Why does the State of Oklahoma agree to unitize sections for oil companies? Many times this will be unfavorable for the mineral owners in a particular section.
Many thanks.
Melinda
Unitization is a tricky deal. If possible, provide us a little more information and we can probably address your concerns. There are usually good reasons to unitize production that ARE beneficial to mineral owners.
They unitized sections 15-07N-05W and 10-07N-05W in Oklahoma for the Taylor wells produced by Newfield/Encana/Ovintiv in 2019. Because of this, the royalty interest on the wells are spaced over 1280 acres instead of 640 for each section. Since we only have property in 15-07N-05W, we get about 60% of RI that we would if they were using 640 acre spacing for each section.
The companies frequently unitize or create multi-section units so that when drilling lateral wells, they can produce from more acreage. Less drilling costs, the more likely it is to drill. Your premise is that you’re only getting 60% of the production. However, in that you’re suggesting that all of the oil and gas is under your section, and none is under the section to the north or south. You are actually getting a fractional share of the oil and gas from two sections rather than a larger share from one section. Technically, unless the well in on your tract, you are getting oil and gas from somebody else’s tract in your section. A larger part from a pond, or a smaller part from a lake.
I actually have a working interest in those wells. There has been no unitization. The Woodford and Mississippi formations were spaced on 1280.00 acres.
I agree with Tim’s explanation. Is 50% of 2 better than 100% of 1?
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