Can anyone explain this Horizontal Pooling Formula used for pooling leases in Oil and Gas?

I’m mainly concerned about the numbers that are used and their meanings.
A(acreage)= [L (actual lateral length drilled) x 0.11488 + 160] x 1.5 = 584.64 (rounded up to the nearest number evenly divisible by 40)

One Response to “Can anyone explain this Horizontal Pooling Formula used for pooling leases in Oil and Gas?”

  1. carbonates Says:

    A landman, or an attorney familiar with oil and gas could answer this better, but since you are getting no other answers I will give you what I can, as a geoscientist who deals with these issues indirectly.

    A is the well spacing acreage size. In this case it works out to 584 acres, or rounded up is 600 acres. That means the pooling, or the hypothetical drainage area of this well would be 600 acres. That’s almost a full section of land, or 640 acres.

    Using this formula, I calculate a 2000 ft lateral. Since a 2000 ft lateral will only cross about a quarter-section, which is 2640 ft square and covers 160 acres, this formula appears to covering a much larger drainage area than I would expect from such a short lateral. Since I don’t know what sort of reservoir this is, or if this is a regulatory formula or just a lease clause, I can’t really say what that means. I would not expect a 2000 foot lateral to drain a 600 acre pool except in a conventional reservoir.

    If you lay out a two thousand foot lateral on a 600 acre square parcel, this suggests that the lateral is draining about 2500 ft on either side of the lateral (in an aerial view) and probably an arc of about 2500 ft around the end of the lateral, with some contribution from the area behind the lateral under the kickoff point (where the well starts turning )and up to the penetration point (where the well reaches the formation and goes horizontal).

    Pooling rules vary significantly by state and other jurisdiction, and in some cases are voluntary. Basically what this formula is doing is either expressing the amount of acreage that will be force-pooled by regulation by this one well, with all the mineral rights owners sharing proportionally in the royalties from the well, while this amount of acreage is "held by production" from this well for the producer. As long as this well is producing oil the lease agreement will remain in effect for the 600 acres in the pool. In a voluntary pool it works much the same. If this is the formula used by the regulators then this will dictate the well spacing. No other wells will be allowed on this 600 acres from this specific reservoir without special permission (if this is a state pooling formula). The spacing may also hold mineral rights for the producer for deeper or shallower formations while this well is producing, depending on the state regulations and applicable lease agreements. In that instance the producer is not forced to drill to test the shallower or deeper formations until the producing well is ready to be abandoned. Lease agreements or state regulations can change that.

    This presentation explains a lot of the issues related to pooling in horizontal wells:
    http://www.colorado.edu/law/nrlc/events/documents/shaleplays/6%20-%20Kramer%20-%20presentation%5B1%5D.pdf