Amendment and Ratification of O&G Lease

We were recently contacted by a landman from DPS Penn and informed that we are are included in a production unit in West Twp. We are HBP and were asked to sign an amended lease to allow unitization and pooling. Attached is a copy of the actual amendment. Has anyone else signed one of these and/or, does this look ok. One line that concerns me is "Lessee is granted the right to change the size, shape and conditions of operation or payment of any unit created". This seems a little vague. I am going to have an attorney review the lease before I sign anything, but was wondering if anyone here might know what this means.

Thanks

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Permalink Reply by Inchworm antenna on March 13, 2012 at 10:28am

At this point they will act like they have the ball in their court but I believe you still have something they want.  The lawyer made a good catch on the unitization.  A good protection so the you can't be HBP forever is to limit the unitization to no more than 1280 acres.  It would be hard for you to negotiate for a bonus since one was already paid to your original lessee.  But I believe you can do better on the royalty.  At the very least, if it's 12.5% net in the original lease then push for 12.5 gross.  I hear from a great source that they have offered people with 12.5%net in the old lease a 12.5% gross for permission to unitize.  But of course this did not happen until people stiffened up.  There's a huge difference between net and gross.

 

Permalink Reply by Curt C on March 14, 2012 at 1:40pm

Thank you all for the great advice. I will talk with all of the neighbors, have the lease reviewed by my attorney and proceed with caution and optimism. I'll keep you posted on the progress.

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