Production Sharing Agreement

We received a PSA in the mail and this is the first time we have come across this, it is for Section 42 & 42 Blk A Midland Co. What exactly is it and what do I need to know before signing?

I think I read a story where someone got an unsolicited offer to purchase, the purchase agreement had a rep and warranty to title, the deal closed and that afternoon the purchaser filed suit against the seller for a breach to the rep to ownership. Then the purchaser settled for a return of the money and kept the minerals...

I would be careful.

From what I've seen, the production sharing agreement doesn't talk about purchasing our minerals.

I thought PSA stood for Purchase and Sale Agreement.

The document uses it as Production Sharing Agreement.

The acronym PSA stands for both: Production Sharing Agreement and Purchase and Sale Agreement. It appears this post is regarding a Production Sharing Agreement.

I have signed Production Sharing Agreements in lieu of ratifications in the past for horizontal well drilling. Their purpose is to pool mineral tracts into a unit and allocate royalties based on a % of wellbore length. For example: If your property had 50% of a horizontal wellbore located on it, but only 25% of the acreage in a unit, you would be paid based on the 50% wellbore length.

As with everything, it is best to have an attorney look it over. While PSA's are usually pretty straightforward, they are also lengthy and can be confusing to someone not familiar with them.

Hope this helps.

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I wish I could help. but I'm not a lawyer and only know a little about leases. our family received a PSA letter as well... a few days before the end of the year and wanted it signed asap. our minerals are in Howard county... currently leased with Hannathon and they want a PSA with Encana. if signed, it would allow Encana to produce the specific number of acres. I'm not sure... but it might also allow Encana to add the property to an adjacent section or block they own... to make a larger unit. not real sure about it... but I think that's how it works. I think it sometimes works out OK for the landowner. usually there's not much you can do but sign... but please check with a lawyer.

The main issue with PSAs is making sure that you're getting a fair allocation of production from the well - and analyzing how it will interact with your lease to hold acreage. I agree with Texas Tea's comments that it is best to have a Texas oil and gas attorney look over a proposed PSA. Here's a blog post with a lot of information about the current state of PSA law in Texas:

Thank you

Thank you