Property "units"

In a earlier discussion Mr. Knapp explained that the gas co. will assign the units for production useing "unit operation designation" filed at the court house, he also explained that these units could be any size because Pa had no legal limits other than what was stated in your lease. In the lease that I have been presented with it stated "no units can exceed 640acres plus 10% or 704 ac. I was wondering what the typical unit size is in Pa? Is it all based on the geological investigations? It's only logical that royalties would be higher for each landowner in a smaller unit. Has anyone heard of a unit that is has a 100acres or less?

 

 

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Permalink Reply by Mike Knapp on January 12, 2011 at 5:35pm

John,

 

There really is no such thing as a "typical" unit.  We have put units together that are less than 2 acres.  Of course that was for shallow well drilling.   For horizontal Marcellus drilling, you are going to need  300-400 acres minimum.  It all depends on how long of a lateral the company wants to drill, what leases they have in the area, the geology of the area, the topography, location of pipelines, etc.   

 

I know that some companies are putting together units as large as 1,200 acres.   Typical would probably be somewhere between 500 and 700 acres.   You are correct that the smaller the unit the larger your proportionate share.  

 

 

Permalink Reply by john ginkel on January 12, 2011 at 6:03pm

Thanks again Mike, your comments are allways helpfull.

 

I was really wanting to hear from some landowners that have been thru the process to answer the question that you adressed earlier about some gas co's being more informative than others and how much research would need to be done by the landowners to determine the size of there units. Maybe there are not that many landowners that have gotten this far that use this site, (or care as long as the checks are cashing)? I am only referring to Marcellus drilling.

Permalink Reply by hunter777 on January 13, 2011 at 12:11pm

In the Dimock area, I am aware of unit sizes of 132 and 106 acres for some of the local wells.

 

They are set up with only one horizontal per unit.

Permalink Reply by Mike Knapp on January 13, 2011 at 4:40pm
are you sure you don't mean one VERTICAL per unit?   thats awfully small for a horizontal.
Permalink Reply by bill h on January 13, 2011 at 8:34pm
That's what a horizontal will actually drain.  Cabot is in full-development mode.  Anything more is a HBP tactic.
Permalink Reply by Mike Knapp on January 14, 2011 at 4:37pm

Bill,

 

How much a horizontal will drain is completely dependent on the length of the lateral.  I can't imagine that a 106 acre property would be profitable to drill, but I suppose stranger things have happened.  

 

It takes a half mile just to turn horizontal.  Those must be some VERY short laterals on a very skinny/long parcel that is perfectly situated along the NW/SE path that laterals run.     

Permalink Reply by Mmmarkkk on March 31, 2011 at 12:22pm

Mike:  most of the work I've seen in presentations are based on 2-3000 foot laterals and use 80-acre spacing.  And these are quite economic.  As the laterals get longer they'll have to increase the spacing.

 

There is also a lot of disagreement related to drainage.  Some people believe that a 4000 foot lateral could potentially drain 200 acres or more.  Look to industry to push drainage out as far as possible until gas prices recover.  HBP is the main focus right now.

Permalink Reply by craig on March 31, 2011 at 1:27pm
I have seen recent paperwork that shows the change from vertical to horzontal is being done in 550', fwiw.
Permalink Reply by hunter777 on January 14, 2011 at 12:17pm
Absolutely sure, they are horizontals!
Permalink Reply by BuckinghamGasMan on January 27, 2011 at 12:38pm

But remember, the smaller the unit, the faster your royalties run out. In a big unit, they may drill multiple wells over a long period of time and your property's check will be received for years -- maybe to your kids and also maybe in a smaller check.

If the Marcellus can provide 100% of the country's gas needs and it is presently providing 10%, the math provides that the Marcellus in its entirety will provide gas (and royalties) for 200 years if the percentage and the use stay constant. Very few landowners will get that big slug of cash in the next few years.

Permalink Reply by FXEF on January 14, 2011 at 8:54pm
Many of the Marcellus operators are reporting an average lateral length of 4,000 ft. with 12 frac stages, and 7-8 Mcfd IP. The operators want their units to be as large as possible, depending on the continuous acreage lease hold they have. A 600-700 acre unit could be effectively drained utilizing 8 wells with 4000' laterals and 12 frac stages.
Permalink Reply by gerard mascellino on January 19, 2011 at 6:42pm
R you saying 7-8mcfd per lateral

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