I have a legal question I hope someone may be able to answer. Our oil and gas lease is set to expire early next year. We signed a three-year lease with an oil company in 2014. The lease includes six sections in one block of Loving County. Drilling and production began on one of the sections last summer. Do we sign another lease for the five sections not under production, or does the oil company “keep” the terms of the original lease into perpetuity as long as one section/well is producing?
John, Depends on the terms of your lease. If it is the company's standard form, that single well probably holds all the acreage. Hopefully it has a horizontal pugh clause that would release acreage not included in a producing unit and a vertical pugh clause that would release deeper depths at the end of the primary term. Or it could contain a continuous drilling obligation that would require the operator to keep drilling more wells to hold more acreage. Bottom line, anyone will need more information about the specific language in your lease to give you a definitive answer one way or the other.
Thanks, Eric, for the quick and helpful reply. I looked back over the original lease, and fortunately there is an Pugh clause in the lease. (I am not sure it is as extensive as what you describe, but it seems to provide us protection or rights over the "undrilled" acreage.)
Your comment is a reminder that we need to seek legal counsel when we sign the lease the next time around.
Hello,
I am not a lawyer, so I am seeking legal advice about another question regarding mineral acres we own. If we sign a copy of a lease agreeing to the lease terms of the offer from an oil and gas company, and then, less than a month later, receive a better offer from a competing oil and gas firm are we contractually bound by the terms of the "copied" lease we sent back originally?
In other words, when is the contract binding?
Thanks for any assistance you can offer on this topic.