T23N 60E Section 6 / 8.5 net mineral acres
We have a lease offer of $750/acre and 1/6 royalty, 5 years. The lease appears to be a standard Oil and Gas Lease. Any opinions on this offer? I have another company that seemed interested in the acres, but they seem to be dragging their feet on an offer. Thanks in advance for any help you can give me on whether to take this offer. This site has been of great help in educating me on this business.
who might the company be and who is dragging their feet? Thanks
The prepared lease is L & H Resources, LLP - Lessee. The other interested party was Transcontinent Land Services.
Jim Sheridan said:
who might the company be and who is dragging their feet? Thanks
We did business with Transcontinent out of Denver...good outfit...you need a Pugh clause and a "Shut In" lease agreement. Dawson cty
Could you give me some guidance on what a pugh clause and a shut it are?
Darned if I know, but everyone told us we needed it...there is some info on these boards about them...you can search for them up top...we had a lawyer reveiw the proposal and he advised us to get them included...when we went back to the landman, they had no problem with it and it passed muster with the shyster in the end. Good luck
Roughly, there are pugh clauses that release acres that are not included in the unit that aren't producing or paying royalty and then there is the depth severance clause that releases non-producing depths/formations so you would be entitled to lease them again.
The depth severance clause should be based on a number of feet above and below the wellbore because formations are too vague and leave room for interpretation. Many depth severance clauses in ND are now worthless because they were based on formation language and operators have been able to get the Bakken and Three Forks declared as a single source of supply because there may be some slight communication between the two, Depth severance clauses are also commonly referred to as pugh clause.
As for shut in, Jenna H. Keller has a blog on the often overlooked shut in clause. Shouldn't take but a couple of minutes to read the blog and replies and I think it's worth reading.