Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2010 at 4:57

John, the option to extend the term of the lease is at the discretion of the lessee, not the lessor. At 12:00 midnight on the last effective day of the lease term the existing lease expires. You should send a certified letter to the lessee requesting them to file a release of your lease with the parish clerk of court. The release will make it evident to anyone searching the public records that you are available to be leased. Should the lessee choose to exercise the option under the terms of the extension clause the existing lease terms will remain in effect for that period.

Permalink Reply by John Moore on November 16, 2010 at 5:06

Thanks skip, I had a feeling you might educate me yet again. I was somewhat confused since people kept talking about redoing the lease language and all. I suppose they were talking about once it totally expires. I might be better off if they do let it die anyway. Thanks :)

Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2010 at 5:44

John, it can be difficult to determine if a lessor is better off or not in the event of a lease expiring. Each case is different. As your primary term is effective until March, there is plenty of time left for your lessee to spud a well.

Permalink Reply by R B on November 16, 2010 at 9:52

Maybe not the right forum to ask this Skip, but after a permit is issued and the operater decides to drill, how long (if there is an average in such a things) from surveying the land, building the roads and pad etc. until spud?

many thanks,

R B

Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2010 at 11:22

An operator may apply for a six month or a twelve month permit. There is no rule of thumb or average time from permit to spud. Activity such as surveys and road and pad construction are good indications that a well is planned in the near future. Unit designations are not required prior to permitting and drilling a well. A number of Haynesville horizontal wells have been permitted and drilled as "non-unitized Haynesville". Often the unit application is made while the well is drilling. A unit order is effective indefinitely and does not require any wells to be drilled. North Caddo Parish had a number of Haynesville Units formed before the results from the first wells were known. Those units may remain undrilled for many years. Some may never see a unit well. The question for many lessors is actually how long does it take if an operator is in a hurry to drill a well prior to leases expiring? That changes from time to time based on availability of rigs and the number of pending permits on file with the LOC, There is no simple answer to what "operations" will hold a lease in force short of spuding a well.

Permalink Reply by Henry on November 16, 2010 at 6:09

John,
If the lessee wishes to extend the lease by exercising the option, the lessee will simply send you a check and a form to sign (and return) that exercises the option. It will be sent by certified mail, so the lessee knows that you received it. If you don't get the letter by the last day of the 3rd year, the option is not exercised and your lease is done.

If the option is exercised, you will live with the terms of lease you originally signed.