Replies to This Discussion

Permalink Reply by Brian on August 5, 2013 at 16:41

Thank you for the quick response.

Permalink Reply by James Wilson on August 6, 2013 at 11:56

8-19-15 is my tract

Permalink Reply by Skip Peel - Mineral Consultant on August 6, 2013 at 13:11

That's definitely in the fairway being leased.  I would guess that you have a modest size acreage interest and if that's correct they probably just haven't gotten to you yet.  Do your homework and be prepared.  Good Luck.

Permalink Reply by James Wilson on August 6, 2013 at 14:39

Thanks

Permalink Reply by Timothy Lawrence on August 7, 2013 at 11:03

As a landowner with limited knowledge, I would like to throw out a few questions and hopefully get some opinions. T19N R15W 14 is the location. I have been approached and had questions perhaps someone could put in simpler terms. I have been monitoring and reading website forums here and other sites. What is the value of the  following Clauses (Pugh)s ? The different websites said to ask for them and I did.

PUGH (HORIZONTAL)

Two (2) years following Upon the expiration of the primary term of this lease or the expiration of any extension or renewal of the primary term, whichever occurs last, in the event a portion or portions of the leased premises is pooled with other land so as to form a pooled unit or units, Operations on such unit or units will not maintain this lease in force as to the land not included in such unit or units.  This lease may be maintained in force as to any land covered hereby and not included in such unit or units in any manner provided for herein.

 

PUGH (VERTICAL)

It is understood and agreed that two (2) years following Upon the expiration of the primary term of this lease or the expiration of any extension or renewal of the primary term, whichever occurs last, Lessee shall release the leased premises as to all rights lying below one hundred (100) feet below either (1) the deepest depth drilled in any well drilled on the leased premises or on lands pooled therewith; or (2) the stratigraphic equivalent of the base of the deepest formation producing or capable of producing in any well drilled on the leased premises or on lands pooled therewith, whichever is the deepest, provided however, if Lessee is then engaged in Operations on the leased premises or on lands pooled therewith, this lease shall remain in full force and effect as to all depths so long as no more than ninety (90) days elapse between Operations.

Question #2 The lease offer also states that the royalty percentage is 22.5% , except that on sulphur the royalty shall be $1.00 per long ton.  Why sulphur here and dirt is worth more than a dollar a ton unless it is contaminated?

Thanks in advance, TL

Permalink Reply by Skip Peel - Mineral Consultant on August 7, 2013 at 11:33

A horizontal Pugh prevents a lease from holding mineral acres not being produced and paying royalty.  Say you have 80 contiguous acres and the south 40 are included in an Anadarko drilling unit.  Production from a unit well would hold the lease in force on all 80 acres although you would receive royalty only on the 40 in the unit.  The horizontal Pugh releases the lease rights to the north 40 acres at the end of the primary lease term, usually 3 or 4 years.  Then that 40 acres is free to be leased all over again. 

In an age of exploration and production from extreme depths, the vertical Pugh also serves to release any minerals covered in a lease below a certain depth.  In the Caddo Pine Island Field there are land owners with multiple leases on varying depth under the same surface footprint.  One to 1000'  for the Nacotosh.  One 1000' to 5000' covering several producing zones and the Pettit.  And then deeper depths for the Cotton Valley, Haynesville and Smackover.  These clauses designed to release minerals not being produced under a lease came along in the 1970's for savvy mineral owners with good O&G attorneys (Mr. Pugh being the prime one) and their use has increased until the present day where they are standard lease clauses.  Both are designed to protect and benefit the land/mineral owner.

Most Oil, Gas and Mineral leases are form leases.  The language is standardized, boiler plate  and any exceptions are additions are added in an Exhibit attached to the form lease.  The portion of the language addressing sulphur is part of that standard language and is included in many form leases.  Some gas wells produce "sour gas" which is high in H2S (hydrogen sulphide).  In some cases they may be used to produce commercial sulphur in which case you would receive payment under the lease language.  However "sour gas" in high concentrations is relatively rare and, being poisonous, is not often produced.  You don't need to worry about sulphur in North Caddo parish.

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