Replies to This Discussion

Permalink Reply by robert edwards on January 30, 2014 at 17:06

we have old ergon, axiom, wells . some are 50+ years old and checks are minimum, but monthly.  we did have depth limits of 3,000 feet for these wells.  hope that will solve the problem for future drilling from a company that is interested in spending money and research in order to make a good well.  oil or oil and gas.

Permalink Reply by Skip Peel - Mineral Consultant on January 30, 2014 at 17:20

Where capable and attentive mineral owners have pressed the issue some operators of shallow zones have released the deep rights on older "all depth" leases.  And in areas that I am aware of where that has happened the operator extended the offer to all the mineral lessors.  Most operators with shallow production are incapable of drilling deep horizontals wells from a technical and capital stand point.  Most have annual operation budgets that are a good deal less than the cost of a single horizontal well.

Permalink Reply by jkw3 on January 30, 2014 at 8:51

As a young landman with Ergon in the late 1970's and early 1980's,  I worked with a resident of Marion, LA to obtain many of these leases. Over 500 wells were drilled in Union Parish by Ergon or Reliance Trusts.  Most leases were a straight printed  "Bath" form with no horizontal or vertical Pugh clauses.  Production from the Arkadelphia formation in which they were completed would hold all depths. The initial production from these wells was nothing like you see today from much deeper and more highly pressured reservoirs.  80 mcf/d was considered good.  The wells were economic because the Arkadelphia was qualified as a tight gas reservoir and they received a higher price under the FERC pricing guidelines.  The Arkadelphia was a tight (low permeability) formation and economic production was not possible without hydraulic fracturing.  These wells were all shallow (about 2300 feet) and received small frac jobs (less than 100,000 lbs of sand).  The operating expenses on these wells were low and thus production necessary to keep them economic was not that much.  Most of these wells paid out in the 1980's.

As to whether the lessee "earned" the deep rights, by the lease provisions of the leases without depth restrictions or depth related Pugh clauses, the lessee did contractually earn those rights and will hold them as long as the wells are productive under specific lease terms or statutory definitions (LRS 31:124).  

Discussion of "production in paying quantities", "commercial production"  and  "reasonable and prudent operator"  or other such terms that might quantify what amount of production could keep a lease from terminating have been discusssed in other forums in GHS.

Permalink Reply by Land Rat on January 30, 2014 at 9:49

"As to whether the lessee "earned" the deep rights, by the lease provisions of the leases without depth restrictions or depth related Pugh clauses, the lessee did contractually earn those rights and will hold them as long as the wells are productive under specific lease terms or statutory definitions (LRS 31:124)."

I agree.

Permalink Reply by Lynn Barron on February 25, 2014 at 10:11

My father & I both received letters in reference to royalties paid for IRS tax info from Axiom TEP.  Neither one of us got a check from them last year.  The phone # on the letter is not in service and I cannot find any other phone numbers.  The one listed for the Marion address goes to someone not at all connected to Axiom. 

Does anybody know how to get in touch with this company?

Permalink Reply by Jimburgess on March 7, 2014 at 4:17

Skip.......Would you advise me to go ahead and write a letter to Axiom Tep LLc  .requesting they either

produce this acreage or release to me. This well, Miller Burgess #1 has produced 1mcf in last 18 months.

It does not seem to be "producing in paying quantities".....and I have received no payment in 2 or 3 years

OR should I have an attorney write the letter.  I own the surface also.  You had mentioned the Mc Vicker wells as being Axioms answer to holding my acreage.  Why would that be sufficient to hold my acreage?

Permalink Reply by HBP on March 7, 2014 at 6:08

Not to step on Skip responding, but I have dealt with Axiom for a client in that area and they are not entirely helpful (i quit using their phone numbers because none worked or would just ring - used letters instead).

Replying to Jim, you could send them the letter but you may want professional help as to what you are really asking for and how to handle it.  Are you asking for them to produce it, or are you asking them to release because they have not produced it, or something else.  Paying quantities and further exploration are 2 different implied obligations.  Either way (or both) you have to lay it up for litigation, even if it is just in case you go that route.  

Regardless, I do not find axiom or any of their associated companies to be the type to release anything based on a letter.  They are seeking a pay day on any lease they control that may hold the Brown Dense, so I doubt they just turn them over.  

Permalink Reply by HBP on March 7, 2014 at 6:09

Also, Skip may be able to help provide you with the info before you take it to your professional, such as which leases apply, mineral and production history,etc...

Permalink Reply by Skip Peel - Mineral Consultant on March 7, 2014 at 6:53

Jim, if I was in your position I would have my O&G attorney write the demand letter.  First off the letter needs to be based on the correct regulatory statutes and specific as to what is demanded.  Secondly, it helps if the letter comes from an attorney recognized by the operator and/or their legal council as a well known experienced O&G attorney known for not making frivolous demands and for following through if there is no response. 

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