I have a landman who represents BP America who wants me to sign an amendment to an oil lease removing the word "horizontal" from the Pugh clause. Is there any advantage for me to do that?
You didn't ask your landman? What reasons did he offer for BP wanting to amend your lease? Advantages? Disadvantages?
He's not my Landman so he wasn't too helpful. There was no reason given, just a request to amend.
Jim,
Was this a phone call, or in writing? If it was a phone call, I'd ask him to put it in writing, so you can have your lawyer look at it. That might be enough to bring out the truths. Never trust anything verbal, when it is dealing with mineral acreage and leases.
Susan
Jim,
If I had horizontal was initially accepted in the Pugh Clause, it would stay.
I'm not sure how I could have missed that since you said "I have a landman". "There was no reason given."
Ask.
jim mills said:
He's not my Landman so he wasn't too helpful. There was no reason given, just a request to amend.
It's too hard to say without seeing the actual clause at issue. I can't imagine a horizontal Pugh that could be changed to a vertical pugh just by removing one word, so I'm not sure what the effect would really be. Can you type up the clause in a reply?
Here is what the clause is now:
Pugh Clause (horizontal) - At the expiration of the primary term, or the second primary term if applicable, all acreage not then included in a unit(s) will expire unless: A) Lessee is currently engaged in drilling or reworking operations upon said land, or Lessee is engaged in drilling operations upon acreage that has been pooled or utilized with said land; or B) Lessee commences operations for the drilling of a well within 180 days from the date a previous well has been completed either as a dry hole or as a producer. Lessee shall have the option to continue drilling on said land or acreage pooled with said land thereafter, by not allowing more than 180 days to lapse between the completion and commencement of drilling operations of wells. At such time as more than 180 days lapse without additional drilling after the primary term has expired, the lease shall terminate as to all acreage not then included in a producing unit, and upon written request of Lessor, Lessee shall execute and deliver to Lessor a written release, releasing all lands of the lease not then so developed.
The Amendment to the Oil, Gas and Mineral lease I received is to remove the word "horizontal" from the above. No reason why was given nor was any incentive such as cash or a higher royalty offered. The property in question is in the John Page Survey, Harrison County.
That clause, except for it's paragraph caption, says nothing about horizontal separation. It does allow for a release on the Lessor's request. I would ask generally for a release as to 100' below te production zone, as that language is more specific that that offered, and would not assent to Lessor's written request, but let it operate on it's own language.
Jim, they're likely just looking to clean up their lease. I agree with David, that it is not a horizontal Pugh Clause, yet is captioned as one. Typically labels mean essentially nothing, and most leases/contracts even have a clause that expressly specify that the labels are to mean nothing. David makes a good point that you should ask for a release as to 100' below the deepest producing zone, but I would be very surprised if they give you that since they don't have to under the terms of the lease. But to answer your question as to whether you should accept their proposal - there is no advantage on your side for doing that... as it is now, you at least have an argument (not a good one) that the clause was intended to be a horizontal pugh clause.
"Hi" by the way, David. Hope you've been doing well!
David Saxe said:
That clause, except for it's paragraph caption, says nothing about horizontal separation. It does allow for a release on the Lessor's request. I would ask generally for a release as to 100' below te production zone, as that language is more specific that that offered, and would not assent to Lessor's written request, but let it operate on it's own language.
I wouldn't follow any of the advice regarding asking for a release as to 100' below the deepest producing zone, because the lease has already been executed. The reason they want you to amend it is because the clause wasn't styled right, as mentioned above. It does appear to be a curative type requirement. However, for you or anyone else to think or advise that this is now an opportunity to ask for anything else, is foolish. BP has no incentive to do that for you. They can't hold a gun to your head and force you to help them clarify their lease, but nor can you use the request for an amendment to any particular advantage. You had already agreed to the terms of the lease. Before making a final decision, I would at least attempt to contact the landman you have who isn't yours, and ask him for some more detail. Then you can make a more intelligent decision as to what you want to do. That was the original advice, and probably the best advice. It would have filled in some of the questions that advisors had here as well. You could have posted his specific reasoning regarding the amendment, but to me it does sound like some type of a minor curative requirement.
There's nothing wrong or "foolish" with asking for a release of unproductive acreage or zones. Especially if you have a big bold heading that reads "HORIZONTAL PUGH CLAUSE." People get lucky every day, and we know nothing about this lease/geology/history/land/etc.
The landman he has, but isn't his, wants to get rid of that big bold heading that reads "HORIZONTAL PUGH CLAUSE". At least the horizontal part. That is what he is being asked to amend. I agree with the last part of your post. So why is he asking his question here? Go ask the guy who sent the amendment.
Dave,
I missed the fact that the lease had been executed and that this related to a modification of the document.
Hi back, Mr. Brister. Busy as a bee out here, seems like I've been three weeks behind for several years!
No big deal. Your friend Brister is right. Anyone can ask for anything. They just don't always get it.
Thanks for all of your input. I have learned a lot from this discussion.