Hello Friends,
We’re negotiating a lease with Surprise Valley/Comstock who is proposing two items in the lease that we don’t agree on. One is that the royalty will be calculated at the well head on the “net” proceeds (after deductions). This doesn’t seem to fit a definition cost-free royalty to me.
The other is that the Pugh clause seems sketchy to me. Here is part of the verbiage - “At the end of the primary term of this lease or upon the cessation of any drilling operations being conducted at the end of the primary term or any extended term under the provisions hereof, this lease shall terminate as to all of the mineral estate lying more than one hundred (100) feet below the stratigraphic equivalent of the base of the Haynesville Shale, as found and defined on e-logs in the Hoyt-Powell Gas Unit #1 (API #42-395-31700) at 16,940 feet measured depth.”
I would love to hear from those of you that have signed leases with Comstock or Surprise valley and would like to know what you were able to get in your lease:
Did you get a cost free royalty? - Was the calculation of your royalty at the wellhead or downstream?
Did you get a Pugh clause? If so, was it similar to the above?
Thanks for any information.