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Conflicting Agreements in the Drilling of Horizontal Wells

Timothy C. Dowd, Horizontal Oil & Gas Development (2012)

In present times, it is highly likely that an Operator seeking to drill a horizontal well will encounter areas that have been developed by previously drilled vertical oil and gas wells. With every well that has been drilled, there is likely to be different contractual arrangements impacting the drilled tracts.

A lessee is likely to encounter issues dealing with multi-unit development, where the prior wells were drilled on lease units as small as 40 acres, or perhaps as large as 640 acres. Therefore, when companies are planning to drill in 1280-acre units or larger, the concept that a lessee might run into differing contractual arrangements is very likely.

Although it may be obvious, one court noted the physical characteristics of a horizontal well. Horizontal wells traverse several tracts owned by different individuals, not all of which are contiguous; they include multiple points along the drain hole rather than a single drillsite; and they penetrate highly fractured formations that do not facilitate the natural migration of oil and gas.1