Continous Operations
Could someone elaborate on this lease clause, please? Would this be a beneficial clause for the lessor?
If lessee is engaged in drilling operations on the leased premises at the end of the primary term, this lease shall not terminate if lessee conducts a program of continuous drilling, allowing no more than one hundred eighty (180) days to elapse between the completion of one well and the commencement of operations for the next succeeding well. For the purposes of this paragraph, "commencement of operations" shall be presumed to be the date Lessee commences actually drilling with rotary drilling tools of a suitable size necessary to reach the objective depth. "Completion" shall be presumed to be the earlier of (a) the date of a timely filing of a completion or potential test report with the applicable governing agency, if a productive well, or the timely filing date of a plugging report with the applicable government agency, if a dry hole; or (b) the 30th day following the last date of actual drilling activity.
Views: 337
Replies to This Discussion
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Permalink Reply by The_Baron on -
It means that the lease can be maintained by contious operations, even if those operations do not result in a producing well.
It is good for the landowner, IF the mineral owner wants to insure that their minerals are explored. I have seen clauses like this from many sofisticated mineral owners, who want to give the best chance of discovering new production. Probally better suitied to less developed areas where it could take several attempts to find any minerals, if at all. Probally not really important one way or the other in the HA, since almost all wells will result in some production anyways.
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Permalink Reply by RONNY on
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One more question, please. Once production is established does this clause become irrelevant? Or should drilling continue until maximum legal spacing is reached. Seems multiple wells on 180 day time frame would be tough to accomplish unless surface locations were lined up in advance. These are vertical wells which cannot be drilled from the same pad due to spacing requirements. I need some Advil. thanks ya'll.
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