Multiple wells AND multiple units Per pad!

I've noticed some O&G co.s are now drilling multiple wells on their pads in Ohio, but also dividing each lateral into their own 160/or so, acre drilling units.This defeats the idea of drilling one well and holding 640 acres or 1280 acres by production. It also keeps every mineral owner within the 1280 acres from having to share the royalties with everyone else in the big units. If your property is within the first drilling unit, you will get royalties from that lateral only,but not what comes from all the others. I'm having a problem putting my finger on what the reason is for this is. In Carroll co. CHPK has been all about getting 1280 acre units, even if only one well per pad.  Now in Guernsey co. the 4/5 well pads are dividing up each lateral into individual units. Go figure.

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Permalink Reply by Brian Day on March 1, 2013 at 8:27am

The one well for a 640 or 1280 acre unit was sole to hold vast amounts of land under HBP.  It NEVER had anything to do with how much acerage a single well could drain.  It kept other companies from coming into an area with competative offers for land that could not be effectively drilled to hold with true production aehorizontal, fracked, and hooked to a pipeline.  It was your basic legally condoned swindle.  A standard practice between government and O&G companies.

Permalink Reply by Kathleen on March 1, 2013 at 9:12am
It makes no sense to me either. CHK begged me (okay DPS Penn) to change my lease to 1280 which I wouldn't and said I would still be in an over all bigger unit. The unit drawing was already on ODNR for the one well. I figured more would be added or at least a larger unit. I'm still waiting for that to happen but now the well was drilled (not fracked). Who knows.
In this unit is a park of 290+ acres. They could hold all of it with this one well and so far its not showing that.
Permalink Reply by John Harrison on March 1, 2013 at 10:43am

In Bradford county, Chesapeake now makes four units for each well pad.  The Felter and Merryall wells and units abut each other with a total of  nearly 4000 acres tied up.  

Permalink Reply by Jimmy Wilson on March 1, 2013 at 10:35am

It's real simple , the old HBP Clinton leases have unitization clauses, most are 80 to 160 acres, those leases were consumated with one thing in mind, Clinton sand wells.... so they had that pesky unit clause they had to deal with this new much larger footprint, more modern wells that were never intended when those Clinton leases were signed.

Basically to answer your question, creative lawyering to get around the unitization clause in the old shallow lease....just one of the many issues that will be headed to court shortly.

Most of the shallow leases have unit size language in them.

 

Permalink Reply by Tim Tarr on March 1, 2013 at 2:28pm

I know RRC is going to have at least 2 seperate units from a pad in S.W. Pa.  a Marcellus unit which I'll be in and an Upper Devonian unit I will not be in. So could be another reason for different units.

Permalink Reply by Jason on March 4, 2013 at 1:06am
Tim - what area is your property in? Beaver county or nw Washington?
Curious - I'm in SW beaver county pa.
Permalink Reply by Tim Tarr on March 5, 2013 at 3:33am

West  Washington county, Buffalo Twp..

Permalink Reply by Kathleen on March 1, 2013 at 2:34pm
The unit I'm referring to I know doesn't have this issue.
One lessor of the unit is held by a Clinton but they would have signed to up the unit size if asked. I'm assuming they were and agreed. Held by a 80 acre Clinton well, the rest of the unit is all new larger acre leases.
Permalink Reply by bo boboski on March 2, 2013 at 12:18am

I"m still lost for a good explaination. I was expecting to see the unit size to be 640 acres ,M/L when there are 4/5 permits for the wellhead pad. instead ,each lateral is divided up into individual units of 150 ac. M/L   Maybe it's a legal, or ancient law loophole deal the lawyers have discovered. It"s gonna divide up the  royalties bigtime. Maybe they will drill 5 wells,but only frac one, suck it dry,then frac another and so on. It"s still the 1st inning of this ballgame, so it we still dont know what the "Norm" will be yet.  

Permalink Reply by bo boboski on March 2, 2013 at 9:55am

If you are not included in the drilling unit, you should not be HBP.  You will gewt a royalty check if you were in it.  I know a freind who has 250 acres about a mile from a wellpad. they sent a lateral to his property,included 1/3 of an acre of his 250. this HBP his whole 250ac., but will only get royalties on 1/3 acre!

Permalink Reply by 0llbnp780fs53 on March 4, 2013 at 12:38am

If he has a good Pugh clause in his lease, they are only holding 1/3 acre or they need to pay on the entire property (but that might run up against 640 acre drill unit max sizes).

Permalink Reply by 0llbnp780fs53 on March 4, 2013 at 12:42am

Maybe they're keeping drilling units small so that, once gathering lines are in, initial royalty checks will be relatively large for some individuals making others more willing to sign leases at lower costs. 

Eventually, they'll have to smoosh out all those drilling units because a lot of leased property will be coming up on their extension period.  If the company doesn't want to pay out all those extension payments to keep holding the leases, they'll have to redefine the drilling units to maximize acres held.  Then the people who got large early royalties will see a huge decrease.

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