Replies to This Discussion

Permalink Reply by JW on July 22, 2008 at 17:22

I didn't catch that until just now. We must have ESP and hit the send button at the same time. Strange how we came up with the same depth.

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Permalink Reply by insomniacnla on July 22, 2008 at 17:30

I was thinking about the Glen Rose depth at 4,200 ft.

Permalink Reply by Snake Stewart on July 22, 2008 at 17:17

Hey gambler , Lets say you sign a lease for 2 years and no option. That means that after 2 years you could release if they didn't drill. Lets say they do come in after the first year and drill a shallower well say 7,000'. It pays a little royalty but not near as much as that cheesy landman said you would get. Even if it paid $10 a year , you could be held by production. They could continue at this slow pace forever. Unless of course you had a depth clause. If after 2 years is up and they still haven't drilled a Haynesville well , you can now go back and release your lower depths to someone else. Anything 100' below the deepest producing depth. In your case 7100'.That way they can't put a shallow well on you and hold you by production.
Hope that helped some.

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Permalink Reply by Gambler on July 22, 2008 at 17:21

yes this helps alot... thanks

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Permalink Reply by JW on July 22, 2008 at 17:34

Here is the real question that I have. There are some shallow oil wells near me in the Wilcox Sand. There is a possibility that we could sign a lease for this type of well. I don't think they would have a problem with a Pugh Clause due to the fact that the Haynesville Shale could be down there. My question is: Will the Big O&G companies frown on this kind of pre-existing lease or do they see this all of the time. Also, there is a possibility of some deep Austin Chalk oil that could be as deep as 20,000'. Would it be feasible to ask a Haynesville Shale drilling company for a Pugh Clause to protect the Austin Chalk depths. This lease would look more like a book but we need to explore all possibilities so we will be prepared when the time comes and it will come. Thanks

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Permalink Reply by insomniacnla on July 22, 2008 at 17:39

Just about all o/g companies will be happy to have your lease include a Pugh Clause. It is a matter of routine nowadays.

No, the o/g companies looking for the Haynesville won't mind that you may have only the deep rights to lease. They do it all the time.

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Permalink Reply by JW on July 22, 2008 at 17:45

Very good information. I am in contact with the other landowners in my section and I sensed some reluctance from some of them with being HBP on some small producing well forever. I have been wondering about this every since we had that conversation. Most of the shallow oil well drilling companies can't play with the Haynesville prices but I would hate to pass up a good opportunity on some shallow stuff as long as it wouldn't hinder us in the long run. It is scary to think about though. I have heard some major regrets in this thing already in a short period of time.

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Permalink Reply by M. Mcwilliams on July 23, 2008 at 1:00

The original concept of Pugh clause was designed to allow the release of a lease as to property that fell outside of a unit line, such as a case where the property leased straddled section lines, or otherwise fell across unit lines. Looking at it this way, I would wonder if there is any need to designate a horizontal line so as to account for the horizontal drilling that is taking place under the land? Anyone?

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Permalink Reply by JW on July 23, 2008 at 1:04

I totally agree with you. With so many different targets below our feet, I believe that this could be the single most important part to put in a lease, besides the royalty figure, of course. I will definitely have one on the papers that I sign. Thanks for the input.

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Permalink Reply by RL on July 23, 2008 at 3:44

This is a very important and needed discussion. Thanks guys for helping us better understand this clause.

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