What do you think about this royalty agreement in my lease?

Oil and Gas Leasing Help
1

ssee agrees to pay lessor as royalty for the oil gas hydrocarbons and by products produced and marketed from leased premises. the price upon which royalty is calculated shall not be less than fair market value for gas oil and hydrocarbons so produced based on arms length transaction for similarly situated wells in the area producing the same quantity ,quality ands being sold at the same point of sale.Payments of royalties for gas oil and other hydrocarbons marketed during any calender month to be on or about the 30th day after receipt of such funds by the lessee. There shall be no deductions from said royalty payment for any reason,directly or indirectly,including but not limited to costs Lessee incurs for producing,gathering,storing ,seperating,treating,transporting,dehydrating,compressing,processing, marketing such oil and or gas, nor shall there be any deductions for taxes, assessment,or any other pre -post production costs. Production from the leased premises shall be measured in accordance with Boyle's Law for the measurement of gas at varying pressures,on the basis of 10 ounces above 14.73 pounds of atmospheric pressure, at a standard base temperature of 60F degrees and stipulated flow temperature of 60degrees,without allowance for temperature and barometric variations. This measurement shall be at the well head. Reports, in reasonable and customary format,pertaining to the calcualtion of Lessor's royalty for any and all wells drilled on the leased premises or lands unitized or pooled with the Leased Premises shall be made reasonably available to Lessor."


In the beginning it states lessee agrees to pay lessor as royalty for the oil,gas,hydrocarbons and by products produced. but under the NO Deductions section the hydrocarbons and byproducts are not stated.

Are they trying to fleece me??? I been told CHK is screwing people by stealing the byproducts such as NG liquids. It doesn't state there shall be no deductions for hydrocarbon or byproducts.

2

I think that it is a poorly drafted clause that no oil company would propose. The royalty percentage is not even mentioned or defined -- sort of a requirement for a royalty provision.

Buddy Cotten

3

above is an addendum

the original is 20% with deductions

4

Then in that case, nobody can comment if they do not see the royalty provision in its entireity. The addendum seems amateurish at first blush.

Tom Sawyer said:

above is an addendum

the original is 20% with deductions

5

Royalty for all oil and gas substances that are produced and sold from the lease premises ,Lessor shall receive as its royalty 20% of the sales proceeds actually received by the lessee from the sale of such production less this same percentage share of all post productions costs, as defined below, and less this same percentage share of all production, severence and ad valorem taxes. As used in this provision, post production costs shall mean (i) all losses of produced volumes(whether by use as fuel,line loss , flaring,venting or otherwise) and (ii)all cost actually incurred by Lessee from and after the wellhead to the point of sale ,inluding, without limitation, all gathering ,dehydration, compression,treatment,processing, marketing and transportation costs incurred in connection with sale of such production. For royalty calculation purposes,Lessee shall never be required to adjust the sales proceeds to account for the purchaser's costs or charges downstream from point of sale. Lessee may withhold Royalty payment unitl such time as the total withheld exceeds $50.

6

I wouldn't sign it. Post production costs can run very high as well as line losses.

7

monday post is original first page. august 16,th is addendum