Well capable of producing...in paying quantities
This seems (and feels) like a strange question, but apparently it is now fairly common in the HS to complete drilling of a well and hold of on
fracturing until a pipeline is ready or until whenever.
Is an "un-frac'ed" well a "well capable of producing oil or gaseous
substances in paying quantities"? How does this affect whether the well
is "shut-in" and if the well (and for how long) can still hold by
production. If the well sits unfractured for a year or more after the
primary term has expired does this affect HBP? Is this a loophole for
the lessee?
If this is too complicated legally for a thread, just let me know. Thanks.
Views: 668
Replies to This Discussion
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Permalink Reply by The_Baron on -
in many cases a un-fraced well is capable, albeit not near what it would be if it would be fraced. The general concencus is that it is not a good idea to frac until the poipeline connection is ready.
The time a shut in well can hold the lease, is dependent on the lease.
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Permalink Reply by Henry on
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Baron,
Is there an official (i.e., legal) definition of "shut in?" For example, I see wells, such as #238703 in 34-10-12, where gas was produced in April 2009, then none again until a tiny amount in July 2009, and none since then. All throughout, sonris gives it a category of "10," or producing. It never gets the "shut in" designation. So how does one, legally, decide when a non-producing well is shut in? Am I making sense in this question?
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Permalink Reply by Mac Davis on
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Would "shut in" apply if the well was never "completed" to "well capable of producing oil or gaseous
substances in paying quantities" status?
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Permalink Reply by Les Bamburg on
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Mac, I do not believe "shut-in" can be applied to a well that was never completed. Typically that term would apply to a completed well that is shut-in waiting on pipeline or some other reason. That can occur for a more conventional non-frac'd gas well as it was common to complete wells in advance of the completion of production facilities and/or downstream pipelines.
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Permalink Reply by Les Bamburg on
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DTS, my opinion is an un-frac'ed well is not capable of producing in paying quantities especially given the well's production casing is not normally perforated until the operator is ready to fracture stimulate. I do not believe any Haynesville Shale well has been produced without being fracture stimulated.
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Permalink Reply by Greedy Landowner on
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Les I think your point makes the most sense. If a well has been drilled but has not had a frac job then it is not producing in paying quantities and subsequently should not hold a lease. I know there is language in the law to the contrary about drilling activity which brings ambiguity into the equation. I bet this one gets challenged in court.
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Permalink Reply by oil guy on
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"Paying Quantities" is a very misunderstood term by most, as long as the monthy production covers the cost associated with operations that's "Paying Quantities". If you have a well that has not been tested, but believe it's commercial and the lease is about to expire, for the most part and in lieu of language in the lease to the contrary, you can maintain this lease by paying "shut ins" and keep it alive for two years.
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Permalink Reply by Mac Davis on
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Not being fracked is one thing. Not perforating the casing might be another thing entirely.
Don't they usually perforate the casing at the same time as doing the fracking? i.e. if you "opened the valve" on a well that is "waiting on frac," would any gas come out, or is the well bore completely sealed?
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Permalink Reply by Les Bamburg on
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Mac, an unperforated well will definitely not flow and several operators have stated an un-frac'd well will not flow either. That is the reason "shut-in" payments should not apply to an un-frac'ed well. Just drilling a hole through the Haynesville Shale does not make a commercial well.
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Permalink Reply by Katie McCullin on
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Hey guys! Here's a site that states in non-technical terms the meaning of a shut in well, and some of the other terms brought up.
http://www.askchesapeake.com/pages/glossary.aspx
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Permalink Reply by red rider on
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Ahh yes, but these oil companies spend millions of $$$ to develop and drill a well, especially a horizontal. The company wants a return on investment. If the well isn't producing, the company isn't getting paid. I would imagine the company wants the well to start producing soon. to leave the well site drilled but not frac'd seems to be a waste of money. at some point the company has to follow through and frac the well.
I mean how long can the limbo status of the well drilled but not frac'd go on? there must be some time frame.
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