Unit Size and HBP

Ok, so Ive been reading a lot about 640 acres vs 1280 acres, and the pros and cons of both. But I have yet to see any discussion of a production company being able to hold 1280 acres with a single pad that is drilling on property leased with a 640 acre unit restriction. Its very simple ... a producer can locate a pad straddeling two 640 acre units... exactly on the border. Then they drill one well just a few feet inside the one unit's border.. then move the rig a short distance (like commonly done) until its in the other unit and drill again. There ya have it! One pad... two wells a few feet or whatever distance is necessary for them.. and 1280 acres held. Or even 2560 acres with a 1280 restriction.. or even much more if the pad is located on the exact corner of 4 units? what about odd shaped units with more than four connecting corners?? What do ya think? HBP 5 or 6 thousand acres with a single pad and 6 or 8 holes? Possibly some of them verticle? Or i could be totally wrong and everyone has made this illegal in their lease agreements.... I would think it would take quite the wordsmith to prohibit this in a lease.

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Permalink Reply by James Stevenson on September 30, 2012 at 10:58am

I own a 53 parcel in Hubbard township with a producing shallow well. This was unitized as a 120 acre unit in the late 1980's with a royalty percentage of 12.5%. I now receive a royalty check of 5.6%. I would appreciate if someone could provide some insight that if Enervest who presently owns the property drills a deep well on a 640 acre or a 1280 acre unit of which I am included,  how  what would my royalty percentage be. Thanks for the information.

Permalink Reply by Rick on October 1, 2012 at 2:08am

Hi James, using the figues you state, and the acres you own divided by the acres in the unit :53 / 120 X the 12.5 % equals the 5.6% of the entire unit's production that they are paying you now. If ALL 53 of your acres were in a 640 acre unit, you would recieve 1.035% of the entire units production. If ALL of your acres were in a 1280 acre unit, your cut would be .5176% of the entire units total production. You arent guaranteed that ALL of your acres will be included in the unit. And from what others have said on here on a different thread, they could possibly put a pad and drill the vertical part of a horizontal well on your property and not even include you in the unit... i think that is totally unfair, but another may seem to think you are entitled to nothing. You didnt mention about deductions so they could possibly decrease your check more for shipping and handling.

Permalink Reply by Rick on October 1, 2012 at 2:23am

I dont think it will hold up in court either, Fang. Without just compensation, anyone can see how unfair that would be. But much stranger and unfair things ARE held up in court!

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