Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2011 at 9:57

Buckshot, I need a section-township-range or a serial number to know the specific well you are referring to.  Keep in mind that a lot of Haynesville horizontal wells are drilling into the adjoining section and are not producing from the section where the drilling pad is located.

Permalink Reply by Two Dogs, Pirate on June 29, 2011 at 9:57

Buckshot, some of the wells are drilled in one section but the horizontal is bored under the adjacent section. They start the perforations on the horizontal 330 feet from the section line so the well is draining the adjacent section and not the section where the well is located.

Permalink Reply by Gambler on June 29, 2011 at 15:03

Question... So if they drill in your section but the gas is coming from another section you dont get paid? is that how i am understanding this?

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2011 at 15:07

The best way for an operator to get the maximum length horizontal lateral in a section/unit is to drill from an adjacent section.  It's quite common and the preferred method where it is possible.  In those cases the only gas produced is where the horizontal well bore is perforated and fracked.  The mineral owners in the section/unit where the well bore is perforated get the royalties, not the those in the section where the well pad is located.  This video shows how a horizontal well is drilled and completed.

 

http://www.oerb.com/Default.aspx?tabid=242

Permalink Reply by Gambler on June 29, 2011 at 15:12

well i guess we got lucky then cause the pad is in our section and we are getting paid so i guess the horizontal lateral is in our section also.

Permalink Reply by Gambler on June 29, 2011 at 15:16

very interesting and informative video    thanks

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2011 at 15:22

If an operator does not hold the leases in the adjacent section and can not get permission to drill from outside the unit, they will utilize a surface location within the section to be produced.  It's just  more difficult to get the maximum length horizontal well bore.  The video conveys the basic principles of horizontal drilling but it's a little old and not totally accurate as to how Haynesville wells are drilled today.  For example frac stages are around 300', not 1000' and there can be 12 to 20 frac stages instead of three.

Permalink Reply by Steve on June 30, 2011 at 7:59

Skip,

If they are constructing a pad on your property and they intend to drill several wells and some wells may bottom hole outside of your unit, you won't get royalties on those wells correct?  A friend is getting ready to sign a Surface Agreement to place a pad on his property.  Shouldn't it include an agreement to pay him some sort of payment on those wells producing outside his unit? - Rental fee or flat payment per well or something? What is customary? They intend to drill several wells from his property but would not allow a clause requiring all wells from his pad to bottom hole in a unit in which includes his acreage. Does he get no $ for those wells drilled from a pad located on his property? That doesn't seem fair. Should he demand a per well fee?

Permalink Reply by Skip Peel - Mineral Consultant on June 30, 2011 at 8:16

If a company holds a lease to lands that does not contain a "no surface use" clause or some specific mention of compensation for surface operations, the lessor is not entitled to receive any monies other that the bonus paid upon execution of the lease.  There is no requirement in law for payment from production of minerals one does not own.  And I feel sure the royalty owners in the section/unit being produced would not care to share.  When an operator wishes to drill from a surface location outside the unit they intend to produce and they do not have a lease covering that property, they must get permission.  If the right to surface operations conferred in a lease is held by a different operator where the well site will be located, they strike a deal that does not include the surface or mineral owner(s).  Where no party has the right to surface operations, an operator must negotiate surface use with the owner of the surface.  If that same operator does not hold mineral rights to the sub-surface they must also negotiate a well bore easement with the owner of the minerals whether that is the surface owner or another party. 

 

Early on I got a lot of flack from members who wanted to discuss lease values in terms of "a going rate".  I warned of pitfalls with that approach.  This is one of those situations where mineral owners who did not seek professional counsel or got counsel from an unqualified party come up short.  Owning land that fits the criteria for a drill site should always be considered when negotiating a lease.  Those in the business, and by now some of the laymen members of GHS, can look at a tract and tell with some degree of accuracy if it qualifies as a "potential" well site.

Permalink Reply by Steve on June 30, 2011 at 9:12

The lease in mind does not specifically address this issue . It only discusses surface rights in regards to payments for pipelines, timber, gates, roads etc.  Do surface right owners normally ask for extra $ compensation from operators to allow that operator to drill multiple horizontal wells into units that exclude that pad owner's property. If they can get no royalty on this production then they would have to negotiate any other compensation up front in the Surface Agreement. Right?

Permalink Reply by Skip Peel - Mineral Consultant on June 30, 2011 at 9:34

There is no compensation based on the number of wells, only on the surface acreage used if the right of use is not already conveyed in the lease.  The simple approach to negotiating a lease is to include a "no surface use" clause as that requires the lessee to negotiate a separate compensation for that right.  The vast majority of surface acres in the Haynesville Shale Play have no surface activity owing to development by horizontal wells.  Those tracts that qualify as drill sites are quite valuable.  Once a lease is signed there is no going back to negotiate without that no surface use clause or specific language addressing compensation for surface operations.

Permalink Reply by Steve on June 30, 2011 at 10:05

Thanks Skip

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