Production Sharing Agreement
Someone educate me on how these Production Sharing Agreements are even legal. I am dealing with Anadarko and although I understand the PSA will allow them to cross over unit lines, this well will be drilled in one unit. They have determined that the lateral will drain an area 660 feet by however long the lateral is, lets say 4500 feet, that equals about 68 acres, but instead of paying just the people that own minerals in the 68 acres they are going to divide those payments up between everyone in the original unit of 688 acres and if the lateral had of crossed into another unit everyone in that unit would get a piece. So it is possible that if the lateral is in two units and the other unit is 688 acres also then Anadarko in reality would be forming a new unit of 1376 acres, when this well is only draining 68 acres and this is suppose to be a good deal for me. I understand there are some court cases involving Devon about this issue that have not been settled yet. Has anyone else done any research into this, maybe I am just looking at it wrong?
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Replies to This Discussion
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Permalink Reply by Hopeful About Natural Gas on -
Excuse me for interrupting but I wanted to point out that this post and thread are excellent examples of GHS (and social media) at its best:
Someone is asking a question of a diverse group of knowledgeable experts. Sure the experts answer from their own perspective but the cumulative total is an invaluable resource of information directly on your question.
This poster could have spent years grumbling about unfairness and maybe he should - but here he has found out why it's done this way and both the theoretical upside an downsides. That is invaluable.
GHS is one of the best things to come out of the whole Haynesville Shale. GHS is the "mother" of all shale blogs (sorry, I could not resist with Mother's Day being tomorrow!)
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Permalink Reply by Skip Peel - Mineral Consultant on -
Right you are, Hopeful. However much of what has been posted is hypothetical since the details of the PSA are unknown. If Rodney would be willing to share some of the detail we can comment upon the pro and con and post our opinion of whether it is a reasonable request or one best declined.
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Permalink Reply by jffree1 on
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Anadarko has filed only one permit for a well which will cross unit boundaries. It is the CGU 15 SA #74HH. It combines acreage from CGU 14 (4 HA wells in 640.12 acre unit), CGU 15 (0 HA wells in 650.00 acre unit) & CGU 19 (3 HA wells in 643.56 acre unit).
Existing CGU 15 Plat (odd shape, cut up, has only vertical & directional wells in CV & shallower, would never have a horizontal Haynesville well drilled without a PSA, most likely)
Scroll down to the comment section on the W-1 to find the 'standard' RRC disclaimer regarding the legality of PSAs and cross unit wells. This will be the standard until someone gets irked enough to take the issue to court, most likely.
Anadarko doesn't make a habit of permitting cross-unit wells. This is the only one I have ever seen them file in the entire district and I think it is designed to utilize the odd sections of the existing units that wouldn't get drilled in the Haynesville otherwise. I don't know that I would object if I was in one of these units... especially CGU 15.
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Permalink Reply by dbob on
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There are also times a PSA would be distinictly favorable to a mineral owner, even without unjust sharing of the resorucs between units.
Where a PSA allows for wells in othewise poorly formed units is the obvious choice.
Less obvious is when the lease applicable does not contain a cost free royalty provision. Hypotheticlaly, a longer lateral allowed by a PSA would result in a lower cost per unit of production, effectively increasing the amount paid.
Anyone else come up with reasona a PSA could be beneficial?
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Off topic but 'interesting', this well is not just a Haynesville well. It has the Woodbine as a secondary target formation. First time I've see that in Panola County on a Haynesvlle permit.
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