(called the terminus).
Pooled Unit or other voluntary pooling document creates the equivalent of one big lease in which every owner in any of the lands in it owns a share of production proportionately. A DPU binds all parties involved in the leases pooled by it, to allow their interest to be proportionately reduced based on their lease’s pooling clause. Unleased owners are not bound by any contract they did not sign. They are not bound by a lease that would contain a pooling provision, so their interest cannot be proportionately reduced. They can be bound by the DPU and their interest proportionately reduced only if they ratify the DPU. They don’t have to sign a lease, but becoming party to the DPU will allow their interest to be proportionately reduced. If they do not ratify, there is an important hitch. If any part of the wellbore comes within 300 feet (or number of feet as ruled by the TRC for that well) of the boundary of their tract, they must be paid 100% of their tract decimal interest (after 100% payout) based on one of the four methods explained earlier. However, their 100% tract interest must be reduced by the allocation factor assigned to that tract in the well. If the wellbore does not come within the number of feet ruled by the TRC, that UMI owner receives no revenues at all for the life of that well. Bear in mind that if there is more than one horizontal well drilled across or near a UMI tract, that owner could be entitled to revenues from a well but most likely not all of them.
The third method sometimes used is based on establishing a proration area around the entire length of the wellbore from penetration point to terminus. This is done by the surveyor measuring out from the lateral 300 feet, or whatever Texas Railroad Commission rule is in effect for this well, on either side of the wellbore. This results in the wellbore lateral in the as-drilled plat having a line drawn around it denoting the proration area, filled in with shading, making it look like a giant cigar or a long box. The surveyor then surveys the amount of surface land in the 600-foot swath with the wellbore in the center of it. The surveyor measures the length of lateral inside of each tract and calculates the amount of proration acres attributable to each tract. This information also is placed by the surveyor in the as-drilled well plat either in a legend or using call-out squares. The fourth method appears to be much less common, involving counting the number of wellbore perforations inside each tract and dividing that number by the total number of perforations in the entire length of wellbore. The legal theory, as it has been explained to me, is that each perforation can be considered a separate “well”, so allocation would be on that basis. A UMI in any one of the producing tracts in an allocation horizontal well would be paid revenues based on their tract mineral interest decimal in that tract multiplied by the allocation factor assigned to that tract by the surveyor. This calculation is done by the division order analyst as part of their task to create a revenue distribution division of interest for the well. Bear in mind that if more than one horizontal well is drilled across the same set of non-pooled tracts, the allocation factors for each tract almost always will be different for each well.
Database Entry Requirements Involving a UMI
There are many versions of revenue distribution databases being used in the industry today. Some are “home grown” meaning they were built by programmers working for the oil company using them, or a commercial database such as Quorum, Enertia, Tobin Domain, P2, BOLO, W, and many others. They each have different features and different methodology for entering data for correct
UMI Owners Inside a Texas Pooled Unit
A pooled unit created by a recorded Declaration of
16
N at i onal A ssociation of D i v i s i on O rder A nalys t s
Made with FlippingBook interactive PDF creator