Oil and Gas Leases Flashcards
Oil and Gas Lease
A legal contract that allows an oil and gas company to explore and produce oil and gas on a specific parcel of land.
Lessor
The landowner who grants the rights to explore and produce oil and gas.
Lessee
The oil and gas company that acquires the rights to explore and produce oil and gas.
Royalty
A share of production, or the revenue from production, paid to the lessor by the lessee.
Primary Term
The initial period of time during which the lessee must begin drilling operations or the lease will expire.
Paid-Up Lease
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.
Shut-In Royalty Clause
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.
Pooling Clause
A provision that allows the lessee to combine the leased land with other leases or mineral interests to form a drilling unit.
Delay Rental
A payment made by the lessee to the lessor to defer drilling operations for a specified period of time.
Surface Use Agreement
A separate agreement that outlines the terms and conditions for the lessee’s use of the surface area during drilling and production operations.
Habendum Clause
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.
Granting Clause
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.
Drill or Pay Clause
A clause that requires the lessee to either begin drilling operations or pay the lessor a specified amount to maintain the lease.
Continuous Operations Clause
A clause that allows the lessee to extend the lease beyond the primary term as long as drilling or production operations are ongoing.
Force Majeure Clause
A clause that excuses the lessee from performance obligations in the event of circumstances beyond their control, such as natural disasters or labor strikes.
Warranty of Title
A clause in which the lessor guarantees their ownership of the mineral rights and the validity of the lease.
Depth Limitations
Restrictions in the lease that limit the lessee’s rights to specific depths or formations.
Horizontal Pugh Clause
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.
Reassignment Clause
A clause that allows the lessee to assign or transfer their interest in the lease to another party.
Extension and Renewal Provisions
Clauses that outline the conditions under which the lessee may extend or renew the lease beyond the primary term.
Cessation of Production Clause
A clause in an oil and gas lease that outlines the conditions under which the lease will terminate if production ceases.
Regulatory Provisions
Clauses in a lease that address compliance with applicable laws, regulations, and rules governing oil and gas operations.
Assignment Clause
A clause that governs the conditions under which a lessee can transfer or assign their interest in the lease to another party.
Lease Ratification
The process of confirming or approving a previously executed lease, typically to correct defects or errors in the original lease.
Lease Amendment
A written modification or change to the terms and conditions of an existing oil and gas lease.
Top Leasing
The practice of acquiring a new lease on a property that is already under an existing lease.
Lease Acquisition Process
The steps and procedures involved in identifying, negotiating, and securing oil and gas leases from mineral owners.
Lease Negotiation
The process of discussing and agreeing upon the terms and conditions of an oil and gas lease with the mineral owner.
Lease Bonus
A one-time payment made to the mineral owner by the lessee as consideration for signing the lease.
Lease Option
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.
Texas Paid-Up Oil and Gas Lease
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.
Texas Lease Ratification Act
A Texas law that allows for the ratification and validation of certain defective oil and gas leases.
Texas Mineral Interest Pooling Act
A Texas law that governs the pooling of mineral interests for the purpose of drilling and production operations.
Vertical Pugh Clause
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.
