Anyone with multiple units on one well pad affecting royalty payments?

Range drilled six wells on our 150 property last year.  We thought the entire 150 acres would be in one unit.  They divided the well pad into three units.  80 acres with three wells, 50 acres with one well and 20 acres with two wells.  We are pleased the entire acreage was included, but feel the multiple units has adversely affected our royalty payments.  Anyone else with this situation?

Views: 1724

▶ Reply to This

Replies to This Discussion

Permalink Reply by James Foster on July 1, 2014 at 6:52am

Mathematically how has it affected your royalty payment.  If you are in a big 640 acre unit and get money from all three wells then would also have to share the money from "your well" with all the other landowners in the big unit.  Are you in PA?  I find it  hard to believe you have a unit there with only 80 acres and three wells.  That is not enough property to meet setback regulations in Ohio.  Most of the production units here are 640 acres or 1280 acres with 3 wells or 6 wells. Maybe I am misunderstanding you.  Are you saying that your acreage is all the units for 6 wells?  So you are getting money from all the wells no matter how the production unit is set up 640 or 1280.  Do not confuse the drilling unit submitted for a permit (in Ohio) with a production unit.  Unit acre drawing is on file at ODNR and maybe PADEP but production unit is in division orders and on file at recorders office .. again in Ohio.  Not sure about PA.  Your 150 acres is fraction of the entire production unit for that pad... for the sake of argument lets say 150/1280.  Even if it is  two 640 acre units you have say 80/640 and 70/640.  Mathematically that is the same.

The advantage of one well in one unit is that only people who have oil/gas being taken from there property get paid. But when the well is done you are done getting money.   The advantage of 3 wells in one unit is that you get money from 3 wells so you may get more money or if they are drilled over several years you get less money but for longer (tax advantage).  And another advantage or disadvantage depending on which land you own is that off one well pad you have say 6 wells.  If one is a dud for whatever reason and you are in a 640 acre unit well you still get some money but the people owning the property under the other two wells are pi$$ed because you got a share of there money but they got nothing from you.  Also 640 vs 1280 is a big topic of discussion.  There is a well near us that has 2 - 640 acre units one nw and one se.  One side has oil and the other side is all wet gas.   The people on the oil side are happy with their 640 acre unit but the people on the wet gas side wish they had signed that paper to make it a 1280 unit or had that in their lease.  Most of the leases in our area say 640 because we did a group signing and that was the language in that lease.

Permalink Reply by Max on July 1, 2014 at 7:40am

Hello James,

We are located in Washington County, PA.  The "A" Unit has 492 acres with two wells using 20 acres of our property.   The "B" Unit has 483 acres with one well using 50 acres of our property.

The "C" Unit has 638 acres with three wells using 80 acres of our property.  The well pad is located on our property.  We have a total of 150 acres in our farm.  

I just thought that having the well pad divided into three units may affect how much royalty payments we will receive over the years versus one unit with all six wells and having our entire farm included in the unit.

I appreciate your thoughts or any ideas on this.  

Max 

I suppose Range did this to hold more land by production also.  We were just a little concerned when we saw the Division Orders coming and found out they divided the well pad into 3 units.  We have not seen that anywhere else in our area (northern Washington County, PA).   

Permalink Reply by David Perotto on July 1, 2014 at 11:52am

James,

What strata does each unit target? You could still be in more units if you sit on one of their "triple plays".

With your above description, you will receive many more small payments, which should be equal to less payments with higher amount. So in theory should make no difference in the end.

Permalink Reply by Philip Thackray on July 2, 2014 at 9:42am

What David said:

"So in theory should make no difference in the end."

Phil

Permalink Reply by bungalow_steve on July 2, 2014 at 10:23am

It only changes the rate you get your royalty, but not the total amount. For instance if you have 150 acres in one unit with 6 wells, you would get your royalties much quicker (which would be nice). But they didn't do this because they rather hold more land by production by spreading the 6 wells over multiple units. If the price of gas goes up in the future you will make out better in the long run, if it goes down worse in the long run. But, anyway, you have no choice in the matter, you get what you get.

Permalink Reply by Kathleen on July 2, 2014 at 12:06pm
One well could be better than the well next to it, on the same pad.
That would affect your royalty but, by being in multi wells you upped your chances of being in a better well.
Permalink Reply by Max on July 3, 2014 at 12:59pm

Thanks everyone for your input.  We really appreciate any new ideas on the matter.  It has helped with our concerns.  

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service