Pre Conference Notice (What the heck does it say and what the heck does it mean).
I’m going to try to lay out what the things on a pre conference notice mean in simple terms to a layman (from a layman). If I get it wrong, please correct me. If it is a nuance difference that is only useful to those of us that love to pick apart every lease clause and obsess over everything oil and gas, please be kind and post it somewhere else. Let's keep it simple. I hope that this blog and comments to it are understandable to anyone who knows nothing about the shale and maybe doesn’t even want to know (I’m obsessed but there are people who have a life - so let’s try to keep it simple).
1. I got this letter, what does it mean and what do I need to do about it?
A oil and gas company wants the right to “pool” a section of land to drill for gas. I section is generally 640 acres. If they don’t have the whole 640 acres leased they have to have a means to account for the unleased property and a measuring stick to decide who gets paid when they drill a well. If you own some mineral rights within the boundary of that 640 acre section then you will get paid from that well.
If you have signed a lease, you will get paid according to the terms of your lease.
If you are unleased, there is nothing to be afraid of, you will get your proportionate share after expenses are paid. It AIN’T as easy as it sounds but YOU WILL NOT BE LEFT OUT. (Search UMI on this site). You will get 100% instead of the % (usually 25%) that the leased mineral owners will get, but you will need to be prepared to put forth the effort to make sure that expenses are "legal" expenses. I don't plan to be UMI and don't recomend it unless you really believe that they won't give you a reasonable lease.
2. But it says they are going to FORCE POOL the property, isn’t that something to be upset about?
No it just means that the owners of the section will get their proportionate share as outlined above. It’s just the legal mumble jumble word that they use for it.
3. But I’m not leased, can they steal my minerals?
No. See above.
4. I’m scared, I haven’t signed a lease, so I’m going to be left out. Shouldn’t I sign now and take whatever they will give me so I won’t be left out.
Yeah, go ahead and sign if you are the kid who would rather give your lunch money away so the bully won’t beat you up.
If on the other hand, you are an adult and want to be treated as such, only sign what YOU think is a fair lease.
No one can define what this figure or the terms are for you. You can see what others are getting in your area. You can hire an attorney. You can consult a magic eight ball. But at the end of the day, YOU are the only one who can determine what your needs are. Make the best deal that you can and then move on after you have the cash in the bank (IMHO).
5. The letter says “X” wants to “unitize” the section, but I’m leased to “Y”.
“X” and “Y” will work together. You will get whatever the terms of your lease state.
6. It says, that the ….. As defined by ….. In Section “X”, Township “Y”, Range “Z” is 10,546 feet to 12,846 feet. This isn’t the section that I am in, but the map on the last page is where my property is located. What does this mean?
They are establishing the stratigraphic (layer) boundaries of the Haynesville Shale in your area. In one area the shale may be more shallow than in another area. The layers are like a stack of pancakes, but pretend that a 5 year old cooked the pancakes for you. They are all bent up and lumpy, but they are still individual pancakes. If you measured down from the top to reach the bottom pancake it might be 5 centimeters in the middle but if you measured on the edge of the stack it might only measure 4 centimeters to reach down to the bottom pancake. The bottom pancake is the bottom pancake no matter what distance you have to travel to get to it. Geologist can determine which layer (think pancake) in a given area by examining a log.
7. Does this mean that the company is ready to drill a well and I’m fixin’ to get some mailbox money?
No. Only the company knows when they plan to drill and just like our plans sometimes they change their plans.
8. I don’t own mineral rights in the section, why did I get this notice?
If you live close to that section you may receive a notice so that you can object as to why the unit is not “fair”. In my opinion, the system has been in place and it pretty much works. If you have mineral rights within the 640 you get paid. If your outside of it you don’t and you will get paid if and when they drill your section. I don’t think they could ever come up with a system that would make everyone happy, but this one is relatively easy to understand and work with. So in my opinion, if it AIN’T broke don’t fix it. All the reasons it “might” not be “fair” are technical, so I would leave it to the technical people to argue about (remember I am writing this for people who have a life other than obsessing about oil and gas).
If you own surface rights without minerals you will also get a copy of the notice. I’m sorry, but if you don’t own minerals I wouldn’t waste any time with this. You may care where a drilling rig will be located in the future, but it’s not going to be addressed at this conference.
9. So what do I need to do?
You may want to attend just for the heck of it. Darn this stuff is exciting and interesting and something novel that you don’t deal with everyday. At the end of the day, you might not even know more than you did before you went, but you may see some of your neighbors that you haven’t seen in a while and you can compare notes about what you’ve heard and what you “hope” will happen when. Kind of like a funeral but nobody died. OK, maybe more like a class reunion.
I went to one. It was ……… a little interesting…….but mainly a waste of my time. I should have just went and had a manicure. But I’m obsessed so I wouldn’t have missed it, but I haven’t been to another one.
If no one request the pre conference hearing they probably won’t have one. That ought to tell you how important they are. IMHO.
10. Are they going to try to lease me now?
Maybe. Maybe not.
You can even sign a lease AFTER the well has been drilled. There is no hurry unless you need the money or you think that your section will never be drilled. I personally don’t think any of these companies throw away money without a good reason, but it’s your mineral rights not mine. So, it’s back to no one can really make the decision for you. They can advise you, but it’s YOUR decision.
I HOPE THAT THIS GIVES YOU SOME BASIC HELPFUL INFORMATION. Les, Skip and Baron (and the other experts) understand it all a bunch better than I do, but I hope I made it simple.