"Exhibit A" counter terms needed

Oil and Gas Leasing Help
1

What do I need in " Exhibit A" to counter these lease terms?

"Lessee is hereby granted the right at any time and from time to time to unitize the leased premises or any portion or portions thereof, as to all strata or any stratum or strata, with any other lands as to all strata or any stratum or strata, for the production primarily of oil or primarily of gas with or without distillate. However, no unit for the production primarily of oil shall embrace more than 160 acres, or for the production primarily of gas with or without distillate more than 640 acres, provided that if any governmental regulation shall prescribe a spacing pattern for the development of the field or allocate a producing allowable based on acreage per well, then any such unit may embrace as much additional acreage as may be so prescribed or as may be used in such allocation of allowable. Lessee shall file written unit designations in the county in which the leased premises are located. Operations upon and production from the unit shall be treated as if such operations were upon or such production were from the leased premises whether or not the well or wells are located thereon. The entire acreage within a unit shall be treated for all purposes as if it were covered by and included in this lease except that the royalty on production from the unit shall be as below provided, and except that in calculating the amount of any shut in gas royalties, only the part of the acreage originally leased and then actually embraced by this lease shall be counted.
In respect to production from the unit, Lessee shall pay Lessor, in lieu of other royalties thereon, only such proportion of the royalties stipulated herein as the amount of his acreage placed in the unit, or his royalty interest therein on an acreage basis bears to the total acreage in the unit.
If said Lessor owns a less interest in the above described land than the entire and undivided fee simple estate therein, then the royalties herein provided shall be paid to the Lessor only in the proportion which his interest bears to the whole and undivided fee."

Vertical and Horizontal Pugh clauses?

Thanks--Rosemary

2

This might be helpful. If, at the end of the primary term, a part but not all of the mineral acreage covered by this lease, is not included within a horizontal or vertical unit or units which remain in effect beyond the primary term under this lease in accordance with the other provisions hereof, this lease shall terminate as to such part, or parts, of the mineral acreage described herein, which lies outside such unit or units, unless this lease is perpetuated as to such mineral acreage as to such mineral acreage outside such unit or units by operations conducted therein, or by the production of oil, gas or other minerals in a different unit which includes such mineral acreage, or by such operations and such production as are in accordance with the provisions hereof. It approaches the subject of how to get them off your minerals instead holding them forever. It does not address the subject of royalty at the bottom which I think is another important issue. From my lawyer. Check to make sure it applies to what you need. I thought they taught us run on sentences were bad.

3

Rosemary:

Signing a lease is something that you could have to live with for a long time; therefore, you need some expert help. A good start would be a good friend that understands, just to bring you up to some level of understanding and then before the pen goes on the paper, go to an attorney. Dollars up front is small change to the cost of signing a bad lease and there are lots of very bad ones out there.

4

Minerals Management in a Nutshell. Bigfoot, you get it. May I quote you to all my contacts?

Bigfoot said:

Rosemary:

Signing a lease is something that you could have to live with for a long time; therefore, you need some expert help. A good start would be a good friend that understands, just to bring you up to some level of understanding and then before the pen goes on the paper, go to an attorney. Dollars up front is small change to the cost of signing a bad lease and there are lots of very bad ones out there.

5

Absolutely; but, I can't imagine any sane person handling it differently!

Gary L. Hutchinson said:

Minerals Management in a Nutshell. Bigfoot, you get it. May I quote you to all my contacts?

Gary L Hutchinson

Minerals Management

Bigfoot said:

Rosemary:

Signing a lease is something that you could have to live with for a long time; therefore, you need some expert help. A good start would be a good friend that understands, just to bring you up to some level of understanding and then before the pen goes on the paper, go to an attorney. Dollars up front is small change to the cost of signing a bad lease and there are lots of very bad ones out there.

6

There has been alot said about shut in royalty. If there is going to be a shut in royalty clause, it needs to be plainly stated in the lease that failure to timely pay shut in royalty outside of the primary term, will terminate the lease.

That being the case I would settle for $1 PER MONTH. I would not give them 6 months before they missed a payment because operators/lessees really don't pay attention, their thinking is all based on their standard lease, then they would be in my playground.

7

I know every lease contains terms which are negotiable, but most leases contain key parts that need to be addressed--valuable information I've gleaned from this forum. In addition to striking the warranty clause, here are my general requests:

SHUT-IN CLAUSE

After the end of the primary term, this lease may not be maintained in force solely by reason of the shut-in royalty payments, as provided for in this lease, for any one shut-in period of more than two (2) years or for shorter periods which exceed two (2) cumulative years.

HORIZONTAL PUGH CLAUSE

Notwithstanding anything to the contrary, it is agreed that should Lessee exercise his option to pool or combine any portion of the land covered hereby with other lands, lease or leases as hereinbefore provided, then such operations and production on and in any such pooled unit as herein provided, shall continue this lease in force and effect during or after the primary term as to that portion of the lands covered by this lease, included in such unit or units as hereinabove provided, but not as to such portion of said lands covered by this lease and not included in any such unit. This lease maybe kept in force and effect as to such remainder in any manner elsewhere provided in this lease not inconsistent with this paragraph.

VERTICAL PUGH CLAUSE

It is understood and agreed that one (1) year after the expiration of the primary term of this lease, upon the expiration of any extension or renewal, or after cessation of operations as provided herein, whichever occurs last, Lessee shall release all rights lying below the stratigraphic equivalent of one hundred feet (100') below the base of the deepest producing perforation in any well drilled on the leased premises or on lands with which the leased premises has been pooled or unitized.

CONTINUOUS DRILLING CLAUSE

In the event a portion or portions of the leased premises is pooled or unitized with other land so as to form a pooled unit or units, operations on, completion of a well upon, or production from such unit or units will not maintain this lease in force as to that portion of the leased premises not included in such unit or units. The lease may be maintained in force as to any portion of the leased premises covered hereby and not included in such unit or units in any manner provided for herein; provided, however, if at the end of the primary term or after the expiration of the primary term, Lessee is then engaged in drilling or reworking operations on the non-unitized portion of the leased premises or on acreage pooled therewith, or if Lessee has completed a well as a producer or a dry hole anywhere on the leased premises or lands pooled therewith within ninety (90) days prior to the expiration of the primary term, this lease shall remain in full force and effect as to all non-unitized acreage so long as Lessee commences drilling operations on the non-unitized portion of the leased premises or on acreage pooled therewith within ninety (90) days of the completion of such well as a producer or a dry hole and conducts continuous operations thereon with no cessation of longer than ninety (90) days between the completion of drilling or reworking operations on a well and the commencement of such operations for the next succeeding well.

Any comments or criticisms are appreciated--Rosemary