had to demand them. That can be a hiccup.