Held by production

If one vertical well is drilled on the property of any given individual who belongs to a much larger unit, what happens to the following:    1. Are the royalities of the one producing well split amoung all the individuals within the unit ? 2. More importantly, does this mean everyone in the unit is held by production for years to come without regard to the terms set forth in the extension of the primary lease? I would appreciate any comments on this. Dan                                                           

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Permalink Reply by Peter Pagano on November 19, 2010 at 6:03am
Daniel,
That can only be answered by the language of the lease. But in general, most leases I've read divide up royalties on a percentage basis of the individuals acreage to the whole units acreage. And again, most leases I've read consider a well on any part of a unit to apply to all parts of the unit as it pertains to held by production.
Permalink Reply by Mike Knapp on November 19, 2010 at 6:11am
Dan,

1. Yes. Based on the amount of acreage they each is contributing to the unit. If 50% of the land in the unit is yours, you get 50% of the royalty.

2. Yes, everyone in the unit is then held by production.


Mike Knapp
President
Knapp Acquisitions & Production, LLC.
0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 17, 2012 at 6:42am

.

bUT WHAT ABOUT HELD BY NO PRODUCTION WITH A VERTICAL WELL?

Any with this problem (waiting for pipelines, etc.) should follow to see what happens at the meeting in the Tioga discussion group....they possibly could find something to help others...have a look, the meeting is today.

http://gomarcellusshale.com/group/tiogacounty/forum/topics/shell-he...

hey, you newspaper members..(such as washington post, etc)...you should send people there..this is a 'hot item' on the expiring leases...and it is disgusting for some landowners who were told certain things ...but the contract clauses are what was clever (fancy) to hold some.

I applaud Scott Brian for taking the time to form a group to discuss these issues...I hope other county groups here at the forum follow up  on such as that may be the way to deal with these issues with the oil companies as they extend leases with their clever worded clauses and tactics instead of sitting at the table with folks and discussing the move forward as people working together instead of looking at a landowner as a negative cash value on their ROI>

Permalink Reply by ljmi on April 17, 2012 at 11:21am

that is interesting the drilling unit for a permit could be different from a production unit. Can people who are in the drilling unit can be replaced by other people after the well is drilled. Wow

Permalink Reply by Finnbear on April 18, 2012 at 4:02am

Pooling and unitization is specified by the language in each specific lease. Your lease may have very different specifications compared to your neighbor's depending on what each of you negotiated before signing. Before any question can accurately be answered about a specific parcel of land, you have to know what the lease for that specific parcel says.

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