Questions about drilling units

I have enjoyed all the information that I've learned on this site. Now I'm hoping that someone can clarify these 2 items of interest for me.

I have heard that it is better (for the Lessor) to have written in your lease for the unit to be in a rectangular or squarish shape. What are the pros and cons of this?

Also, what are the advantages and disadvantages of having an addendum that says "if any part of my acreage is in a unit then the all my acreage is to be included"?

I appreciate any help with this!  Jett

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Permalink Reply by oildude on March 24, 2012 at 8:57am

Jett

Im not sure about the shape of the drill unit but I suspect that it is planned according to what the engineers NEED to do to best develop the chosen area. Another member of this website told me about the "inclusion clause" you speak of. Its basically "all or none" as far as including you property in a drill unit. The downside is that if you have 50 acres and they only need 30 acres to complete the drill unit they will forget you and go the other way. Im sure others on this site can give you more " in depth" information.

Permalink Reply by jett on March 24, 2012 at 10:19am

That makes sense. I guess that our property could be included in more than one unit. Wonder if the horizontal Pugh clause would be part of the lease if the inclusion clause is in there.

I've seen the shape requirement in some leases out there. I've also seen some plat maps(?) that show a nice rectangular shape and yet others that have a crazy configuration.

Permalink Reply by Clinton44 on March 24, 2012 at 8:59am

Hi Jazz, This forum does have many members with firsthand experience dealing with gas company leases. I am sure your questions will generate some interesting responses. Most drilling units in PA as far as I have seen are rectangular in shape, with the standard size being 640 acres some are more, we have some acreage in one that is 943 acres.

In any case regarding the two lease clauses you mentioned I have mixed feelings, for if you do not have a large parcel of land that the drilling companies want or are joined with a group of your neighbors and are controling a large block of acreage in your area they might by pass you if you are to restrictive in your demands.

Are you currently in a lease or still in the negotiation stages?? What state, county, township are you in?

If you are in a drilling unit there should be documents in the county courthouse showing the size and shape of a drilling unit and they are public record. If you are a landowner that does not live near your leased agreage there are some online document retrieval sites thatyou can use to access the public documents. Infocon county access is the one I use in PA to keep tract of drilling activitites in the area of our acreage as we do not live in the area of our lease

RL store is also a good site to pull permit information off of. Hope this information helps...  

Permalink Reply by jett on March 24, 2012 at 10:28am

We have mixed feelings, too. That's why I asked: trying to get some clarification before committing our lives away! We haven't leased yet - we're still lining all our ducks up in a row.

Permalink Reply by oildude on March 24, 2012 at 10:34am

Jett

If there is only one piece of information that you TRUELY NEED it is to hire a good oil and gas attorney. Make sure they specialize in oil and gas. Good luck.

Permalink Reply by jett on March 24, 2012 at 11:03am

Thanks - I absolutely agree about the attorney but all the different experiences and knowledge on here is helping us to know what to ask the attorney and to have a reasonably intelligent discussion about our concerns. I still would like to understand why others have included the rectangular/squarish unit requirement in their leases.

Permalink Reply by Clinton44 on March 24, 2012 at 11:10am

Jett, Oildude is correct a good lawyer with experience in gas leases is a must. We found a good one however we did not find him in time to help with the lease negotiations, but he helped us set up a seperate corporation, have our lease appraised, so a group of our members could purchase said lease from the 501 C non profit hunting camp that we have all been members of for years. It has worked out quite well as we are now in two poducing units. Without his advise all monies would have been tied up in the nonprofit.   

As it stands now the non profit made out well because they got the signing bonus on the lease and a nice sum when we purchased the lease as well, So it turned into a win for all involved

Good luck with your lease !! 

Permalink Reply by jett on March 26, 2012 at 7:54pm

We are in Eastern Ohio. We do have a pretty good attorney for oil and gas leasing.

When we mentioned the rectangular/squarish shaped unit addendum, it seemed as if he didn't give it much notice. But we have seen it in other leases and don't want to leave it out of ours if it is important. We've spent over a year doing research on leases, etc. and sure don't want to mess up now. Does anyone know why this rectangular/squarish unit shape has been included in some leases? We appreciate the lawyer's advice but feel we need to know for ourselves what we're signing to. Thanks for any and all help in this!

Jett

Permalink Reply by jett on March 26, 2012 at 11:31pm

Thanks, Utica Shale. I really appreciate your explanation.  It's pretty important to maximize our royalties so we'll be including that addendum for sure!

Thanks, everyone and Keith for setting up this site. There's no way that our decisions would be so informed without all that I've learned on here!

Jett

Jim ShoosPermalink Reply by Jim Shoos on March 27, 2012 at 9:14am

The shape of a unit means very little, although it does in a very general sense need to conform to the length and orientation of the horizontal lateral...but it could be shaped like a "death star" if an operator wanted to.  In theory it is supposed to mirror the drainage pattern but the reality is that operators like to include as much acreage in whatever shape for HBP purposes.  When you start putting in restrictions on shape, along with imposing acreage size limitations and inclusion clauses you risk getting left out of a unit altogether.  When an operator cannot rely upon forced pooling and runs into a landowner that simply refuses to lease...at any price then an operator doesn't have the ability to always comply with a prescribed unit shape.  There is literally no categorical "right or wrong" with prescribing unit shapes or sizes.  Yes, a larger unit means you share royalty income with a larger group... but you could be one of those that gets left out were it not for the larger unit.  Additionally, not all wells are created equal... having a larger unit with 5 or 6 eventual laterals in it gives you the ability of "averaging" great wells and not so great wells.  Having a smaller unit for those of you that don't want to "share" might result in you having a well all to yourself...but it might be that you get stuck with a not so great well, while that of your neighbors was a great well. 

Permalink Reply by JDM on March 28, 2012 at 7:51am

Is anyone else that is in the process of obtaining a lease having a hard time trying to negotiate with the major gas company in this area? They have given me a lease and I have tried to have things added or changed and they have told me that this is it...sign or not....I'm curious if others are running into these same challenges and if anyone has suggestions on what I should do....sign with the gas company or sign up with a landgroup that promises the world??? Help????

Permalink Reply by JDM on March 28, 2012 at 10:15am

i talked with a new land group that has all but promised to get the same lease at $5800 per acre with chesapeake....but i'm doubtful this can happen because i have not heard of anyone signing in the last few weeks with chesapeake at this amount....am i wrong in thinking like this. I am trying to get good info so i can make a decision on what to do....sign up with a land group/ individual or try this on my own. The thing I don't like about the land groups/ individual is that they want me to give them 60 days to get a lease for me and if they don't get me a lease or I don't like the terms then they want me to wait 90 days before i can negotiate my own lease and if i do this within the 90 days then i still owe them a % of my signing bonus....my logic is if they can't get a lease in 60 days why i should i have to wait another 90 days to go at it on my own? Someone please explain this to me.  And has anyone had any sucess with these land groups/ individuals that will negotiate a lease for you.....and this is not ALOV nor Buckeye and I live in south Mahoning county.

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