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Permalink Reply by Skip Peel - Mineral Consultant on September 6, 2016 at 11:07

Nope, stow the conspiracy theories.  The first well in a drilling unit is the unit well.  After a drilling unit is approved all it takes is a well permit for that first well.  All subsequent wells are alternate unit wells.  Alternate unit wells must comply with spacing requirements so before one or more well permits may be issued the unit operator must apply for alternate unit well spacing.  Once the state confirms that the spacing fits the regulations they approve alternate unit wells.  The same applies for Cross Unit alternate unit wells.  There are two very straight forward reasons why MRD and,in fact, all other drillers of horizontal wells regardless of formation drill horizontal alternate wells..  The operator may drill a longer lateral.  If a well is drilled in one unit it would have a maximum allowable perforated length of 4620'.  A Cross Unit Lateral well, designated by the letters HC, can be as long as 9900', though most are less:  5500' to 7600'. Operators may drill longer laterals in the future.  The second reason is that a horizontal well drilled within a single unit leaves 40 acres on the north boundary and 40 acres on the south boundary un-stimulated (not fracked) and therefore not produced.  When an HC well is drilled the 330' set back on the north end of the southern section and southern end of the northern section are stimulated.  The original state requirements were leaving 80 acres in each section undeveloped.  Cross Unit Lateral wells eliminate that waste.  And produce more revenue for the operator, the royalty interests and the state.

Unleased Mineral Interests (UMIs) don't pay any costs.  They received 100% of their proportional share of production once a well pays out.  After that the UMI will have some deductions for Lease Operating Expenses.  The unit operator is obligated to send periodic reports to UMIs although some times it helps to send a demand letter to make sure they are on notice.

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Permalink Reply by RONNY on September 9, 2016 at 15:08

I get paid royalties in two different states by three different operators .  I don't think any of them are evil.  However, one of them definitely is immoral and corrupt.

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Permalink Reply by Clay Johnston on September 12, 2016 at 2:57

Just my opinion:  I don't think MRD is corrupt/crooked....I don't think Mr. Jay Graham would allow.  However, I do think MRD is incompetent; their employees and other people/contractors do not have a clue of the entire operation in North Louisiana.  Too much for the average operator to handle.  The original Wildhorse group were competent, educated, and always communicated with the landowners, and Jay Graham was part of the original group.  Wildhorse original land people knew the entire operation all across the Terryville field.  They were not perfect, but they do still acknowledge the landowners when they see them and try to assist. (From what I understand Wildhorse 11, the original group still has a small group of land people in Ruston) It is a shame the original group is still not on the ground and in the office.  Hopefully, when Range takes over soon, these changes will be made.  I believe the upper management of MRD are very much aware of the problems they have and are working with Range to correct.  I believe the people of Lincoln Parish/Terryville will soon see a change that is positive. JS

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Permalink Reply by Skip Peel - Mineral Consultant on September 12, 2016 at 4:39

I was at the Office of Conservation Shreveport office last week and spoke with the staffer that is responsible for completion and production reporting.  MRD had a number of problems with regular reporting over the last year.  As far as OOC, Shreveport is concerned MRD is now caught up and in compliance.  They don't deal with timely payment of royalty nor royalty deductions.  That is a matter of civil law.

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Permalink Reply by Skip Peel - Mineral Consultant on September 12, 2016 at 4:45

Not really.  I don't think you want the DNR/OOC deciding those issues.  I think the chances of a favorable ruling are better in court.  The state cares about conserving natural resources and getting their share in taxes outside of that they have little or no interest.

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Permalink Reply by Clay Johnston on September 12, 2016 at 4:46

Good.  I hope MRD pays everyone and all these issues resolved.  It is not good for the industry.

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Permalink Reply by Skip Peel - Mineral Consultant on September 12, 2016 at 13:06

I suspect that MRD or Range will get caught up on royalty payments.  The major question going forward is how courts will interpret a lessee's ability to charge royalty interests for capital expenditures to build out transportation and treatment infrastructure and charge transportation and treatment deductions on those same royalty interests.  From what I have been able to learn, capital expenditure deductions are a recent development and not a traditional business practice.

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