Increase in Unit Size

O&G company wants to increase the Unit Size from 640 acres to 2,560 Acres with the ability to increase or decrease size of Units as needed. Has anyone heard of this?  I know that with laterals now being longer than ever and 10 or more wells may be in one Unit  that an increase in acreage is needed but this seems excessive.

I also realize that increase in acreage means that you get your portion of royalty from all of the pie which may be a good thing because if you were in a small Unit you could have a couple of bad wells where as your chances in a bigger Unit may be better with sharing of Multiple wells that could be better producers.

Does anyone see any drawbacks to this extra  huge increase and  their discretion in increase or decrease at will?

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Permalink Reply by Jim Litwinowicz on June 24, 2017 at 12:26pm

With modern drilling technology that is a difficult subject to deal with.  Some companies are drilling out 15,000' or longer.  Some pads have as many as 25 wells on them. They can drill different strata so one pad may have Marcellus wells, UD wells, Utica wells.  So I can see why large units are necessary.

On the other hand, massive units means they could drill one or two wells and hold the entire unit in perpetuity..  Not good at all. Even five wells on a 5000 acre unit would be bad thing for landowners.

I would try some other approach of a compromise situation.  Say they can have a large unit but must drill ten wells in five years.  Or 50% of the unit must be in production. That would be better than a open unit size but I doubt it would work unless all landowners start demanding something similar.

Permalink Reply by Dott on June 24, 2017 at 1:06pm

Jim,

I did not consider what you pointed out so thank you for that.  The added details they stuck in are:

No such unit may be established so as to contain more than 160 acres for any single vertical well with no horizontal drilling component, and 320 acres for any single lateral or horizontal well, but in no event may a unit that is intended to contain multiple lateral or horizontal wells exceed 2560 continuous acres.

I don't know if this is reasonable given the larger lengths or again to their benefit

Permalink Reply by Barry D on June 25, 2017 at 6:59am

@Dott

It appears the reason for the request is expedience and cost control.

On a large unit the company would be able to drill multiple wells.

If unit size is limited say to 320 acres or 640 acres, the company would have to continually return to landowners in order to increase unit size if necessary in order to drill future wells. That is a time consuming and expensive process.

By making the request it appears the company wants to be efficient and control cost.

It also appears that the company plans to drill more than one well. It does not appear the company wishes to hold all the acreage with one well. That is good for you and the other landowners.

Just my view.

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