pugh clause terms

Hello, in 2011 we signed a lease with gulfport in belmont county with option to renew once which they did in 2016. gulfport then assigned the lease to ascent in 2018 and it expired in june 2021, a few weeks ago I received a call from a guy from purple land mgmt stating ascent wanted to extend the lease under the pugh clause but they want to pay yearly instead of the 5 yr term up front as the lease spells out. as I read the clause this could be used during the primary term 1 time as long as the bonus money is paid. my thoughts are 1. lease expired in 2021 after being renewed once already and 2. changing the payment terms of the bonus money doesn't follow terms of said lease. can someone with knowledge of the pugh clause help me please??? thanks in advance        Joe

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Permalink Reply by Joe C. on April 21, 2023 at 7:46am

Joe, give Nick a call at AMCO Oil and Gas, he help me out with leasing terms, reviewing the area to make sure you’re lease wasn’t put in a unit, etc.. very helpful. 
amcooilgas.com 

Permalink Reply by Utica Watcher on April 21, 2023 at 8:15am

Are you sure that when the landman said "extend the lease under the pugh clause", that they meant they want to sign a new lease under the acreage the expired, per your pugh clause?  Leases are fairly common it seems now in Belmont County to negotiate 1 year deals, or at least the companies try to get leases under consecutive one-year lease terms, with the option to extend in one year increments for up to 5-10 year years.

Seek help from any attorneys you feel are knowledgeable.  But my guess is, especially if you have acreage already in production, that Ascent is trying to lease your acreage that expired per the pugh clause with a new lease under consecutive 1 year option to renew terms.  Good luck.

Permalink Reply by joe traczyk on April 22, 2023 at 10:42pm

this landman is trying to tell me that the pugh clause allows them to extend the lease that expired in 2021 for 2 years after it expired but then wanted to change the payment terms from what was in said lease 

Permalink Reply by jett on April 23, 2023 at 12:24am

I’m pretty sure that’s the opposite of what a Pugh clause does. A Pugh clause is for the landowner’s protection 

A Pugh clause sets you free from the lease any acreage that is not in a unit - so that you can lease again with new sign-on bonus and terms you want on your acreage that is now free

They sometimes do not understand the legal language and is why a knowledgeable lawyer working for you can be a protection from people working in their own interests 

And landmen & any fees they may get could be probably be avoided by you’re having your lawyer working directly with the oil/gas company in your behalf

Most landmen want the company to hire them so they would not necessarily be working for your best interests 

Wishing you the best

Permalink Reply by joe traczyk on May 2, 2023 at 6:53pm

Jett, can you deal directly with ascent  because according to this guy the lease will be coming from him but I would rather deal with ascent directly

Permalink Reply by jett on May 3, 2023 at 3:52am

If you have your own lawyer, I very much doubt a land man is necessary. Don’t know if the oil/gas company will deal with the landowner directly.
When we did our lease, we used our lawyer and he dealt directly with the oil/gas company with no landman involved.   We hired our own lawyer, Jeff Roskisky & Associates out of Weirton, WV. He made up the contract with the specific protections and royalties we wanted. They really took their time to get the lease exactly how we wanted. We included extra money in the bonus money to cover the lawyer’s fee.

The fact that you had a Pugh clause included in your lease was great. Don’t know if you have any deductions from your royalties in your old lease but make sure to get a totally no deductions lease.
Also you might want to put in that they can’t put any well pads, etc right out of your back door. It happen sometimes 

I’d rather pay a lawyer working for me than someone working for themselves.  Just giving misinformation about how the Pugh clause works would be a red flag for me. JMHO

Permalink Reply by joe traczyk on May 3, 2023 at 9:39pm

Jett, that is who did our original lease but I called them 2 months ago about a question on the deductions they are taking out of us and they never called me back. we have a no deduction lease signed with gulfport and it was followed until part of our properties were taken over by ascent,they have been taking deductions and when I asked them about it they basically told me to take them to court

Permalink Reply by jett on May 4, 2023 at 10:30pm

We also have partial acreage in a unit so I checked our statements and can’t be sure if deductions are being taken out so I’m having the lawyers’ office look them over next week. 
Maybe if you talk with the lawyers’ office about the new lease, take in the royalty statements you have now and they can look them over?

Rhetorical questions -  Is there only one company leasing in your area right now? Do you want to lease again right now? If a company  doesn’t abide by the current lease, will they abide by any new lease you make?
Hoping you get the best deal! And hopefully the deductions get straightened out for us both!

Permalink Reply by joe traczyk on May 6, 2023 at 10:10pm

ascent has the area where our property is located(pease twp outside colerain) and they are putting a drilling unit together now, my brother works for the state and he saw a map where they surveyed our property for a well so I feel if we don't get a new lease in place under our terms that they will pool us under their terms if that makes sense

 

Permalink Reply by jett on May 7, 2023 at 9:06am

That’s great you’re going to be a unit

Yes, it sure makes sense to get the lease on your terms. 

Permalink Reply by jett on April 22, 2023 at 2:48pm

This is why a Pugh clause is great to have. Any acreage not in a unit is free and clear for the landowner to make a brand new lease on. 

It’s true that the companies can set forth terms that benefit them; but you, the landowner, can also set terms that are best for you. If your last lease has done well for you then you have a good foundation for this new lease. 

For sure, get help from attorneys that know the ins and outs of oil/gas leasing and want to help you, the landowner 

Permalink Reply by David Cain on April 24, 2023 at 7:28pm

Joe,

One option you may want to consider is trying to get a 5 year paid up lease under a new lease contract rather than extending the old lease on a year to year basis.  If you agree to a year to year lease and they drill in the first year you wouldn't receive a bonus payment for years 2-5.  With a 5 year term lease and a new lease you would receive all that money up front.  I know for certain that Ascent is signing some 5 year leases in SE Guernsey county.  I assume the same would be true for parts of Belmont county.  Was the 2011 lease, which was renewed in 2016, prepared for you by your attorney or a land group that worked with an attorney?  If not, this might be a good opportunity to get stronger protections and/or better royalty rates.  As others have recommended in their replies, getting a good oil and gas attorney is a really good idea.  Personally, I have used Bill Williams of KWGD and have been very happy.  This is just my opinion, but I believe that the oil and gas companies are focused on only the areas that they are planning to drill in the next few years. If you sign a lease (or renew your old one), then this may be the one that counts.  Good luck on this opportunity. 

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