SPACING Vertical Horizontal Eric R. King Week Three September 8, 2011

Conservation 52 O.S Common Source of Supply of Oil Well Spacing and Drilling Units

Spacing Actual Notice at least 15 days prior to Hearing to all parties who have the right to share in production File Application Notice via regular mail at least 15 days before Hearing Publication Notice – At least 15 days prior in County where Land is situated and Oklahoma County before the Hearing Hearing Issues

OAC Drilling and spacing unit establishment or modification

OAC Horizontal well unitization for shale reservoirs

OAC Multiunit horizontal wells in share reservoirs

General Well Spacing Requirements OAC 165: Any unspaced common source of supply 2,500 feet or more in depth – No closer than 330 feet from any property line or 600 feet from any drilling or producing oil or gas well from the same formation Any unspaced common source of supply 2,500 feet or less in depth – No closer than 165 feet from any property line or 300 feet from any drilling or producing oil or gas well from the same formation

Drilling and Spacing Units OAC 165: (a) The Commission may establish drilling and spacing units in any common source of supply a s provided by law, and the special orders creating drilling and spacing units shall supersede the provisions of 165: It shall be The responsibility of any operator who proposes to drill a well to ascertain the existence and provisions of special spacing orders.

(b) The drilling of a well or wells in to a common source of supply in an area covered by an application pending before the Commission seeking the establishment of drilling and spacing units is prohibited except by special order of the Commission. However, if an Intent to Drill (Form 1000) has been approved by the Commission and operations commenced prior to the filing of a spacing application, the operator shall be permitted to drill and complete the well without a special order of the Commission.

Permitted Well Locations Within Standard Drilling and Spacing Units OAC 165: (a) The permitted well location within any standard square drilling and spacing unit shall be the center of the unit. The permitted well locations within standard rectangular drilling and spacing units shall be the centers of alternate square tracts constituting the units (alternate halves of the units); provided, however, a well will be deemed drilled at the permitted location if drilled within the following tolerance areas:

(1) Not less than 165 feet from the boundary of any standard 10-acre drilling and spacing unit or the proper square 10-acre tract within any standard 20- acre drilling and spacing unit. (2) Not less than 330 feet from the boundary of any standard 40-acre drilling and spacing unit or the proper square 40-acre tract within any standard 80- acre drilling and spacing unit. (3) Not less than 660-feet from the boundary of any standard 160-acre drilling and spacing unit or the proper square 160-acre tract within any standard 320-acre drilling and spacing unit. (4 ) Not less than 1320 feet from the boundary of any standard 640-acre drilling and spacing unit.

Drilling and Spacing Units A Township - 36 Sections of Land Size of Drilling and Spacing Units – 640 acres (Section) – 320 acres – stand-up or laydown units – 160 acres (Quarter Section) – 80 acres – stand-up or laydown units – 40 acres (Quarter Quarter Section) – 20 acres Stand-Up or Lay-Down Units – 10 acres (Quarter Quarter Quarter Section)

A Township - 36 Sections of Land

640 acres (Section)

320 acres (Half Section)

160 acres (Quarter Section)

Proper Well Location Requirements 640 acres - No closer than 1320 feet from unit boundaries 320 acres - Stand-Up or Lay-Down Units – No closer than 660 feet from proper Quarter Section i.e. on NW-SE proper location within each 320 acre unit (or can be NE-SW) 160 acres –No closer than 660 from unit boundaries 80 acres – Stand-Up or Lay-Down Units – No closer than 330 feet from proper Quarter Quarter Section i.e. on NW-SE proper location within each 80 acre unit (or can be NE-SW)

Proper Well Location Requirements (continued) 40 acres No closer than 330 feet from unit boundary 20 acres Stand-Up or Lay-Down Units - No closer than 165 feet from proper Quarter Quarter Section i.e. on NW-SE proper location within each 20 acre unit (or can be NE-SW) 10 acres – No closer than 165 feet from unit boundary

Vertical Drilling and Spacing Causes Samples applications/notices/orders 40-acre units 80 acre stand-up units 160-acre units 320-acre lay-down Units 640-acre units

Horizontal Drilling Offshore

Horizontal Drilling Texas

Horizontal Drilling compared to Slant Hole Drilling

Horizontal Drilling OAC 165:

Definitions

General horizontal drilling requirements

(1) Within 30 days after completion of a horizontal well, the operator shall show that the location of the completion interval complies with the applicable general rule, location exception order, or other order of the Commission by submitting the following to the Technical Services Department: (A) A directional survey run in the horizontal well. (B) A plat constructed from the results of the directional survey showing the completion interval. (2) The completion interval of a horizontal well shall be located not closer than the minimum distance as set out below from any other oil or gas well completed in the same common source of supply except as authorized by a special order of the Commission:

(A) Three hundred feet from any other oil or gas well completed in the same common source of supply, the top of which is less than 2,500 feet in true vertical depth. B) Six hundred feet from any other oil or gas well completed in the same common source of supply, the tope of which is 2,500 feet or more in true vertical depth. (C) This paragraph does not apply to horizontal wells drilled in a unit created for secondary or enhanced recovery operations pursuant to 52 O.S. § et seq. or to horizontal wells drilled in a horizontal well unitization created pursuant to 52 O.S. § 87.6 et seq.

Horizontal well requirements in an unspaced common source of supply.

In a horizontal well drilled in a common source of supply in which the Commission has not established any drilling and spacing units or horizontal well units, the completion interval of a horizontal well may not be located closer to the boundaries of the applicable mineral estate, oil and gas leasehold estate, or voluntary unit than the minimum distance set out below except as authorized by a special order of the Commission: (1) Not less than 165 feet when the top of the common source of supply is less than 2,500 feet in true vertical depth. (2) Not less than 330 feet when the top of common source of supply is 2,500 feet or more in true vertical depth.

Drilling and spacing units

(1) A horizontal well may be drilled on any drilling and spacing unit. (2) A horizontal well unit may be created in accordance with 165: and 165: Such units shall be created as new units after notice and hearing as provided for by the Rules of Practice, OAC 165:5. (3) The Commission may create a non-standard horizontal well unit covering contiguous lands in any configuration or shape deemed by the Commission to be necessary for the development of a conventional reservoir or an unconventional reservoir by the drilling of one or more horizontal wells. A non-standard horizontal well unit may not exceed 640 acres plus the tolerances and variances allowed pursuant to 52 O.S. § 87.1.

Horizontal well location requirements for horizontal well units and horizontal well unitizations

(1) Conventional reservoirs. In a conventional reservoir, the completion interval of a horizontal well in a horizontal well unit shall be located not less than the minimum distance from the unit boundary as follows: (A) Not less than 165 feet from the boundary of any 10-, 20-, or 40-acre horizontal well unit. (B) Not less than 330 feet from the boundary of any 80- or 160-acre horizontal well unit. (C) Not less than 660 feet from the boundary of any 320- or 640-acre horizontal well unit.

(2) Unconventional reservoirs. In an unconventional reservoir, the completion interval of a horizontal well in a horizontal well unit shall be located not less than the minimum distance from the unit boundary as follows: (A) Not less than 165 feet from the boundary of any 10-, 20-, or 40-acre horizontal well unit. (B) Not less than 330 feet from the boundary of any 80-, 160-, 320-, or 640-acre horizontal well unit. (3) Horizontal well unitizations. The completion interval of a horizontal well in a horizontal well unitization shall not be located less than 330 feet from the unit boundary.

The Commission may establish well location requirements different from those provided in subsection (f) of this Section when necessary to prevent waste and protect correlative rights. These requirements may be established in the order creating a standard or nonstandard horizontal well unit or through a special rule of the Commission covering a conventional or unconventional reservoir in a designated geographic area. (see OAC 165:10, Subchapter 29, Special Area Rules). Alternative well location requirements.

(1) Horizontal oil well allowables may be established administratively using the standard allowables provided in Appendix A (Allocated Well Allowable Table) supplemented by the additional allowables provided in Appendix C (Table HD) to this Chapter. (2) The allowable for a horizontal gas well shall be computed in the manner prescribed for a non-horizontal gas well in the same common source of supply. Allowable

(3) The allowable for a horizontal well unit or horizontal well unitization with multiple horizontal gas wells shall be the sum of allowables for the separate horizontal gas wells. Fro this summation, the allowable for each horizontal gas well will be calculated as if it were the only well in the unit. (4) The allowable for a multi-unit horizontal well shall be allocated to each affected unit using the allocation factors determine in accordance with 52 O.S. § 87.8(B)(1).

Horizontal well units, horizontal well unitizations and multi-unit horizontal wells may be pooled as provided in 52 O.S. § 87.1, 52 O.S. § 87.6 et seq. and Commission Rules of Practice, OAC 165:5. Pooling

OAC 165: Alternative location requirements for horizontal well units

(a)Scope and effect. The well location requirements of this Section apply to horizontal wells completed in horizontal well units in designated common sources of supply and geographic areas as specified in this Section. Horizontal wells covered by this Section are subject to OAC 165: and other applicable Commission rules except as provided in this Section. (b) Woodford shale. (1)This subsection applies to horizontal wells completed in the Woodford shale common source of supply in Atoka, Blaine, Caddo, Canadian, Coal, Dewey, Grady, Haskell, Hughes, Kingfisher, LeFlore, Latimer, McIntosh, Pittsburg, and Sequoyah Counties.

(2) The completion interval of a horizontal well subject to this subsection shall be located not less than the minimum distance from the boundary of a standard or non-standard horizontal well unit as follows: (A) Not less than 330 feet from an east or west unit boundary. (B) Not less than 165 feet from a north or south unit boundary.

Appendix C: Table HD Recommended Additional Allowable for Horizontal Oil Wells based on True Vertical Depth and Completion Interval Average True Vertical Depth of Pool in Feet Additional Allowable in Barrels per foot of Completion Interval To 4, ,001 to 8, ,001 to 12,000.4 Greater than 12,000.5

All oil produced and marketed during the drilling and completion operations shall be charged against the allowable assigned to the well upon completion. Effective date of the allowable shall be the date of first production.

Horizontal Drilling and Spacing Causes Sample application/notice/final order

Sample Survey

Horizontal Spacing (OCC Rules and Regulations) OAC: 165:5-7-6(g) OAC: 165:5-7-6(h) OAC: 165:5-7-6(i) OAC: 165: OAC: 165: OAC: 165: OAC:165: OAC:165:

OAC:165:10-3-4(f) OAC:165: (c)(1) OAC:165: Appendix C (Table HD) (Case Law) Samson Resources Company v. Corporation Commission, 831 P.2d 663, 665 (Okla. App 1992)

Horizontal Pooling (OCC Rules and Regulations) OAC:165:5-15-3(g) OAC:165:5-13-3(h) Deviation from the Vertical (OCC Rules and Regulations) OAC:165:

Horizontal Allowables (OCC Rules and Regulations) OAC:165: (C)(2) OAC:165: (f)(1) OAC:165: (f)(2) OAC:165: (h)(2) OAC: (j)(1)

Horizontal Gross Production Tax (OCC Rules and Regulations) OAC:165: OAC:165: OAC:165: OAC:165:

Eric R. King One Leadership Square, 15 th Floor 211 N. Robinson Ave. Oklahoma City, OK (405)