New lease terms or New tricks?
As you all know I work as a landman. I would like you thoughts and ideas about the lastest tricks I have seen. My daughter recieved a lease, amount agreeded upon (by the way not my company).
The form La Spec. 14-br1--2a-nl rev2/99 has 17 items. This lease has 20, the following are copied and pasted from her lease and they are the changes.
provided that no one operating unit shall, in the case of gas, including condensate, embrace more than six
hundred forty (640) acres [except in the event of a horizontal oil or gas completion, in which event such unit may embrace as much as
one thousand nine hundred twenty (1920) acres], and in the case of oil, including casinghead gas, (other than a horizontal oil or gas
completion) embrace more than forty (40) acres; and provided further, however,
1920 acre unit?
14. It is expressly understood and agreed that the premises leased herein shall, for all the purposes of this lease, be
considered and treated as owned in indivision by the Lessor and shall be developed and operated as one lease, and there shall be no
obligation on the part of Lessee to offset wells on separate tracts into which the land covered by this lease may be now or hereafter divided
by sale, or otherwise, or to furnish separate measuring, or receiving tanks, and all rentals, royalties and other payments accruing hereunder
shall be treated as an entirety and shall be divided among and paid to Lessor in the proportion that the acreage (mineral rights) owned by
each bears to the entire leased acreage. Lessee may at any time or times pay or tender all sums accruing hereunder to the joint credit of
Lessor.
This is not in our lease.
17. Lessee shall pay for actual damages caused by its operations to growing crops and timber on said land leased herein.
Lessor specifically agrees that the obligations and liabilities of the Lessee and its successors and assigns for reclamation, restoration, repair
or maintenance of the surface or subsurface of the leased premises shall never exceed the fair market value (determined as of the effective
date hereof) of the lands covered by this lease, or the portion thereof, for which such reclamation, restoration, repair or maintenance is
required.
The first line is standard.
20. For the same consideration recited above, Lessor hereby grants, assigns and conveys unto Lessee, its successors
and assigns, a perpetual subsurface well bore easement under and through the leased premises for the placement of well bores (along
routes selected by Lessee) from oil or gas wells the surface locations of which are situated on other tracts of land not covered hereby
and which are not intended to develop the leased premises or lands pooled therewith and from which Lessor shall have no right to
royalty or other benefit. Such subsurface well bore easements shall run with the land and survive any termination of this lease.
This one is added on too.
Ok I need someone who can translat mummbo jummbo into English to tell me what these new additions mean.
Seems like you might need to learn how to read between the lines.
The form La Spec. 14-br1--2a-nl rev2/99 has 17 items. This lease has 20, the following are copied and pasted from her lease and they are the changes.
provided that no one operating unit shall, in the case of gas, including condensate, embrace more than six
hundred forty (640) acres [except in the event of a horizontal oil or gas completion, in which event such unit may embrace as much as
one thousand nine hundred twenty (1920) acres], and in the case of oil, including casinghead gas, (other than a horizontal oil or gas
completion) embrace more than forty (40) acres; and provided further, however,
1920 acre unit?
14. It is expressly understood and agreed that the premises leased herein shall, for all the purposes of this lease, be
considered and treated as owned in indivision by the Lessor and shall be developed and operated as one lease, and there shall be no
obligation on the part of Lessee to offset wells on separate tracts into which the land covered by this lease may be now or hereafter divided
by sale, or otherwise, or to furnish separate measuring, or receiving tanks, and all rentals, royalties and other payments accruing hereunder
shall be treated as an entirety and shall be divided among and paid to Lessor in the proportion that the acreage (mineral rights) owned by
each bears to the entire leased acreage. Lessee may at any time or times pay or tender all sums accruing hereunder to the joint credit of
Lessor.
This is not in our lease.
17. Lessee shall pay for actual damages caused by its operations to growing crops and timber on said land leased herein.
Lessor specifically agrees that the obligations and liabilities of the Lessee and its successors and assigns for reclamation, restoration, repair
or maintenance of the surface or subsurface of the leased premises shall never exceed the fair market value (determined as of the effective
date hereof) of the lands covered by this lease, or the portion thereof, for which such reclamation, restoration, repair or maintenance is
required.
The first line is standard.
20. For the same consideration recited above, Lessor hereby grants, assigns and conveys unto Lessee, its successors
and assigns, a perpetual subsurface well bore easement under and through the leased premises for the placement of well bores (along
routes selected by Lessee) from oil or gas wells the surface locations of which are situated on other tracts of land not covered hereby
and which are not intended to develop the leased premises or lands pooled therewith and from which Lessor shall have no right to
royalty or other benefit. Such subsurface well bore easements shall run with the land and survive any termination of this lease.
This one is added on too.
Ok I need someone who can translat mummbo jummbo into English to tell me what these new additions mean.
Seems like you might need to learn how to read between the lines.
Views: 380
Replies to This Discussion
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Permalink Reply by Randy on -
1. Chesapeakes standard lease they are having us use allows for a 1920 acre unit. There are a few threads about it, the consensus is that is just a precaution they are taking. As there has never been an actual unit of that size filed, ever. I believe if you ask nicely you can have it stricken or changed in addendum to 640.
17. Just more of Chesapeake covering their butts.
20. I THINK that is so they can run a well bore under your property to develop minerals in another section from a drill site in your section.
Hope that clarifies it a little bit.
Randy
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Permalink Reply by Foxiecajun on
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Thank you. Since I keep my nose in the books, looking for the mineral owners.
I had already told her to tell them she wanted the 1920 out. That makes me think they will try and put one well in ever three sections to hold there lease, then go back and drill more. If we all live long enough to see one to every 80 acres. But looks that the royalty on one in 1920 unit would go way down.
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Permalink Reply by Randy on
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Not really because they will put 3x as many wells in that section. It could be beneficial for some. Depends on where you are at.
You have to understand that it is a lot easier to get that magic 75-90% of a 640 acre section than of 1920 acres. So if they wait until they have enough to get 1920 acres they could have wells in the other 2 sections already if they had formed 640 acre units.
Bottom line, it probably won't happen. For more reasons than what I just listed... don't forget the COC has to approve it also.
Randy
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Permalink Reply by Renee S Cd1 on -
Randy - You said it could be beneficial for some. Wouldn't more wells in a unit be more money for those in the unit, no matter what the size of the unit?
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Permalink Reply by Aubrey C. Sanders, Jr. on
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One well is all that is required in each unit. Suppose that one well is marginal and operator never drills another well in unit?
Would yo rather be in 640 acre unit or 1920.
One needs to further understand the reason units are established in the first place. The acreage contained in a unit should be sufficient to drain said acreage with one well. For numerous geologic and engineering reasons it may be determined one well cannot drain all the acreage. In that case operator can request permission to drill alternate unit well(s) so that he can obtain his equitable share of hydrocarbons underlying his acreage. In most cases one well is rarely sufficent to drain entire unit.
The office of conservation, in addition to setting unit boundaries and size, issue well spacing requirements. For example in some cases no one can drill a well closer than 330 feet from a unit boundary or any closer than 1500 feet to an existing well producing from same zone (formation). This is to help prevent draining oil or gas from another unit, thereby protecting landowners interests as well as operators.
All landowners neeed to realize that some of the leases they sign today will govern mineral production for 100 or more years. For example I know of leases in Haynesville FIELD which have been in effect since 1919.
I do not want to share my unit with landowners 3 miles distant. I would prefer to see 320 acres for HS units. And I will oppose anything more than 640 acres in my area at hearings before Office of Conservation. I urge all of you to attend hearings and most importantly speak up.
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Permalink Reply by Snake Stewart on
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1920 wouldn't be good for anybody that was being held by production. The 3 section approach would be to HBP in my opinion. It will be years before these sections will be drilled to the extent of final conditions. Even if good well hits the royalty you would have received would be divided by 3. Not good in my opinion. Only way I see it o.k. would be if all 24 wells were drilled at once and we know thats not going to happen.I don't blame them for trying because the leasing will have to slow even more if sections cant be HBP.Theres a lot of money on the line.
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Permalink Reply by JW on
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Snake,
I have heard that the state is looking at changing the section to 1920 favorably. Do you know if the one well that they will drill to hold these sections will pay everyone in the 3 sections? That somehow doesn't seem fair to dilute the royalties that way.
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If it held the other two sections wouldn't it have to pay royalty to all as well. That would definatly dilute the royalty amount. If they will make billions off of this play now , how much more will it be worth 3- 5 years from now ?
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I completely agree with Snake. And I add that all landowners should pay close attention to all hearing and pre-conference hearing notices. Be aware that pre-conference hearings will not be scheduled unless interested paries request them. READ ALL NOTICES YOU RECIEVE FROM APPLICANTS ATTORNIES AND?OR OFFICE OF CONSERVATION. Many interested parties may not be on mailing lists even though the applicants are required by law to make "good faith" attempts to do so. It is a great expense to applicants to develop mailing lists.
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Permalink Reply by louisiana lady on
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I understand that the 1920 ac unit was proposed to access some sections that are difficult to drill i.e. Cross Lake, T18R15S28.
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This lease is in Desotot sec 27- 13-13 NO lake any where!!
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