KDK, I think you are going to need a legal opinion on that, whether it is two years from cessation of production or simply two years past the primary term. There can be other things in the lease such as the force majure clause, which may state that the operator may maintain the shut in well by shut in payments for lack of a market. I'd have to see the whole thing to give an informed opinion, and it would be my opinion, not a lawyers.
KDK said:
Thanks guys. The well is shut-in as of July 6, 2012. It produced in April, but nothing in May. I assume there is going to be none in June, given the shut-in date of July 6, 2012. (this is the info I find on the MT Board of Oil and Gas website)
Can you tell me if I have this correct: The primary term of the lease expired February 25, 2010. The lease has a continuous drilling clause for 120 days, so lessee has until approximately the end of August 2012 (April 30, 2012 + 120 days) to commence re-working operations or drill a new well. Otherwise, the lease has expired.r w kennedy, you are right, the lease also has this clause: ..."One Dollar per year per net royalty acre retained hereunder, such payment or tender to be made on or before the anniversary date of this lease next ensuing after the expiration of 90 days form the date such well is shut in and thereafter on or before the anniversary date of this lease during the period such well is shut in. If such payment or tender is made, it will be considered that gas is being produced within the meaning of the this lease."
However, this shut-in clause appears to be limited by an added clause in an Exhibit A that states "In no event shall the "shut-in" gas clause extend this lease more than two (2) years beyond the expiration of the primary term."Can you also tell me if this is correct: Given what I typed above regarding the shut-in clause, since we are well past "two years beyond the expiration of the primary term", lessee cannot extend the lease with a shut-in payment. The only way they will be to extend the lease is to commence re-working operations, get the current well producing, or by drilling a new well.