Falsifying Production?

I think that the oil company that is holding our oil rights on production may be falsifying their production.  Is there a way to check that?

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Permalink Reply by Gunner Ostergard on April 2, 2013 at 3:23am

I have never heard of a 160 acre unit for a deep horizontal unit.  The smallest I have heard of is 640.  Has anyone out there heard of a deep horizontal unit of 160 acres?

 

Permalink Reply by James Brink, Esq. on April 2, 2013 at 4:04am

In some of the old leases they had different unit sizes for oil wells and gas wells.  I have seen 160 limitations for oil, but never gas.

Permalink Reply by James Brink, Esq. on April 2, 2013 at 4:11am

No, I have not.  An operator would be foolish to do this since the operators controlling neighboring lands would be prospecting by practicing "closeology."  That is, once they see the production numbers on a well that close, they would certainly follow suit on thier own acreage, which could, maybe, result in cross-drainage issues.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 2, 2013 at 4:14am

"I have never heard of a 160 acre unit for a deep horizontal unit."

Then you haven't been listening.  CNX did one up my way that is 113 acres.  CHK routinely does them significantly smaller than 640.

Permalink Reply by James Brink, Esq. on April 2, 2013 at 4:32am

WOW.  Marcus, at 113 acres, that is the smallest deep unit I have ever heard of.  I would love to own the neighboring land!  You are correct about CHK.  They have formed some units in Western PA that contain less than 640 acres, but that is generally done when they cannot unitize the neighboring lands.  CHK's general rule here seems to be to form the largest unit possible in order to hold the most land by production rather than to pay a  primary term extension bonus.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 2, 2013 at 4:56am

James,

CHK is forming smaller units in Carroll County where I think--check my math if you care to--they own 117% of all the leases.  Downspacing will be a reality and those who choose not to amend their leases may just end up in 160's anyway.  I randomly looked at four wells in the Columbiana/Carroll area and none of them were more than 160.  GPOR drilled one of the Shugert wells on a 162 acre unit and the lateral was over 5,500'.

Permalink Reply by John Goold on April 3, 2013 at 7:52am

I just found out something interesting in 2011 one well produced 128 mcfs of gas and 5 barrels of oil and the other produced 84 mcfs of gas and no oil per the production report to the Washington County Auditor's office.

Permalink Reply by Paul Martinelli on April 2, 2013 at 3:30am

Marcus,

 

I understand the units may now be getting smaller due to closer lateral spacing, but wouldn't pooling still be required due to the shape/lay of the parcels? I'm guessing few parcels would lie in a NW/SE  direction to allow for a lateral  without pooling the lease with neighboring parcels.

Permalink Reply by James Brink, Esq. on April 2, 2013 at 4:08am

One would hope that the shape and size of the parcels would control the shape of the unit, but that is not always the case.  If the pooled leases do not have a Pugh clause, the operator may decide just to nip the parcel and hold the rest by production.  I have seen final mapped units that have no defined shape at all.  As far as size, it usually will depend on how much acreage the operator has contiguous to the production tract.  I have seen 1000 acre units as well as 400 acre units.  There really is no general rule how it is done.

Permalink Reply by Gunner Ostergard on April 2, 2013 at 4:12am

Esquire is right and brings up another important point you want in your lease,  a pugh or "all pool" clause.

 

Permalink Reply by John Goold on May 14, 2013 at 5:04pm

Our lawyer just sent a letter to the oil company that is claiming that they hold us by production telling them to return the oil and gas rights to us or we will be filing an affidavit of forfeiture.  The courts have pretty much been deciding once a lease is broken it is broken and can't be retrieved.  If the wells were shut in at any point and no shut in fees were paid then the lease is gone.  Also the courts are determining that 100-300 mcf per year is not production.  With the exception of maybe one year in the late 80s or early 90s we have never had production of over 300 mcf per year so I think we are in good shape.  We may have to settle and buy the oil company out but I have a lot of optimism.

Permalink Reply by william r rinehart on May 15, 2013 at 5:31am

I am in the same situation, HBP. I talked to a lawyer there is in Ohio an implied covent, that states that all oil and gas for leased property should be developed to maximum potencial. He said he has beaten shallow well drillers in court. His fee is around $10,000, because they lawyer up.  One well on 260 acres does not develope the property to its full potencial and paying $48 dollars a year to the oringinal owner does not hold the property. We are waiting for them to try and sell the lease to a deep well driller, then slap a lawsuit on them. The numbers you posted are about the same as the numbers that ODNR posted for the well holding us.

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