Replies to This Discussion

Permalink Reply by The_Baron on December 29, 2008 at 3:56

If the lease had an extension option, you had already given up your chance to renegotiate. All they had to do was send you a check for the previously negotiated bonus.

I am a little confused though, Do I understand correctly that they only wanted to extend for one year instaed of the two years as provided by the lease?

Also, did they want to reduce the renewal bonus by a corresponding amount?

• ▶ Reply

Permalink Reply by preston on December 29, 2008 at 13:32

you are correct, they wanted to lease for only one year and didn't change the terms. I may be wrong but thought they had to produce before extending

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on December 29, 2008 at 13:37

They don't have to produce all they have to do is send you the money for the extension if the extension clause is like all the others that I have seen with Encana/Shell. Yours may be different though.

• ▶ Reply

Permalink Reply by Les Bamburg on December 29, 2008 at 4:10

Preston, where is your family's land?

• ▶ Reply

Permalink Reply by preston on December 29, 2008 at 12:55

in section 3 & 10 martin field

• ▶ Reply

Permalink Reply by Les Bamburg on December 29, 2008 at 13:05

Preston, I am aware of others that had similar lease extensions by EnCana.

I assume you mean Sec 10-T13N-R9W. There is a well currently drilling in that section.

Nabors #F12 Rig, EnCana, Indigo Min 10 #H1 Well, Serial #238708, S10-T13N-R9W

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on December 29, 2008 at 13:17

Les, are you saying the extension is different than all the other Encana/Shell extensions?

• ▶ Reply

Permalink Reply by Les Bamburg on December 29, 2008 at 16:20

Two Dogs, many of EnCana's lease agreements had a three year term (expiring in 2008) with two 1-yr options. EnCana exercised the first 1-yr extension option immediately before expiration of the initial 3-yr term as expected. But within a few weeks exercised the second 1-yr extension option rather than waiting until 2009.

• ▶ Reply

Permalink Reply by Dion Warr, CPL on December 30, 2008 at 8:50

Gang:

Encana and their lease brokers bought up many leases at "three, one and one" type terms. The extensions would be annual at a set price per year.

Preston:

Normally, drilling over an anniversary date would extend your lease without the need for a rental payment (or extension payment, in this case). Past the primary term, the lease would be extended at least 90 days past the date of last operations, if not by production from the well. If the timing would be close to the date of the next payment, Encana may have elected to pay the extensions on some leases rather than lose them if their planned activities were delayed past the anniversary date. As it stands, the well that Les quoted was spudded on November 26 of this year. If Encana sent an extension payment prior to August 31, your lease was extended to August 31, 2009.

They may desire to send you an extension payment to hold the portion of your lease outside of Section 10 until August 31, 2010, dependent upon their future plans (particularly if they wish to drill in Section 3, but they have no ability to commit to do so until after August 2009). Depending on how the extension language is written, they may have to pay you for the entire lease acreage amount in order to do so unconditionally, absent production from the well in Section 10. If Encana obtains production from the well prior to that date, they may be able to extend your lease by the payment of a Pugh rental.

It would help if you could give us the contents of the lease rider to review in its entirety.

• ▶ Reply