In some states held by production means that the oil diller has the lease until there is no longer any production. Other states there seems to be an assumption that the oil company is required to make an effort to produce all sands on the lease eventhough the lease is producing the other formations be come available if no effort is made to produce them. Where is Oklalhoma in this held by production.
Deeper formations can be held by production if there was no depth clause in the lease. The one who is holding the lease decide when to go deeper. They could be pooled and someone could drill deeper and you should have the same royalty interest as the first well. The one holding the lease is to protect you interest also. They can't be letting someone drain you from another track. That is the way I understand it. I'm sure there is more to know then that so good luck.
THANK YOU VERY MUCH Good question good answer I have always wondered about that. This Pugh clause thing is something I believe we fouled up on years ago.
In Oklahoma, production from any formation is sufficient to hold a lease with the following exceptions:
1. If you have a depth clause in the lease, you can demand a release consistent with the depth clause. The clauses come in different varieties, some hold to the deepest depth drilled, some to the deepest depth of production. The former is more common, the later is better for the mineral owner.
2. The production must be in "commercially paying quantities," meaning the operator is covering their operating costs and not producing at a loss for the purpose of holding the lease.
3. There is an implied duty to develop other formations, but under Oklahoma case law you must make demand on the lessee to fully develop as a condition precedent to a demand for a release of the formations from the lease. A lease will not be cancelled unless the demand has been made and the lessee has refused to make reasonable efforts to develop other formations.
Gabe Thanks to you also . I will be looking at some leases today. :)
Gabe Thank you.