Question, re: multple laterals/royalties

The way I understand it is you have one vertical well that several laterals that branch off from it.  If only one of those laterals touch your land do you just get royalties from that single lateral or do you get it from all the laterals?  It seems that all the laterals feed into one place.

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Permalink Reply by Barry D on January 22, 2016 at 7:12am

Rick,

I believe that each lateral has an associated vertical.

You only receive royalties from the production unit(s) which include your property (generally speaking). It is possible that the actual lateral associated with a production unit may not "touch" your land.

Depending on the size and or location of your property, it could be included in one or more production units

As usual, just my opinion.

Permalink Reply by Rick S. on January 22, 2016 at 8:07am

Berry,

Thanks for your reply, I can see this is going to get confusing.  If each lateral is considered a separate well and each lateral has its own vertical then would not the "total" acres in any unit only include the acres that your lateral covers?  The notice I got I think includes the total acres in all four laterals.

Permalink Reply by DESJR on January 22, 2016 at 8:39am

if you are in ohio, you can access the well information and see the well unit and the associated laterals. They will show each lateral with the property owners noted and the acres associated with that lateral. It will show the unitized acres for that lateral. Here is a link showing one lateral from the RIce Energy Mohawk Warrior showing the lateral with the base outline and the landowner\mineral owner acres involved. 
http://apps.ohiodnr.gov/mineral/oil/MRMImages/17/6/299647.pdf

Permalink Reply by DESJR on January 27, 2016 at 2:41am

I just sent a friend request. It would be better to do it in messages than cluttering up this thread. It can be a pain to learn how to navigate thru the well locator, but I will be happy to help.

Permalink Reply by LewPa on January 22, 2016 at 8:44am

Rick,

Your land doesn't have to be near the actual vertical or lateral to be in a unit. The gas company can put anybody they want into a unit as long as every property abuts to other property that abuts to the property that the vertical is drilled on. The only thing that limits the size of the unit is each owner's lease language.

Permalink Reply by Barry D on January 22, 2016 at 3:59pm

Rick,

It is possible that the initial well was say a 500 acre unit. As the company adds wells it changes the size of the original unit. Depending on the number of acres you own and how it is situated your property could be included in multiple drilling and production units.

A friend of ours has 180 acres and it is included in three separate drilling units.

Can you find unit plats for each well?

What state are you in?

Permalink Reply by KAS on January 22, 2016 at 8:38am

It all depends on the production unit the company creates.  Our well pad has 3 wells on it and all are in our production unit which is over 500 acres - even though only two touch our land.  Another well pad near here has 5 wells on it but the production units are smaller and include 1 or 2 wells and unit size of 200-300 acres. Some lease language does not allow pooling which can also affect production unit.  As usually with O&G there is not simple answer.  In Ohio the ODNR has a site that shows which property the lateral goes under as well as the actual production unit (usually a larger rectangle box) and details out who all is included in that production unit.

Permalink Reply by G.H. on January 22, 2016 at 9:13am

Usually they create units that have multiple laterals all coming off of the same pad.  There may be 1, 2, 3, 4, 5, 6 etc. laterals in a unit.  I think the most I've seen in Ohio is 6 for a pad with laterals going in one direction.  It is possible laterals go in two directions, NW and SE, and then I suppose you could have up to 12 if my guess of 6 maximum is correct.  Generally the unit boundary encompasses all of the laterals coming off that pad, sometimes in two directions (NW and SE), sometimes in just one direction, and your royalties are calculated by the following method: (your amount of acreage in the unit)/(total unit acreage)*your royalty percentage.  That number (often referred to as decimal interest on division orders) is multiplied by the total sales or total production to result in the royalty paid to you (LESS ANY DEDUCTIONS OF COURSE, BUT THAT IS A WHOLE OTHER STORY, RON HALE WHERE YOU AT?).  This does not apply across the board, but is definitely the most common for horizontal wells in Ohio.  Look at a unit map and this might make more sense if it doesn't already.  Hope this helps.

Example: Let's say the amount of your parcel included in the unit is 100 acres and the unit you are in is 500 acres.  Your royalty is 1/8 or 12.5%.  You would calculate: 100/500= 0.2   0.2*0.125=0.025.  You would be paid on 0.025 or 2.5% of the total production.

Permalink Reply by Thomas Malcolm Pendergast on January 23, 2016 at 5:27am

Excellent, G.H.!  That clears up a lot of blank spaces in my knowledge of E&P.

One question:  Why do laterals always go out NW and SE?  I'm sure a geologist would be best placed to answer that one.

Permalink Reply by G.H. on January 23, 2016 at 2:45pm

My understanding is that the laterals run perpendicular to the natural fractures of the shale so that they intersect as many fractures as possible.  Meaning that in Ohio, the fractures would run NE to SW, which is why the laterals run NW to SE or SE to NW.  I am sure someone can chime in if I am wrong.

Permalink Reply by Thomas Malcolm Pendergast on January 23, 2016 at 4:16pm

Aha!  That makes sense.  Suddenly it all comes together!  Thank you very much.

Permalink Reply by G.H. on January 23, 2016 at 7:20pm

glad to help

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