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Allocation Wells & PSA Permitting/Drilling

Allocation Wells & PSA Permitting/Drilling. North Houston Association of Professional Landmen December 11, 2018. Allocation Wells & PSA Per m itting/Drill i ng. ► Panelist s : ► Phili p Jordon – Crossing Rocks Energy, LLC ► Kelli Kenn e y – McElroy, Sullivan , Miller We b er , LLP

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Allocation Wells & PSA Permitting/Drilling

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  1. Allocation Wells & PSA Permitting/Drilling North Houston Association of Professional Landmen December 11, 2018

  2. AllocationWells&PSA Permitting/Drilling ►Panelists: ►PhilipJordon–Crossing Rocks Energy, LLC ►KelliKenney –McElroy,Sullivan,Miller Weber,LLP ►ShandyRobl–BPXEnergy ►Luke McCarley – Riviera Resources, LLC ► Moderator:Paul Yale – Gray Reed

  3. Who is DrillingPSAWells? As of07/12/2018 (ThankstoBrianSullivanofMcElroy,Sullivan,Miller,Weber&Olmstead,L.L.P.)

  4. Who is DrillingPSAWells? (ThankstoBrianSullivanofMcElroy,Sullivan,Miller,Weber&Olmstead,L.L.P.)

  5. Who is DrillingAllocationWells? As of07/12/2018 (ThankstoBrianSullivanofMcElroy,Sullivan,Miller,Weber&Olmstead,L.L.P.)

  6. Who is DrillingAllocationWells? (ThankstoBrianSullivanofMcElroy,Sullivan,Miller,Weber&Olmstead,L.L.P.)

  7. DiscussionQuestion ►ProductionSharingAgreementsvs. AllocationWells ►Whataretheadvantagesand disadvantages of each?

  8. DiscussionQuestion ►Havetherebeen anynew casesof note sincetheKlotzmancase?

  9. DiscussionQuestion ►Are companiesusing productionsharing agreements,pooling agreements,or relying oncaselaw forcalculating royalties?

  10. DiscussionQuestion ►AreAllocationWells thenew pooling,i.e., do theyeliminatetheneed for pooling?

  11. DiscussionQuestion ►Whatmethodsareoperatorsmost frequentlyusingto accountto royalty ownerswhendrillingallocation wells? ► lengthoflateral ► numberof perforations ► surfaceacres ► othermethods

  12. DiscussionQuestion ►Howto handleallocationwellsthat cross differentJOA contractareas? ►AmendJOA ►Allocateproductionbetween JOA contract areas,and if so,wherein theJOAis supportinglanguage, andwhatis theriskof notbeingable toenforcenon-consent penalties.

  13. DiscussionQuestion ►Are recentlandownerleaseforms addressingallocation wellsby either preventingorby encouragingthem? ►Examples?

  14. DiscussionQuestion ►Those pesky non-perforation zonesand Rule37 issues. Howareoperatorshanding thesesituations?

  15. DiscussionQuestion ►Are therebetteror moreaccurate measures of productionfromeach tract? ►Specifically,whatabout theuseoftracersto determinethepercentageof production fromeachperforation?

  16. DiscussionQuestion ►You cashcallthewellparticipantsfor the costof an allocationwellbasedon the lengthof theproposedlateral, but the lateraldoes not reachtheproposedlength, and asaresult,howwouldyouhandlethe accountingto “true-up” thedifference in costsbetween theproposedlateralandthe actualas-drilledlateral.

  17. DiscussionQuestion ►Multi-tractAllocationWells: ►Are surfaceeasementsneededdown the entirelateral(acrosseachtract)? ►Are saltwater disposalagreementsneeded forproducedwastewateronsurface locationtract?

  18. DiscussionQuestion ►Are subsurface easementsnecessary? ►In relationto surfacedrillsites andoff-lease drillsites.

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