We leased our minerals about 2.5 years ago and the 1st part of the contract will be up in a few months they have a 2 year option after. In the last couple of month we have been getting tax forms to fill out and new ownership of lease information ect I'm assuming they found oil/gas ect. Since the lease is under new ownership will the 2 year extension apply? Also if this well has hit what to expect after the 2 year extension (if applicable) as far as lease price and terms? Will the lease offer be more since it is producing or longer contract?
Lee, someone else is probably better equipped to aid you in Texas but I might mention a few things. If your lease was assigned, unless your lease says anything to the contrary, the new owner of your lease has all of the rights of your original lessee, including the extension. If they did strike oil and gas in commercial quantities and they produce, your lease will enter the secondary term, as long thereafter that oil, gas or both are produced, and the extension will become moot.
Thats what i was thinking about the 2 year option. I'm curious about what the lease price and terms would be after that since the new well is producing.
Lee, same as the old terms because your lease would not expire if they are producing. If they produce gas or oil on the last day of the primary term of your lease, the lease goes into it's secondary term and lasts until production stops, possibly decades from now.
If the operator has merely started a well and is continuing to work in an attempt to get production, your lease probably contains a continuing operations grace period of 60, 90 or possibly 180 days or more and as long as the lessee/operator continues to attempt to get the well to produce without stopping, at any one time, for longer than the continuing operations grace period, your lease will be saved for the lessee/operator. A possible cumulative time of years, if the operator does not give up before then.
Lee, read your lease and consider everything with it's broadest possible meaning.
Texas? If a well has hit, the lease will be extended as long as there is production, in simple terms. Many variables, however, depending on what your lease says.