Originally published by John McFarland.
A client recently asked me whether he should sign a production sharing agreement. I replied that this is not an easy question to answer.
First, the nomenclature. These terms are not defined anywhere and their usage is not always consistent, but here’s what I mean when I use these terms:
Allocation Well. A horizontal well drilled across two or more lease lines without creating a pooled unit including the leases. Because no provision of the leases dictates how production will be shared among the leases, production must be “allocated” among the leases.
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