Lease Expiration

I need advice on when a lease actually terminates. I signed a 3 year lease with language "and as long thereafter as oil or gas, or either of them, is produced from said land by the Lessee."

What constitutes production ? The lease is dated October 9, 2014 and so far, no well has been drilled.

Bill, It would be 3 years from the date at the top of the lease. As long as there is no effort to drill a well by October 9, 2017 (assuming this is the date at the top of the lease) then you can lease again. If someone contacts you around the time it expires I would check to make sure no one was filed a permit to drill before signing a new lease.

I would make sure there is not a 2 year extension on it. If it has a two year extension you should be contacted by the holder of the lease prior to the end of the original 3 year term to pay you for an extension or it is invalid.

Thanks Darla, is it necessary to file some sort of notice once the lease has expired - I guess I'm asking what is the common practice.

In Grady County I very seldom see a notice recorded. In some of the counties in Northern Oklahoma they almost always do. Chances are if anyone is looking to drill there they know how to check to make sure nothing has been drilled and how to tell it has expired, but if it makes you sleep better you can, but it won't get you leased again any faster.

Darla I was looking at your reply to Bill.I have a question.I have a lease with a 2 year extension in McClain County Oklahoma.The extension will be up in November.But I never received a notice after the end of the primary term.Does that mean that I can leases this property again in November because they did not notify me even though it is in the lease offer.The property also has a vertical on it and it paid me like 67.00 dollars last year.Is that enough money to be HBP?Any help would be appreciated.

Odds are the lease is HBP. The $67 you received is only for your share (as per your acreage as part of the total unit) of the royalty interest.

So gross up this $67 to a higher number (e.g. assuming that your acreage is 10% of the total unit, total royalty would be 10 times the $67 or $670).

Then assuming that the royalty is 25%, then one can assume that the operator made about $2000 for the year).

This is just an example of the calculation so that you can figure this out knowing your percentage of the production unit.

David, Without looking at the lease and checking production I can't say for sure, but from what your saying... If they drilled this well producing vertical well in the first three years of the lease and there is no pugh clause in your lease it can be holding all of the acreage on your lease with it's production. Since no one has tried to lease you then this is probably what has happened. You are welcome to send me the name on the lease and Sec. Twn and Rng and I will take a look.

Thank you Roick Man.