Common use of Continuous Drilling Clause in Contracts

Continuous Drilling. At the end of the primary term, this Lease shall remain in full force and effect as to all acreage included in each designated or existing Drilling Block. In order for a three (3) section Drilling Block to be in effect at the end of the primary term, there must be at least one (1) well producing or capable of producing oil and/or gas for its corresponding or associated three (3) section Drilling Block, or operations for the drilling of a corresponding well on a Drilling Block must be commenced. In order to hold or maintain said three (3) section Drilling Block(s) after the end of the primary term, Lessee must: a) be in compliance with the “Continuous Drilling Program” provisions contained herein on a three (3) section Drilling Block; said drilling operations holding the acreage attributable to the associated Drilling Block or b) on Drilling Block(s) in effect, but not in compliance with the Continuous Development Program, Lessee shall pay a delay rental equal to $5.00 per acre as to the acreage within said Drilling Block(s), but only on the acreage outside the defined “Well Tracts”. Said payment initially becomes due 180 days after the end of the primary term and thereafter on the anniversary date of the Lease. As to any acreage outside the Drilling Block(s) in effect at the end of the primary term, Lessee has the option within thirty (30) days to renew said acreage for $25.00 per acre on a separate oil and gas lease, which provides for a 1/6th (16.6666%) royalty, term of 5 years, initial base rental rate of $5.00 per net acre with a $2.50/acre per year escalation on rentals. At the later of (i) 180 days following the end of the primary term of this Lease, or (ii) the conclusion of the Continuous Development Program, as defined hereinafter, this Lease shall terminate as to all lands covered by this Lease not included within a Well Tract, as defined hereinafter except as to acreage renewed by Lessee pursuant to this paragraph. A Well Tract shall consist of any area surrounding each well which is capable of producing oil and/or gas containing 40 acres for each well, plus a tolerance of 10% with the Well Tract for each such well being as nearly as practicable in the shape of a square or rectangle surrounding such well. Should, however, the governmental authority having jurisdiction prescribe or permit the creation of drilling or proration units having a larger than the area above specified for Well Tracts, then said Well Tracts shall conform substantially in size with said drilling or proration units prescribed or permitted by governmental regulations. It is understood that should all or any portion of the lands covered by this Lease be pooled or unitized under the provisions of the pooling clause of Paragraph 5 hereof, that land so pooled or unitized shall be considered with the Well Tract of said pooled unit. This Continuous Development Program, for the purposes of this provision, shall consist of a period during which Lessee conducts operations for the drilling of a well on any Drilling Block, or on land pooled therewith, with no lapse of more than 180 days between the completion or plugging and abandoning of one well and the commencement of operations on the next succeeding well, and with operations for drilling on each well being conducted with no cessation of more than 180 consecutive days and will be hold and perpetuate the acreage only attributable to its associated Drilling Block. For the purposes of this provision, completion of a well shall be deemed to be the date on which Form C-105 report is filed by, Lessee in conformance with the requirements on Rule 1105 (Well Completion or Recompletion Report and Log) of the New Mexico Oil Conservation Division. Commencement of operations shall be deemed to have occurred when Lessee provides Lessor with a drillsite location plat as provided for in Paragraph 16 hereinabove. Notwithstanding the termination of this Lease as to a portion of the lands covered hereby, Lessee shall nevertheless continue to have the right of ingress to and egress from the lands still subject to this Lease for all purposes provided in this Lease, together with easements and rights-of-way for roads, pipelines and other facilities on, over and across all the lands originally covered by this Lease, for access to and from the lands still subject to this Lease, and for the gathering or transportation of oil and/or gas produced from the retained land so long as in accordance with the terms and provisions of this Lease and addendum.

Continuous Drilling. At the end of the primary term, this Lease lease shall remain in full force and effect as to all acreage included in each designated or existing Drilling Blockdrilling block. In order for a three (3) section Drilling Block drilling block to be in effect at the end of the primary term, there must be at least one (1) well producing or capable of producing oil and/or gas for its corresponding or associated three (3) section Drilling Blockdrilling block, or operations for the drilling of a corresponding well on a Drilling Block “drilling block” must be commenced. In order to hold or maintain said three (3) section Drilling Block(s) “drilling block(s)” after the end of the primary term, Lessee must: a) be in compliance with the “Continuous Drilling Program” provisions contained herein on a three (3) section Drilling Block; “drilling block”, said drilling operations holding the acreage attributable to the associated Drilling Block drilling block; or b) on Drilling Block(s) drilling blocks in effect, but not in compliance with the Continuous Development Programcontinuous development program, Lessee shall pay a delay rental equal to $5.00 per acre as to the acreage within said Drilling Block(sdrilling block(s), but only on the acreage outside the defined “Well Tractswell tracts”. Said payment initially becomes due 180 days after the end of the primary term and thereafter on the anniversary date of the Leaselease. As to any acreage outside the Drilling Block(sdrilling block(s) in effect at the end of the primary term, Lessee has the option within thirty (30) days to renew said acreage for $25.00 5.00 per acre on a separate oil and gas lease similar in terms to this lease, which provides for a 1/6th . (16.6666Royalty: 13.5%) royalty, term of ; Term: 5 years, initial base rental rate of ; Initial Base Rental Rate: $5.00 2.00 per net acre with a $2.50/1.00 per net acre per year escalation on rentalsclause as contained herein). At the later of (i1) 180 days following the end of the primary term of this Leaselease, or (ii) the conclusion of the “Continuous Development Program”, as defined hereinafter, this Lease shall terminate as to all lands covered by this Lease not included within a “Well Tract”, as defined hereinafter except as to acreage renewed by Lessee pursuant to this paragraph. A “Well Tract Tract” shall consist of any area surrounding each well which is capable of producing oil and/or gas containing 160 acres for each gas well and 40 acres for each oil well, plus a tolerance of 10% with the Well Tract for each such well being as nearly as practicable in the shape of a square or rectangle surrounding such well. Should, however, the governmental authority having jurisdiction prescribe or permit the creation of drilling or proration units having a larger area than the area above specified for Well Tracts, then said Well Tracts shall conform substantially in size with said drilling or proration units prescribed or permitted by governmental regulations. It is understood that should all or any portion of the lands covered by this Lease be pooled or unitized under the provisions of the pooling clause of Paragraph 5 4 hereof, that land so pooled or unitized shall be considered with within the Well Tract of said pooled unit. This “Continuous Development Program, ” for the purposes of this provision, provision shall consist of a period during which Lessee conducts operations for the drilling of a well on any Drilling Blockdrilling block, or on land pooled therewith, with no lapse of more than 180 days between the completion or of plugging and abandoning of one well and the commencement of operations on the next succeeding well, and with operations for drilling on each well being conducted with no cessation of more than 180 consecutive days and will be hold and perpetuate the acreage only attributable to its associated Drilling Blockdrilling block. For the purposes of this provision, completion of a well shall be deemed to be the date on which Form C-105 report is filed by, Lessee in conformance with the requirements on Rule 1105 (Well Completion or Recompletion Report and Log) of the New Mexico Oil Conservation Division. Commencement of operations shall be deemed to have occurred when Lessee provides Lessor with a drillsite location plat as provided for in Paragraph 16 14 hereinabove. Notwithstanding the termination of this Lease lease as to a portion of the lands covered hereby, Lessee shall nevertheless continue to have the right of ingress to and egress from the lands still subject to this Lease for all purposes provided in this Lease, together with easements and rights-of-way for roads, pipelines and other facilities on, over and across all the lands originally covered by this Lease, for access to and from the lands still subject to this Lease, and for the gathering or transportation of oil and/or gas produced from the retained land so long as in accordance with the terms and provisions of this Lease lease and addendum.

Continuous Drilling. At the end of the primary term, this Lease lease shall remain in full force and effect as to all acreage included in each designated or existing Drilling Blockdrilling block. In order for a three (3) section Drilling Block drilling block composed of 1,920 acres of contiguous land covered by the lease to be in effect at the end of the primary term, there must be at least one (1) well producing or capable of producing oil and/or gas for its corresponding or associated three (3) section Drilling Block, drilling block composed of 1,920 acres of contiguous land covered by the lease or operations for the drilling of a corresponding well on a Drilling Block “drilling block” must be commenced. In order to hold or maintain said three (3) section Drilling Block(s) drilling block composed of 1,920 acres of contiguous land covered by the lease after the end of the primary term, Lessee must: a) be in compliance with the “Continuous Drilling Program” provisions contained herein on a three (3) section Drilling Block; drilling block composed of 1,920 acres of contiguous land covered by the lease, said drilling operations holding the acreage attributable to the associated Drilling Block drilling block; or b) on Drilling Block(s) drilling blocks in effect, but not in compliance with the Continuous Development Programcontinuous development program, Lessee shall pay a delay rental equal to $5.00 per acre as to the acreage within said Drilling Block(sdrilling block(s), but only on the acreage outside the defined “Well Tractswell tracts”. Said payment initially becomes due 180 days after the end of the primary term and thereafter on the anniversary date of the Leaselease. As to any acreage outside the Drilling Block(sdrilling block(s) in effect at the end of the primary term, Lessee has the option within thirty (30) days to renew said acreage for $25.00 5.00 per acre on a separate oil and gas lease similar in terms to this lease, which provides for a 1/6th . (16.6666Royalty: 13.5%) royalty, term of ; Term: 5 years, initial base rental rate of ; Initial Base Rental Rate: $5.00 2.00 per net acre with a $2.50/1.00 per net acre per year escalation on rentals. clause as contained herein.) At the later of (i) 180 days following the end of the primary term of this Leaselease, or (ii) the conclusion of the “Continuous Development Program”, as defined hereinafter, this Lease shall terminate as to all lands covered by this Lease not included within a “Well Tract”, as defined hereinafter hereafter except as to acreage renewed by Lessee pursuant to this paragraph. A “Well Tract Tract” shall consist of any area surrounding an acreage tract of land out of the drilling block including the well location, designated by Lessee, for each well which is capable of producing oil and/or gas containing 40 gas, and shall contain no more than 176 acres for each well, plus a tolerance of 10% with the Well Tract gas well and no more than 44 acres for each such oil well being as nearly as practicable in (provided that, a dewatering well drilled to any coal bearing sand under the shape of lands will be deemed to be a square or rectangle surrounding such wellgas well for this purpose). Should, however, the governmental authority having jurisdiction prescribe or permit the creation of drilling or proration units having a larger area than the area above specified for Well Tracts, then said Well Tracts shall conform substantially in size with said drilling or proration units prescribed or permitted by governmental regulations. It is understood that should all or any portion of the lands covered by this Lease be pooled or unitized under the provisions of the pooling clause of Paragraph 5 hereof, that land so pooled or unitized shall be considered with within the Well Tract of said pooled unit. This “Continuous Development Program, ” for the purposes of this provision, provision shall consist of a period during which Lessee conducts operations for the drilling of a well on any Drilling Blockdrilling block, or on land pooled therewith, with no lapse of more than 180 days between the completion or of plugging and abandoning of one well and the commencement of operations on the next succeeding well, and with operations for drilling on each well being conducted with no cessation of more than 180 consecutive days and will be hold and perpetuate the acreage only attributable to its associated Drilling Blockdrilling block. For the purposes of this provision, completion of a well shall be deemed to be the date on which Form C-105 report is filed by, Lessee in conformance with the requirements on Rule 1105 (Well Completion or Recompletion Report and Log) of the New Mexico Oil Conservation Division. Commencement of operations shall be deemed to have occurred when Lessee provides Lessor with a drillsite location plat as provided for in Paragraph 16 17 hereinabove. Notwithstanding the termination of this Lease lease as to a portion of the lands covered hereby, Lessee shall nevertheless continue to have the right of ingress to and egress from the lands still subject to this Lease for all purposes provided in this Lease, together with easements and rights-of-way for roads, pipelines and other facilities on, over and across all the lands originally covered by this Lease, for access to and from the lands still subject to this Lease, and for the gathering or transportation of oil and/or gas produced from the retained land so long as in accordance with the terms and provisions of this Lease and addendumlease.