Understanding a lease period.

I signed a lease with Frontier in May, 2010.  I presume they have sold the lease to Range since Range is now writing the checks. The lease was signed for a term of 5 years.  There is a second clause stating that the lessee may extend the primary term one additional period equal in duration to the primary term. After reading all of the discussions of people anticipating a new lease after 5 years I question whether I will come up for a new lease in 2015 (after 5 years) or 2020 after an extension period. It does not seem logical that a leasing oil company would allow itself to be capped after a 10th year.  Does anyone have experience with this "extension period" lease language?  Help!

Views: 523

▶ Reply to This

Replies to This Discussion

Permalink Reply by Gusher on April 1, 2014 at 6:26am

You mentioned that "Range is now writing the checks" if you are getting royalties then it is a evergreen lease and continues as long as things are producing or capable of. If Range does not drill then they have first option of refusal on your lease to extend it 5 more years and the same price you signed for in 2010. after that 5 years if no one drills then you are free and clear

Permalink Reply by Alan Bowers on April 1, 2014 at 6:57am

If you are receiving "Checks" from Range Resources was it for a Royalty? or a Shut-in Royalty?

If you signed in May 2010 with a 5yr primary term then any renewal wouldn't happen until May 2015 provided you were not tied into a drill unit.

If you have been receiving multiple checks then I would be willing to bet your land is tied into a well and you are Held By Production (HBP).  In which case May 2020 can come and go and you are still held by that lease you signed back in May 2010.

The only way out of the Lease, if you are HBP, is if they give you a Release of Lease or they violate the terms of the Lease (Lessee is in Default) and you go to court to have the Lease declared void.

Permalink Reply by Keith A Williams on April 1, 2014 at 2:46pm

Bruce,

Did you get your rental payment up front or do you get a yearly rental payment? I am guessing that the payment you are getting from Range is a yearly rental payment, many of the newer leases get all the money up front and that confuses people. (called a Bonus Payment)

The way you understand it is correct. The lessee gets 5 years as the primary term. They then have the option to renew for the secondary 5 years. 2015 end of Primary, 2020 end of secondary. They then have no right to renew after that. You will need to get a new lease.

Of course if the lessee does not use their option at the end of the primary term, you should get them to give you a release to file at the courthouse and then you would be free to sign a new lease with whoever you can find at that time.

All this becomes moot, if the lessee at any times drills a well and either pays a shut-in or production royalty. The lease is then in force for as long as production continues or the shut in royalty is payed.

Of course your lease is the controlling factor in all this, and without reading it, I am guessing as to what it actually says. As always a good oil and gas lawyer that can read and understand your lease would be your best bet.

HTH

Keith

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service