Pooling and Unitization

I am in a 30+ year old lease 12.5% etc. The old lease does not include pooling and unitization. A drilling company now has the lease for the utica shale. The drilling company would now like to amend the lease to include pooling and unitization. What are pooling and unitization rights worth? I have been offered $1500 an acre. It appears that they would not be able to drill without this amendment. What have others been offered or sign for?

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Permalink Reply by Tony Yurina on May 13, 2014 at 6:13am

Some folks have been offered an increase in royalty percentage as well as dollars per acre. One or both.

Negotiate within the ballpark of reasonableness may be one approach.

Permalink Reply by Bill Clark on May 13, 2014 at 6:35am

I was hoping to find out what is reasonable?

Permalink Reply by Bill Clark on May 13, 2014 at 10:54am

The acreage is in northern Washington county Ohio. I have never negotiated against an O&G company. I only want what fair, reasonable. If anyone has experience with this I would like to hear from you.

Permalink Reply by brat on May 14, 2014 at 7:59am

Bill, I too would like to know what to expect.  In my case Utica Shale, I have control of 133 acres in nw Harrison county, most but not all HBP at 12 1/2% and have a non-pooling HBP lease.  Also for  what its worth, looks like AEP has picked up a number of the neighbors HBP leases' deep rights right next to me,including mine.  I have some, but limited negotiating experience  with g/o companies.

The answer with examples to Bill's question shouldn't be that rare.

Permalink Reply by pinehill on May 14, 2014 at 8:06am

Has AEP contacted you?  Are you held by production by Red Hill?

Permalink Reply by brat on May 14, 2014 at 10:09am

pine..No contact from AEP,  no not Red HIll, but another small company.  I found out by cruising the assignments and sales at the court house.  Assignments and partial assignments went from Sierra Buckeye and  from Enervest to AEP.

Permalink Reply by brat on May 14, 2014 at 10:28am

Will be interesting to see how landowners are treated by the AEP company.  Hopefully Aubrey will have straightened up a little.

Permalink Reply by Philip Thackray on May 14, 2014 at 10:49am

 

Bill, Brat

They need the unitization clause.  I had a no unit clause in an XTO 12.5 % (2008) lease.  I negotiated the 12.5% to 16.5 % for allowing them to unitize.  That land is now in an XTO production unit.

I have leases with XTO and Rex Energy.  I used a lawyer who had done a large number of leases with both companies and he knew what royalty and upfront per acre number that could be gotten.

There may not be a lot of lawyers familiar with the Harrison County, OH and surrounding areas because that development is so new but it is worth finding the most experienced one around.

One twist for you guys is that the HBP lease holder is not the guy who is going to drill the well - all the more reason for a lawyer.

Good luck,

Phil

Permalink Reply by brat on May 15, 2014 at 5:33am

Phil, Thanks for the good advice.  I was pretty sure I would want a new contract.  Am not sure if just an addendum to the old HBP lease would be sufficient, but would sleep better with a new lease.  The upgrade to 16.5% would be fair I believe.  I know the current HBP lease holder said he got 15% for the deep rights, but that may be debatable.

Were you able to get any other moneys, like a signup bonus when renegotiating?

Are you Pa?  and could you pass long the attorney's name who helped you with your lease negotiation?  I am in NE Ohio.

Thanks again.

Brat

 

Permalink Reply by Philip Thackray on May 15, 2014 at 5:56am

Brat,

I am in Butler County, PA

Lawyer – I use Wil White at Dillon McCandless King Coulter & Graham, Butler PA 724 283 2200.

Royalties and upfront money are extremely location dependent.  Harrison County, OH seems like a great location but I don’t know if it is great throughout the County or not so.

You will need a good local lawyer.  You are probably leased to a company that is not the company that will be the horizontal well operator.  However, your HBP lessee cannot make a deal with the horizontal operator because your lease currently prevents unitization.  It seems to me that makes it a three way negotiation.  Seems complicated.

Good luck!

Phil

Permalink Reply by Philip Thackray on May 13, 2014 at 7:03am

Bill,

 

You should start with a whole new lease.  The modern clauses in the unconventional well leases protect you and the driller far better than an old vertical lease.  Whatever you do, you will need a lawyer but start over if you can.  It is possible; I just did that with a Rex Energy lease that came with a farm I bought in 2010.  If you use a gas and oil lawyer very familiar with the leased area, he can tell you the dollar terms of nearby leases.

 

You are HBP but the operator must have the unitization language.  This two man “Mexican stand-off” should get you a new lease.

 

Phil

Permalink Reply by BIG on May 13, 2014 at 1:41pm

Bill, does the lease have a unitization in the lease, but crossed out, specifically states no unitization, or there is no unitization language at all in the lease?

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