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Permalink Reply by Joseph-Ohio on October 27, 2015 at 11:50am

I've read it said all they have to do is park some equipment on leased acreage to HBP.

Wonder if it's true ?

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Permalink Reply by evan on October 27, 2015 at 1:27pm

Like people say all the time. It all depends what your old lease says 

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Permalink Reply by Larry Jacobson on October 27, 2015 at 2:19pm

It's the exact same lease that a bunch of people signed with Shell.  We were all at the Southeastern equipment conference building. My guess would be there more than a thousand people who signed it.  The company was called SWEPI

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Permalink Reply by Jon on October 27, 2015 at 2:29pm

There could be a provision in the lease that stops that. Was it with a landowners group?

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Permalink Reply by Jim Litwinowicz on October 27, 2015 at 3:53pm

All depends on your lease, doesn't matter how many signed it.  And if you signed a lease from SWEPI without having an attorney look it over, you are probably screwed. SWEPI is/was Shell's hired gun to do their bidding.

Best get an attorney to look it over now to see if you have an options....before they come with any extension offers.

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Permalink Reply by bo boboski on October 27, 2015 at 9:24pm

I signed the same lease. It states that for them to extend the lease after the 5 year term. "operations" have to have begun. That means drilling a well and you and a piece of your property have to be included in that unit. So that would be a good thing.And I do think it has to be a producing well,but there is a "shut in" clause, in case they don't produce. I haven't heard of any drillers who spend $10 mil. on a well, then cap it it, unless its a dud.

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Permalink Reply by Joseph-Ohio on October 28, 2015 at 1:26am

Bo,

I think I've heard stories of wells developed and then 'choked back' / 'shut-in' before.

I'm thinking that these days the 'lack of infrastructure' may be reason enough.

I think also, that these days, considering uncertainties like the 'oil glut', low prices for the resources / commodities on the 'world wide market', political evolution / elections, etc. might be reasons to 'shut-in' wells.

Also, I think that maybe, for a well to be considered 'shut-in' doesn't necessarily mean totally 'capping it off. Maybe just shutting off / closing off the valves would be enough to call a well 'shut-in' ?

Does anyone know if well has to be 'capped' to be termed 'shut-in' ?

Also, I don't know exactly what would constitute the beginnings of 'operations' insofar as being HBP is concerned myself. Does anyone know for sure ?

There are things like 'spudding a well' and 'spud fee' stipulations in leases I've had a chance to read. Wondering if the leases in question make mention of those things in way of defining the 'beginning of operations' ?

Remember we swim with sharks and walk with wolves and there are many words in leases discussing many angles (writing these words based on what I've read on these pages alone).

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Permalink Reply by Larry Jacobson on October 29, 2015 at 3:26am

It looks like there is a "shut in" clause in the contract - they have to pay a shut in royalty (which does not amount to crap) and there is a limit to how long the well can be Shut In -  24 months consecutive / 60 months cumulative

So I guess for future reference if anybody is going to lease or re-up a lease, make sure you have a shut in clause that states the oil people have to pay you a fee for your lease after it expires even if there is a shut in well or any other type of activity taking place on your land.

Having your property locked in after your lease is up because there is "activity taking place on your land" is a bunch of crap.  They should have to pay the going rate to release no matter what.

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Permalink Reply by Jim Litwinowicz on October 29, 2015 at 4:48am

Sounds like you are screwed.  "Operations" is very vague and open ended. That means they could park an old rusty piece of equipment, plant a few flags, or even just apply for permits and claim operations have begun.  Lease should have had a clause like 'drill in ground and turning and continuing in a workmanlike manner'' as defining when operations have begun as for continuing the lease.

But you need to be in a unit for this to happen and since there is no drilling in your area, you most likely are not in a unit.  If you are not in a unit, then your lease will expire. Bad news is that prices are so low there is very little leasing going on unless you are in a very good location. And even then, the lease offers are not very good as compared to what was being offered a few years ago.

Check your lease as most gave the company an option to extend the lease for an additional five years at the same terms. If the lease was for good money like several thousand/acre and a good royalty, expect them to allow it to expire and then offer a lease at much lower terms and not at all landowner friendly.

Bo;   There are over a thousand wells that have been drilled but not yet fracked, probably double that.  The low prices have caused companies to drill the hole but wait for better prices before fracking/completion. This allows companies to HBP land under most leases.

Joe; capped and shut in are basically the same thing, AFAIK. 'Plugged" is permanent plugging of well, capped and shut in are just temporarily stopping production.

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