1  - Is there a reasonable average for new Haynesville well production?  I realize that is a very difficult question and depends on a lot of factors.

2 - When a cross unit well is drilled, how is the production allocated?  For instance if it cross 3 sections, do you divide your mineral acres by (640*3)?  Or is it not necessarily equally prorated?

3 - Inherited property/minerals - if you are unleased in a section and there are existing wells you have discovered, I believe you can give notice to the operator to provide cost information to determine if the wells ever reached pay-out.  Best to get attorney to handle?  What happens if they have not been paying?  Any penalties?

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Sorry, no such thing as a "reasonable average'.  Haynesville horizontal wells may be ~4600' in length or 15,000'.  As much as operators like to drill long laterals, I still see a fair number of shorter lateral alternate unit wells.  The rock quality and thus production volume also varies across the play fairway.

After an operator completes a multi-unit horizontal well, they provide a report to the state that defines the linear feet of perforated lateral that lies in each section/unit.  That is also the way that operators allocated the production volume to each unit and each ownership tract.

If you believe you own unleased minerals in a producing section, you must show proof and the operator must agree.  Unleased mineral owners can demand quarterly reports from the operator that tract production income against well cost until the well "pays out".  Once a well reaches payout, the unleased mineral owner is due their proportional share of production less monthly lease operating expenses.  It is a good idea to get an experienced O&G attorney to draft the demand letter for quarterly reports and may also be of help in getting the operator to recognize your ownership in the unit.  You will have to provide copies of public record documents that evidence your ownership.

Thanks Skip.

As to the unleased part.  This is on inherited property/mineral rights.  Fairly recently.

A Cross unit application was filed last April for 5 new wells.

Had a land man purporting to work for the operator approach about leasing basically in preparation for these new potential wells. His title work agrees that we are not leased.

Very professional.

However there is a producing well in this section - by the operator in question via a merger or acquisition at some point.

It has been “on the list” to figure this out.

What's to figure out?  If the unit operator agrees that you have an unleased interest, the question becomes on what well?  If it is the original unit well, it may not have paid out.  Many older unit wells have not.  Without some specific detail, no one can offer an informed opinion.

20-10N-14W

This was relatively recently inherited 

Found out about the existing well a few months ago and realized there was no lease and nothing being paid

The conversation with the land man as to the new wells was as of Friday and he was like “oh”…. Once I mentioned the existing well.  The operator has not acknowledged anything directly.

HA RA SUQ in the Converse Field only has the original unit well drilled in 2012.  It cost almost $15M and has just now produced 4 BCF so it likely has not paid out and might never considering the low natural gas prices 2012 through 2014 when the well produced 75% of it's Estimated Ultimate Recovery.  The good news is there is economic Haynesville and Bossier reserves in your section, so room for eleven future wells total.  If I was a landman for Comstock, I would want you under lease as opposed to remaining an Unleased Mineral Interest (UMI) in the unit.  The ball is in your court.  Suggest you get some help from an experienced O&(G attorney before you make a decision on how to proceed.

Thanks again.

Unleased mineral owners don't get well invoices.  Their proportional share of production is applied to their proportional share of well costs until such time as a well reaches payout.  That is tracked by way of the quarterly production reports that operators are required to provide for UMOs upon demand.  After that point, they receive 8/8ths. (100% since they don't have a royalty burden) of their share of production less lease operating expenses.  There are a number of producing Haynesville and Bossier wells in the township.  This is close to the southern edge of the defined Haynesville shale fairway which extends another six miles south based on current development.

I assume a 1/4 royalty is still a reasonable target? 

Absolutely

Every situation is unique.  Those with significant acreage positions have more leverage.  Those with surface ownership where operators need surface use have more leverage.  The one situation that provides the most leverage is competition for leases.  This late in the play there are not many large unleased acreages that are located well within the fairway.  Most leases I see have 20% or 22.5% royalty offers which reflects lack of competition and the fact that the play has matured.  A quarter royalty is still possible in the right situation however it is not a given.

But cost free lease equally important

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