We have been notified by Holland Services that Eclipse wants to increase the size of unit from 640 to 1280 acres. Will this have any negative output with a size increase ? They have sent an amendment to our lease for signing. I'm not all that familiar with unitization, so I'm hoping someone could let me know if this is something that needs to be dealt with by an attorney or not. Any input is greatly apprciated.
Yes you need an O&G attorney.
The problem with being in a unit, if you own the whole piece of land, is that you can be tied up for years.
Once the wells age and are producing less and less, you will want to get your land released and that can be a problem to deal with.
We are in such a situation now...
Where is your land?
we r in salesville, bordering mill and sycamore, 155 acres. Eclipse is pushing us to sign quickly to get drilling asap, supposedly. I will be looking for an attorney, as our initial is no longer available. Any suggestions? December will mark our 5th year lease with eclipse. Thanks for the insight.
It could cut your royalties way down. Unless of course they drill more wells on that pad,or longer laterals,then you'll get more.Best let an attorney look at the amendment because there could be some wording snuck in it that could screw you down the road. sometimes it only takes one word.
I agree with Bo. A different O&G company asked us to ratify our current 640 acre lease. They wanted to increase to 2400 so that they could drill longer laterals and more wells. It is true about needing the extra acreage for longer laterals however they also tried to change the lease terminology which would have weakened our lease in other aspects. I did get a lawyer and we questioned everything including the acreage. They dropped all of the changes and dropped the acreage down to I think 1400. I tried to get other concessions from them but we could not agree. Apparently there were a few other hold outs. The company has not moved forward with anything and it has been 6 months. I was also told that they could take the holdouts to court ( a unitization hearing so something) and force us into the larger unit. As far as a larger units and more wells. Let say they were planning 6 wells with the smaller unit and 12 wells with the larger unit. It could be good or bad because if they drilled 6 wells in your smaller unit and the wells produced poorly you would be stuck. But the additional 6 wells could be in a better area and really have good production in which you would now share. But you could easily turn that scenario around. It a crap shoot. But everyone says you do whatever you have to in order to get into a unit and drilled. That is the bottom line.
What does your lease say about the size limit? If your lease has 640 for the limit, and they want you to alter it to the larger size, then you have some leverage to add things to your lease to make it better!! No surface clause, higher royalty percentage, even upfront bonus money per acre. I got all of these things when my lease said 640 and they needed more to tie up more lease holders into a unit years ago. You would still need to talk with an attorney to go over your options.
What everybody else said....get a COMPETENT O&G attorney to look things over before you sign anything.
A larger unit could also include more wells, hence more production to pay royalties....but more folks will be sharing because of the increased acreage, so it is tough to predict how you may benefit until the final plans are known.
Lewpa has good insight here.....if you can 'renegotiate' your current lease, you may receive more bonus money, change your royalty percentage, etc....all kinds of things, depending on how bad they want your acreage.
Best of luck to you.....
a good way to compare apples to apples is to look at the number of lateral feet per unit acre - If you have two 10,000 foot wells in a 550 acres unit, then you have 20,000 lateral feet in the unit or ~ 36 lateral feet per unit acre. If you have two 10,000 foot wells in a 1200 acre unit, well, then you only have 16 lateral feet per unit.
I track wells/units - here's a quick summary for some of Gulfport's units (It's not complete, but you should get the idea):
|OPERATOR||COUNTY||TOWNSHIP||UNIT||ACREAGE||WELLS||AVG LENGTH||TOTAL LENGTH||LAT/ACRE||BCF EST||WELL NAMES||BCF/1000'||BCF/ACRE||MMCF/ACRE||MCF/ACE||ACRES/WELL|
|GULFPORT||MONROE||SUNSBURY||CAMPBELL||704.21||4||6,524||26,096||37.0569||CAMPBELL 1A, 2B, 3C, 4D||0.00||0.0000||0.00||0||176.05|
|GULFPORT||BELMONT||SMITH & WASHINGTON||CONDOR EAST||679.22||2||14,310||28,620||42.1364||67.7||DORON 3A & 4B||2.37||0.0997||99.67||99,673||339.61|
|GULFPORT||BELMONT||SMITH & WASHINGTON||CONDOR WEST||646.46||2||12,965||25,930||40.1105||61.3||DORON 1A & 2B||2.36||0.0948||94.82||94,824||323.23|
|GULFPORT||MONROE & BELMONT||SUNSBURY & WAYNE||EAST FORK NORTH||851.33||4||7,779||31,115||36.5488||59.8||SHRIVER||1.92||0.0702||70.24||70,243||212.83|
|GULFPORT||MONROE||SUNSBURY & SWITERLAND||HEADLEY RIDGE SOUTH||836.79||3||8,081||24,243||28.9713||46.2||ARNOLD||1.91||0.0552||55.21||55,211||278.93|
|GULFPORT||MONROE||SUNSBURY||MELLOTT RIDGE II EAST||704.25||4||6,575||26,300||37.3450||55.2||GARY 2A 1B||2.10||0.0784||78.38||78,382||176.06|
|GULFPORT||MONROE||MALAGA & SUNSBURY||OZARK II NORTH||704.22||4||6,435||25,740||36.5511||54.5||HOLIDAY||2.12||0.0774||77.39||77,391||176.05|
|GULFPORT||MONROE||CENTER & SUNSBURY||OZARK II SOUTH||701.77||4||6,435||25,740||36.6789||54.5||HOLIDAY||2.12||0.0777||77.66||77,661||175.44|
|GULFPORT||BELMONT||MEAD||PA 19A EAST||511.04||2||9,939||19,878||38.8974||45.2||DILLES BOTTOM 3B & SMITH||2.27||0.0884||88.45||88,448||255.52|
|GULFPORT||BELMONT||MEAD||PA 19A WEST||259.34||1||10,169||10,169||39.2105||20.7||SMITH||2.04||0.0798||79.82||79,817||259.34|
|GULFPORT||BELMONT||MEAD||PA 19B||625.06||2||12,282||24,564||39.2986||55.5||DILLES BOTTOM 2A & 1B||2.26||0.0888||88.79||88,791||312.53|
|GULFPORT||BELMONT||YORK||SHANNON FAR EAST||438.60||2||6,817||13,634||31.0856||34.8||HENDERSHOT||2.55||0.0793||79.34||79,344||219.30|
|GULFPORT||MONROE||ADAMS||STANDINGSTONE RUN A||700.76||4||6,537||26,148||37.3136||51.9||HORTON||1.98||0.0741||74.06||74,062||175.19|
|GULFPORT||MONROE||ADAMS||STANDINGSTONE RUN B||543.65||3||6,574||19,722||36.2768||39.2||TRUAX||1.99||0.0721||72.10||72,105||181.22|
|GULFPORT||MONROE||ADAMS & SUNSBURY||YELLOW RIDGE||665.09||3||6,574||19,722||29.6531||45.3||ROBINETTE||2.30||0.0681||68.11||68,111||221.70|
|RICE||BELMONT||WASHINGTON & MEAD||DREAM WEAVER NOTH 3||604.56||2||12,410||24819||41.0529||DREAMWEAVER 5 & 7||302.2807|
|RICE||BELMONT||MEAD & SMITH||SMASHOSAURUS NORTH 1 UNIT||530.54||1||16435||16435||30.9780||SMASHOSAURUS 1|
not sure if that's going to show correctly..PM me or email me and I can send it to you firstname.lastname@example.org
Jeffery, I can see your apples to apples comparison but I think the reason that the O&G companies want a unit size increase is so that they can drill multiple wells and almost double the length of the 10,000 foot lateral. That is the plan in my case. They want to drill 13 wells instead of 6 and increase the length substantially.
In my case, they wanted a unit size increase to HBP more of their current leases that were about to expire. Saved them millions!!
yes that is typically the case, and hence my point. Increased unit size isn't necessarily a negative, it comes down to how many lateral feet are going to be in the unit. Furthermore, operators are pushing for longer laterals like you indicated as the drilling and completion technology has advanced far enough to permit laterals longer than previously conceived. Longer laterals tend to enable an operator to drill a well less expensively than before as they can spread the cost of the surface equipment and vertical portion of the well over more lateral feet.
YOU MIGHT WANT TO READ YOUR LEASE VERY CAREFULLY AND SEE IF AN ASSIGNMENT DIMINISHES THE ROYALTY PERCENTAGE THAT YOU WILL RECEIVE.. THE LEASE MAY EVEN SAY YOU CANNOT DENY THE LESSEE FROM ASSIGNING ANY PART OF THE LEASE.. MY LEASE ALLOWED THE LESSEE TO ASSIGN ANY PART OF THE LEASE AND CUT MY 20% OF THE GROSS ROYALTY DOWN TO LESS THEN 1% OF THE GROSS!! MY ATTORNEY HELPED WRITE THE LEASE AND I STILL GOT SCREWED!! ATHENS TWP. HARRISON COUNTY, OHIO; 198 ACRES..