We have received a recorded copy of a Unit Agreement for the Development and Operation of the Grisham-State Unit between Cimarex and the State of Texas. Just trying to find out how that impacts us. Any suggestions? I have emailed the landman from Cimarex who signed the cover letter but have not gotten a response. Thought maybe someone might be able to give me a Readers' Digest version of the affects of this agreement on the mineral rights owners. Thanks!
Well, Lea, it comes out better for some than others. I'm usually glad to be unitized because it's normally a waterflood - secondary or tertiary recovery - that will increase the production.
Ann - I wrote a reply yesterday evening but I'm not sure it posted since I don't see it this morning. If you didn't get it I just wanted to thank you for your reply but also, to let you know that I am way out of your league! I am definitely still a newbie! The only thing I think I understand in the agreement is that even if Cimarex doesn't begin operations before our lease expires in July, 2015, the lease will continue in force as long as the unit exists and that they are required to drill a minimum of 4 wells per year within the unit lands. They have a very long horizontal well approved on our property and we have negotiated a Surface Use Agmt so I believe that they do intend to drill this well. Anyway, I wish I understood your response! I like the part about "increase the production"! But, there might not be a Readers' Digest explanation. Again, Thanks! Lea
OK, Lea, I see now that you are referring to a different definition of "unit". Horizontal wells take quite a few acres and those acres are referred to as a unit. They may drill more than one well in the unit and in your case it appears 4 wells are planned. You will be paid your proportionate share of production.
Your lease will continue in force as long as there is production. Also, your lease may have an option for a 2 year extension and Cimarex may exercise this option next July if they haven't found production yet.
Yesterday I was referring to older production. Unitization is where a number of leases are combined and to oversimplify, salt water is pumped into one end of the lease and it forces oil out the other end of the lease. It is to recover oil that otherwise can't be pumped out.
Thanks so much, Ann!