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Permalink Reply by Two Dogs, Pirate on May 27, 2015 at 3:21

A couple of months ago I bought 10 leases with no bonus money being paid. Two of the lessors were using a prominent oil and gas attorney. Consulting with someone that doesn't know the oil and gas business is not a good idea. Being an experienced landman I could see myself granting a free lease under certain circumstances. 

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Permalink Reply by Jacob Boisdarc on May 29, 2015 at 2:13

Name of the well is "Hall et al #2"  Legal description is in Section  township 19 North Range 16 W -- the South 8 acres of the NE Corridor of the SW quarter of Section 5. (per the landman caller).

I have just received my parents documents to reconcile with the caller's information -- next task.

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Permalink Reply by Two Dogs, Pirate on May 29, 2015 at 3:37

If it were me I would only grant a lease down to a depth of no more than 3000 feet or to 100 feet below the depth of production. I have read about some new types of pumps used for recovery of oil that work really good.

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Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2015 at 14:37

Jacob, the Hall Et Al #2 has been producing from the Fredericksburg Formation. See perforation depths below.  You need to invest a little in an experienced O&G attorney and have them draw up a depth definition that limits the development rights to the base of the Fredericksburg in that specific location as an addendum to the lease you are being offered. 

PERFORATIONS

SERIAL NUM	COMPLETION DATE	UPPER PERF	LOWER PERF	SANDS	RESERVOIR
186897	05/07/1984	2310	2330	FREDERICKSBURG

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Permalink Reply by Jacob Boisdarc on May 30, 2015 at 2:49

Thank you.  I am wondering how does that play out in a unitized pool?  The well is not on Dad's acres.

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Permalink Reply by Skip Peel - Mineral Consultant on May 30, 2015 at 3:02

That's not uncommon in the Caddo Pine Island Field.  Begs the question why the company is seeking a new lease?  Does it have the same terms as the old lease?

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Permalink Reply by Jacob Boisdarc on May 30, 2015 at 3:09

As I understand it, the old lease died after the well was sold, during a lapse in production years ago and no new lease was made when the well started back up. Royalties were paid more recently (2014) but I do not have the history on earlier payments. I am told the new owners want current leases before investing in further development of the well.  I imagine there is general agreement that there was a mistake in not getting new leases when the well was sold in the 1990's, to the people the new owners purchased from -- but then again I am new to all of this.

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Permalink Reply by Skip Peel - Mineral Consultant on May 30, 2015 at 3:16

If a mineral interest is included in a production unit or in a field-wide pool it doesn't matter what happens to a single well as far as production and royalty payments.  The facts of how the company came to offer a new lease isn't in the end important.  What is important is that you do not grant an "all depths" lease to a shallow stripper operator.  The process of limiting the lease to specific depths or formations is best done by an experienced O&G attorney.

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Permalink Reply by Herman (Chuck) Plonnigs, III on May 30, 2015 at 4:38

Not to diminish the value of an attorney; however, when a company approached us about shallow oil I typed an addendum stating they could not produce anything deeper than 3,000 feet. They included the addendum in the lease which was recorded in the clerk’s office.

The well has been producing several years and my family has signed a lease for potential deeper production since the shallow well was brought in.

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Permalink Reply by Skip Peel - Mineral Consultant on May 30, 2015 at 4:45

The deep rights are the future value to be protected.  Depth limitations in O&G leases sometimes end up in court.  Just because a company is willing to accept a lease with such a clause today doesn't men it will stand up in a court.  An experienced O&G attorney isn't a big expense for help with a depth clause.  And it could be money well spent if you, or your heirs, end up in court in the future.

Permalink Reply by jeff on May 30, 2015 at 7:09

Two Dogs, what kind of pumps?

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Permalink Reply by Skip Peel - Mineral Consultant on May 30, 2015 at 7:41

While you wait for the specific pump Two Dogs alludes to, here are some links that discuss the challenges of the Caddo Pine Island Field and some of the new technology being employed.  GHS member, Jay Reynolds, is our go to expert for the CPI.

http://www.gohaynesvilleshale.com/group/NorthCaddo/forum/topics/cad...

https://www.youtube.com/watch?v=dag1_YGL2Xk

https://www.youtube.com/watch?v=4LaHxz7ijKY

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