leases

Does anyone know what happens after the 2nd 5 year lease is up.  Is there a third 5 year lease or do the oil companies just pay royaltiesas long as they are actively pumping?

Also, in general is the 2nd lease usually higher amount per acre than the first lease?

 

 

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Permalink Reply by Utica Shale on May 4, 2012 at 1:55pm

If you are getting royalties then there is no "2nd lease". You are Held-By-Production and you will receive royalties for as long as the well "produces" under the terms of the original lease.

Permalink Reply by Jim Shoos on May 4, 2012 at 2:06pm

Geez...I hope this is one of those fraternity pranks like where they write in some unimaginable story to the Playboy Adviser column.  Seriously, you signed a lease way back when and you have no greater level of understanding than to ask questions such as this one?  No wonder people sign things and then complain about them after the fact.  If you attached no greater significance to this document when you signed it then you darn well deserve whatever result comes your way. 

Permalink Reply by Billy Park Whyde on May 4, 2012 at 2:26pm

Jim the only dumb question is the one never asked. Might seem  backwards but guess what Jim, there are some people that do not have a puter, cell phone, or a good grip of what is going on such as senior citizens. 

Permalink Reply by Jim Shoos on May 4, 2012 at 2:39pm

Check back... I never stated that the question was dumb.  I only stated that I found it inconceivable that somebody would enter into a legal agreement without having any understanding of what they were getting into.  I don't care if you are old, don't have a computer or cell phone... none of these renders you incapable of exercising common sense.  No wonder con men find it simple to swindle people.  

Permalink Reply by alan fernandez on May 4, 2012 at 3:17pm

Jim...............Who said I signed any contract.....I like to ask as many questions as I can before I make any major decisions such as this. I plan on joining a landowners assoc. later this year.

I would advise you on EXERCISING COMMON SENSE when making such harsh remarks on limited information presented to you.  

Permalink Reply by Jim Shoos on May 4, 2012 at 3:32pm

Ha Ha... fair enough.  I made an assumption based upon the limited information you provided that you were now in a position of trying to negotiate some new lease bonus for your "3rd five year term".  My bad.

Permalink Reply by Mike h on May 4, 2012 at 4:57pm

To answer your question Alan, If the lease isn't HBP and the extension period expires then the lease is over and you are free to try to re-lease.

The amount paid is dependent on negotiation and does not have to be the same term or $$ as the primary term. For example, my primary term is 5 years and the addional term is 3 years but the payment is annually for each of the 3 years (but totals the same amount as what was paid for the initial 5 year term).

Permalink Reply by alan fernandez on May 4, 2012 at 5:24pm

Thanks Mike,   That clarifies a few things for me.  But one question I have...

Is it true what Mr. Utica Shale says about you can not get a 2nd sign on bonus if active drilling is occurring and you are getting royalties. I am just double checking..Or is this based on what type of lease???

Permalink Reply by Utica Shale on May 4, 2012 at 5:32pm

Alan,

 What you say could be true unless Nat Gas was $10/mcf for the past 5 years and now Nat Gas is only $2/mcf for the next 5 years.  I sincerely doubt that another round of Signing Bonus Money could make up for that kind of loss. 

 Just sayin' - TIMING is important, too.

 

Permalink Reply by Kathleen on May 4, 2012 at 6:00pm
A paugh clause is something you also should look up. If you have say 50 acres and signed a lease, In two years of the first five years 25 of your acres are placed in a unit and you start receiving royalties on only that 25. That first 25 acres is now considered held by production and as long as an acitve well is going there is no second sign on bonus. This can be held by production for the rest of your life. But now what about the other 25 acres if they are not put into a unit within the next three years of the first five year term? This is where a paugh clause can help. It can say if any of the 50 acres is not in a unit (wording in a lease about what is considered held by production or activity of drilling is so important) actively drilling or receiving royalties can be released after that first term is up.
Please remember wording in a lease is everything and the oil co. Is going to hold you to it. On this site look in the upper right hand corner is a search box. Put in leases and please read a few. I would first look for the boilerplate lease the oil co. landman use when they just knock on your door, than look around for say an AVOL lease. The differences are amazing.
Good luck.

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