Replies to This Discussion

Permalink Reply by E & E on October 28, 2009 at 10:20

Missy,
I am going to add to your thought process. If you are leased to another operator and the majority of the leaseholds in your section are held by the same operator - (not the one drilling into another section). I would highly recommend you contact your operator as they may have plans for a drillsite. The reason this is a concern is the locations of these wells - they are around the section lines and the operator that you are leased to may have plans that will be impeded by this other operators wellbore. Especially when you can only drill 8 wells per section and the grain of the shale lays out better in the north to south direction. I personally would go to the courthouse and look at all the leases in your section b4 calling the operator to know what is what in your section. This also deals with the landout(landscape) of the section. Just because an operator holds your lease doesn't mean that they hold the majority to be the operator of your section.
Earlene the barefooted UMO
P.S. Earl sez you need to get an ORRI on the well.
P.S.S. I am on the section line with road frontage and it is a corner. So I know how important this is.

Permalink Reply by Missy on October 28, 2009 at 14:31

Hi Earlene
I wish I was an UMO :-)I am dealing with Questar & I think Questar is the majority around me. I'm gonna disappoint Hobbs and ask a dumb question. What is an ORRI?? I'm sure I do need one. I need all the help I can get! I am also on the section line, corner, almost road frontage. Why is that important? Thanks

Permalink Reply by Missy on October 28, 2009 at 15:01

Nervermind on the dumb question. Do you know anyone who actually gets ORRI on wells? I have asked for a small amount of royalty from any wells that are drilled from my location, into neighboring section/unit. I didn't know the term for it. I don't even know how much it should be.

Permalink Reply by E & E on October 28, 2009 at 16:46

Missy,
ORRI is Overriding Royalty Interest. As to how much of a percentage, that is up to negotiations. But you do want alittle mailbox money for your trouble. You have to do your due diligence on what is what for your situation. When you say you "think" STR has the majority, you need to know. The only way to know for sure is to go look it up @ the courthouse. For me, I know who holds the leases for all in my section and even expiration dates. Knowing this information is helpful in knowing where to stand. I happen to like STR, but It is up to me to cya. And as I tried to warn you b4, if another operator is going to drill your section then it is most important for your benefit to make sure that "your" operator has all the options for locations to drill first b4 another section. As Skip has warned b4 in his own way, don't sign a thing until you atleast have attorney review and explain it to you.
Earlene the barefooted UMO

Permalink Reply by Missy on October 29, 2009 at 6:11

When I go to the courthouse, can I just ask someone there for what I need, or do I have to know what I'm doing to find it myself?

Permalink Reply by Hobbs on October 29, 2009 at 11:07

Missy, there are no dumb questions here, and your question was very good. To expand on Double E's, an overriding royalty interest ("ORR" or ORRI") is a cost-free percentage of production. Rather than receiving an ORR, I would suggest that you negotiate a monthly or yearly surface rental fee. The reason? The production will ultimately cease, but the well might stay on your property unplugged for legitimate (needs to be stimulated/frac'd, plug back to a shallower zone, etc.) or less legitimate (wanting to wait as long as possible to plug) reasons. You wouldn't be receiving money while the well was down and still on your property if you go with the ORR. I'm sure that there are many Shalers that can attest to wells become unwelcome kin on their property!

I would suggest that you don't need to do the research, unless you are curious. Your deal is your deal no matter who you deal with - just make sure that the party you deal with is the only one that will operate the well (you don't want them assigning the rights under the contract to someone you're not comfortable with without your permission). Questar is a good Haynesville operator with a solid reputation. If you have any problems on your surface, call them first and give them a chance to fix them.

You need to know what to do in the courthouse - the Clerk's folks there are very busy and don't normally help with research (just showing folks where everything is). I would be glad to help you if you ever want a tour, and based on the tone of their responses here, I'm sure that there are others here that would help, too. Check with Keith if you're interested.

Be blessed and stay away from tornados (one just strafed our building downtown)! Blew the steeple right off the Methodist church!

Permalink Reply by Missy on October 29, 2009 at 14:45

Hobbs, I went to the courthouse and looked up other leases as Earlene suggested. I found all but one, It is LA Minerals LTD/Willamette. But according to her color coded map of leaseholds, Questar is the majority operator. Since questar is the one trying to secure the surface/PL ROW agreement with me, I'm not sure why all that matters. (I'm still learning) . Thanks for your offer to give me a tour. I was in Arcadia when the steeple blew off! Bless you too and Thanks.

Permalink Reply by E & E on October 30, 2009 at 4:33

Missy,
Glad you are surviving this weather. I have to say I agree with Hobbs on one point and disagree on another. I agree with the comment on rental fees - this would be an easier negotiation term. I disagree with his comments that unless you are just curious......... If it had turned out that your section/unit was held by another operator then it would have been information that you could stand on to protect your interests. Your next step would have been to contact that operator and tell them what this "other" operator was proposing. Heck even possibly both companies would have wanted your surface corner(It is that important). It is important to your benefit as to whether or not your section has enough places for locations of 8 wells eventually. Not all units will be able to have 8 wells due to terrain. You do not want to cut yourself one well short. And anyone telling you different...well then they aren't looking out for your best interest. Now since it is the same operator you want to see what their plans are for Your section and if this location will short your section a well. Based on the 80 acre spacing per DNR and the way the shale lays out - each unit should end up with wells on the section lines for the longest laterals - 8 across the top or bottom with laterals 660 feet from each other. Concerning the terrain it will vary - 4 on the North section line with 4 on the South section line or 2 to 6 or 1 to 7.......I think you get what I am saying. Not sure if you want to even get this in writing as plans do change. IMHO Questar is a good company and probable isn't going to "short" any of their units the 8 wells, but you want confirmation. I am glad that you are trying to learn all you can to protect your interests, anytime you want to ask me anything just leave me a comment on my page.
Earlene the barefooted UMO

Permalink Reply by Hobbs on October 30, 2009 at 4:46

Missy, the difficulty tracking all this is that the company that negotiates with you for the surface lease may not necessarily be the party that is the "Operator" of the well (the operator being the responsible party to the State, the one that shows up in SONRIS as the operator). The contractor that actually drills the well for the E&P (Exploration and Production) company Operator, also known as the "contract operator" or "drilling contractor", might on some occasions be the one that approaches you for the surface lease. Also, as you have seen, a field landman from a land brokerage firm could also be hired by the Operator to negotiate with you. One way to find out the current Operator of your section is to go to SONRIS and look up wells by Section, Township and Range. Check the most recent wells drilled, and the ones currently producing, to tell who is the primary operator. Note that a different operator could show up in SONRIS to drill a Haynesville well - this often happens when bigger Shale players like Quester, Petrohawk and Chesapeake make a deal with a smaller company to drill their deep rights (usually because the smaller company doesn't have the money or expertise, or doesn't want to take so much risk). I know of a few sections in which Questar has swapped into deep rights when another company operated the shallow wells.

As for the lease ownership, it can also be difficult to track. You found Questar, but you could have found another current lessee that wasn't Questar if they reached a contractual arrangement that is not of record (which most non-title instruments aren't). This is why I said, in an earlier post, that it really doesn't matter who owns the leases in the adjacent section or who you are negotiating with - what matters is which Operator you allow to drill and maintain a well and facilities on your property. Just make sure that you are satisfied with the reputation of the Operator, and that they sign on the dotted line.

Permalink Reply by Missy on October 31, 2009 at 18:13

Thanks for all the helpful insight. This website is a great tool. Thanks Keith!

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