Lease Assignment

We have 36 acres under an old lease (2004).  After we signed, a shallow well was drilled and has been producing ever since.  Recently, the deep rights were sold off to a large energy company.  Does the shallow well production keep the lease active even though the deep rights have been sold?  In other words, does the holder of the deep rights have to produce in order to keep the lease?  Thanks in advance for your help.  

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Permalink Reply by Nancy Mosley on February 24, 2021 at 4:31am

You would have to read the assignment documents to see what was assigned/conveyed/sold and what was retained/excluded. I have seen the "whole" lease assigned with the deeper rights retained, and just the shallow wells sold, and sometimes the shallow wells with maybe 5 acres around the well sold, etc. Sometimes these documents refer to some "Agreement" that is not recorded so you might not see exactly what the terms are. But the bottom line is, that whoever holds the original lease, that lease is in effect as long as the terms of that lease are met (like continuous production, regular payment maybe monthly or quarterly, or a "flat rate royalty" paid regularly, or something. If any one well involving that acreage (including if that lease acreage is in a unit) is still producing / paying royalty, then the lease is valid. As I said before, I am not a lawyer but I have read a lot of leases and assignments, and have attempted to sort out my own sometimes very complicated "who owns what" situations. And, once the Original Lessor signs the lease, unless there is a provision for him/her to be notified or to approve any assignments, he/she is at the mercy of the lessee/assignee for any information.

Permalink Reply by Joe C. on February 24, 2021 at 4:37am

Yes, thanks Nancy. 

Permalink Reply by farmgas on February 24, 2021 at 4:46am

This gas industry business is indeed very complicated...

Permalink Reply by Nancy Mosley on February 24, 2021 at 4:48am

So true!

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