Panola County -

We are being encouraged to sign a Production Sharing Agreement by Anadarko that will effect our minerals in Panola County in order to drill a Horizontal Haynseville Shale Well (these minerals have been HBP since the 40's with a 1/8 royalty and we do not want to reduce our revenue in a future well by increasing in unit size).  Does anyone have any information, suggestions or history regarding these instruments?  

More production will mean more money, but mainly we are curious as to our negotiation leverage (if any) to gain a better royalty.

I was suggested to post this question here, thanks.

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A lot depends on the size of your tract, your net mineral ownership in that tract, your proportionate share of unit wnership on a surface acreage basis, and whether or not you would be considered a drillsite tract.  Can you provide more detail as to the size of your tract and net mineral acres, and have they provided you a plat of the proposed well?  Ultimately, you want to create sufficient leverage to negotiate an amendment to your lease with an increased royalty and better terms, including a bonus possibly, in exchange for your agreement to sign. 


Thanks for your reply.  The tract size is 126 acres with us owning 100% of minerals and surface.  The entire acreage is HBP.  The plat that was provided shows the proposed lateral traversing our acreage.  Not the entire tract, but a good portion.

We really just don't want to miss out on an opportunity to amend our royalty.  We're not sure if this PSA even warrants negotiations, but if a signature is needed we thought "This might be our chance to get out of that 1/8 royalty".  I read a few places where the RRC ruled on DEVON's request to start drilling across unit lines and this was released"  "the commission will not issue administrative approval for the drilling permit if participation for either working or royalty interest owners is less than 65% for any lease or pooled unit contributing to the PSA".

Thanks again

How big is the planned unit?  The fact that you own 100% of 126 acres and are a drillsite tract should give you good leverage to get an amended royalty. 

Our unit size is 652 acres and the sharing unit (this time) is ~720 is what I believe she told me. The agreement, would, however, allow for sharing with any of the units surrounding units (depending on the lateral direction).


Ok, so they are intending to create a 720 acre unit via the Production Sharing Agreement, which would include part of your existing 652 acre unit and adjacent existing units.  Is that right? 



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