Third Party Leases

Oil and Gas Leasing Help
1

When someone leases to a third party (other than the company that drills the well) and that third party sells or assigns to the drilling company:

a) where do the royalty payments come, the third party or the drilling company

b) who's responsibility is it to uphold the terms, the third party or the drilling company

Basically, once the third party sells or assigns does that remove the third party as a middleman.

Given all of these what if the third party participates in the well? Then any royalty payments to the MO flows through\from the third party.

2

It really depends on the assignment clause in the lease and the terms of the assignment between the lessee and third party, but typically these assignments will be structured such that the original lessee is relieved of all obligations under the lease including the payment of royalties. In exchange for the assignment, the original lessee will often reserve a small overriding royalty which gets paid by the third party just like the MO's royalty.

3

If the original lessee participates as a working interest owner you mean? That would also depend on the duties it maintains under its assignment, but you can also add in your lease that to the extent asssigned, the original lessee will remain on the hook for any obligations, or that if asssigned, any assignee will assume all obligations under the lease.

4

I would recommend getting an oil and gas lawyer to help you.