Override Question
I and some other family members are getting royalties from Haynesville Shale wells in Caddo Parish. This is through a lease we signed in 2017. We are getting division orders for an old lease that dates to the 80's for an old oil well that has not had any production since April 2019. The unit includes some of the area also in the Haynesville Shale unit. I discussed this with the company sending the orders, I questioned whether the lease was still valid since there had not been any production in over 5 years. Their response was that they were getting a small override for the Haynesville wells and this makes the lease still valid. They said they still had some oil in a tank they wanted to process, but have no plans to rework the well. Does seem to make sense?
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Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on -
Yes. Many small oil operators of old wells that were producing and holding old "all depth" leases in force when the Haynesville Shale play started were able to assign the deep rights to the shale operators. Chances are the early Haynesville Shale wells went into production long before 2019.
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Permalink Reply by William Arnold on
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Thanks. Some of these Haynesville wells started production in 2019 and we are getting paid through the leases we signed in 2017.
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Permalink Reply by Skip Peel - Mineral Consultant on
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That override is the difference between the royalty in the old lease and the royalty that the small oil operator received for the assignment. Depending on the date of the old lease, if it was a one eighth royalty and the operator got the difference, you would both be getting paid on one eighth. You got the original one eighth and the oil operator got an eighth on top of that for a quarter royalty. The usual difference is that an override is cost free while you get dinged for post production deductions.
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