HBP----Legal definition of Producing quantities - GoMarcellusShale.com2024-03-28T22:32:46Zhttps://gomarcellusshale.com/forum/topics/hbp-legal-definition-of-producing-quantities?commentId=2274639%3AComment%3A684970&x=1&feed=yes&xn_auth=noI expect your talking about o…tag:gomarcellusshale.com,2015-07-13:2274639:Comment:6849702015-07-13T13:22:07.512ZMike Murphyhttps://gomarcellusshale.com/xn/detail/u_25tdvsf650mjn
<p>I expect your talking about old Clinton wells and most of them are exhausted and most of them are making the oil companies able to HBP the acreage as long as the landowner received a royalty check no matter how big or how small it is production royalties have nothing to do with how profitable a well is to the producer as long as u get royalties u are HBP and even though they may have abandoned and plugged some of the wells on the property as long as one well makes revenue you are HBP on…</p>
<p>I expect your talking about old Clinton wells and most of them are exhausted and most of them are making the oil companies able to HBP the acreage as long as the landowner received a royalty check no matter how big or how small it is production royalties have nothing to do with how profitable a well is to the producer as long as u get royalties u are HBP and even though they may have abandoned and plugged some of the wells on the property as long as one well makes revenue you are HBP on the whole property the original owner received 10 bucks he was paid for production if this year they pay 1 buck you are still HBP </p> Mike,
the point I was trying…tag:gomarcellusshale.com,2015-07-13:2274639:Comment:6849652015-07-13T12:59:54.970Zwilliam r rineharthttps://gomarcellusshale.com/profile/williamrrinehart
<p>Mike,</p>
<p>the point I was trying to make is unless you pay a lawyer to audit production numbers there is now way of knowing what is true. The driller supplies the production numbers, are they real or are they just trying up the land, waiting for the large offer from a driller? I was part of a large farm theat was sold off in parcels.</p>
<p>I think the original owners receive $10.00 for the year.</p>
<p>Bill</p>
<p> </p>
<p>Mike,</p>
<p>the point I was trying to make is unless you pay a lawyer to audit production numbers there is now way of knowing what is true. The driller supplies the production numbers, are they real or are they just trying up the land, waiting for the large offer from a driller? I was part of a large farm theat was sold off in parcels.</p>
<p>I think the original owners receive $10.00 for the year.</p>
<p>Bill</p>
<p> </p> Thanks for the info.tag:gomarcellusshale.com,2015-07-13:2274639:Comment:6850142015-07-13T00:37:15.868ZWhite Tigerhttps://gomarcellusshale.com/profile/Ty
Thanks for the info.
Thanks for the info. I have seen leases like this…tag:gomarcellusshale.com,2015-07-12:2274639:Comment:6849182015-07-12T15:47:39.800ZMarkushttps://gomarcellusshale.com/profile/Martin219
<p>I have seen leases like this and I think that it would most certainly be open to interpretation - does the receipt of house gas mean that oil and/ or gas is indeed found and continues to be found? I think so. </p>
<p>Though, in the same leases it is pretty specific that a royalty equivalent to 1/8 needs to be paid on gas sold "as long as oil and/ or gas is found". </p>
<p>A typical house uses about 100 MCF per year in natural gas (depending on a number of factors of course) so a well does…</p>
<p>I have seen leases like this and I think that it would most certainly be open to interpretation - does the receipt of house gas mean that oil and/ or gas is indeed found and continues to be found? I think so. </p>
<p>Though, in the same leases it is pretty specific that a royalty equivalent to 1/8 needs to be paid on gas sold "as long as oil and/ or gas is found". </p>
<p>A typical house uses about 100 MCF per year in natural gas (depending on a number of factors of course) so a well does not have to put out that much gas to meet the needs of a residence located on the lease and it is very possible that the residence can use all gas produced by the well leaving no extra gas for the operator to sell. Hmmmm. Though in this case, oil and/ or gas is indeed found.</p> Leasetag:gomarcellusshale.com,2015-07-12:2274639:Comment:6848262015-07-12T01:46:32.486ZWhite Tigerhttps://gomarcellusshale.com/profile/Ty
Lease
Lease What if there is no royalty p…tag:gomarcellusshale.com,2015-07-12:2274639:Comment:6846122015-07-12T01:46:03.259ZWhite Tigerhttps://gomarcellusshale.com/profile/Ty
What if there is no royalty paid and no production for 2 years? But the lead says as long as oil and gas is found?
What if there is no royalty paid and no production for 2 years? But the lead says as long as oil and gas is found? I am with Mike Murphy on this…tag:gomarcellusshale.com,2015-07-11:2274639:Comment:6847792015-07-11T23:39:00.381ZMarkushttps://gomarcellusshale.com/profile/Martin219
<p>I am with Mike Murphy on this. </p>
<p>It is determined by the specific lease language but in cases where it is not specified, as long as a royalty is paid based on revenue derived from producing the well, the lease is HBP. Royalties should by definition come right off the top, before expenses, so all of the discussion about costs and profits is not relevant. Royalties paid, regardless of amount, based on production equals HBP.</p>
<p>Another thing to consider is that in many cases…</p>
<p>I am with Mike Murphy on this. </p>
<p>It is determined by the specific lease language but in cases where it is not specified, as long as a royalty is paid based on revenue derived from producing the well, the lease is HBP. Royalties should by definition come right off the top, before expenses, so all of the discussion about costs and profits is not relevant. Royalties paid, regardless of amount, based on production equals HBP.</p>
<p>Another thing to consider is that in many cases landowners are receiving house gas which is an important aspect for many and worth keeping that old well online, even if a marginal or minimal producer. I know many cases where landowners cheat quite a bit on this by heating barns and other outbuildings which thus deprives the producer of revenue from the well, and thus affects royalty amounts.</p>
<p></p> I do a lot of work in this ar…tag:gomarcellusshale.com,2015-07-11:2274639:Comment:6848162015-07-11T17:15:09.717ZE Johnsonhttps://gomarcellusshale.com/profile/EJohnson
<p>I do a lot of work in this area, being an o&g attorney. The simple answer to your question, as discussed in numerous Ohio court opinions, is that the lease must be generating a profit. Profit means income less expenses. The profit need only be minimal, i.e. they are making more money than they are spending.</p>
<p></p>
<p>Where the confusion comes in is in two primary areas. First, what period of time do we use to determine profit? If the lease is only unprofitable for a year, I'd say…</p>
<p>I do a lot of work in this area, being an o&g attorney. The simple answer to your question, as discussed in numerous Ohio court opinions, is that the lease must be generating a profit. Profit means income less expenses. The profit need only be minimal, i.e. they are making more money than they are spending.</p>
<p></p>
<p>Where the confusion comes in is in two primary areas. First, what period of time do we use to determine profit? If the lease is only unprofitable for a year, I'd say you have a pretty tough case. Four or five years in a row - that's a different story.</p>
<p></p>
<p>Second, though income is generally pretty easy to figure out (you can simply look at the gas and oil volumes reported to the ODNR and multiply by an estimate price for same), costs are more difficult to determine without actually filing a lawsuit. Bigger companies, who have larger overhead, likely have more operating costs. Oil wells, which require brine to be disposed, have higher costs than dry gas wells. Also, what about the eventual cost of plugging the well and restoring the property? Is that factored into the cost of production. </p>
<p></p>
<p>Generally speaking, it does not cost a lot to operate an old gas well that produces mostly gas - could be as little as $200/month - maybe less for a small operator. </p>
<p></p>
<p></p>
<p>Hope that is helpful. More can be found about this topic in an article I did here: <a href="http://johnsonandjohnsonohio.com/oil-and-gas-lease-ownership-challenges/" target="_blank">http://johnsonandjohnsonohio.com/oil-and-gas-lease-ownership-challenges/</a> </p> Paul,
Who defines the term "…tag:gomarcellusshale.com,2015-07-11:2274639:Comment:6847352015-07-11T01:55:28.592ZBarry Dhttps://gomarcellusshale.com/profile/BarryDyngel
<p>Paul,</p>
<p>Who defines the term " paying quantities" ?</p>
<p>One man's paying quantity is another man's loss.</p>
<p>Many corporations operate multiple facilities. Some make a profit some don't. But over all the corporation makes a profit. So why doesn't a corporation just shut down unprofitable facilities to increase profit? Because more goes into the equation than the simple profitability or lack of profitability to decide whether or not to shutter a facility.</p>
<p>The same is true of…</p>
<p>Paul,</p>
<p>Who defines the term " paying quantities" ?</p>
<p>One man's paying quantity is another man's loss.</p>
<p>Many corporations operate multiple facilities. Some make a profit some don't. But over all the corporation makes a profit. So why doesn't a corporation just shut down unprofitable facilities to increase profit? Because more goes into the equation than the simple profitability or lack of profitability to decide whether or not to shutter a facility.</p>
<p>The same is true of o&g wells. Yes there are those operators who are holding on to "un-profitable" wells to maintain leases, But doesn't that actually make the well profitable for the company ? That some day the lease that well holds will pay dividends in a sale of that lease?</p>
<p>Please understand, I am not sayinf the situation is fair to the landowner; it isn't. However, I do see the method to the madness of some of these companies in "producing" marginal wells.</p>
<p>I'd also like to know which law firms have tackled this issue and won; and how.</p>
<p></p> Exactly!
Some of the leases…tag:gomarcellusshale.com,2015-07-11:2274639:Comment:6844902015-07-11T00:29:36.810ZCharles Hurlburthttps://gomarcellusshale.com/profile/CharlesHurlburt
<p>Exactly!</p>
<p></p>
<p>Some of the leases I administer have such a "minimum royalty" requirement (not much, just a couple of hundred dollars per year for an 160 lease) and for years I argued that a marginal lease that didn't return at LEAST the cost of the minimum royalty should expire. I lost that fight every time; the minimum royalty is simply not one of the "cost of production" item we can check. </p>
<p>However, that turns out to be a double edged sword for some producers. The extra…</p>
<p>Exactly!</p>
<p></p>
<p>Some of the leases I administer have such a "minimum royalty" requirement (not much, just a couple of hundred dollars per year for an 160 lease) and for years I argued that a marginal lease that didn't return at LEAST the cost of the minimum royalty should expire. I lost that fight every time; the minimum royalty is simply not one of the "cost of production" item we can check. </p>
<p>However, that turns out to be a double edged sword for some producers. The extra royalty isn't a cost to produce, but payment of the royalty in lieu of production doesn't hold the lease--FAILURE to pay can lose a lease but simply paying the amount can't hold one absent real production.</p>
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<p>Please note that we are talking about the least valuable leasehold properties in your area; the ones that just barely produce at best and maybe don't produce t worst. </p>
<p></p>