I’m applying for a division order analyst position, and I was told that I would be tested on how a Pugh clause affects WI.
As I’m thinking about this, the only way I can think of a Pugh clause affecting WI would be that it makes the mineral owners Net Acres smaller upon release of the un-pooled land and therefore the operators net leasehold acres would be smaller. Which would reduce your total WI in the tract (Sum of Net Leasehold Acres/Total acres of the unit)
Is there another way that the Pugh Clause can change an operators WI in an allocated DOI or does this sound right?
There is no set language in a lease in regards to creating a Pugh Clause. There are various types of Pugh Clauses such as surface and depth provisions. Note that depth restrictions may not include going up hole to a shallow depth. If at all depends on the language of the lease. If your lease has questionable Pugh language it’s recommended that your company have a title attorney review the lease.