This seems to be the hot topic for enquiring minds.
I am probably missing something but this seems pretty straight forward: "each well is its own well." Each well is its own industry.
An existing well on 1280-acre spacing will remain a well on 1280-acre spacing regardless of future wells, future spacing.
That's all one needs to know, assuming it is accurate. I don't own minerals and haven't read the rules and the definitions, but that seems to be the gist of what I am hearing, reading elsewhere.
Having said that (that's all one needs to know), it begs the question: can there be multiple spacing units affecting the same acre. For example, we have seen 1280-acre spacing on top of 640-acre spacing. A year from now, could we see 2560-acre spacing on top of the 1280-acre spacing? I don't know why not. I would assume there needs to be a way to identify which spacing unit a proposed well will be defined. For example, assume there is an overlapping 1280-acre unit on a 640-acre unit, and a new operator wants to drill a new well in that section. Will there be a way to identify a well based on its name / legal description whether it's a 640-, 1280-, or a 2560-acre well, or something else?
Bruce, I think you have a clear understanding. There is no reason tomorrow's 1,280 spacing might not incorporate two existing 640's. Minerals owners might object if there was a large difference in the production under those 640's. Though if the acreage appears to have similar potential there may not be any pressing need for objections.
ReplyDeleteAs to a way to identify... I believe you're always going to need to refer to a well's case file to know, rather than any attempt to try to designate the well's spacing within a well name. Though a company could try to incorporate it into a name.
I agree: I think one will have to go back to the well's case file to find out the spacing; I was just throwing that out to "cover" another base. But I agree; unlikely to be in the name/legal description. Thank you.
DeleteYes. As an example, if two spacing units overlap , the mineral acres that are in both spacing units have a share of both wells in proportion to the fractional interest of the gross area of each spacing unit. The acres that are in non overlaping areas share only the well on their spacing unit.
ReplyDeleteThank you. Multiple ways of explaining it or understanding, but it looks like we are all on the same page of music. Thank you for taking time to comment.
DeleteThis very scenario is at work in a spacing unit my wife and I are a part of. Original spacing unit 150-94-20 1 well short lateral; sec. 17 1 short lateral 640 spacing each. Now a 1280 4 section spacing of sections 8-17-19-20. Permitted for 6 long laterals 3 three forks and 3 middle bakken. Excited to see how this pans out. EOG is the holder of the lease and driller. They seem to be one of the best to have working for us.
ReplyDeleteI would agree (about EOG). Good luck.
DeleteIf the production of the wells is about the same , then there is no advantage/disadvantage for the mineral owner as it averages out. Where there may be an issue is if there is a significant disparity in production. In that case, the more productive wells are sharing with the less productive .
ReplyDeleteThat would be accurate.
DeleteOn another, but somewhat related, note, I'm in the minority on this one based on the poll , but all things being equal, in the Bakken, larger spacing units are for the better for all involved (the operator, the surface owner, and the mineral owners).
The only thing I see happening is more oil being taken out of the spacing unit and more royalty to the mineral right owner. For example. I own minerals in a quarter section of land (160) acres. And lets assume that is part of 1/4 of a 640 acre unit and 1280/acre unit.
ReplyDeleteI lease my mineral rights 1 time. So I get 20 % of the production from each person drilling. I don't have seperate leases. If both units are drilled on, I am just getting more royalty from two directions.
160 acres: 1/4 of production from a short lateral; 1/8 of production from a long lateral?
DeleteYep, that is what I tried to say. Because there should only be one lease on the 1/4 section. So they get paid from both.
ReplyDeleteRegardless of the math, I hope you do very, very well. Good luck. With price of oil today, you are probably smiling. If not, you should be.
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