new investor, page-28

I know MIR has already answered, but i will chuck a bit more detail in for anyone who is new.

Each lease parcel is only held if AUT puts it on production , and only the pay zones at or above the depth used for production are held. The lease parcel size is dependent on whether they are gas or oil wells. The company must drill one well per 320 / 640 acres to hold the leases. The maximum lease parcel size to be held by production is 640 acres per well. You can apply to the TRRC for variations to the 1 well per 320 acre rule and if your horizontals are long enough they may grant you one well per 640 acres .

So if they went targeting shallower shales, which are believed by AUT managment and some others to be better, they would lose the ability to hold the leases for the pay zones they are currently in. Also even though some extra wells can be put into highly productive areas on a much smaller acerage basis, they need to drill and put on production one well per lease parcel of 320 to 640 acres to hold the leases.

Only after all lease areas have been put on production at the deepest targets, will they begin to reduce the well spacings and per haps target shallower zones.

hope this helps