Lease Maintenance: Increasingly Important in Land Management

07/16/2020
Lease Maintenance: Increasingly Important in Land Management

Maintenance is a fact of life. Just think about all the things you own or possess that need continual maintenance or upkeep. Cars need oil changes. Air conditioners and furnaces need new filters. Appliances need cleaning and inspection. Computers need protection from malware. The list goes on and on. Your oil and gas leases are no different. Lease maintenance is important in understanding what obligations exist on your leases and how to be efficient in maintaining your lease position.

All leases no matter if they are standard templates or new landowner generated forms have a variety of terms and conditions. These terms and conditions are the guiding force between keeping a lease and losing a lease, so lease maintenance has become increasingly important. It’s what we like to call business intelligence in land management. This program tells lease holders – from an input of data – specific lease terms and conditions plus what obligations are necessary to maintain a lease. Naturally, this depends on each condition and its criteria, the operations performed or expected, etc. Through our advanced algorithms at P2 iLandMan, we can give you the answers to these complex questions in seconds while other programs can’t, or it takes weeks for an analyst to crank it out of Excel.

Lease Maintenance Scenarios

  1. Limited Production or Shut-In – Say you have a well that is sputtering, or paraffin buildup is limiting production. Engineering sends you a notice that the well will be shut-in for an extended period because of rig availability, slow partner notice, or financial constraints. Using appropriate lease maintenance strategies, you see with certainty what leases will be affected and know exactly how much the rental will be to maintain each lease, either monthly or annually, so you can notify management for budget preparations.
  2. Acquisition – Maybe you acquired a couple of competitor leases in a new area adjacent to your own lease position. You get your leases converted or inputted quickly and evaluate your new acquisitions. Perhaps this new area has only been explored through conventional means in the shallower producing zones and your company wants to explore a new zone through unconventional methods. One thing you need to know is the acreage you own in the new zone since many leases have depth segregation clauses where zones below the producing interval are released. If you begin drilling this new area, consider the other obligations or terms that will affect your acreage retention. What acreage will be held by the new production and what acreage outside of producing units is at risk from leases containing Pugh clauses or other related language? Ensure you can access an accurate acreage count by formation for the shallower and deeper (now drilling) formations and get the actual payments needed to maintain the acreage outside the producing units. Business intelligence through P2 iLandMan assures this information!
  3. Continuous Development and/or Drilling – Your company has been able to maintain drilling on a large lease area for many years, then the unexpected happens. Commodity prices drop and management decides not to drill any new wells. Many of your leases, including this large one, have continuous drilling and/or development clauses. At this point, you need answers to the following questions:
    1. What is needed to maintain or hold the most acreage under each producing well?
    2. What happens to the acreage outside of the selected units?
    3. What is the configuration that will benefit your company most in the future?

Ensure you can access accurate held by production information, acreage selection information, and any obligations needed to maintain the acreage inside and outside the producing acreage under these clauses. Business intelligence through P2 iLandMan helps you assess and clarify this information!

Maintaining Complex Lease Provisions

Being able to answer when an obligation is due, whether monetary or actionable, your land department can instruct either accounting or engineering on the actions necessary to maintain today’s complex lease provisions. We’ve learned configurable dashboards that provide answers to common queries are helpful for landmen and land personnel.

Our goal at P2 iLandMan is to give land departments a better perspective on their position from both a surface view and a three-dimensional formation view. Using technological tools like APIs, P2 iLandMan can integrate your lease data with well data (yours and others) so that you have industry-leading tools to help make sound operational and financial decisions.

Interested in learning how a land management system could benefit your upstream oil and gas land team? Click the banner below, and check out our ultimate guide to land management software.

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