Replies to This Discussion

Permalink Reply by adubu on June 27, 2010 at 14:33

doubt they would release you before expiration date of lease. nothing you can do until that date arrives so hope you have 25% r with good terms and no 2 year option extention to your lease. If date arrives with out any drilling request a sign release of the lease and hope you are in core area for release--then do lots of reading before signing with some one that will and has the money and ability to drill a shale well like EOG EXCO XTO CHK HK,etc

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Permalink Reply by red rider on June 27, 2010 at 14:42

i am not a lawyer, but i think the oil/gas company must provide the landowner with a oil/ gas lease to sign, not sooner than 6 months before the property lease expires. so in other words, when you get down to 6 months till lease expires, and you have not received paperwork to sign for drilling, then its safe to say the lease will expire as scheduled, however, the oil/gas compnay might want to start a new lease. you never know. but then again i might just be wrong on that. i had read that somewhere that the oil/gas co's cannot drop paperwork on you to sign the day before the lease expires.

like i said i am not a lawyer, maybe someone else knows.

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Permalink Reply by Skip Peel - Mineral Consultant on June 27, 2010 at 14:53

It's not a matter of notice. The lessee may commence drilling on the last day of the lease term and continue the lease in force through a good faith effort to produce and then indefinitely with successful and continuing production. The lessee will have to obtain a well permit and the services of a driller before term expiration. There is no requirement but a lessee that wishes to extend the lease would probably make an offer prior to the last few days or weeks of the lease term.

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Permalink Reply by adubu on June 27, 2010 at 14:57

red rider-- no they have no obligation to tell you anything before the lease expires only if they are going to drill the bit must hit the ground (ie spud) before midnight on expiration day to extend the lease by activity. They may talk to you about a "top lease" before it expires if they still like the area and think they will not be able to drill before expiration date and if you sign that prevent you from leasing to some one else at expiration however understand this would be a "new" lease if you agree to resign with them--so new terms and bonus. You are not obligated to sign a top lease. If they do not drill or talk to you before it expires it may just expire and now avaiable for you to release it to some one else.

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Permalink Reply by red rider on June 27, 2010 at 15:13

ok thanks. i remember reading some information about leasing and was try to paraphrase it, and can't recall where i read it either. and i also am not sure it pertained to Louisiana property or was from another state.
And i seem to recall the 6 month provision because i think six months time is cutting it to close to get permits signed, the site cleared, pipeline row's permits signed, and drilling to include production. provided everything went well with no setbacks.

is that about right? usually the oil'gas co's need more than 6 months to complete?

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Permalink Reply by Skip Peel - Mineral Consultant on June 27, 2010 at 15:18

It varies depending on the availability of drilling rigs. The permit process and time to prepare a well pad would be much less than six months. The pipeline does not have to be in place as the operator may complete the well and then pay shut in royalty for a period specified in the lease for the time required to complete a pipeline connection.

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Permalink Reply by DJG on June 30, 2010 at 14:23

It can also vary significantly based upon what is defined as "operations" in the terms of your lease agreement.

Many of the O&G's standard contracts have the "commencement of operations" defined to their advantage and can be as open ended as preparing a road or, if worded as such, conducting a survey in preparation for spudding the well.

Depending upon where you are located, it might be in your favor to remain quite on this front until after your lease's primary term has actually expired. You could likely be in a better position to re-negotiate for improved terms with your O&G or to solicit offers from other 3rd party operators, after your current lease is no longer valid.

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Permalink Reply by J B Nabors on June 30, 2010 at 17:56

Excellent post. I agree 100%.

Your best bet is to remain quiet. There is nothing to be gained and a lot that may potentially be lost by alerting the lease holder to an expiring lease. They may overlook you -- although with the amount of money at stake, that is unlikely. And you need to be sure to request and physically attend every meeting or discussion they tell you about, even if (or especially if) they tell you that you do not need to attend.

Don't slap a sleeping pit bull on the head.

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Permalink Reply by Les Bamburg on June 27, 2010 at 15:32

RR, in some cases the operator will have the well pad prepared in adavance so the well can spud almost immediately after receiving the permit. Then all they have to do is spud the well before lease expiration then drill and complete the well as a continuous activity.

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Permalink Reply by Dan Aaron on June 27, 2010 at 15:55

Thanks to all of you. The info is very valuable to me. There is a pipeline running across my property. I am less than a mile from Comstock's Noble well.

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Permalink Reply by The_Baron on July 1, 2010 at 17:34

Les,

depending on the lease, location building could be defined as operations. Personally, i would want to spud before the end of the primary, but have seen a casewhere even the drilling of a water supply well held a lease by operations.

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Permalink Reply by J B Nabors on June 30, 2010 at 17:52

Re: "... no they have no obligation to tell you anything before the lease expires only if they are going to drill the bit must hit the ground (ie spud) before midnight on expiration day to extend the lease by activity. ..."

Sorry, but I need to correct that. It is absolutely not true. It depends upon the terms of your lease. If your lease specifically says "SPUD" before expiration of primary term, then it is true. Otherwise, spud-in may be totally irrelevant. Most leases, unfortunately (mine also), have some weasel wording such as "drilling activity" or "activity to drill". This weasel-wording may mean that surveying a pad, cutting timber, or building a road to an intended pad may qualify to fulfill terms of the lease.

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