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Permalink Reply by The_Baron on April 8, 2010 at 4:21

With out seeing the lease I can only speak in general terms.

The 90 days is for well that is capable of producing, but for what ever reason is shut in (waiting on pipline, mechanical failure, etc.). After the 90 days a shut in rental would be paid to extend the lease, typically for one year.

The situation above is a well that has not been completed. As long as the Operator is making reasonable attemts to complete the well, the lease is held in effect. It is not unusual to have delays in well completion, somtimes you can wait several months for a workover rig. The test is if the Operator is working in a resonable and prudent manner. It is very difficult to break a lease due to perceved delays in the completion process.

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Permalink Reply by The_Baron on April 8, 2010 at 4:23

Typical shut in clause

5. If Lessee during or after the primary term should drill a well capable of producing gas or gaseous substances in paying quantities, (or which although previously produced Lessee is unable to continue to produce) and should Lessee be unable to operate said well because of lack of market or marketing facilities or governmental restrictions, then Lessee's rights may be maintained beyond or after the primary term without production of minerals or further drilling operations by paying Lessor as royalty a sum equal to one dollar (1.00) per acre of land covered hereby per year, the first payment being due, if said well should be completed or shut-in after the primary term, within ninety (90) days after the completion of such well or the cessation of production and such payment will extend Lessee's rights for one year from the date of such completion or cessation. If such a well should be completed during the primary term, the first payment, if made by Lessee, shall be due within 90 days after such well is shut-in, or before the expiration date of the primary term herein fixed, whichever is the later date. Thereafter Lessee's rights may be continued from year to year by making annual payments in the amount stated on or before the anniversary date beginning with the date of completion of said well (if completed after the primary term) or the end of the primary term (if completed prior thereto) as the case may be; each of such payments to extend Lessee's rights for one year. The annual payments herein provided for may be deposited to Lessor's credit in the Pay directly to Lessor at Lessor’s address Bank of , which bank shall be and remain Lessor's agent for such purpose regardless of any change or changes in the ownership of the land or mineral rights therein. The owners of the royalty as of the date of such payments shall be entitled thereto in proportion to their ownership of said royalty. The provisions of this paragraph shall be recurring at all times during the life of this lease. Should any well producing gas or gaseous substances be completed on a drilling unit which includes any part of the land herein leased, the provisions of this paragraph shall be subject to all other agreements herein contained allowing the pooling of the above described lands with other lands.

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Permalink Reply by The_Baron on April 8, 2010 at 4:30

language for extension by operations

, this lease shall remain in force so long thereafter as Lessee either (a) is engaged in operations for drilling, completion or reworking, or operations to achieve or restore production, with no cessation between operations or between such cessation of production and additional operations of more than ninety (90) consecutive days; or (b) is producing oil, gas, sulphur or other mineral from said land hereunder or from land pooled therewith.

As you can see there is some wiggle room, as operations could consist of just about anything. I have seen operators go out with a bulldozer and move dirt around in orderr to appear active.


In any event, a judge is going to usually side with the operator, unless there is just a obvious abdandonment of the location.

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Permalink Reply by adubu on April 8, 2010 at 4:56

baron--thanks for reply

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Permalink Reply by Phillip Briggs on April 8, 2010 at 17:08

Where's the problem???

I'd be glad they've actually drilled a well!

One of my properties in Panola County has been leased twice in the last 7 years, and the company never got around to drilling. Now it's unleased, and it's likely to not be leased, as long as gas prices are depressed.

I'd gladly 'exchange' situations!

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Permalink Reply by adubu on April 9, 2010 at 5:41

phillip----Don't miss understand my question---I am very happy they drilled the well--now want them to get it completed and drills some more--if they don't I would be happy to become the owner of the well unfrac. ,which they would never let that happen. I was looking for time table and what-when would things happen in this situation which Baron answered

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Permalink Reply by The_Baron on April 9, 2010 at 8:35

If they spent the money to drill a horz. well, I assure you they will complete it. In any event, if the lease expired, they would most likely P&A.

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Permalink Reply by adubu on April 9, 2010 at 11:12

Baron--It's a vertical well and I agree I feel sure they will complete it--the question was a "what if" for education and as I said time table of what happens next and when. Thanks again. please explain P&A????

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