DAILY & WOODS A PROFESSIONAL LIMITED LIABILITY COMPANY ATTORNEYS AT LAW

Transcription

1 JERRY L. CANFIELD, P.A. THOMAS A. DAILY, P.A. WYMAN R. WADE, JR., P.A. DOUGLAS M. CARSON, P.A. ROBERT R. BRIGGS, P.A. * C. MI CHA EL D AILY, P.A. COBY W. LOGAN L. MA TTH EW D AVI S, P.A. COLBY ROE * Fayetteville Office Also Licensed in Oklahoma February 2, 2010 DAILY & WOODS A PROFESSIONAL LIMITED LIABILITY COMPANY ATTORNEYS AT LAW KMW BUILDING 58 SOUTH SIXTH STREET P.O. BOX 1446 FORT SM ITH, AR TELEPHON E (479) FAX (479) COMMERCE PARK II BUILDING 2049 EAST JOYC E BOULEV ARD, STE. 301 FAYETTEV ILLE, AR TELEPHON E (479) FAX (479) JAMES E. WEST PHILLIP E. NORVELL * DALE CARLTON * OF COUNSEL HARRY P. DAILY ( ) JOHN P. WO ODS ( ) JOHN S. DAILY ( ) Arkansas Oil and Gas Commission 301 Natural Resources Drive, Suite 102 Little Rock, Arkansas Re: ORDER REFERENCE NO Application of SEECO, Inc. for Integration of All Unleased Mineral Interests and Non-consenting Working Interests in a unit described as Section 35, Township 8 North, Range 15 West, Conway County, Arkansas Commissioners: SEECO, Inc., 2350 N. Sam Houston Parkway E, Houston, TX 77032, hereby applies to the Arkansas Oil and Gas Commission for the integration of all unleased mineral interests and non-consenting working interests in its proposed drilling unit which is described above. 1. The proposed drilling unit is an established unit as defined in paragraph (f) of Arkansas Oil and Gas Commission General Rule B-43. Applicant proposes to drill a horizontal well from a non-exceptional surface location in the Southwest Quarter down to a non-exceptional bottom hole location in the Northwest Quarter of the abovedescribed unit. The proposed well will be drilled to a total vertical depth of 5,441 feet to test the Fayetteville Shale Formation. Applicant has obtained one or more oil and gas leases covering its proposed drill site. 2. Applicant owns oil and gas leases covering a substantial part of the proposed unit. Applicant should be named as operator of the well. The person or persons to be integrated are shown in Exhibit "A" attached hereto and made a part hereof. 3. Applicant has made diligent efforts to negotiate with the non-participating leasehold working interest owners, each of said parties owning an oil and gas leasehold interest in the proposed unit, but applicant has been unable to secure an assignment of the leasehold interest on an equitable basis or to secure participation by said parties in the drilling of the proposed well.

2 4. Applicant states that it has made repeated efforts to negotiate with the owners of the unleased mineral interests in order to agree on a plan of development of said drilling unit; that those owners have been offered an opportunity to participate in the proposed well; that they have been offered a fair and reasonable bonus consideration for the execution of an oil and gas lease covering their interests; that they have been furnished with a proposed oil and gas lease and a copy of the AAPL operating agreement form which applicant proposes to use in connection with the drilling of said well; but that all of the efforts of the applicant have produced no agreement by said parties. 5. Applicant states that it is in the best interest of conservation and the protection of correlative rights of all interested parties that the proposed unit be developed for oil and gas production without undue delay. 6. In order that applicant may proceed with the orderly development of said unit, applicant hereby requests that the Arkansas Oil and Gas Commission issue its order, in the alternative, that: (a) (b) The owners of non-consenting oil and gas leasehold working interests indicated above shall participate in the cost of drilling, testing and completion of the test well to be drilled by applicant on the captioned unit, subject to the terms of an Operating Agreement which substantially employs the terms of the AAPL Operating agreement, with a COPAS attached. All of the non-consenting oil and gas leasehold working interests within the proposed unit shall be force pooled and integrated into said unit, and a reasonable risk factor shall be established and assessed as a penalty against said integrated interest. 7. Applicant further states that due to the risks and costs inherent in the drilling of the proposed well, the Commission should fix a reasonable risk factor to be assessed as a penalty against the integrated interests within the unit. The risk factor should be applied to the proportionate cost and expense of drilling, completing and equipping the well, which would have been borne by the interest of said parties had they participated. Applicant requests that if the integrated parties do not elect within 15 days after issuance of the Commission's order as between alternatives (a) and (b), it shall be assumed that the integrated parties elected alternative (b) in lieu of the right to participate in the working interest in said unit. 8. Applicant requests that the Arkansas Oil and Gas Commission set this matter for public hearing, and after same, issue its order, in the alternative, that: (a) Each of the owners of the unleased mineral interests indicated above execute and deliver to applicant a one year oil and gas lease, on an AAPL lease form, for a bonus consideration of $ per net mineral acre to be paid as fair and reasonable

3 compensation in lieu of the right to participate in the working interest in said unit, and that said oil and gas lease provide for a 1/8 royalty on oil and gas. (b) (c) Each of the owners of unleased mineral interests indicated above be force pooled and integrated into the captioned unit with assessment of a reasonable risk factor penalty against their interest. The owners of unleased mineral interests shall participate in the cost of drilling, testing and completion of the test well to be drilled by applicant on the captioned unit, subject to the terms of an operating agreement which substantially employs the terms of the AAPL Operating Agreement. Applicant further requests that said mineral owners be required to elect within fifteen (15) days after issuance of the Commission's order which method will be pursued in the development of the above described unit, and, in the event no election is made, that it shall be assumed that the owner of said unleased mineral interest has elected to accept a bonus of $ per net mineral acre as compensation in lieu of the right to participate in the working interest in said unit, and with the royalty to be 1/8. 9. Applicant further states that due to the risks and costs inherent in the drilling of the proposed well, the Commission should fix a reasonable risk factor to be assessed as a penalty against the integrated interests within the unit. The risk factor should be applied to the proportionate cost and expenses of drilling, completing and equipping the well, which would have been borne by the interest of said parties had they participated. 10. Applicant further requests that this Commission's order specifically provide that any party electing either to participate or be force pooled subject to recoupment of a risk factor penalty be bound by the terms of the attached AAPL Operating Agreement for the life of commercial production within the unit so that all future unit operations might be proposed pursuant to the provisions of such agreement without the necessity of future action by this Commission. 11. Applicant also requests that said order be made applicable to any unknown spouse, heir, devisee, personal representative, successor or assign of said parties. 12. The names and addresses of parties interested in this proceeding are set forth in Exhibit "A" attached hereto and made a part hereof.

4 13. Please note the appearance of Thomas A. Daily of Daily & Woods, P.L.L.C., P.O. Box 1446, Fort Smith, Arkansas, 72902, on behalf of applicant. Very truly yours, Thomas A. Daily jmt

5 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT A INTERESTED PARTIES MINERAL OWNERS Crow, Jason and Adriane Crow See Page 1 of Exhibit B E G Energy, L. L. C. See Page 2 of Exhibit B Hammett, Debra Jo aka Debra Jo Huett See Page 3 of Exhibit B Huett, Maurine See Page 4 of Exhibit B Isaacs Family Limited Liability Limited Partnership See Page 5 of Exhibit B Meyer, Carol Uren See Page 6 of Exhibit B Oxy USA, Inc. See Page 7 of Exhibit B Quail Creek Royalty, LLC See Page 8 of Exhibit B Uren, Andrew W., III and Kathleen L. Uren See Page 9 of Exhibit B Uren, Andrew W., IV See Page 10 of Exhibit B XTO Energy, Inc. See Page 11 of Exhibit B WORKING INTEREST OWNERS: BP America Production Company See Page 12 of Exhibit B Chesapeake Exploration, L. L. C. See Page 13 of Exhibit B Petrohawk Properties, LP See Page 14 of Exhibit B Page 1 of 1

6 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas Jason Crow and Adriane Crow EXHIBIT B RESUME OF EFFORTS TO LEASE November 16, 2009 November 30, 2009 December 11, 2009 December 24, 2009 January 15, 2010 January 26, 2010 February 2, 2010 Located an address for owner in office records. The address was in care of Andrew W. Uren, III. Mailed lease proposal letter. Spoke with Andrew W. Uren, III. He is the family spokesperson. He claims that all interests have been leased to a third party. He will have his wife find the copy of the leases when she comes back into town in a couple of weeks. Called Andrew Uren, no answer or answering machine. Mailed owner a letter asking who they leased to. No third party lease found of record to date. Called again, still no answer. Drove to Andrew Uren s home. No one was there. Left a note asking owner to call. Called again, still no answer. Spoke with Andrew Uren s father. He said they were very busy and hard to contact. He said he would ask Mr. Uren to call. No return call. No third party lease found of record to date. Well proposal letter and AFE mailed. Page 1 of 14

7 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE E G Energy, L. L. C. November 4, 2009 November 17, 2009 December 2, 2009 December 16, 2009 December 30, 2009 January 14, 2010 February 2, 2010 Owner s mineral interests are handled by Harry Lear with Osage Land Co. Called Mr. Lear, discussed lease terms. Terms unacceptable. Called Mr. Lear again. He is out for the week. Spoke with Mr. Lear again. He wants to wait for a well proposal letter before making a decision. No change in status. Owner will wait for a well proposal letter. No change in status. Owner will wait for a well proposal letter. Owner still wants to wait for a well proposal letter. Well proposal letter and AFE mailed. Page 2 of 14

8 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas Debra Jo Hammett aka Debra Jo Huett EXHIBIT B RESUME OF EFFORTS TO LEASE November 16, 2009 November 30, 2009 December 15, 2009 January 4, 2010 January 13, 2010 January 18, 2010 January 23, 2010 January 26, 2010 February 2, 2010 Located owner s contact information in office files. Called, no answer. Left a message. Mailed lease proposal letter. Spoke with owner, discussed lease terms. She is considering leasing, but wants to wait. Spoke with owner. She has received a higher offer from a third party. She is still considering offer. Spoke with owner again. She has not made a decision. Owner agreed to lease. Lease and related documents being prepared. Delivered lease for execution. Owner disagreed with the amount of acreage and refused to sign the lease. Called owner to discuss the acreage issue. Discussed the discrepancy. He said he understood. Spoke with owner s husband. He said he and Debra would discuss it. Waiting for executed lease to be returned. Well proposal letter and AFE mailed. Page 3 of 14

9 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE Maurine Huett Owner owned a life estate in this section. Per landmen in the field, she is deceased. Proof of death was sent to Debra Jo Hammett (remainderman) (See Page 3 of Exhibit B) for verification. Since there is nothing of record verifying that owner is deceased, she is being named for protection purposes. January 23, 2010 January 26, 2010 February 2, 2010 Delivered a proof of death affidavit to Debra Jo Hammett for execution. She will sign and send it in. Waiting for proof of death affidavit to be received. Well proposal letter and AFE mailed to Maurine Huett in care of Debra Jo Hammett. Page 4 of 14

10 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE Isaacs Family Limited Liability Limited Partnership (Oil and Gas Industry Professional) February 2, 2010 Well proposal letter and AFE mailed. Page 5 of 14

11 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE Carol Uren Meyer November 16, 2009 November 30, 2009 December 11, 2009 December 24, 2009 January 15, 2010 January 26, 2010 February 2, 2010 Located an address for owner in office records. The address was in care of Andrew W. Uren, III. Mailed lease proposal letter. Spoke with Andrew W. Uren, III. He is the family spokesperson. He claims that all interests have been leased to a third party. He will have his wife find the copy of the leases when she comes back into town in a couple of weeks. Called Andrew Uren, no answer or answering machine. Mailed owner a letter asking who they leased to. No third party lease found of record to date. Called again, still no answer. Drove to Andrew Uren s home. No one was there. Left a note asking owner to call. Called again, still no answer. Spoke with Andrew Uren s father. He said they were very busy and hard to contact. He said he would ask Mr. Uren to call. No return call. No third party lease found of record to date. Well proposal letter and AFE mailed. Page 6 of 14

12 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE OXY USA, Inc. Owner has stated that they do not wish to be contacted by landmen. They will wait for a well proposal letter. February 2, 2010 Well proposal letter and AFE mailed. Page 7 of 14

13 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas Quail Creek Royalty, LLC (Oil and Gas Industry Professional) EXHIBIT B RESUME OF EFFORTS TO LEASE February 2, 2010 Well proposal letter and AFE mailed. Page 8 of 14

14 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas Andrew W. Uren, III and Kathleen L. Uren EXHIBIT B RESUME OF EFFORTS TO LEASE November 16, 2009 November 30, 2009 December 11, 2009 December 24, 2009 January 15, 2010 January 26, 2010 February 2, 2010 Located an address for owner in office records. Mailed lease proposal letter. Spoke with owner. He claims that all of his interest has been leased to a third part. He will have his wife find the copy of the lease when she comes back into town in a couple of weeks. Called owner, no answer or answering machine. Mailed owner a letter asking who they leased to. No third party lease found of record to date. Called again, still no answer. Drove to owner s home. No one was there. Left a note asking owner to call. Called again, still no answer. Spoke with owner s father. He said they were very busy and hard to contact. He said he would ask Mr. Uren to call. No return call. No third party lease found of record to date. Well proposal letter and AFE mailed. Page 9 of 14

15 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE Andrew W. Uren, IV November 16, 2009 November 30, 2009 December 11, 2009 December 24, 2009 January 15, 2010 January 26, 2010 February 2, 2010 Located an address for owner in office records. The address was in care of Andrew W. Uren, III. Mailed lease proposal letter. Spoke with Andrew W. Uren, III. He is the family spokesperson. He claims that all interests have been leased to a third party. He will have his wife find the copy of the leases when she comes back into town in a couple of weeks. Called Andrew Uren, no answer or answering machine. Mailed owner a letter asking who they leased to. No third party lease found of record to date. Called again, still no answer. Drove to Andrew Uren s home. No one was there. Left a note asking owner to call. Called again, still no answer. Spoke with Andrew Uren s father. He said they were very busy and hard to contact. He said he would ask Mr. Uren to call. No return call. No third party lease found of record to date. Well proposal letter and AFE mailed. Page 10 of 14

16 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE XTO Energy, Inc. (Oil and Gas Industry Professional) February 2, 2010 Well proposal letter and AFE mailed. Page 11 of 14

17 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas BP America Production Company EXHIBIT B RESUME OF EFFORTS TO LEASE BP America Production Company owns a working interest in the following Oil & Gas leases recorded in Conway County, Arkansas: 1) Georgie Woolverton to David H. Arrington Oil & Gas, Inc. dated April 7, 2006 and recorded in Oil & Gas book 120 at page ) Margaret Wert and Dale Wert to Strata Minerals, Inc. dated June 21, 2006 and recorded in Oil & gas book 127 at page 1. 3) Mary Jane Ayou, Trustee of the Mary Jane Ayou Trust dated January 24, 1995 to Strata Minerals, Inc. dated June 21, 2006 and recorded in Oil & GAS book 127 at page 41. 4) Charles Elmer Logan, Jr. to Strata Minerals, Inc. dated June 21, 2006 and recorded in Oil & Gas book 127 at page 45. 5) AgriBank, FCB to Chesapeake Exploration, LLC dated January 2, 2008 and recorded in Oil & Gas book 159 at page ) Preston Investments Limited Partnership to Chesapeake Exploration, LLC effective September 27, 2008 and recorded in Oil & Gas book 172 at page ) Diane Doornbos Successor Co-Trustee of the Charles F. Doornbos Revocable Trust under Trust Agreement dated August 1, 1990 to Chesapeake Exploration, LLC dated August 18, 2008 and recorded in Oil & Gas book 172 at page 336. Chesapeake Exploration, L. L. C. assigned an undivided interest to BP America Production Company. Said assignment is effective July 1, 2008 and recorded in Oil & Gas book 171 at page 610. February 2, 2010 Well proposal letter and AFE mailed. Page 12 of 14

18 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas Chesapeake Exploration, L. L. C. EXHIBIT B RESUME OF EFFORTS TO LEASE Chesapeake Exploration, L. L. C. owns a working interest in the following Oil & Gas leases recorded in Conway County, Arkansas: 1) Georgie Woolverton to David H. Arrington Oil & Gas, Inc. dated April 7, 2006 and recorded in Oil & Gas book 120 at page ) Margaret Wert and Dale Wert to Strata Minerals, Inc. dated June 21, 2006 and recorded in Oil & gas book 127 at page 1. 3) Mary Jane Ayou, Trustee of the Mary Jane Ayou Trust dated January 24, 1995 to Strata Minerals, Inc. dated June 21, 2006 and recorded in Oil & GAS book 127 at page 41. 4) Charles Elmer Logan, Jr. to Strata Minerals, Inc. dated June 21, 2006 and recorded in Oil & Gas book 127 at page 45. 5) AgriBank, FCB to Chesapeake Exploration, LLC dated January 2, 2008 and recorded in Oil & Gas book 159 at page ) Preston Investments Limited Partnership to Chesapeake Exploration, LLC effective September 27, 2008 and recorded in Oil & Gas book 172 at page ) Diane Doornbos Successor Co-Trustee of the Charles F. Doornbos Revocable Trust under Trust Agreement dated August 1, 1990 to Chesapeake Exploration, LLC dated August 18, 2008 and recorded in Oil & Gas book 172 at page 336. Chesapeake Exploration Limited Partnership, by Affidavit of Identity and Corporate Successorship, is now Chesapeake Exploration, L. L. C. effective August 6, 2007 and recorded in Oil & Gas book 151 at page 239. February 2, 2010 Well proposal letter and AFE mailed. Page 13 of 14

19 Bradshaw, Catherine #1-35H Section 35 T8N R15W Conway County, Arkansas EXHIBIT B RESUME OF EFFORTS TO LEASE Petrohawk Properties, LP Petrohawk Properties, LP owns a working interest in the following Oil & Gas leases recorded in Conway County, Arkansas: 1) Mary C. Bradshaw to Griffith Land Services, Inc. dated February 2, 2005 and recorded in Oil & Gas book 99 at page ) Gordon Fendley and Judy Fendley Living Trust to Griffith Land Services, Inc. dated December 6, 2004 and recorded in Oil & Gas book 99 at page 454. Said lease was renewed December 18, 2009 and recorded in Oil & Gas book 192 at page ) Mary C. Bradshaw to Griffith Land Services, Inc. dated February 28, 2005 and recorded in Oil and Gas book 100 at page ) Troy Watkins and Mary Watkins to Griffith Land Services, Inc. dated February 28, 2005 and recorded in Oil & Gas book 100 at page ) James Huett and Betty Jo Huett to Griffith Land services, Inc. dated March 3, 2005 and recorded in Oil & Gas book 100 at page 162. Through various assignments, Petrohawk Properties owns an undivided interest in the above leases. February 2, 2010 Well proposal letter and AFE mailed. Page 14 of 14

20 EXHIBIT C Applicant s statement regarding Operating Agreement The applicant requests incorporation of the Model Form Joint Operating Agreement approved by the Arkansas Oil and Gas Commission on October 24, 2006, with Paragraph III.1.A.(1) of the COPAS providing for a drilling well rate of $7, and a producing well rate of $750.00, and with the following proposed revisions, deletions and/or insertions, if applicable: NONE

21

22

23

24

25

26

27

28

29

30

31