State Of New Mexico Communitization Agreement

Unlike other states. B like Texas and Oklahoma, where private ownership can reach 95%, New Mexico has a much larger share of public land held by the state for oil and gas leasing. New Mexico is only about 42% private (fresh), which falls to 33% for the Delaware basin in particular. Each state has its own national land management authority (including two in the case of Texas), but most notifications and regulatory charges pass through a single source: the Oil Conservation Commission (OCC) in Oklahoma and the Railway Commission (RRC) in Texas. In New Mexico, it is different. While there is a vast, complex ecosystem within federal and regional authorities that involves mandatory consolidations, agreements, communitarianizations and other consolidation interests that require the use of a regulator and perhaps the strength of government, much of what is happening in New Mexico is still done through voluntary agreements between private interest owners. Common enterprise agreements, farmout agreements, voluntary poolings and even periodic rents are covered by this stock. There is not much transparency in these transactions and submissions simply because they do not require federal and/or regional oversight, but there is still valuable information that can be archived in the regional court building. Compared to other states such as Oklahoma, where about 80,000 poolings have been ordered over time, New Mexico has a relatively small fee pool and only 5,000 pooling contracts. However, in 2018, there have been twice as many poolings as any other year in the history of the NM, and we expect this trend to continue when more operators enter the Permian NM, things get more and more overloaded and virtually every well drilled in Delaware runs horizontally. A bit like on the federal side of things, if you plan to drill on multiple state leases, or a mixture of government leases and paying or federal leases, you need an (other) communitarian agreement. You might need the federal version if you drill on BLM-Land (which outperforms the state bid), but you still have to submit both.

Now, if you do not have interested people in the area, you must have a mandatory pooling allowed before communitarianization can be approved. And if you don`t have enough interest in each wing you drill, your pooling must be approved before you can submit your authorization, otherwise it only needs to be approved before you can produce the well.