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Permalink Reply by Skip Peel - Mineral Consultant on June 30, 2013 at 3:41

Cross unit laterals have a defined linear footage of perforated horizontal well bore.  Each unit has x number of feet of perforated lateral within its boundary.  And that percentage of the whole is the production credited to that unit and shared by the mineral interests pooled in the unit.  Think feet of perforated lateral as opposed to bottom hole location.  Yes, mineral interests would receive royalty on every cross unit lateral well that included their unit.

If a cross unit lateral has 9400 total linear feet and 4950' is in unit A and 4450' in unit B, then 52.66% of production would be credited to unit A and 47.34% to unit B.

Cross unit laterals are a new development in the evolution of horizontal drilling and production.  Operators are attempting to drive down the cost of producing a unit of hydrocarbon.  IMO a reasonable response to low gas prices that are unlikely to improve much over the short term.  There is also the realization that unit set back requirements leave a significant amount of productive shale un-fraced and therefore un-produced.  A cross unit lateral eliminates the 660' (330' in each adjoining unit) of un-fraced shale where two units meet.  Set backs are an important means to limit production to only the minerals pooled within a unit that originates in the past where basically 100% of hydrocarbons produced came from formations with sufficient permeability allowing oil and gas to flow to a well bore over considerable distance.  In "tight" formations that doesn't happen.  Without a fracture stimulation (frac) there is no flow.  Theoretically the production of the shale in that set back zone should increase the production for all the units, and mineral interests, sharing the cross unit lateral.

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Permalink Reply by fred on June 30, 2013 at 4:23

Very interesting. So a property owner would still get his/her percentage share of the well based on acreage owned, depending on how much of the lateral is in the section? How deep are these wells? Are they using existing well pads? Mostly Haynesville? Can you cite any completions? Lots of questions.

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Permalink Reply by Skip Peel - Mineral Consultant on June 30, 2013 at 4:52

Yes, Haynesville Shale wells, fred.  Same True Vertical Depth (TVD) as previous HS horizontal wells.  I haven't looked at any completion data for Cross Unit Lateral wells.  I'm not sure there is anything to compare them to with regard to improved production.  Likely only the operators have that data and I haven't seen any public statement regarding CULs. There have been a number of units approved for CULs but I don't think many of those wells have been drilled yet.  We may have to wait awhile to get any information.  I suspect it will come up eventually in energy company presentations.

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Permalink Reply by w.r. frank on July 3, 2013 at 11:12

See ECA recent Quarterly Conference Call on 940 acre unit, with 6 wells per unit. 7,500' lateral, EUR of 2.5 bcf/1000' of lateral. Results in 18 bcf/well, or 108 bcf/940A unit. Estimated $13 to $14 MM per well cost.

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Permalink Reply by Skip Peel - Mineral Consultant on July 3, 2013 at 16:24

Thanks, w.r.  I'll try to find time to identify an actual completed ECA CUL and post the plat with a break down of proportional production by unit.

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