RECIEVED NOTICE ON TWO HORIZONTAL IN SECTION 33 GREENWOOD WASKAOM FIELD. I WAS TOLD OWNER WOULDBE PAID ON HALF PRODUCTION FROM EACH HORIZONTAL. IS THIS CORRECT AND OW IS THE PRECENTAGE ESTABLISHED
Jesse, do you have a unit survey plat for each of your producing units?
Skip, no I do not have a survey plat for each of our units. It's a concern; but, like I stated, I'm reasonably happy with our pay status. Right now I'm busy, managing a number of irons in several fires. When I have time in the future, I may drilled down via your helpful advice to check the info via SONRIS. Yet per the complexity of my family's heirship, my gut has no ringing bells. In life I've learned that rocking the boat can sometimes cause more trouble than it's worth. Plus, we will probably have more CULs drilled in the near future (with the Iran/House of Saud flareup looming), and I don't want to do anything to throw a wrench into the well-oiled drilling/royalty machine, so to speak. Thanks for your concern.
Andrew, your CHK CUL letter provides a decimal percentage for volume allocation as opposed to a unit royalty decimal and although the example sheet shows the math formula, it does not convert the volume decimal for JHN 3&34 - 14 - 15 #1H to a royalty fraction. So my question is, did you receive a separate DO for this well? And, if so, did that DO multiply the volume allocation fraction and the unit participation royalty fraction to come up with an adjusted royalty decimal for this well?
Yes, what Andrew said ^.
It may very well depend upon the operator as to how they show this on pay statements. Many operators use a "well property" breakdown on their statements - depending upon the type of software used, DOs may be able to or opt to proportionately reduce the prior "pre-CUL" decimal interest by the allocation percentage (or, alternately, proportionately reduce the production values at the volumetric level), where others may recalculate the deck proportionately reduced by the allocation fraction for each unit and show this decimal for any CUL wells.
This appears to apply also to the CUL accounting at the state level, as well. I have seen LUWs set up as a "CUL LUW" code which captures only those CUL wells. Alternately, I have seen where two sets of reporting are shown, one for each unit represented as to the "pre-CUL" LUW - and thus you have to match to your unit's LUW code to obtain your respective production volume. I would personally prefer the latter method be used for each, since LUW codes may change from time to time and the original unit LUW matches to what is in the orders.
Of course, the allocation of production for each well in a CUL is further calculated on a well-to-well basis using actual footages of perforated wellbore FOR EACH WELL. So, there will doubtlessly be some confusion in any event once the second, third, etc. CULs are drilled which affect a given formed unit. But in any event, the formed unit acreage (as surveyed) and each owner's share of production calculated on owner's contribution to the said unit, expressed as a decimal) should not change - which is a primary reason as to why I would personally favor this method.
When I was assisting in setting up DOIs for a larger industry client, we ALWAYS included the formula into our spreadsheets so that there was no confusion as to how we reached our results. If ever we needed to reexamine the calculations (revised survey, ownership change, etc.) one could always examine the prior work and adjust accordingly. However, smaller clients commonly ask only for the decks on either a per-tract or an owner breakdown. Additionally, when their interests go through M&A, it is common that the JIBs and the DOIs from producing properties are blindly transferred into the new owner's system - the land records are transferred as well but not as likely correlated against the decks.
Good luck with it.
Thanks, Dion. Now I'm really confused! :-) Sowing confusion is something that CHK is quite good at.
On the CHK letter, their last calculation is... cross unit interest calculation for unit "A" and "B"
Isn't that the sum of what Owner X and Owner Z own together? What on earth does that have to do with anything? If a single owner owned both five acre interests, I can understand why they would show that but since it's different owners, why include this?
Considering your statement that, " I have seen LUWs set up as a "CUL LUW" code which captures only those CUL wells. Alternately, I have seen where two sets of reporting are shown, one for each unit represented as to the "pre-CUL" LUW - and thus you have to match to your unit's LUW code to obtain your respective production volume", can you point me to a well file with a "CUL LUW". I have never run across one in my Haynesville related research. All the LUW well file sections I have seen fit your second example, production volume reported by two or three different LUW code numbers one for each unit transected by a perforated lateral.
Thanks. That's the first LUW code number I've seen starting with a "3". And I look at a lot of HC wells. I'll have to ask the SONRIS staff about this. They may have a logical reason but I can't think of one off the top of my head.
Just as an aside - How many completed CULs are you showing currently across how many units at this time (assuming completed, and initial completion reports / IPs shown)? And although the Haynesville makes up a fair number of these, but how many as to Horizontal CV / LCVs?
Dion, I don't keep running totals like that. They have no relevance for my business.
Here is a cut and paste of a reply from OOC/SONRIS regarding HC wells reporting under code numbers starting with "3". It explains why there are few such wells. The response is based on the EXCO wells you referenced.
"Cross unit wells with a LUW starting with “3” will be amended to unit LUWs eventually. Those wells were completed in a manner not approved by Order. For instance, the Exco wells have laterals completed longer than requested by Order. Exco will have another hearing (if they haven’t already done so) to present the as-drilled lateral and if no objection is received, an Order will be approved to produce the wells as-drilled, and the unit LUWs will be added."
Slight thread drift but as a RO that received a sim. CHK DO & accompanying letter like Andrew on the previous page & also a RO in the above LEMAC FARMS 7-6 HC 1 w/ Exco, I'll be tracking what you fellas are discussing here.