Can multiple properties under one lease be in multiple units?

Can you be in multiple units?

We have land in a few areas, all under the same lease. If we signed for a 640 unit, and one part is already in a unit of 640 can our other parcels be in another unit?

Thanks!

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Permalink Reply by Philip Thackray on June 4, 2014 at 9:20am

Yes.

But the same acreage cannot be in different units.

Phil

Permalink Reply by Paul Martinelli on June 4, 2014 at 9:24am

unless the units are for different formations ( depths).

Permalink Reply by Bill Barnaby on June 4, 2014 at 9:49am

Great info to know, thanks folks. I am currently in a unit but due to lease terms they missed between 15-30 acres of my land. So I will assume at the current lease that will go un-drilled forever.

Permalink Reply by Philip Brutz on June 4, 2014 at 10:01am

Do you have a Pugh clause in your lease?

Permalink Reply by Philip Thackray on June 4, 2014 at 10:03am

Paul,

Of course.

Bill,

What do you mean "but due to lease terms they missed between 15-30 acres of my land"? 

Phil

Permalink Reply by Bill Barnaby on June 4, 2014 at 10:34am

These are hypothetical numbers, but this is what is happening.

I have a 600 acre parcel

450 acres are in a unit, the unit size total is 650. Due to the length of the laterals the unit size is longer, rather than wider.

So, I have 150 acres that is outside the unit boundary lines but are on the same parcel. So the only way to hit those 150 acres is to

1. get into a bigger unit

2. Get put into a second unit, which can't be done as you stated earlier.

In short, my leased unit size is maxed out and I have land left over that is outside the unit, but in the same parcel.

Permalink Reply by Philip Thackray on June 4, 2014 at 11:22am

Bill,

For the 150 acres that is not in the unit:

1) The lease can be held by the production of the acreage in the current unit,

2) but the 150 acres can definitely be put into a separate unit.

2a) If you have a surface Pugh clause, the rights to that 150 acres will be returned to you at the normal end of the lease - that is the 150 acres would not be held by production if you have a surface Pugh clause.

2b) If you don't have a Pugh clause the original lessee can do what they want with the remaining 150 acres.  They could put it in another unit or sell that part of the lease to someone else who could put it in a unit.  Either way, you would get the royalty from the 150 acre parcel.

 

My original comment was simply that you can't have the SAME acreage in two different units.  Sorry that I was not more clear.

Phil

Permalink Reply by Bill Barnaby on June 4, 2014 at 2:53pm

Ah ok Phil, thanks for that update this information is invaluable! If that's the case than we can hope for a knock on the door here in a year or so.

Also Phil, in theory you could be in 5, 160 acre units on the same parcel (but not the same spot in that parcel). This makes signing big acre leases (1240 as an example) a little less appealing depending on your situation.

Permalink Reply by Philip Thackray on June 4, 2014 at 4:20pm

Bill,

I'm fine with the newer 1280 acres lease limits.  More people are likely to have all of their land in the unit if the allowable unit size is larger.  Drillers have no problem filling up 1280 acres especially with the long laterals used today.

From a royally standpoint there is no difference between being in five 160 acres units or one 800 acre unit assuming that the per acre production is the same.

Phil

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