Comment

Comment by RJS on January 20, 2013 at 4:17pm

We bought the property in 1997 with mineral rights already leased for the shallow wells with terminology in the lease that allowed continued development or whatever it says. So, we are just kind of along for the ride with the less than advantageous lease terms.  We still get a small amount of royalties from the shallow well unit in which our property resides.  The royalty percentage is 12.5%.  My understanding from all my reading is that the lease terms we already have apply to this, as well.

Comment by Berk on January 20, 2013 at 4:12pm

RJS-Are you HBP from an older well or did you recently lease to Range?  

Comment by RJS on January 20, 2013 at 4:05pm

We have just over 11 acres.  Better than nothing and much better than a stick in the eye.

Comment by RJS on January 20, 2013 at 4:00pm

Berk - thanks for that thought - that makes a lot of sense.

Comment by Jim Litwinowicz on January 20, 2013 at 4:00pm

RJS, if all of your land falls within the unit, you will receive royalties on all acres. It will be what ever fraction of the 248 aces of the total unit is your. If you have 50 acres you will receive a royalty based on 50/248th of the unit times your royalty rate. Congratulations! Just may take six months to a year yet.

Comment by RJS on January 20, 2013 at 3:57pm

I have seen a couple of the maps for Ohio wells and they were similar sized to this one.

Comment by Berk on January 20, 2013 at 3:56pm

I believe that 330' circle is just showing that they "range" is that distance from other property lines not in the 248 ac unit. 

Comment by Jim Litwinowicz on January 20, 2013 at 3:55pm

Most horizontals drain 80 to 120 acres  depending on the length of laterals. And since the laterals are usually a minimum of  5000' they can drill all 1280 acres off an single pad. Distance between laterals varies a lot depending on shale characteristics and the success on the fracking. Properly spaced laterals will allow 8 wells to cover 1280 acres.  Of course if there are multiple strata that are productive, which is highly likely, they may drill more wells.

Could be several reasons for a smaller unit.  Some people/rights owners may have not leased. They may be holding out for more money or may be against HVHF altogether. Some parcels may be leased to other companies and the operator doesn't want to do a JV and share whatever data they generate. Also. the lease(s) in that unit may be for only 12.5% and allow deductions. If so, they drill there and only pay half the royalties if it would include parcels with leases that have a much higher royalty.

As for Henry Hub vs NYMX, a lot depends on the lease. Some will state either/or.  Some will state that royalty is based on sale price so neither HH or NYMX will come into play. According to Jack Straw, much of the gas is "stranded" meaning that the price paid in any one locality will not reflect either HH or NYMX. Stranded means there is insufficient carrying capacity to get the gas to the major markets and thus gets a below premium price. Some areas are getting as much as a dollar less than NYMX. In  N Dakota and even the Eagle Ford in Tx there is so little pipeline capacity that gas is being flared off because getting to a market costs more than what they can sell it for.

Comment by RJS on January 20, 2013 at 3:52pm

Sorry about the confusion on the 330' foot circle.  By way of explanation - The map shows the horizontal running nw-se for about 5400+ feet.  On both sides of the line for the horizontal there is a parallel line at 330' for rectangle with a total width of 660'.  At both ends of the horizontal, there is a 330' circle drawn.  This entire structure lies within a defined unit of about 248 acres.  And to answer another question - our property lies entirely within the 248 acre unit but not entirely within the the 330' lines around the horizontal and its terminal points.  I have attached the pdf so you can see for yourselves.Lippert0002.jpg

Comment by sldouglass on January 20, 2013 at 2:09pm

If you think about it, the wells producing from one well pad might be a very logical unit. Although the area drilled and producing from one well pad can vary greatly, four wells on a pad could be realistic with two wells running NNE and 2 Running SSW, say 3/4 of a mile in each direction or a total of 1.5 miles. The math on that suggests that each of the wells might cover 40-50 acres with perhaps a vertical well in the center [a 5th well?] to catch what might missed in the curve of the vertical to get to the horizontal drilling. The total of that rectangular underground acreage would come out to about the 248 acres you mention. All conjecture, of course. The plat you have may tell more-or not. A 1280 acre unit might have space for over 30 wells from several well pads, each likely to have space for 4 or more wells. Only the producer knows and the producer's plans can change.

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