Unit Size and HBP

Ok, so Ive been reading a lot about 640 acres vs 1280 acres, and the pros and cons of both. But I have yet to see any discussion of a production company being able to hold 1280 acres with a single pad that is drilling on property leased with a 640 acre unit restriction. Its very simple ... a producer can locate a pad straddeling two 640 acre units... exactly on the border. Then they drill one well just a few feet inside the one unit's border.. then move the rig a short distance (like commonly done) until its in the other unit and drill again. There ya have it! One pad... two wells a few feet or whatever distance is necessary for them.. and 1280 acres held. Or even 2560 acres with a 1280 restriction.. or even much more if the pad is located on the exact corner of 4 units? what about odd shaped units with more than four connecting corners?? What do ya think? HBP 5 or 6 thousand acres with a single pad and 6 or 8 holes? Possibly some of them verticle? Or i could be totally wrong and everyone has made this illegal in their lease agreements.... I would think it would take quite the wordsmith to prohibit this in a lease.

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Permalink Reply by Kathleen on September 28, 2012 at 2:09pm
One pad can easily do 1280 acres, it doesn't need to straddle 4 corners. One pad depending on lateral size could hold even more.
In some leases one pad can hold acreage 3 towns over (lease stating acreage does not need to be continuous).
Agreeing to a 1280 is betting on the driller to drill all wells on that pad to drain all 1280 acres. If you are in the wet gas area I bet you see a well drilled in your lifetime but what about the other 5-11 wells? If we stay dependent on fossil fuels one day I think it all will be drilled in wet gas areas since we bring up NG, oil and liquids, the question again though is when will they drill all 1280.
Read your lease, how long can they shut you in, is there an amount they need to bring up per year, etc...
I'm staying at 640.
I was told again today by DPS penn that the 1280 units are to the benefit of the mineral owners. I said only if they drill all of it in my lifetime, maybe. He shrugged.
Permalink Reply by Rick on September 28, 2012 at 2:15pm

what I am saying is that they dont really need to alter your lease... they can just make two 640 acre units and drill them both with one pad setup..640 acres in one direction and 640 acres in the opposite direction.. do you see what I am saying? or i may not be explaining myself well.

Permalink Reply by Kathleen on September 28, 2012 at 4:19pm
Hi fang,

I did. At first I asked for % bump and it was a fast no and was told no extra $ either, so than I tried having them release from I think the queenstone (I could have layer name wrong) and the DPS penn guy thought he could get that. He called a few weeks later to say CHK wouldn't approve it.
This was a few months ago and they haven't called again. I didn't think of the develop clause. Honestly I don't think they would have given in to anything. One of the 1st things the guy said was "this isn't opening up your lease, this is just us changing the unit size". I told him it was reopening the lease for negotiation if they wanted a change.
Permalink Reply by Rick on September 28, 2012 at 2:22pm

not really a question, just observing that a lot of land can become hbp with a lower initial cost to the developer by just setting up one pad and drilling a well in each direction. one well per 640 acres, but several 640 acre units converging under one pad.

Permalink Reply by Kathleen on September 28, 2012 at 4:11pm
Correct. They could also just drill one well on that pad if all the leases state 1280 or more and hold them all HBP. Either way you feel about a bigger/smaller unit there is one certainty, it's cheaper for the driller when it comes HPB acreage.
I see both sides of this dilemma since if they do drill the whole 1280 within a reasonable timeframe your potential to hit a sweet spot doubles and the royalty's should go on longer.
Permalink Reply by Rick on September 29, 2012 at 1:49am

Kathleen,  I agree. Since they are so unwilling to budge on anything that you want, seems they will have to deal with 640. Thats probably what i would do also. Pretty hard for them to try the old lie of "we will just drill around you" when they already have you in a lease. It might be different if they were drilling full tilt, with hundreds of rigs in the area, and drilling 6, 8, or 12 holes on each pad one after another.... Like they say, its not always about the size of the unit, its how its being used!  Ha! {;-o

Permalink Reply by gary SWF on September 29, 2012 at 2:25am

As Technolgy moves forward in the "Old Oil Patch" which it will, the question to me is how do we design "Leases" that allow all parties (land owner, energy co., and society to) share in the rewards..........It would appear the horizonal wells will have longer and longer laterals thus the need for increased drilling unit size. With fewer wells comes fewer pads, few holes in the ground, thus Society should benifit....... Now how do we as land owners share in the  cost saving(profit) from fewer pads and less holes in the ground? To me we need to think about leases that will allow for us to share in increased revenue and profits created as well technolgy progress.....I don't have the answer to this question, but I bet collectively we can come up with some good ideas.......The Energy company "decision maker" will understand that he will have to share these profits with the land owners....the people that we talk to do not necessary understand this point..... Technolgy will move forward and more profits will be generated per acre in the future than currently are generated now......How do we make sure we(the land owner) get our correct proportion?........as they say,...... "GAME ON"...........IMHO

Permalink Reply by Utica Shale on September 29, 2012 at 2:37am

Rick,

 The average number of wells per pad is already about three well per pad. As wells prove themselves with good production the drillers are coming back to the pads with one well and they are drilling more wells from the same pad with only one well. The drillers are not typically drilling just one well per pad and then never returning.

 

 Typically, 3 wells going North-West fit nicely into one 640 PU and 3 wells going South-East fit nicely into another 640 PU or all six are in one giant 1,280 PU. This seems to be common with the CKPK wells in NE Ohio.

 

Permalink Reply by Rick on September 29, 2012 at 2:41am

not any bigger than existing pads with 10 or 12 wells on it, actually much smaller.... there are some pads like that. But even so, one pad with four wells to HBP four units is cheaper to build, than four pads with access roads etc... to HBP those same four units.. they can probably change the unit configuration later if they see fit... its like a free for all for the production companies.

Permalink Reply by Utica Shale on September 29, 2012 at 2:40am

Rick,

"... but several 640 acre units converging under one pad ..."

Several ?

Typically, at most two - one going NW and one going SE in NE Ohio.

 

Permalink Reply by Rick on September 29, 2012 at 2:45am

Yes Utica SEVERAL ... just locate the pad on the four corners of four adjoining units ...all wells can still be drilled nw and se..

Permalink Reply by Utica Shale on September 29, 2012 at 3:16am

Rick,

 Please name the PAD that has 4 @ 640 Acre PU's in NE Ohio ...

 

 

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