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.

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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?

Good luck..

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.

Michael,

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.

Michael,

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 BELMONT RICHLAND BARTON 643.99 4 6,411 25,644 39.8207     0.00 0.0000 0.00 0   161.00
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 YORK CHARLIE 210055   3     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT BELMONT YORK CHARLIE 210472   3     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT BELMONT YORK CHARLIE SOUTH 700.72 3 8,708 26,123 37.2801   CHARLIE 0.00 0.0000 0.00 0   233.57
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 BELMONT WASHINGTON GEORGE SOUTHEAST 486.08 2 12,056 24,112 49.6055 38.0 GEORGE 1.58 0.0782 78.18 78,177   243.04
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 BELMONT YORK HENDERSHOT WEST 410.29 2 7,097 14,193 34.5928 36.4 HENDERSHOT 2.56 0.0887 88.72 88,718   205.14
GULFPORT MONROE SUNSBURY HOWELL   4     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT MONROE SUNSBURY JONES   3     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT BELMONT PEASE MCKEEGAN SOUTH 59,049.00 2 11,052 22,103 0.3743 44.4 MCKEEGAN 2.01 0.0008 0.75 752   29,524.50
GULFPORT BELMONT PULTNEY MCMAHON A 1,087.05 4 10,559 42,236 38.8538 94.8 SHIMBLE 2.24 0.0872 87.21 87,209   271.76
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 RAMSEY         #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   #DIV/0!
GULFPORT BELMONT YORK RAMSEY 614.01 3 7,874 23,621 38.4699 53.1 SHANNON 2.25 0.0865 86.48 86,480   204.67
GULFPORT MONROE SUNSBURY ROBINETTE   4     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT MONROE SUNSBURY ROUTH   4     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
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 BELMONT YORK SHANNON SOUTH 608.60 3 7,245 21,736 35.7150 45.6 SHANNON 2.10 0.0749 74.93 74,927   202.87
GULFPORT MONROE SUNSBURY SHRIVER   4     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
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 BELMONT WASHINGTON TIMBER WOLF 661.92 4 6,120 24,478 36.9806 49.7 WATKINS 2.03 0.0751 75.09 75,085   165.48
GULFPORT MONROE SUNSBURY TRUAX   4     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT BELMONT YORK VALERIE   3     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
GULFPORT BELMONT PEASE WARE SOUTH 627.37 3 7,872 23,616 37.6427 48.9 WARE 2.07 0.0779 77.94 77,944   209.12
GULFPORT MONROE SUNSBURY WESTHAWK   4     #DIV/0!     #DIV/0! #DIV/0! #DIV/0! #DIV/0!   0.00
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  jb@frontrange-ep.com

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.

Dott,

In my case, they wanted a unit size increase to HBP more of their current leases that were about to expire. Saved them millions!!

Dott

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..

GOOD LUCK

RAYMOND McELROY

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