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"paying quantity" for gas lease

Posted by rubeedoo on 8/13/08 at 7:28 am

It is understood that an operator must produce a well at commercial paying quantities. However, is that amount defined. Our property is covered by a lease signed close to 10 years ago. The operator has never done anything with it. The average monthly mcf produced over the past year is around 60. There have been months within the year that were 0, just not consecutively.

Is this amount of mcf considered paying quantities?

thanks in advance for any replies.

Money Talk

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re: Haynesville Shale

Posted by rubeedoo on 8/3/08 at 6:34 pm to Mr Truth

Thanks Old Dog and Double Duece,

The acreage is in Red River Parish, so all estimates indicate that it should be in the Haynesville play.

So, an operator can identify a well that has not produced for a year, file permits to take it over and sign leases with the landowner to try and make a run with this well. Let's say the timeframe is 10 years ago, so the landowner signs for 20% and no royalty.

The new operator produces it thoughout this time period, and now learns about the opportunity in the shale. Is it correct that the operator can cut the deal with Petrohawk, Chesapeake, Encana or whomever for 25% plus the bonus?

It is bothersome that the operator is able to capatalize to this degree on an opportunity that they were not aware of when they took over a non-producing well.

I now understand about depth clauses and other protections. But, the thought that the operator can release your minerals, and be paid handsomely for any margin above what they may pay you is doesn't seem right.

I can only assume that there are many others faced with the same situation. That is why I am hoping that "paying quantities" is defined.

thanks

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re: Haynesville Shale

Posted by rubeedoo on 8/1/08 at 7:33 am to Pierre

Is there any discussion about defining what a marketable production volume is? If you have acreage that is held by production, but that production amount is miniscule, it seems the operator can hold you hostage from leasing minerals that may be on your acreage.

We signed a lease about 10 years ago, and knew nothing about it, so there were no depth clauses or other protections.

The well has averaged about 50 mcf per month over the past 12 months.

It would be nice to know if this were at least being discussed.

thanks

Money Talk

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