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Permalink Reply by buggs on November 2, 2011 at 1:55am

As written in the 5th edition Handbook of Oil Industry Terms & Phrases: "A lease given by the landowner while his property is still under lease by another person or company. Such as lease becomes effective if and when the existing lease expires or is terminated. The top lease is dated to go into effect the minute the primary term of the existing lease runs out. This is not pleasing to the leaseholder, but it often happens. The person taking the lease and the one giving the lease (landowner) rationalize that the former lessee had three to five years to commence a well but failed to do so; therefore, the land is up for grabs."

 

Hope that helps.

Permalink Reply by ShaleAdvice (Steven C. Townsend) on November 2, 2011 at 4:03am

be very careful when negotiating a top lease for an O&G lease.  There are a lot of pitfalls associated with these due to the sometimes fluid expiration terms