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Permalink Reply by Henry on July 8, 2010 at 13:11

The lessee is not obligated to take the option for the second two years. He has the choice -- that is why it is called an option. If your lessee elects to take the two-year option, you will receive notice and a check before the end of the primary term. If you don't get the letter and check, your lease expires.

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Permalink Reply by DJG on July 8, 2010 at 13:18

Barbara,

Much will depend upon the exact wording of your lease. That said, it is pretty common for these leases to have a 3 year primary term with provisional options for the Oil and Gas company to extend the lease for another 2 years should they wish to keep your land under lease.

Does the 3 year primary term for your lease end this July 2010, or did you mean that it expires in July 2011?

At the end of the primary term, there are a few potential scenarios:

A. The O&G company begins operations for a well in a unit that contains your acreage prior to the expiration of your primary term and your acreage is then held by production (HBP) under the terms of your original contract indefinately for as long as their is production in paying quantities in your unit.

B. The O&G company chooses to excercise the option to continue your lease by paying you whatever amount was agreed upon for including that lease extension option in your initial contract.

C. The O&G company elects to let the lease expire. If this is the case, you will then want to make sure that you have them file a notice of "release" of your lease at county clerks office so that it becomes public record that you are no longer under lease by that company. This would give notice to other companies who might be interested in leasing your acreage.


Hope that helps.

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Permalink Reply by Barbara Washburn on July 9, 2010 at 9:27

Thanks so much for the information. You asked when our lease expires and it is next July 2011. Thanks again for your reply.
Barbara

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Permalink Reply by Barbara Washburn on July 9, 2010 at 9:31

I appreciation the information you provided for me. My lease expires in July 2011. You have been very helpful and thanks so much.

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