Previous - Slide 27 - Next

This drawing shows the four wells drilled according to “well spacing”, each one in one of the units.

So that is the spacing, or the “unitizing”.  But where does the royalty sharing come in?

All the owners of the mineral that are included in each unit will get a share of the royalties from the gas produced from the well on that unit.  As part of the unitizing, the acreage of each mineral owner who has any minerals included in each unit is determined.  Each mineral owner included in a unit is then entitled to a fraction of the royalty from the one well on that unit.  The fraction of the royalty each mineral owner is entitled to is the fraction acres they own out of the total acres in the unit.

Here, Ms. Southwest, Ms. Southeast, and Mr. Northeast each own about 1/3 of the area in the drilling unit being drained by well #4. 
So Ms. Southeast will get 1/3 of the royalty paid on the gas produced from well #4.  She will get this even though there is not well drilled on her minerals.

Ms. Southwest will get  1/3 of the royalty from well #4; in addition she will get 2/3 of the royalties produced by well #1.  That is because Ms. Southwest owns about 1/3 of the mineral acreage included in the unit begin drained by well #4 and about 2/3 of the mineral acreage included in the unit being drained by well #1.

And so on for the other owners.  Each will get a share of the proceeds of each well drilled according to their share of the minerals being drained by each well.

This would be the best for the mineral owners, the surface owners, the investors, the environment, and, in the long term, for operators as a class.