Can a lease be done to exclude an existing well in the unit?
Has anyone ever heard of a lease structured to exclude a well already producing on a unit?
It would make sense for the landowner if the well came in and has proven production then why grant a lease that gives away 75% of that well. You already sweated out the hard part then the company comes knocking for a lease. I wonder what they would do if you proposed a lease on only undrilled wells from that date. The landowner could be umo on well #1 and leased on all subsequent wells. Just thinking outloud.
It would make sense for the landowner if the well came in and has proven production then why grant a lease that gives away 75% of that well. You already sweated out the hard part then the company comes knocking for a lease. I wonder what they would do if you proposed a lease on only undrilled wells from that date. The landowner could be umo on well #1 and leased on all subsequent wells. Just thinking outloud.
Views: 70
Replies to This Discussion
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Permalink Reply by Aubrey C. Sanders, Jr. on
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YES. I have done that and I operate well. Also have friend who did that.
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Permalink Reply by Skip Peel - Mineral Consultant on -
Aubrey, is operating a well something that you would recommend to those with no significant industry experience? I would think you should consider providing them with an owner's manual. And laying out the potential challenges up front.
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Permalink Reply by Jeff on
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Now I am lost. Please explain operating a well.
We are simply unleased with 20 ac. The well in our unit is waiting on fracture stimulation.
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Skip,
I would not reccomend someone with no relevant experience to become an operator unless I knew that person and could judge their capabilities. Many people could handle this if they are committed to doing so. It can be a daunting experienceat times. Much depends upon type well (pumping or flowing). Generally it is not a demanding job on day to day basis. But someone w/no experience should have someone with experience to hold their hand sometimes.
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NO PROBLEM.
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Operating a well means being in charge of it and being responsible for all physical aspects to make well function.; that is operating valves, checking tanks, maintenance of all equipment and handling sales of products.
In your situation you are currently just an unleased mineral owner. The company who owns the well will be the operator. You may elect to remain unleased and own a working interest in subject well. Or, you may negotiate a lease with any company. You should be in good negotiating position or you may simply want to remain unleased.
Carefully weigh your options and get some professional advice before making decision. I would relish being in your situation. GOOD LUCK
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Permalink Reply by Les Bamburg on
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Jeff, the operator would likely not separate the production between the wells in the unit. This would make it very difficult to track production information for the unleased well. It would seem more logical to go leased or unleased on all the wells in the unit.
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Permalink Reply by Jeff on
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It is pretty much hypothetical right now. There is no offer currently on the table. I was trying to see if anyone had done this before. Best to be prepared for any senario. Thanks for the input.
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Jeff,
I agree with Les B that it would probably be logical to either wholly lease or unleased for all wells. However, there should be no accounting problem whatsoever. Well production is reported on each well separately to Office of Conservation if you are in La. I suppose it is reported to Texas Railroad Commission if in TX.
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Permalink Reply by Jeff on
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Thank you all for your kind advice. Sounds like the next several months should be very interesting. I will surely have our attorney by our side whenever any of this comes to pass. I do like to have my ducks in a row before anything happens so it is good to have all of this great input.
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Permalink Reply by Les Bamburg on
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Aubrey, just recognize the separate well production for a unit is probabably allocated based on well test rather than separately measured on a continuous basis making the accuracy less than great.
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