Concerned about a Cancellation Clause

Oil and Gas Leasing Help
1

Hello All.

I am concerned about the following clause.

In case of cancellation or termination of this lease from any cause, Lesee shall have the right to retain around each producing well, being worked on, or drilling, the number of acres allocated to each well under the spacing and proration rules.

This seems scary, how long do they "retain it" ?.

What if they terminate the lease ?.

Thanks in advance...

2

You are very wise to be concerned. This language is reprehensible.

It says, it a nutshell that if the lease is terminated or cancelled for cause, they still get to keep enough of your land to produce the well.

The even more frightening part is that if the "Lease" is terminated, so is your royalty clause, so potentially you have given them a free well if they breach the lease and cause a forfeiture.

You should never deal with a company who has a hook like that in a lease form.

3

Thanks Buddy,

A thought occurred to me however. If this lease is terminated do they then not have to pay me royalties under the forced pooling rules?.

4

I could be wrong, but I think they would not have to pay, because your lease contract says, and you agreed by signing, they get to keep it. Have you talked to any other oil co’s yet ? I think you need to deal with another company. One that wants to pay you for your oil while they make a good profit themselves. The one you are dealing with seems to want to mousetrap you. Just my curiosity; Is this the same company that your last thread concerned ?

5

Thanks RW.

Yes I have talked to other companies. I am looking over more than 1 lease. The company that has this clause is the same company as the other thread.

r w kennedy said:

I could be wrong, but I think they would not have to pay, because your lease contract says, and you agreed by signing, they get to keep it. Have you talked to any other oil co's yet ? I think you need to deal with another company. One that wants to pay you for your oil while they make a good profit themselves. The one you are dealing with seems to want to mousetrap you. Just my curiosity; Is this the same company that your last thread concerned ?
6

It's a great question. What if you were not forced pooled? You signed a lease with that clause and your lessee breached the lease and it terminated?

It is just such a bad clause its unbelievable.

If this is the way some companies are doing business in ND, no wonder so many Dakotians are angry.

Dakota67 said:

Thanks Buddy,

A thought occurred to me however. If this lease is terminated do they then not have to pay me royalties under the forced pooling rules?.

7

What are the odds that Dakota 67’s lease in question doesn’t have a pooling clause so they wouldn’t have to force pool him ? I doubt they left that door open.

8

Dakota67,

Is this a lease you already have in play? If you're only studying the lease pre signing, RUN as fast as you can. Mr. Cotten and r w kennedy have given you some very good advice. If I may say so, if I were you and you have several properties, I would seek out a good manager to manage your affairs and let them deal with all the clauses you are not sure of. It will cost you a fraction of your lease money and the best money you ever spent. If you will email me thru my profile I will furnish you the name of an excellent manager. Just my thoughts on the predicament you seem to be in. I do wish you luck in all your oil business.

Wes Luke

9

Wes,

I would be interested in talking to a minerals manager. I didn't know there was such a thing. You can email me at LukesFather04@yahoo.com.

Thanks to all for you support.

10

Done deal