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 18, 2014 at 4:11am
I need something explained to me on this one.
When a oil and gas co., goes to the ODNR to ask about forcing a mineral owner in they are using the unitazation clause since they only need 65% of the unit leased while a forced pooling requires more leased land.
When I've seen this, its not just for the well platt area its for the unit.
So how are they different? They both want minerals included that are not under the well bore, making a larger unit to hold land/minerals.
Permalink Reply by INVICTUS on March 18, 2014 at 7:13am

I'll take a non-attorney shot at this. Advice is free, so take it for what it's worth.

Spacing requirements in Ohio are the driver in this. If their plans for meeting the spacing requirements are compromised, they will pool the unwilling party through legal action.

Second driver in this is to minimize pads (Read expenses) and get more area from fewer pads. Drill whatever wells are needed (always keeping in mind spacing laws) but keep that pad count down.

My understanding always was:

Drilling units established PER BORE

Next, combine drilling units into PRODUCTION UNITS

Finally, when ready to lock in everything permanently and for the final record, and ready to pay royalties: Finalize the area with DIVISION ORDERS.

Well plat area I interpret as "drilling unit". Locks in the spacing area within the bore in question.

If I didn't answer that correctly, I interpreted your question wrong and its my fault.

Permalink Reply by Mike Fulper on March 18, 2014 at 4:18am

AS I said before....

Our leases do not allow pooling

of the 640 section...:)

so... all wells in our 640 are DRILLING UNITS.. unitization...:)

BIG % for us....

Permalink Reply by john on March 18, 2014 at 3:15am

I went to the county courthouse and in minutes they printed out a unit description with names of all the parcel owners and their individual interests.  It even included the piciture of the unit. Subsequently I received confirmation notices from the lesser/s asking for information.

They wish to make sure they are writing cks to the correct parties.

I did not even know that the well was producing because I did not live near it. 

But note:  just because you may have signed to lease 100 acres does not necessarily mean all will be in the unit.  only 50% of ours is in the unit.  and we have to wait for the next unit to be declared.  Some peoplel had 100 acres signed , but only 10% in the unit which means they get paid for only the % in the uniti and have to wait and wait and wait

to be wealthy, ha!!

Permalink Reply by john on March 18, 2014 at 3:18am

ps:  for example our unit started to produce in october 2013 and here it is Mar 2014 and have not rcvd first ck, but soon, very soonl  do not go out and make any large pucchases because the price of NG despite the winter is still very cheap. 

we willl be receiving cks from 3 different companies because we found out they split the unit between themseleves because they needed capital.  so be it.!!  not a big deal.

Permalink Reply by Kevin on March 18, 2014 at 3:26am

Our unit started to produce May 23, 2013. We received first check Dec.27 and two months later the division orders.

Permalink Reply by Mike Fulper on March 18, 2014 at 4:13am

The map is there on one of the pages....:)

Permalink Reply by john on March 18, 2014 at 3:08am

The first ck can be 6 mos. after the unit is producing.

patience is the key. 

a unit is a rectangle of 800 acres consisting of all the parcels of land

in the unit.  the # of which is determined by the size of the individual parcels.

it is paid out in a percentage basis, e.g., if you have 100 acres in an 800 acre unit

then you own 100/800 as a fraction or .125 as a percent interest.  Therefore you will get

.125 of the payout monthly.  Whether you are changed deductions or not depends upon your contract.

There may be one payer or in some cases 3 or more companies writing cks each month.  Very complicaed, but just sign the cks and enjoy.

Permalink Reply by evan on March 18, 2014 at 3:15am

John are you in a unit somewhere getting royalties

Permalink Reply by Kevin on March 18, 2014 at 3:24am

You want to make sure that your decimal interest is correct on your division orders. That would be the .125 x your royalty percentage.

Permalink Reply by evan on March 18, 2014 at 3:31am

Hate to ask but are the royalties all there cracked up to be ,thanks

Permalink Reply by Kevin on March 18, 2014 at 4:24am

I'm with Southwestern and my deductions are around 12%. Which is pretty good compared to that other company. It's all going to depend on how the production is. This well averaged about 6 million /day for the second half of 2013. My paltry 3.34 acres in the 411 acre unit has averaged $720.00 / month net. They have drilled well 2 and 3. If someone wants to give me money for doing nothing, I'll take it. Will my checks double and then triple when the other two wells come on line. All I can do is hope. I expect nothing every month. That way I won't spend what I don't get. 

You have to remember the lack of pipelines may be restricting the mcf/day. These wells might be capable of much more. Only time will tell.

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