Lessee wants to change this from “depth drilled” in our family lawyer approved family lease to “common source of supply”. I’ve read some of what that change means, that it adds the entire depth of the formation, which could be a few thousand feet, and then another 100’ that might be into another source.
My question on this possibility (and maybe the term “Held by Production”)…is the lessee able to prevent another entity from drilling the formation or does it only limit our ability to lease to the second entity? If another well were drilled, I assume we would get paid for production under the original lease terms? What else do I need to know to fully understand what we might give up?
Thanks!
A: DEPTH CLAUSE: It is further understood and agreed that all acreage not included in a unit and not producing or upon which drilling operations have not commenced, shall be released at the expiration of the primary term. This lease shall also expire at the expiration of the primary term as to all formations situated 100 feet below the stratigraphic equivalent of the deepest producing depth drilled in any well situated on the leased premises or on acreage pooled or unitized therewith.
B DEPTH CLAUSE: It is further understood and agreed that all acreage not included in a unit and not producing or upon which drilling operations have not commenced, shall be released at the expiration of the primary term. This lease shall also expire at the expiration of the primary term as to all formations situated 100 feet below the stratigraphic equivalent of the deepest producing common source of supply in any well situated on the leased premises or on acreage pooled or unitized therewith.