I am still considering a lease of mineral rights in Canadian County - SE/4SW/4 a/d/a The E/2SW/4 and Lot 4 a/d/a/ the SW/4SW/4 - The lease being offered is a Paid Up lease, offering a Primary term of 3 years and and additional 2 years. The wording in question is:
If, at the expiration of the primary term, lessee is conducting operations for drilling, completing or reworking a well, this lease nevertheless shall continue as long as such operations are prosecuted or additional operations are commenced and prosecuted (whether on the same or successive wells) with no cessation of more than 90 days, and if production is discovered, this lease shall continue as long thereafter as oil or gas, are produced.
My question is - does that mean the lease will continue even after the additional 2 years if they are doing any kind of exploration, etc? My concern is getting stuck in an agreement for a longer period of time than the 5 years total.
All this legal wording is confusing! Thank you for any help you can give.
June Lucky
My advice is to tell them you want a lease with no option , 3 years is plenty of time and then if they do not start to drill you can lease again if the area is hot.
Caroly,
What is the Section, Township and Range. Your minerals could be in a hot area and lease for 1/4 with a high dollar bonus?
Does the have an Exhibit A? .
email me k5bm@cox.net and I will send you a good Exhibit to attach to the lease.
That wording means that the producer can perpetuate the lease in full force and effect, without having to exercise their option to extend the lease and without having to renegotiate a NEW lease, until production ceases for more than ninety days. By the way, you have the wrong perspective on this. You SHOULD want to be "stuck in an agreement" for more than five years total, because that means that you will be receiving ROYALTY payments, a hopefully steady, albeit not uniform, stream of income for many years. Generally speaking, you will make MORE money from the royalty payments on a good well than you would signing a new lease and getting another one-time bonus payment.