# wells GROSS vs NET ?

In the REX quarterly report they stated:

In the Butler Operated Area, the company drilled six gross (4.2 net) wells in the second quarter of 2013, with five gross (3.5 net) wells fracture stimulated and four gross (2.8 net) wells placed into sales. The company had 14 gross (9.8 net) wells drilled and awaiting completion as of June 30, 2013 .

 

Can someone explain how a physical well is not just gross? Where does a NET # of physical wells come from?

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on August 7, 2013 at 1:46am

It has to do with total NRI (net revenue interest) in each well.  A gross well is any well that the company has a working interest in.  The net is the combination of all fractions of ownership in each well added up.  So if Rex has two wells drilled and owns an 82% WI in one and a 100% WI in another the gross is two but the net is 1.82.

Permalink Reply by landowner on August 7, 2013 at 2:07am

OK, Thanks for the reply. I guess I still don't get it, because why wouldn't REX own 100% WI on all wells, since they own the leases for the unit?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on August 7, 2013 at 2:16am

They probably either 1.) don't own every lease in the unit and have a participation agreement with another company or 2.) sold part of the WI to another entity or entities.

Permalink Reply by Brian Powers on August 7, 2013 at 3:06am

Marcus -

I agree with your assessment here. It is very common for an operator to sell or farmout a portion of their leasehold, principally to reduce risk and to continue acreage development.

Brian

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