How a drilling unit is paid out?

Does anyone know how they pay out a drilling unit? do you get paid on the percentage of land you hold in the unit or do you only get paid if your so many feet from the lateral?

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Permalink Reply by Kathleen on March 17, 2014 at 7:24am
When a drilling unit is set up each mineral owner will receive "a declaration of a pooled unit" from the driller.
In that paper work it will show how big the unit is.
Ex. 640 acres is the full production unit. If one well is drilled using 150 acres of those declared 640 mineral acres, all acres are now held by that one well.
In that paper work it will show how many mineral acres each owner has in the 640 mineral acre unit. Most units are rectangles. Your minerals have to be in that rectangle. Some are odd shaped but for this example just picture a rectangle.
The amount of minerals someone has in that rectangle is turned into a decimal % of their share of the well. 640 is 1.
If for some reason only one person owns the whole 640 aces then they are listed as 1. If someone owns 320 acres of the 640 mineral acres, then they have a decimal interest of .50.
It goes like that until every decimal is accounted for in the full declared production unit.
Permalink Reply by The Rooster on March 17, 2014 at 7:40am

thank you. is this something you were told or are you getting royalties and know from experience?

Permalink Reply by Kathleen on March 17, 2014 at 7:45am
I was told it and now I'm in a unit with that paper work in hand.
Permalink Reply by The Rooster on March 17, 2014 at 7:53am

thanks Kathleen.

Permalink Reply by Kathleen on March 17, 2014 at 7:58am
Yur welcome.
Do you think you are in a unit?
Permalink Reply by evan on March 17, 2014 at 9:03am
Listen to Kathleen , she knows her stuff. She finally got me straightened out. And I had it confirmed. She's 100% correct.
Permalink Reply by Mike Fulper on March 17, 2014 at 9:58am

All horizontals are on a PLATT MAP....

Can be any size... but mostly 120 to 200 acre..UNIT

Will be 500 feet side to side. overall 1000 feet wide...

and any lengthe they want...

will be long parallel sides with ROUNDED ENDS...

IF... it is CALLED.. a DRILLING UNIT.. .ONLY those within those bounderies get royalties....

Our unit is only 128 acres. and called a DRILLING UNIT...

my 24 acres come out to about 18%....of the land...

IF.....they call that HORIZONTEL LEG a .. PRODUCTION UNIT...

then everyone in the 640 gets a royalty off it.. SMALL....% then

BEST.. if your in a DRILLING UNIT....ie... MORE $

AMARADO MADE ALL OF OUR LEASES.......SO THERE COULD NOT BE ANYTHING OTHER THEN 640 ACRES... NO POOLING ALLOWED..

BEST THING TO EVERY HAPPEN TO US... CONSEQUENTLLY...

ALL OF THE HORIZONTALS IN OUR AREA  ARE..."DRILLING UNITS"

NEWER LEASES in our area can be POOLED... ours cant...

Thanks to AMARADO AND JEFF RIGGENS....We got  GOOD DEAL :)

MOST horizontals... everywhere....wont be "classified" till about ready to PAY ROYALTIES....that's when the DRILLER sends out the Division Order.....stating what you are in...

WE.. already know...:)

EQT found out everyone was "FREINDLY" over our way...

and we have 21 wells going in...

Others held out for the MOON.. and got......0.....  :(

Mike

Permalink Reply by Philip Brutz on March 17, 2014 at 10:28am

Mike, have you receive your first royalty check yet?

Permalink Reply by Mike Fulper on March 17, 2014 at 10:46am

No,  it will be quite awhile yet...

they are doing 3 legs for the next few weeks and

wont Frack til 1st of May....

Our Neighbor is on the Clark well.. EQT. .same thing as

our unit and it took quite awhile before he started getting checks..

EQT keeping things quiet.. but I see quite a few tanker trucks go out each week.. from Clark

EVERYONE says NO PRESSURE OVER HERE...

NOT SO.... Clark well has "pressure" pushing the OIL out :)

Also.. EQT is keeping the quarterly report "sealed" till last minute... ha...

They got 45 days after the quarter . to report...

Its not very hard to figure Royalties.. IF..a person knows how much the oil sold for.....I don't figure gas..

If a well does 360 bbls a day.. at $100 a barrel....sold..

that's 10,800 barrels a month.....times.... $100...

that is then.... ONE MILLIONE 80 THOUSAND...GROSS SALES....JUST AN EXAMPLE...

Our lease says we are figured at 17%....so.....

that gives a figure of $183,600... that is going to be devided

up by the land owners WITHIN THAT DRILLING UNIT...

We have 24 acres... on a 128 acre drilling unit....

MAKES US ABOUT 18% of the LAND....

SOOOOOOOOOO.....we would get 18 PERCENT OF THE $183,600... WHICH IS...

ABOUT......$33 THOUSAND 48 DOLLORS....

FOR THAT MONTH...

Wouldn't that be nice..

but.... that is only if a well did 360 bbls a day for a month..

etc and so on...but anyway.. just an example for those trying to figure it out..

BY THE WAY.... IF... WE WERE IN

A" PRODUCTION UNIT.".

IE... ALL IN THE 640 GETTING A CUT...

.... OUR PERCENTAGE WOULD BE

WAAAAAAAAAAAAAAAAY  LOWER.....:(

I Will be happy with $2K a month.... :)

after all. I didn't have to do anything... !!

Permalink Reply by TM on March 17, 2014 at 11:17am

The gross sales every month are taken times your decimal interest in the unit. If you had 24 acres in a 128 acre drilling unit and a royalty percentage of 17% your decimal interest would be .031875.

If the well did $1,800,000 total oil sales for the month your monthly royalty would be $57,375.

Permalink Reply by evan on March 17, 2014 at 10:39am
That's what I thought to mike but Kathleen corrected me. I confirmed it with attorneys and Chesapeake. If you get the DPU the declaration of pooled unit and are in the 640 acre unit or whatever it may be you will receive royalties off of any wells drilled in the unit even if they don't go under you.
Permalink Reply by Mike Fulper on March 17, 2014 at 10:55am

If the well within a 640 is "classified" as a "production unit"

Yes..all within the 640 get a "small" percent..

Even if the leg does not go under you....

IF the well is classified as a "Drilling Unit "  no..

only those within the 1000 foot wide by however long unit

get a cut... bigger payout...:)

Why the difference...?

If a driller classifies his WELL as a "production Unit"

ALL LEASES IN  THAT 640.. ARE HBP.. held by production

Forever...

That is to the drillers benefit...

He can drill ONE WELL.. within that 640 and HOLD the rest..

MEANING..... if your lease runs out......

and no well drilled on or under you

you CANNOT re- lease....it is HBP....

to the drillers benefit...

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