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Permalink Reply by Skip Peel - Mineral Consultant on October 16, 2015 at 1:55

The surface location is a none factor.  What matters is where the horizontal wellbore is perforated.  In a Cross Unit Lateral Well, designated as HC and producing from multiple units, production is allocated to each unit based on the percentage of linear feet of the perforated lateral located in each unit.  If the perforated portion of the wellbore is 10,000' in total length and 6,500' is in Unit A and 3,500' in Unit B then the allocation is 65% of production to A and 35% to B.  So how do you know where the wellbore is perforated and how much lies in each unit?  There is a plat provided to the state as part of the well permit process that shows the "first take point" and the "last take point".  Of course the well may not confirm exactly to that plat when drilled so the operator is required to file an "as drilled" plat with the well completion paperwork.  These plats are contained in the Document Access portion of the SONRIS database.

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Permalink Reply by Randy K on October 16, 2015 at 2:04

whwn looking at well info on SONRIS Lite, is the production split up or do you have to figure it out yourself by looking at the docs

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Permalink Reply by Skip Peel - Mineral Consultant on October 16, 2015 at 2:07

Good question.  I haven't looked into the specifics of reporting.  When I get time I'll see if I can get an answer.

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Permalink Reply by HBP on October 16, 2015 at 6:50

On Sonris, look for indications in the well name that it is a cross unit lateral - "CUL" (Look for "HC" as Skip mentioned).  If you are in the Surface Hole Section and it is a CUL, then you should receive a division order for the well that shows your proportionate share.  If memory serves me correct it is calculated based on the length of productive well bore in each section in relation to the whole of the productive well bore.

But first you would need to identify it as a CUL, otherwise the surface location being in a unit will not affect whether that unit shares in the well because it may not actually produce from that unit.

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Permalink Reply by Skip Peel - Mineral Consultant on October 16, 2015 at 6:53

HBP, when an HC well produces from two or more units, how is production reported to the state?  Is that production split proportionally between the existing unit LUW codes?

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Permalink Reply by HBP on October 17, 2015 at 2:11

It appears they they show a split to two different LUW codes on the HC CUL well's main listing (under its sole serial number).  So it would list the same production month twice and show production attributable to each LUW. But its still the LUW's cumulative, so you would have to take extra steps to get the exact production from the CUL alone.  If you go to other well's Serial #s related to the 2nd LUW shown, it does not show the HC CUL listed again, but the production reported to any other wells within the LUW match the cumulative that was shown for the LUW where the HC was reported.

As I read back over this, I don't think I'm simplifying it, but it is reported in a way that can be reconciled assuming you have the as drilled plat, and you know the percentage of ownership being allocated to each unit (which a new DO should indicate).

 

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Permalink Reply by Randy K on October 17, 2015 at 2:18

Great information.  Thanks guys, this helps me a great deal.

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Permalink Reply by Skip Peel - Mineral Consultant on October 17, 2015 at 2:24

Thanks, HBP.  I think your explanation is about as good as can be had for a reporting process that is a difficult grasp for mineral lessors.  Although I've mentioned it previously your last thought about a new Division Order (DO) provides the opportunity to remind mineral lessors that the new DO process can uncover mistakes from the original process when more accurate surveys are performed.  The corrections made to pay decks owing to those new surveys can change the decimal interests that have been in effect for quite some time.  And cause royalty recipients to have their payments suspended until back over payments have been recouped by the operator/lessee.

The horizontal drilling revolution changed a lot of legal and regulatory situations long in force based upon vertical wells.  Now that Cross Unit development has become the norm that situation is complicated even more.

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