landowner

Primary lease term option 3yr extension questions

Can someone help me understand something so I know when primary term is up if I could potentially be extended on a 3yr extension on lease of property. Primary term would be up sometime around Sept early oct of this year. They have drilled off site meaning I draw royalty but through a pooled acre amount as it's not on our personal property. If they are giving us royalty payments and the lease would that mean they would automatically pay to extend it or have a high chance for it to? If helps lease is near a recent well drilled Weyerhauser(spelling) 15-10 h loc 15-16n-1w thank you in advance of understanding it. I will locate lease info when back home later today if legal paragraph info needed from it.

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Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on January 27, 2018 at 5:32

Colleen,  your mineral interest is pooled in a drilling unit and you receive royalty on any well drilled in that unit.  Your lease is therefore Held By Production (HBP).  That means your lease remains in force as long as there is continuing production not interrupted for more than a set period, usually 90 to 120 days depending on language regarding continuing operations.  There is no need for a company to extend your lease, they hold it by production.


landownerPermalink Reply by John Matherne on February 1, 2018 at 7:19

You did not mention property that may be outside of the production unit. Hopefully there is a pugh clause in the lease which would require the outside property to have the lease renewed to be held or it will be available to be lease by others in the market.


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on February 1, 2018 at 7:24

Horizontal Pugh clauses now appear in most standard form leases.  And in unconventional plays it is unusual but not unheard of for tracts immediately adjacent to a economic unit to not be included in their own producing unit unlike conventional plays.


landownerPermalink Reply by James Thomas McCrary on January 28, 2018 at 0:50

Thank you skip, in still new to this realm so im learning. 


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on January 28, 2018 at 2:44

You're welcome, James.  Being a mineral owner and a royalty interest can be complicated.  It takes a little work to be a good steward of your asset.  Do not expect the industry or the state to look out for your interests.

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