Three years ago I was a newbie and it would seem I still am. My lease was up in Sept. and my operator now tells me they can stay where they are without lease renewal as long as the well is producing. Did I miss something along the way? Is this proper protocol? Any and all help in this matter would be greatly appreciated. Thank you.
That would be correct if they are producing (although I have not read YOUR lease) and paying you royalties. Will be month to month you can say until the close shop. What block are you or part of Reeves? I’m in same boat as you, 3 year lease now extended as we have a producing lease now.
Yes, that is normal on most leases. Read your lease and there may be some wording along the lines of “It is agreed that this lease shall remain in force for a term of __________ years from date (herein call primary term) and as long thereafter as oil or gas. or either of them, is produced from said land by the lessee.” The primary term is the time in which the operator can choose to drill, but is not required (unless the lease says so). Once there is production, the lease moves into the secondary term and remains in force as long as there is production or any of the “savings” clauses of the lease are in force.
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Read that and it was followed by a 90 day non-production statement basically stating that the lease was terminated if there was NO production for a consecutive period of 90 days. This of course is my understanding of the wording. I read your business profile and must say I am highly impressed; Thank you for your response.
SE/4 Section 136 Block 13
The primary term of the lease gives them time to drill if they decide to do so. If they do drill within that time frame, then they move into the secondary time frame if there is production and that can last from days to decades. Many leases have a 90-180 day savings clause that says if they have spud the well before the end of the primary term, they get the extra days to complete the well. “Saves the lease” for the lessee an extra 90 days (without paying anything).
The additional 90 days that you are referring to is another “savings clause” that kicks in at the end of the producing secondary term. This could be decades later. It gives them 90 days to drill another well and get more production. (Another 90 days they do not have to pay for.) Quite normal language.
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One lease and they own you for life?
Pretty much (in some cases) That is why it is so important to get good oil and gas legal help for that very first lease so you understand the consequences of every clause and how long it might hold you.
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I completely and totally agree with that. I inherited these rights “out of the blue”; came in blind, was led blind, agreed blind. Everything up front was rush, rush, rush; sign this, do that, affadavit this, legalize that. I barely had time to read the lease over once; had to sign it, ready to drill right now; I should have seen it. Hindsight is 20/20. So the per net mineral acre royalties were a one time deal? I’m so upset with myself. Thank you so much for all your information, I sincerely appreciate it. R Speir
Don’t be too hard on yourself. We all start at ground zero. I have learned most in life by making mistakes, yet learning from them. The bonus you received for the lease is a one time event if it is the “paid up” payment for all the primary term years. Most leases are that way these days. The royalties that you get from the producing wells will come as long as the wells produce. Your original Division Order may have had a $100 minimum on it, but you can change that to $25. I do that when I first sign the Division Order or send the confirmation of decimal amount letter. That way, as time goes on and royalties get lower and lower, I get my checks in a more timely fashion instead of waiting for royalties to add up to $100 and only getting a check every few months.
Hi… in our leases we have a continuous drilling clause. This is where they have 90/180 days to drill more wells. This means once the primary term has ended plus either the 90 or 180 days have passed that any and ALL acreage not associated with any one well is open to be leased again. There are also depth clauses as part of any continuous drilling clause. Depends on what your lease says.
RDS, not sure why you are so hard on yourself here? Did you not get a BONUS for signing the lease? If you did not then yes a slight kick in the pants is justified. But regardless, if they are drilling and you are getting royalties then you should be very thankful. Many a lease is signed and nothing much ever happens. And lets also be thankful that if we ever see a penny out of this land many of us here simply inherited it for little or no cost.
If anyone should be angry it would be my great-great grandfather whom got swindled buying this acreage over 100+ years ago!
Point well made and well taken.
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HOW and WHERE can I do that (division order) and as I said before; I appreciate your help.
I am seriously re-reading this lease and going through and over every word with a fine tooth comb and all I’m coming up with is “flakes” but I haven’t come across “continuous drilling” YET. My “acreage” is small and I’m part of a collective I guess you would call it so I don’t know how that would apply to me.
You can use the NADOA form. It is best if you have your original Division Order to look at. If you do not have the original, contact your operator and ask for a copy of it. Always keep those in your files. If you are in TEXAS, you original DO was probably longer than the NADOA form. Many of us use the NADOA form instead.
0_NADOA_Division Order Model Blank Form 2017v 2.pdf (78.2 KB)
Primexx drilled the RED UNIT 136-137E 10H well which was completed in April 2018. RRC Lease 08-49640. The plat shows that the unit is the E/2 of Section 136 and Section 137 and includes the entire SE/4 of Section 136. So all of your acreage is included in the unit. If your lease contains a depth severance clause, then some deeper depths may have expired. You are listed as a mineral owner in the tax records and should be receiving royalty checks from Primexx. Oil production fell precipitously in March 2020 and is running about 100 bbl per month. RRC report shows production but no oil sales in October and November 2020 and Primexx has not reported December 2020 production. As of November 30, there were 366 bbl sitting in the tanks. At 100 bbl per month, trucked oil will only be picked up and sold about every three months. Your royalties may be held in minimum suspense until reaching the amount specified in your division order or annually. Watch the production on the RRC to see if the well ceases to produce for an extended time. Your lease may also allow Primexx to shut-in the well and hold the lease by a making a shut-in royalty payment.
I appreciate all this insight. Where do I go to peruse all this info first hand for myself as well as where to watch the production on the RRC? It’s obvious I need to pay more attention and learn a lot more “oil-lese”. Thanks again for all the help.
My Division order is @ $50 minimum my operator informed me.