Posted on 12/19/2014 6:30:24 AM PST by thackney
You put the wells on a timer.
Produce 1 or 2 barrels a month and report your production then the wells aren’t considered shut in and you don’t have to fool with the regulations since you are still producing.
That way you can also avoid paying shut in cost to the mineral owners and you don’t loose your lease since a lease is held by production.
Thanks for that. I had heard that before but it is outside my experience.
Like the 1/8 hasn’t been passed out to various landmen already.
There is also a time period specified in a lease, generally a couple of months, where you don’t have to produce before the well is considered shut in and you are required to pay shut in cost to the land owner to keep the lease.
A lease is also held by activity, meaning working on the well, without production being reported.
You can stretch it out for several months with a well being down and no production before it’s considered shut in.
If your going to be down anyway and the pump needs a rebuild it’s a good time to do it since you don’t loose money from production while working on the well.
As long as the production equipment is idled in such a way that corrosion will not present a problem, and for a short period of time, re-start will not likely present a huge (expensive) problem.
The mechanical aspects depend on depth, corrosion in that wellbore environment, and other factors. Operators with an eye for the future may even use the opportunity to rebuild or replace production equipment nearing the end of its service cycle.
Consider the new well decline curve when it comes to forecasting prices, that is for those (horizontal oil) wells which have been on line less than one year, 40 to 50% decline in BOPD output. Unless that is replaced by new drilling, overall production will decline, and the price likely adjust to reflect that. For the short term, they may be able to idle those stripper wells without much effect on the formation or subsequent production when the price is more favorable, provided no equipment fails in the meantime.
Yes, I have similar terms on our lease.
Thanks Joe, once again.
A lot of people that lease their property for the first time don’t realize they can stipulate in their lease the oil co. release property from the lease that isn’t in a unit. For example if you lease 100 acres and only 50 acres are in the producing unit, unless the co continues operations, drill a well, to include the other 50 in a unit after a certain period of time the co looses the lease to the 50 acres not in the unit.
People also make the mistake of not making the oil co release the zones below the producing zone from the lease so someone else can come in and lease the lower zones and drill another well if they want to.
Make them release the lower zones and you can get multiple leases/wells for the same property.
A word of advice to anyone leasing their property, never let an oil company hold a lease on all your property with the production from just one well and never let them hold the lease on the lower zones with production from the upper zones.
I hired a lawyer who was experienced in mineral leases in Louisiana. Got recommendations from others before hiring. We tried to keep out of unitizing but could not get signed without it.
We did get exclusions on the zones.
You’re welcome!
Sounds like there were some other mineral owners that got signed up before you and they let them hold it all so you were SOL..
I know Louisiana oil and gas law is completely different than any other state so you definitely need a Louisiana lawyer when leasing.
Smart move.
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