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Pecos Council approves production‑sharing agreement with Civitas Permian
Summary
Pecos City voted to enter a production‑sharing agreement with Civitas Permian Operating LLC to allocate royalties from five new wells on Sections 15 and 16 in Reeves County; city staff said the wells could begin producing this summer and revenue division orders could follow within 30–60 days.
Pecos City Council on Jan. 24 approved a production‑sharing agreement (PSA) with Civitas Permian Operating LLC that covers drilling five new wells crossing city lands in sections 15 and 16 of Reeves County.
The agreement sets an allocation method that divides royalty payments according to the proportion of each well lateral that lies in pooled units. City and company representatives said the contract formalizes how the city’s share will be calculated once the wells begin producing.
Jody Watkins, a representative of Civitas Permian Operating LLC, described the proposal and the local drilling plan. He told the council the project will drill three wells on the west side and two on the east side of the mapped units and that, “provided we have the full infrastructure there and full takeaway capacity, they’ll be coming online sometime in August.”
Watkins explained the allocation math used for pooled units, telling the council that the city’s current net revenue interest on one pooled unit is about 12.2% and that mixing royalties across pooled units produces blended effective percentages. He said the eastern side produces an estimated combined net revenue interest of about 14.43% under the proposed allocation method.
Parker Johnson, the city attorney, and council members asked about legal review and whether the city should retain an oil‑and‑gas attorney to vet the agreement. Council members discussed the General Land Office’s (GLO) separate PSA process for state interests and noted that Balmorhea State’s PSA was expected to be on the GLO docket in mid‑July.
The council voted to approve the PSA. Council members were told division orders could be issued roughly 30–60 days after production begins and that the city could expect revenue once the division orders are processed.
The PSA covers land described as sections 15 and 16, block H and G, RR Co. surveys in Reeves County and was submitted by Bison Energy Group LLC on behalf of Civitas. Council discussion included a recommendation to consider outside legal counsel with oil and gas expertise before future agreements.
The council did not provide an estimate of projected annual revenue from the new wells beyond the percentage allocations and timing described by company staff.
