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Permalink Reply by RAY on August 11, 2008 at 6:14

see the post "Force Pooling"

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Permalink Reply by TCB DS3 on August 11, 2008 at 6:29

I understand being force pooled. What I want information about is the pthe landowner requesting before they lease to obtain say 5% or 10% working interest in the well. What is the process? Do you just request it in Attachment A of the lease? Is it something o/gs generally will agree to allow? TCB DS3

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Permalink Reply by TCB DS3 on August 11, 2008 at 6:50

Thanks, that is what I wanted to know "let me into the deal as a paid up undilutable working interest owner" TCB DS3

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Permalink Reply by Kassi on August 11, 2008 at 7:07

I would ask an O&G attorney but my understanding is you would have to pay your portion of the cost up front. Of course that is from a conversation with someone so I am not sure how accurate it is.

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Permalink Reply by Aubrey C. Sanders, Jr. on August 11, 2008 at 11:16

Indeed you do have to pay upfront prior to spudding of well. If you simply do not lease you will be in for the % your land represents and operator will deduct all your costs of drilling and completion (your % share) from production before they start to pay. Would you be willing to forfeit lease bonus for possible dry hole?

On the other hand, depending upon the acreage you own, you might cut a deal such as you described with company. Probably difficult, but you don't know til you ask

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Permalink Reply by Dion Warr, CPL on August 11, 2008 at 10:00

Wow, what a question!

From what I understand (I apologize if this talks around your specific question), the process of being an unleased mineral interest in essence makes you for many intents and purposes a working interest owner. The big difference would be that as UMI, there are provisions which prevent you from being penalized as to multiples of payout (say 200% - 500%) that are in the mineral code. (See other discussions on the site for specific citations of the mineral code).

However, what you are talking about would be (IMO as a non-attorney) tantamount to "entering the oil business", and as such, you could lose any safe harbor that you may have by statute as simply an UMI party. I would say to consider this VERY CAREFULLY, as based upon your question, you would all but certainly be a non-operator, and in most versions of the Joint Operating Agreement currently used in the industry, you would be responsible for well drilling, operation, and maintenance costs as billed (AFEs), penalties for non-consent, P&A costs, legal liabilities, etc., and would not be "in control" as to proposed operations.

If you were already "in the business", you would usually lease at a royalty rate, with a certain amount of royalty being convertible to a working interest (say, lease at 1/4 with a 1/16 being convertible to a 30% WI at payout). Large oil companies with "fee lands" can be even more ruthless in their trades, in that they will lease at a royalty rate, then at payout their RI will go up (from say 25% to 30%) OR they will enter as a WI partner (at say 30%). But these type of leases are less leases and more like company farmouts.

Chances are if you are talking about 5-10% in one unit, a company isn't going to want to do this. It's less headache to say "no thanks" and make you a lease offer that you can accept or reject. If they have gotten this far, the company probably doesn't want or need you to "kick in" for your share, or want another partner.

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Permalink Reply by Aubrey C. Sanders, Jr. on August 11, 2008 at 11:23

Dion, This is a very good description and answer your question. At one time or the other I have been in just about all the situations you cited. Certainly if you have significant acreage in your unit this will be a major obstacle.
However, if you have large tract you might want to lease only a portion of it.

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Permalink Reply by bullbayou on August 11, 2008 at 11:53

To be frank TCB, I assure you that you do not want to be a WI owner, either consenting or nonconsenting. You are not in the oil business, so don't pretend to be in it. You either don't have enough money (its expensive) or you have too much to risk (ie there's a blowout and hurts and kills 15 people). Just make the best deal you can and be done with it.

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Permalink Reply by RAY on August 12, 2008 at 4:27

remember 333:
I would love to be 'force pooled' , that's why my asking price is 333 [$30,000 / 30% / 3yrs].

if they are not willing to accept my price, I will not sign & they will have to may me a partner.

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Permalink Reply by ETOilman on August 12, 2008 at 10:27

Good luck.

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Permalink Reply by DYST_JP on August 12, 2008 at 4:47

what about non-consent? Do you not start getting payments after production payout is covered 300%. This payment based on % of land in unit. Example Well cost 10 million to drill. Production after 1 year is 30 million. You will start getting payouts based on the % of land you own in unit after this point.

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Permalink Reply by Thomas T. Thomas on August 12, 2008 at 7:53

That is quite the grim outlook, bullbayou. TCB, working interest is a very risky venture, but it can also be very rewarding. In the heart of Haynesville Shale play, 3 million acres, there will not be "dry holes." There will be engineering errors. A shale doesn't thin or thicken much, therefore it is consistant and easy to hit pay, comparably to other plays. Another risk you run is a huge drop in the price of natural gas. This isn't quite the risk people make it out to be. Think about it, CEOs of O&G companies are bright people, more so than I am atleast, therefore they won't release a large enough supply to adversly affect the price of natural gas, to a great extent.
Even saying that, it is impossible to buy working interest in HA, at the moment. You would have a better chance of being offered a working interest position if you had a connection to someone in the operating business.
But who is friends with the O&G types? They aren't real people like me, they are evil ;)

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