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Cross unit drilling

  • 13 Replies
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shinobi

  • 4203
Cross unit drilling
« on: March 28, 2015, 09:40:43 AM »
The concept of cross unit drilling is new to me.  On chance it might also be new to you, I decided to share:

http://www.gohaynesvilleshale.com/forum/topics/cross-unit-horizontal-well-notices

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cara

  • 819
Re: Cross unit drilling
« Reply #1 on: March 30, 2015, 09:26:46 AM »
I posted info on the issue a couple of years ago and there will be more and more.  The approach makes sense in the respect of a common pad reaching across a single or multiple units.  As a matter of fact Texas has current pending legislation to create a uniform standard.  The reason this need further definiation is there are some operators that are only perferating part of the lateral and not all.  Under this approach one could argue only the royalty owners within the perforated portion are due royalty.

All have to remember there has to be a lease in place to establish the royalty rate that is then a percent of the footage of owned acreage over lateral footage from take point to take point.

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shinobi

  • 4203
Re: Cross unit drilling
« Reply #2 on: April 13, 2015, 10:19:45 AM »
I posted info on the issue a couple of years ago and there will be more and more.  The approach makes sense in the respect of a common pad reaching across a single or multiple units.  As a matter of fact Texas has current pending legislation to create a uniform standard.  The reason this need further definiation is there are some operators that are only perferating part of the lateral and not all.  Under this approach one could argue only the royalty owners within the perforated portion are due royalty.

All have to remember there has to be a lease in place to establish the royalty rate that is then a percent of the footage of owned acreage over lateral footage from take point to take point.

Appreciate response, cara, thanks.  Cannot claim really to understand this like you do.  Sounds regardless to me as if it could be can of worms.  Hope it does not come to PA.

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cara

  • 819
Re: Cross unit drilling
« Reply #3 on: April 15, 2015, 09:20:09 AM »
It will come.  We are also starting to see this in ND, CO, NM & OK.  If the agreement is structured right, why not it's additional money.  Without such an agreement there is well bore trespass.  Each of you needs to be aware of any surrounding activity to ensure your fully and correctly paid.

For example, a typical drilling permit will identify the land location of the well pad and it should also identify the land description of the end of the lateral.  The net result is usually a much larger unit that can include anywhere from a couple hundred acres upwards to 2,560, depending upon state location.  I have heard of a 12,000 acre unit application that was not approved.

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shinobi

  • 4203
Re: Cross unit drilling
« Reply #4 on: April 15, 2015, 09:47:53 AM »
It will come.  We are also starting to see this in ND, CO, NM & OK.  If the agreement is structured right, why not it's additional money.  Without such an agreement there is well bore trespass.  Each of you needs to be aware of any surrounding activity to ensure your fully and correctly paid.

For example, a typical drilling permit will identify the land location of the well pad and it should also identify the land description of the end of the lateral.  The net result is usually a much larger unit that can include anywhere from a couple hundred acres upwards to 2,560, depending upon state location.  I have heard of a 12,000 acre unit application that was not approved.

Well, thanks once again.  I respect your opinion.  But . . groan . . this could be the straw that breaks this camel's back.  It's one more thing for me to try to wrap my tired head around.

Maybe some kind soul will make a sort of "Cross Unit Drilling for Dummies" post.  That would be so nice.  ;D 

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aubrey

  • 14393
  • NEWBIE
Re: Cross unit drilling
« Reply #5 on: February 19, 2018, 11:15:44 AM »
It's one more thing for me to try to wrap my tired head around.

wrap your head around this then...

picture 3 contiguous units, each having say 5000 feet of wellbore making a 15000 foot cross unit well. the operator frac's the entire unit which is farthest from the wellhead, and nothing in the other 2 units. who gets paid all of the royalties? the frac'd unit of course.

after 5 years, the well is only producing a small amount of gas, so the operator frac's the middle unit. who gets paid the royalties? 50% to each unit.

5 more years, the well is depleted again and they frac the last unit. each unit now gets 30% of the remaining gas.

the first unit gets around 55% of the gas, the last one gets around 9%.

why would an operator do this? perhaps the first unit has a lower average royalty burden, or even better...the operator may own a portion of the mineral rights in that first unit, giving themselves the lions share of the gas without a royalty burden.

it's a pretty slick way to scam mineral owners out of more of their gas. if the royalty is apportioned according to the length of lateral whether frac'd or not, it would be fair, but that's not the way it's gonna be done, cuz they're the operator, and they'll be controlling the development of the well.

and how will the mineral owner know if this is being done in his unit? if he's smart he might figure it out, but if he has signed an agreement allowing this, there'll be nothing he can do.

wj
« Last Edit: February 19, 2018, 11:21:28 AM by aubrey »
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macal

  • 9584
Re: Cross unit drilling
« Reply #6 on: February 19, 2018, 03:13:17 PM »



  The deal with Cabot is that the units are assigned a percentage of the production depending on how much of the horizontal is under them. Simple calculation. Never said anything about fracing part of it. The other would be a dirty trick. Hmmm.

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ghrit

  • 3401
  • Member since October 05, 2008
Re: Cross unit drilling
« Reply #7 on: February 19, 2018, 04:00:59 PM »



  The deal with Cabot is that the units are assigned a percentage of the production depending on how much of the horizontal is under them. Simple calculation. Never said anything about fracing part of it. The other would be a dirty trick. Hmmm.
Indeed it would be a dirty trick.  While Cabot MAY be on the upandup, I'll not extend that to all operators.  The key here will be to read and understand the proposed lease alterations before you grant permission for the operator to make ANY changes to the conditions of the lease.  Me, I trust no one.

As to the "simple" calculation, you might want to take a closer look at your assumptions.  Some of your earlier calcs have been, shall we say, subject to more study time than you've spent on them.  Suppose for example that the well is drilled right at the edge of the leasehold, drilled away from that leasehold under the two next in line units, and NONE of the lateral is in the drilled unit ---
There are two kinds of ships.  Submarines and targets.
www.survivalmonkey.com

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aubrey

  • 14393
  • NEWBIE
Re: Cross unit drilling
« Reply #8 on: February 19, 2018, 04:48:26 PM »
The key here will be to read and understand the proposed lease alterations before you grant permission for the operator to make ANY changes to the conditions of the lease.  Me, I trust no one.

if only it were that simple....

in the chk agreement, they state that whether you sign the agreement or not, they will be developing these wells and apportioning the gas to each unit according to the percentage of "perforated" casing that each unit has.

they further state that there is no law against it in pa, so they have the right to do it as they please.

I have no doubt that at this moment, they are lobbying legislators to craft a new law that gives them the codified right to operate this way, probably modeled after Oklahoma's law.

time to start making calls.

wj
CHANGE IT BACK!

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macal

  • 9584
Re: Cross unit drilling
« Reply #9 on: February 19, 2018, 05:59:32 PM »



  A couple things. First is that the vertical part of the lateral is not perforated so the horizontal distance it covers to get to the Marcellus layer won't be part of the proportional equation. Second, are some of these companies still fracing just parts of the laterals. I know that was the case with CHK and Chief in the past to hold leases.

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ghrit

  • 3401
  • Member since October 05, 2008
Re: Cross unit drilling
« Reply #10 on: February 19, 2018, 06:41:43 PM »



First is that the vertical part of the lateral is not perforated so the horizontal distance it covers to get to the Marcellus layer won't be part of the proportional equation.
Astute, that.  If the vertical part were perforated, there would be some gas bubbles in the goat pasture.
There are two kinds of ships.  Submarines and targets.
www.survivalmonkey.com

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aubrey

  • 14393
  • NEWBIE
Re: Cross unit drilling
« Reply #11 on: February 19, 2018, 07:03:38 PM »
wax has a well?

 slaplaugh
   wj
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duffy

  • 2878
Re: Cross unit drilling
« Reply #12 on: February 19, 2018, 08:30:50 PM »



  A couple things. First is that the vertical part of the lateral is not perforated so the horizontal distance it covers to get to the Marcellus layer won't be part of the proportional equation. Second, are some of these companies still fracing just parts of the laterals. I know that was the case with CHK and Chief in the past to hold leases.
Reread the scenerio  headpat

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macal

  • 9584
Re: Cross unit drilling
« Reply #13 on: February 19, 2018, 08:50:44 PM »



  Cabots deal never mentioned perforations.  But if Chesapeake"s does then beware. They do some kinky stuff.
 I feel sorry for their employees.