Hi. We have mineral rights in Grady county OK sec 16 that were under lease x 3yrs starting Oct 2013. I understand they started drilling in Sept 2016. No one has approached us about another lease. Are we still under the first lease since they started drilling before it expired? Thanks! Still trying to figure this all out!!
Check your lease for the proper answer, but most would hold the lease. If they didn’t strike a commercially feasible well, the lease would no longer be in effect
what was the bonus paid and interest on Grady Section 16?
Do you know the formation and depths of the well?
Does "Noble-Olson" and "Fortuna" sound familiar?
Who is the Lessee?
Sundown just filed a permit for the above mentioned formations in Grady Section 16, May 2017
Mary,
If the oil company drills a well during the primary term of the lease and the well produces the lease will be "Held By Production(HBP)". This will continue as long as there is a producing oil well on the lease. If you have a "pugh" clause in your lease some of the acreage might be released but with the large unit sizes of these horizontal wells most of the time that pugh clause won't do anything unless you have 1000's of acres leased up.
Let me know if you have further questions.
Cam
If I understand your "Pugh Clause comment" a minority acre holder, like 10-40 acres out of 160 or so that might be unitized, the "Pugh" and/or "Depth" clauses are somewhat worthless, that is if the majority of the unitized lease does not have such clauses?
John,
Not necessarily, there is a vertical and horizontal pugh clause. So while an owner might only have 20 acres in a 640 acre unit, they will not have enough acres to pugh out of the unit and have their acreage leased for another well in the same formation, but they can have everything 100' feet and below the deepest producing formation released and open to be leased. So, if a company wants to drill a deeper well they can lease the owners deep rights. If the other owners in the section don't have pugh clauses the company wanting to drill deep would have to approach the oil company holding the leases and ask for an assignment of the deep rights. In my opinion, every owner should include vertical and horizontal pugh clauses regardless if they own 5 acres of a full 640 acre section.
Hope that makes sense, if not, feel free to ask questions.
Cam
just making sure - we have leases - part of the family signed away their pugh and depths to the Lessee (did not include), but we do not want or wish to do such, thus have these limitations put into our leases. My concern is that such clauses are moot or limited since we are minor Lessor's. There seem to be high valued reserves in the SCOOP and STACK plays - some small companies get swallow leases then sell them for the deeper prospector for a considerable return, but the original Lessee has sold this opportunity to the Primary / Secondary Lessee