My father signed an oil and gas lease in 1981 covering 160 acres in Kingfisher County, Oklahoma. That lease is still in effect today since a well had been drilled on it. I have been trying to educate myself on how the leases and royalty payments are derived. My brother and I purchased all of my dad's royalty interest before he passed away. Since there is a lot of activity in our county now, I have gone to the courthouse and researched all of the leases, transfers, etc. On this particular lease it has a clause in it that states "This lease is a stand up 80 acre lease and shall be so treated by lessee and/or operator if production is obtained". Can anyone please explain to me what this clause means? Does it affect the how the decimal interest is calculated on the royalty payments or is it something that just refers to the surface area on the property. Also, I should mention that I own the 160 acres of surface now as well as 1/2 of my father's mineral interest in the property.
A 40 acre tract is typically a square 1320' x 1320' (1/4 mile x 1/4 mile) An 80 acre tract is two forties either in "Lay Down" (side by side East-West) or "Stand Up" (one on top of the other North-South).
Thank you Steve! I really appreciate the explanation- very helpful information.
Your quote implies that your father put some constraints on unitization for production purposes. He may have been protecting surface rights access. Also, one well may not hold all of the lease or perhaps you have two leases. In Kingfisher, it may be good to research the producing unit. especially the precise date of the well completion. See if there is an Exhibit to the lease referred to. Avoid signing a lease extension or ratification until you know your rights.
Gary L Hutchinson
Thank you for your input Gary. The lease covers the SW/4 of Sec. 32-T17N-R5W of Kingfisher County, Oklahoma. There is only one well on the property which is located in the NE corner of the quarter. The well name is Brian #2-32. I looked on the Oklahoma Corporation Commissions website and their records indicate the spud date was 2-16-1982 and the drill end date was 3-12-1982. The well is still currently producing - very little, but still in operation. During some of my research I found where a cousin of mine had leased the W/2 of the SW/4 to a different company. This makes me believe that my portion of interest is open for lease in the W/2 as well. Do you believe this is true as well? Also, other content in the lease reads, "However, no unit for the production primarily of oil shall embrace more than 40 acres of oil, or for the production primarily of gas with or without distillate more than 640 acres; provided that if any governmental regulation shall prescribe a spacing pattern for the development of the field or allocate a producing allowable based on acreage per well, then any such unit may embrace as much additional acreage as may be so prescribed or as may be used in such allocation of allowable." I own 26 net mineral acres on the whole 160 acres. I am thinking that 13 are on the E/2 SW/4 and 13 on the W/2 SW/4. I know I may have to hire an attorney before this is all said and done, but I am trying to educate myself as much as I can from knowledgeable people like you. Another question I have is concerning calculation of my decimal interest. I know it doesn't matter if it is based on 26 net mineral acres /160 acres, or 13 net mineral acres/80 acres, as the decimal interest would be the same, but does the above referenced clause in the lease indicate it should be calculated on 40 acres instead?
To date, I have not signed any thing - just trying to understand what the stipulations in the original lease mean. I wish stuff was written in layman's terms - any help you can give me will be greatly appreciated!!!!!!
A drilling unit or spacing pattern in the form of a square: i.e.40, 160 or 640 acres
or a rectangle: i.e. 20 or 80 acres
Thank you Ann!