Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2015 at 6:01

Ronny, you favorited your own discussion?  LOL!  The answer is yes.  The concern is the small percentage of the lateral in Section 19 - only 330'.  This is an issue that has been under debate by the Mineral Law Institute with participation from Senator Robert Adley.  I expected that there would be legislation concerning a minimum required penetration of a unit in a CUL, HC well.  I haven't heard if it has been addressed.  I'll try to report back after the session is over.

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Permalink Reply by Joseph on June 10, 2015 at 8:17

It is expected that some variation of the attached Bill will be passed this Summer. The minimum length of perforated lateral being discussed is 500' feet.

Attachments:

• CUL Senate Bill 88-Adley.pdf, 51 KB

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Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2015 at 8:35

That conforms with the last update I got.  Do you mean, expected to be passed during this legislative session?

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Permalink Reply by Joseph on June 10, 2015 at 10:50

Yep. In my opinion, it's not particularly well written either. Also, it doesn't seem that it will be very effective in the core of Haynesville where virtually every HA unit has a producing unit well with perforated lateral lengths much greater than 500'.

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Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2015 at 11:00

The fear of some mineral lessors was that when their existing unit well depleted the operator could continue to hold the leases by way of an HC well with minimal penetration.  I don't consider that a likely scenario but obviously some of Senator Adley's constituents disagree.  It was my interest that the process of approving HC alternate unit wells would include the requirement for the operator to offer leases to any Unleased Mineral Interests.

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Permalink Reply by RONNY on June 11, 2015 at 10:28

Anyone have an idea how the production company will determine the amount of gas attributable to each section?

Skip,  I think I just unfavorited my discussion. Not sure if unfavorited is a word. LOL

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Permalink Reply by Jesse Joyner on June 11, 2015 at 11:17

The operator will assume that the CUL will produce hydrocarbons in equal amounts along the entire footage of the fracked horizontal, which means that the royalty paid out will be based upon the actual length of the producing well in each section of the CUL.

In other words, the division order should state the percentage of the entire lateral that has been fracked that's in each section and pay you accordingly. If one section has 30% of the fracked lateral, then the mineral owners in that section get 30% of the well's production per the dictates of their signed leases, with the other mineral owners receiving 70% of the production in the other  section that's butted up to it, if the CUL is only producing from two sections.

Simple math that can seem to get a bit complicated for someone to crunch in the actual division of royalty pay. Plus, the statements for such CUL wells can have various line items per each slicing of the pie if a landowner happens to have land in both producing sections.

Not so simple math as occurred with the old 640 acre units within one section per regular non-CUL horizontals.

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Permalink Reply by Skip Peel - Mineral Consultant on June 11, 2015 at 12:11

Production is allocated to each unit based on the linear feet of perforated lateral in each section.

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Permalink Reply by w.r. frank on June 12, 2015 at 4:21

Seems to me that the old simple math for a 640 A unit (few are exactly 640) works once you prorate between units (1, 2 or 3 units) by the linear feet of perforations in each unit. Of course, since the lessee/operator may have more acreage in one unit than another, in the case of CHK, you would have to "trust" that the perforation data was accurate. All this CUL stuff still leaves 330' on either end of the CUL that remains unperforated, or a total of 660'. This is 6.27% of a 2 section CUL. That is a lot of NG never produced when you are talking thousands of sections. The Haynesville is a resource play, not a reservoir play, so the old reservoir  setbacks designed to avoid one unit draining another aren't IMO as important. Sure you will get some drainage, but this is pretty tight rock to crack with fracking. As a landowner, I would rather produce that 330' in my section even if my neighbor section owners got a little of mine through drainage. It all evens out because I will get a little of my neighbors NG when his section is drilled. The state also loses severance taxes on all NG that stays in the ground unperforated! But, of course, the state doesn't need revenue!

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Permalink Reply by Skip Peel - Mineral Consultant on June 12, 2015 at 6:53

HC wells are designed to stimulate and produce the 330' on the north and south end of a section.  An HC well is allowed perfs in that former set back area.

Permalink Reply by w.r. frank on June 12, 2015 at 10:41

Skip, all the CUL applications I have seen are for a stacked two section CUL. If the operator begins with a pad on the south unit (in the CUL or offsite) he doesn't begin the perf until 330' from the south line of the CUL and he ends the perf 330' from the north line of the northern section of the CUL. He does perf the former single unit 330' setback in each section where the two sections join so you gain 330' feet of perf in each section. BUT you still leave two 330' in the CUL that are not perforated--the northern 330' and the southern 330'. So that area never has a perforated lateral. Am I missing something?

Permalink Reply by Skip Peel - Mineral Consultant on June 12, 2015 at 10:58

If you look at the well plats in the alternate unit well applications on the Commissioner's public hearing schedule you will find many different HC versions.  Some include 3 sections/units and they are utilized for units other than Haynesville.  Wherever an HC lateral crosses a section line it is producing from two 330' strips not previously stimulated.  How far the lateral extends beyond that point has many variables. 

http://dnr.louisiana.gov/index.cfm?md=pagebuilder&tmp=home&...

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