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Permalink Reply by Shaleeee on January 19, 2010 at 7:17

This info is great! My thinking was not to give an extension option but I was told (hearsay) that O&G companies are insisting on the extension - probably a strong arm tatic - I am glad I took Lease Extensions 101 - better informed when the time comes . . . Also was told that the co. would only give drafts, not checks - wish we had a site just for recommendations of good O&G attorneys that work by the hour (names and phone numbers) - have written down a few names from these discussions.
Shaleeee

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Permalink Reply by adubu on January 19, 2010 at 8:21

Parker and D. Gaar-----That is correct summary of what I said above---confirmed by Skip Peel's grade assigned

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Permalink Reply by Mattie on January 19, 2010 at 8:45

Absolutely correct, Abu - this is nothing other than a "free option" for the producer. JUST SAY NO!!!! Just go to any financial trading board, and you will see what the "underlying value" of such an option is - whether it is commodities, interest rates, or other tradable asset.

The only way that such an option would make ANY sense is if you had come to a "final negotiated price" on a lease, and then wished to improve those terms (i.e. higher bonus and/or higher royalty %), then possibly offer them an extension option.

From my perspective, I'd never offer it because they would likely have upped the original bonus and royalty without the extension anyway. Essentially, whatever the company is paying you is ALL that you can count on receiving UNLESS values are much higher at expiration of the initial term - you have then given up any "upside" to this company if such is the case.

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Permalink Reply by Skip Peel - Mineral Consultant on January 20, 2010 at 4:00

Probably. But there are rare instances where a lessee slips up and misses the renewal date. If that happens, do not cash a check from them. Take it to an experienced O&G attorney and have them send a demand for a release. Then have the release recorded so that other companies will know to make offers.

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Permalink Reply by Skip Peel - Mineral Consultant on January 20, 2010 at 4:36

I should add, don't wait for a check. If you haven't received one by the renewal date take the lease to an experienced O&G attorney the very next business day and get the demand for release underway.

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Permalink Reply by Mac Davis on February 10, 2010 at 16:05

What if a lease without an extension clause expires? Is a release needed?

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Permalink Reply by Skip Peel - Mineral Consultant on February 10, 2010 at 16:12

The lease is dead. If you wish that status to be of public record, a release should be filed. Otherwise it may not be obvious that the lease is no longer in force. If you would care to receive new offers, it's a good idea to make your unleased status obvious to those who might provide those offers.

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Permalink Reply by Mac Davis on February 10, 2010 at 16:07

It would probably still be a good idea to NOT cash the check.

I wonder what happens if they say they sent a check, but you didn't get it.

Or if they sent it postmarked before the deadline, but you didn't get it before the deadline.

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Permalink Reply by Skip Peel - Mineral Consultant on February 10, 2010 at 16:13

Good thoughts, Mac. That's why you don't cash the check. You want to take it and the envelope it came in to an O&G attorney.

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Permalink Reply by drilltheshale on February 9, 2010 at 12:41

Our lease is set to expire in 3 months. It's a three-year with no renewal. If it does (and who knows the odds) expire before they drill in our unit, is there correspondence we should send to the leasing company? Also, any chance they will approach us for a "top-lease" and any thoughts on that. We're in central Desoto (so-called "double-shale" territory).

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