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Technique Addressing Changes to Units - Fair?

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Technique Addressing Changes to Units - Fair?
« on: November 10, 2014, 02:23:32 PM »
I ran across something the other day that I haven't seen before.

It involves a new group of wells adjacent to a slightly older group. The Midler-Froebe wells in Cross Creek, Washington County, were drilled in 2012 and put into production that fall. The Midler-Froebe unit included eight wells, one of which was left about 1500' short of the unit boundaries to the south. The Carns Donald 15-18H, 23H,25H wells were drilled a bit south in summer 2014 -- I don't believe that they have started production yet.

The Carns Donald unit includes five wells (there are another half-dozen Carns wells at another pad) and has some funny inclusions in the unit. Range added some acreage that was previously in the M-F unit, adding it as one tract in the Carns unit. I haven't seen any division orders yet, but it seems that they intend to evenly distribute these new Carns royalties equally amongst the M-F acreage. I don't think the above explains it well, so I will re-phrase. The acreage that has flipped from the M-F unit to the Carns unit already enjoyed the flush new production of the M-F wells, so it may not be fair to take out the acreage and simply add it to the new Carns unit. Instead, the royalties from the acreage that switched will be shared equally amongst the original M-F royalty owners.

Is this method fair? Definitely fairer than allowing the switched acreage to enjoy those big first two years off of two different groups of wells. In the end, it will depend on the number of wells in each unit and the production. The M-F unit was 944ac and had 8 fair wells. The Carns unit has 6 wells and 734 acres. If the new wells outproduce the old ones, it will end up being a wash.