- 6 -
under its consideration a proposal to allow "infill drilling"8 in
the Hugoton field. In its third quarterly report dated September
30, 1985 (1985 third quarter report), the first shareholder
report issued by petitioner after its spinoff from KN Energy,
petitioner indicated that it expected that infill drilling would,
if allowed, add approximately 31 percent to its proven9 natural
gas reserves. Petitioner further anticipated that, as a result
of deregulation, it could expect to receive a price for those
reserves that would be between three and four times the average
price it was then receiving for its production from the Hugoton
field. On April 24, 1986, the KCC issued an order that permitted
infill drilling by petitioner in the Hugoton field beginning on
January 1, 1987 (the KCC infill drilling order). On November 18,
1986, petitioner announced that it would receive $1.63 per Mcf
for infill gas production from the Hugoton field. The KCC infill
drilling order in the Hugoton field was challenged10 but
ultimately affirmed by the Kansas Supreme Court on January 20,
8 An "infill well" is defined as "A well drilled on an
irregular pattern disregarding normal target and spacing
requirements." Williams & Meyers, Oil & Gas Terms 529 (9th ed.
1994).
9 The term "proven" or "proved" reserves is frequently used to
denote the amount of oil in known deposits which is estimated to
be recoverable under current economic and operating conditions.
See id.
10 Mobil Oil and other interested parties contested the KCC
infill drilling order in the Hugoton field.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011