What happens when companies drill at the end of your lease

Oil and Gas Leasing Help
1

My question is two-fold:

  1. If a company drills at the end of a lease and continues to use the land after the lease expires, I’m assuming they have to compensate the mineral owner with another bonus of some kind. Is that correct?

  2. If so, is the bonus the new market value or the original bonus signed years before?

2

When you read your lease, it will state that the primary term is 3 or 5 or X years. However, if production is established, then the lease will stay in effect for as long as there is production from your tract or pooled minerals. There are leases over 100 years old because of new wells being drilled before production ceases from existing wells. It is very different from an apartment or office lease which expires absolutely unless the parties agree to a new lease. Good luck with your new well.

1 Like
3

The only time you will get the extension bonus is if they did not drill in the allotted times of the original lease. They can drill on the day before your lease is about to expire and that lease will stay active as long as they are producing.

4

Dear Mr. Primrose,

Expanding a bit on TennisDaze, as he correctly notes, the real answer is in the lease form itself!

Some forms require actual production at the end of the primary term, some require operations (such as staking a location), some require that the well be spudded in by the last day of the primary term, etc.

If you could upload a copy of the lease form, we will be glad to take a look and give you an opinion.

5

Great comments above:

In short:

  1. Understand your lease.
  2. Have good lease terms. If not for you, for your heirs.