Horizontal Drilling - Division of Interests

Horizontal Drilling Title Challenges

With the ability to drill numerous horizontal wells on a combined surface location, oil and gas operators will often develop multiple sections at once, utilizing several drilling and spacing units or horizontal wellbore spacing units. This practice is commonly used by operators in the Denver-Julesburg Basin (“DJ Basin”) and the Greater Wattenberg Area in northern Colorado, targeting the Niobrara and Codell formations for oil and gas development. A typical development area can consist of several sections of land or portions of those sections, and the proposed spacing units will overlap these lands in various configurations.

From a title perspective, this creates a challenging situation because of the extent of the lands covered and the need to prepare division of interest schedules for each unique unit, often numbering in the dozens. In addition, when multiple surface locations are planned in close proximity to one another, the developed lands and spacing units will likely overlap. In these situations, oil and gas title attorney costs can be reduced when duplicative review of the same lands is avoided.

Section Opinions and Rapid Turnaround Division of Interest tables

In addition to providing comprehensive drilling and division order title opinions, our firm also prepares Division of Interest (“DOI”) spreadsheets that are composed of detailed interest calculations in a customized Excel form. Efficiency is achieved by creating a separate title opinion for each section of land or portions of a section in the development area, and then preparing DOI tables for each proposed spacing unit based off the title opinions. By preparing a title opinion once for particular lands, as opposed to providing multiple wellbore specific title opinions that may overlap (corresponding to overlapping spacing units), clients save on title attorney costs.

Often, these DOI tables can be prepared as soon as mineral and leasehold interest chaining is complete and can be delivered to the client prior to the base title opinions being completed. This gives operators a head start on their title planning process, including preparing notifications, AFEs, or sending out oil and gas lease offers to unleased mineral owners within the proposed spacing units. Typically, our firm can prepare Division of Interest tables for proposed spacing units on short notice to meet the rapidly changing rig schedules of our clients.

In addition to providing tract legal descriptions, acreage numbers, and working interest and royalty calculations, our spreadsheets also include full address information to assist with notification requirements. The spreadsheets are also provided in an editable format for convenience of the client and are easily modified to update ownership changes or to incorporate new information.