Please translate this clause in our O&G lease addendum? I think I comprehend a pooled unit, but not a production unit.
• Item 15. “After the expiration of … continuous drilling program … this … mineral lease shall be construed to be a separate lease as to each separate production unit”.
• Item 19. Pooling, seems straightforward, eight different terms, uses term “pooled unit”. (Our recorded pooled unit is 636 acres).
A previous addendum term set the size of a horizontal “production unit” at (0.064 X drainhole length). The initial well is 10,000’ horizontal.
Interpretation of lease provisions requires a thorough reading of the lease as a whole to see the interaction of the various provisions. You should consult your lawyer about the clauses in relation to specific facts or circumstances.
Agree I should have asked for explanation at the time, but too late now, we signed and I don’t want to start up another legal bill. I think it pertains to large tracts (not us) that overlap multiple production units … cessation of drilling normally terminates a lease, but if drilling ceases in one production unit, the lease will not terminate in another production unit if continuous drilling continues in the second still-productive unit.
I disagree with Roys explaination in that lease termination may end with no “production of minerals” for a certain period of time, but termination of “drilling” simply means that a drilling rig has quit drilling a hole in the ground. This is followed by post drilling activity such as casing, perforating, fracking, treatment with various products such as water, sand, and chemicals. Finally after all these types of things are done to the well there comes “production”