Oil and Gas Leases

Question 1

Oil and Gas Lease

Answer 1

A legal contract that allows an oil and gas company to explore and produce oil and gas on a specific parcel of land.

Question 2

Lessor

Answer 2

The landowner who grants the rights to explore and produce oil and gas.

Question 3

Lessee

Answer 3

The oil and gas company that acquires the rights to explore and produce oil and gas.

Question 4

Royalty

Answer 4

A share of production, or the revenue from production, paid to the lessor by the lessee.

Question 5

Primary Term

Answer 5

The initial period of time during which the lessee must begin drilling operations or the lease will expire.

Question 6

Paid-Up Lease

Answer 6

A lease that does not require the lessee to begin drilling operations during the primary term, as long as the lessee pays the agreed-upon bonus.

Question 7

Shut-In Royalty Clause

Answer 7

A provision that allows the lessee to maintain the lease by paying a specified amount (shut-in royalty) if a well is capable of producing but not being marketed.

Question 8

Pooling Clause

Answer 8

A provision that allows the lessee to combine the leased land with other leases or mineral interests to form a drilling unit.

Question 9

Delay Rental

Answer 9

A payment made by the lessee to the lessor to defer drilling operations for a specified period of time.

Question 10

Surface Use Agreement

Answer 10

A separate agreement that outlines the terms and conditions for the lessee’s use of the surface area during drilling and production operations.

Question 11

Habendum Clause

Answer 11

A clause in an oil and gas lease that defines the duration of the lessee’s rights and the conditions under which the lease may be extended.

Question 12

Granting Clause

Answer 12

The clause in an oil and gas lease that grants the lessee the right to explore and produce oil and gas on the leased premises.

Question 13

Drill or Pay Clause

Answer 13

A clause that requires the lessee to either begin drilling operations or pay the lessor a specified amount to maintain the lease.

Question 14

Continuous Operations Clause

Answer 14

A clause that allows the lessee to extend the lease beyond the primary term as long as drilling or production operations are ongoing.

Question 15

Force Majeure Clause

Answer 15

A clause that excuses the lessee from performance obligations in the event of circumstances beyond their control, such as natural disasters or labor strikes.

Question 16

Warranty of Title

Answer 16

A clause in which the lessor guarantees their ownership of the mineral rights and the validity of the lease.

Question 17

Depth Limitations

Answer 17

Restrictions in the lease that limit the lessee’s rights to specific depths or formations.

Question 18

Horizontal Pugh Clause

Answer 18

A clause that allows the lessee to maintain only the portion of the leased premises that has been included in a drilling or production unit.

Question 19

Reassignment Clause

Answer 19

A clause that allows the lessee to assign or transfer their interest in the lease to another party.

Question 20

Extension and Renewal Provisions

Answer 20

Clauses that outline the conditions under which the lessee may extend or renew the lease beyond the primary term.

Question 21

Cessation of Production Clause

Answer 21

A clause in an oil and gas lease that outlines the conditions under which the lease will terminate if production ceases.

Question 22

Regulatory Provisions

Answer 22

Clauses in a lease that address compliance with applicable laws, regulations, and rules governing oil and gas operations.

Question 23

Assignment Clause

Answer 23

A clause that governs the conditions under which a lessee can transfer or assign their interest in the lease to another party.

Question 24

Lease Ratification

Answer 24

The process of confirming or approving a previously executed lease, typically to correct defects or errors in the original lease.

Question 25

Lease Amendment

Answer 25

A written modification or change to the terms and conditions of an existing oil and gas lease.

Question 26

Top Leasing

Answer 26

The practice of acquiring a new lease on a property that is already under an existing lease.

Question 27

Lease Acquisition Process

Answer 27

The steps and procedures involved in identifying, negotiating, and securing oil and gas leases from mineral owners.

Question 28

Lease Negotiation

Answer 28

The process of discussing and agreeing upon the terms and conditions of an oil and gas lease with the mineral owner.

Question 29

Lease Bonus

Answer 29

A one-time payment made to the mineral owner by the lessee as consideration for signing the lease.

Question 30

Lease Option

Answer 30

A contract that gives the lessee the right, but not the obligation, to acquire an oil and gas lease on a property within a specified time frame.

Question 31

Texas Paid-Up Oil and Gas Lease

Answer 31

A type of lease commonly used in Texas that does not require the lessee to begin drilling operations during the primary term, as long as the agreed-upon bonus payment is made.

Question 32

Texas Lease Ratification Act

Answer 32

A Texas law that allows for the ratification and validation of certain defective oil and gas leases.

Question 33

Texas Mineral Interest Pooling Act

Answer 33

A Texas law that governs the pooling of mineral interests for the purpose of drilling and production operations.

Question 34

Vertical Pugh Clause

Answer 34

a provision in an oil and gas lease that prevents a lessee from holding rights to undrilled depths based solely on production from a single depth.