Common use of OFFSET XXXXX Clause in Contracts

OFFSET XXXXX. (a) In the event of production in paying quantities being obtained from a geological formation which is also within the demised estate from any well drilled, prior to or after the date hereof, into any spacing unit laterally or diagonally adjoining the said lands and not owned by the Lessor, or, if owned by the Lessor, not under lease to the Lessee, then, with respect to each spacing unit of the said lands laterally or diagonally adjoining the spacing unit from which production is being so obtained, unless a well has been drilled, tested and completed or is being drilled, tested or completed in the spacing unit and to the horizon in the formation in which production is being so obtained, the Lessee shall, within ninety (90) days from the date of said well being placed on production or the date of this Lease, whichever is later, either: (i) Commence or cause to be commenced operations for the drilling of an offset well into the spacing unit and thereafter diligently and continuously drill, test and complete same to the horizon in the formation from which production is being obtained from the adjoining spacing unit; or (ii) Surrender all those portions of the demised estate and leased substances comprising the spacing unit; or (iii) Where production is being obtained from the spacing unit from a formation other than the formation from which production is being obtained from the spacing unit laterally or diagonally adjoining the said lands, surrender all formations which lie within the spacing unit except that formation within the spacing unit from which the Lessee is obtaining production; or (iv) Extend the time for spudding an offset well under subclause (a)(i) or surrendering under subclause (a)(ii) or (a)(iii), of this clause 8, by paying to the Lessor a compensatory royalty, calculated and paid in accordance with the provisions of this Lease relating to the payment of royalty, equal to the royalty that would be payable to the Lessor hereunder if the leased substances produced from the adjoining producing well were being produced from a well on the said lands; provided that, in the event that there is more than one spacing unit containing a producing well adjoining a spacing unit of the said lands which are producing from the same formations, such compensatory royalty shall be paid on the basis of the production from the adjoining producing well having the highest production in each month. In the event there is a well or xxxxx in the spacing unit or units adjoining a spacing unit of the said lands which is, or are, producing from more than one formation, the compensatory royalty shall be paid on the basis of the aggregate production in each month from all formations which are also within the demised estate. The compensatory royalty shall commence automatically without the requirement of notice by the Lessor to the Lessee, on the last day of the aforesaid ninety (90) day period and shall terminate upon the first day of the month following spudding pursuant to subclause (a)(i) or surrender under subclause (a)(ii) or (a)(iii), of this clause 8. If the Lessee requires production data from publically available sources for calculation of the compensatory royalty, and such information is not yet available on the last day of the ninety (90) day period, the month the production data becomes available will be deemed to be the month in which Lessee markets the leased substances in subclause 5(b). For greater certainty, although this may result in a delay in commencing payment, the compensatory royalty shall still be calculated and payable on production occurring on and after the last day of the ninety (90) day period. (b) If any part of the said lands is laterally or diagonally adjoined by lands that are unitized under a plan of unitization (including, without limitation, a formal unit agreement, a production allocation unit agreement or any other unit or pooling agreement whereby it is agreed to share production from an area greater than a single spacing unit) the Lessor may give written notice to the Lessee that the unitized lands (or the lands which are subject to such other agreement) shall be deemed for all purposes under this Lease to be spacing units from which production in paying quantities is being obtained and the provisions of subclause 8(a) will apply, with the ninety (90) day period provided for therein commencing as at the date of receipt by the Lessee of the Lessor's notice. (c) In addition to the offset obligation provided for in subclause 8(a), the Lessee, to the extent it is consistent with good oilfield practice, shall use its best efforts to drill in a timely manner sufficient xxxxx on the said lands to provide the same density of xxxxx as are producing on the laterally or diagonally adjoining lands. (d) If the drilling of xxxxx pursuant to subclause 8(c) requires a reduction in the size of spacing unit on the said lands, or, subject to the Lessor's approval, if the Lessee otherwise desires a reduction in the size of the spacing unit, the Lessee shall, at its cost, make application for such reduction in the size of spacing unit on the said lands. Notwithstanding the granting of such reduction in the size of the spacing unit, this Lease will continue in force with respect to the demised estate contained within the original spacing unit, as if the reduction in the size of the spacing unit had not been granted, for a period of one (1) year following the date of the granting of the reduction in the size of the spacing unit, after which time this Lease will continue in force, in accordance with its terms, having regard to the reduction in the size of the spacing unit.

OFFSET XXXXX. (a) It shall be the duty and obligation of the Lessee to protect the Lands against drainage of the Leased Substances through a well drilled on Spacing Units laterally or diagonally adjoining the Lands. Offset drilling on the Lands shall be carried on in accordance with, and to the extent of, the general offsetting practice al the time and in the area affected with due regard for established practice in the industry. In this clause, unless the event context otherwise requires, "Producing Well" means a well that has had Commercial Production therefrom at any time subsequent to the date of production in paying quantities being obtained this Lease of one or more of the Leased Substances from lands which are not the Lands and from a geological zone or formation which is also within the demised estate from any Lands; PROVIDED THAT a well drilled, prior to or after existing at the date hereof, into any spacing unit xxxx of this Lease on Spacing Units laterally or diagonally adjoining the said lands and Lands shall not owned by be a "Producing Well" for the Lessor, or, if owned by the Lessor, not under lease purposes of this Clause 17 save to the Lesseeextent that Commercial Production is obtained after the date of this Lease from a formation or formations in such well, thenwhether deepened or not, with respect from which Commercial Production has not been obtained prior to each spacing unit the date of this Lease and in such an instance the said lands provisions of this Clause 17 will apply mutatis mutandis to such well but only insofar as such formation or formations are concerned. If a Producing Well exists on a Spacing Unit laterally or diagonally adjoining the spacing unit from Lands, which Spacing Unit is not owned by the Lessor and leased to the Lessee, and if al any lime after such adjoining Producing Well has been on production is being so obtainedfor one hundred and twenty (120) days, then unless a well has been drilled, tested and completed or is being drilled, tested drilled on the Spacing Unit of the Lands laterally or completed diagonally adjoining the Spacing Unit of the Producing Well and into each zone or formation from which Commercial Production is being obtained from the Producing Well; or all or part of the Spacing Unit of the Lands laterally or diagonally adjoining the Spacing Unit of the Producing Well has been pooled or included in the spacing unit and to the horizon in the formation a Unit in which the pooled or unitized substances include production is being so obtained, the Lessee shall, within ninety (90) days from the date of said well being placed on production each zone or the date of this Lease, whichever is later, either: (i) Commence or cause to be commenced operations for the drilling of an offset well into the spacing unit and thereafter diligently and continuously drill, test and complete same to the horizon in the formation from which production is being obtained from the adjoining spacing unitProducing Well; or the Lessee shall have a period of sixty (ii60) Surrender all those portions days to elect either: to commence within sixty (60) days of the demised estate date of election the drilling of an offset well on each Spacing Unit of the Lands laterally or diagonally adjoining the Spacing Unit where the Producing Well is located (such part of the Lands being herein called "Lessor's Spacing Unit") to each horizon or zones from which such adjoining well is or was producing, and leased substances comprising having commenced the spacing unitdrilling of the offset well or xxxxx, the Lessee shall proceed diligently therewith; or (iii) Where production is being obtained from or to surrender to the spacing unit from a formation other than Lessor, free and clear of the formation covenants, terms, conditions and provisions hereof, all formations and horizons and all of the Leased Substances within each zone or zones from which production is being or was obtained on such adjoining Spacing Unit to the extent that such zone or zones underlie the Lessor's Spacing Unit or units, saving and reserving nevertheless to the Lessee its interest in any other well being drilled on, or producing or capable of being produced from the spacing unit laterally Lessor's Spacing Unit or diagonally adjoining Units to be surrendered and the said lands, surrender all formations which lie within the spacing unit except that formation within the spacing unit from production therefrom to which the Lessee is obtaining entitled from the zone or zones from which such well is capable of producing or, in the case of a drilling well, from the zone or zones in which such well is initially completed for the purpose of taking production; or (iv) Extend or to extend the time period for spudding an offset well the election by the Lessee under subclause (a)(ieither Clause 17.c.(iii) or surrendering under subclause Clause 17(c)(iv) for up to one (a)(ii1) or year from the expiry date of the sixty (a)(iii), of this clause 8, by paying to 60) day notice period provided for in Clause 17(c) and pay compensatory royalty in the Lessor a compensatory royalty, calculated and paid in accordance with the provisions of this Lease relating to the following manner: payment of royalty, the compensatory royally commences at the expiry of the sixty (60) day notice period provided for in Clause 17(c); the compensatory royalty shall be an amount equal to one hundred percent (100%) of the royalty that would be payable to the Lessor hereunder if the leased substances produced production, if any, obtained during the period the Lessee elected to pay compensatory royalty from the adjoining producing well Producing Well were being produced obtained from a well on the said landsLands; provided that, compensatory royalty shall be calculated and paid in the event that accordance with all applicable terms and provisions hereof relating to royally other than royalty paid in kind; if there is more than one spacing unit Spacing Unit containing a producing well Producing Well adjoining a spacing unit of the said lands which are Lessor's Spacing Unit or units and producing from the same formationshorizon, such compensatory royalty shall be paid on the basis of the production from the adjoining producing well having which is closest to the highest production in each month. In the event Lands; if there is a well or xxxxx in on a Spacing Unit adjoining the spacing unit or units adjoining a spacing unit of the said lands which is, or are, Lessor's Spacing Unit producing from more than one formationhorizon, the compensatory royalty shall be paid on the basis of the aggregate production in each month from all formations which are also within horizons; and the demised estate. The payment of compensatory royalty shall commence automatically without the requirement of notice by the Lessor to the Lessee, terminate either: on the last day of the aforesaid ninety (90) day period and shall terminate upon the first day of the month following spudding pursuant to subclause (a)(i) or the surrender by the. Lessee under subclause (a)(ii) or (a)(iiiClause 17.c.(iv), on the first day of this clause 8the month following the commencement of drilling the offset well in the event that the Lessee elects to commence drilling under Clause 17(c)(iii). If the Lessee requires Lands are a window parcel in a unit, the Lessor may, at any time after the expiry of sixty (60) days from the commencement of production data from publically available sources for calculation the unitized zone(s) of the Spacing Units adjoining the Lands involved, give written notice to the Lessee and the provisions of Clauses 17(b) and 17(c) (including without limitation the election provisions of Clause 17(c)) shall apply mutatis mutandis, as though the adjoining Spacing Units of unit lands were the adjoining Spacing Unit(s) from which the Leased Substances were being produced from the unitized horizons through a Producing Well thereon, and for the purposes of compensatory royalty, and production allocated under the unitization to such information is not yet available adjoining Spacing Units or unit lands shall be considered produced from a Producing Well on the last day of the ninety (90) day period, the month the production data becomes available will be deemed to be the month in which Lessee markets the leased substances in subclause 5(b)adjoining Spacing Unit. For greater certainty, although the purposes of this may result Lease a "window parcel" in a delay in commencing payment, unit means the compensatory royalty shall still be calculated Lands that contain the zone(s) that has been unitized and payable that are surrounded on production occurring on and after the last day of the ninety al least three (903) day period. (b) If any part of the said lands is laterally or diagonally adjoined sides by lands that are unitized under a plan or scheme of unitization unitization. PROVIDED THAT, if a Producing Well creates more than one (including1) offset obligation on the Lands and the Lessee commences drilling an offset well on a Lessor's Spacing Unit within the time period set forth in Clause 17(c)(iii), without limitationthe Lessee shall have the right for a period of thirty (30) days after rig release of the last offset well drilled on a Lessor's Spacing Unit to make the election provided for in Clauses 17(c)(iv) and (v) in respect of any remaining Lessor's Spacing Unit(s) or to commence the drilling of a subsequent offset well on any remaining Lessor's Spacing Unit(s) within forty-five (45) days of rig release of the last offset well drilled on the Lands. If the Lessee fails to make any of the elections provided for in Clause 17(c) within the sixty (60) day period provided therefor, a formal unit agreementthe Lessee shall forthwith be deemed to have made the election to pay compensatory royalty under Clause 17(c)(v) and if within the one year period it has not elected pursuant to Clause 17.c., a production allocation unit agreement it shall thereupon be deemed to have elected under Clause 17.(c)(iv). Pooling and Unitization The Lessee is hereby given the right and power at any time and from time to lime to pool the Lands or any portion thereof, or any zone or formation underlying the Lands or any portion thereof, or any of the Leased Substances therein, with any other unit lands or pooling agreement whereby it is agreed any zone or formation underlying such other lands, if such other lands or any zone or formation thereof, together with the Lands or any zone or formation thereof comprise a Spacing Unit, in order to share production from an area greater than forth a single spacing unit) Spacing Unit. The right and power to pool shall be exercisable by the Lessor may give Lessee giving written notice to the Lessee Lessor describing the extent to which the Lands are being pooled and describing the Spacing Unit with respect to which they are so pooled. In the event of pooling there shall be allocated to that portion of the unitized lands (or Lands included in the Spacing Unit that proportion of the total production of the Leased Substances from the Spacing Unit, alter deducting a proportionate share of any Leased Substances used in operations on the Pooled Lands, which the surface area of that portion of the Lands placed in the Spacing Unit bears to the total surface area of the lands which are subject to such other agreement) in the Spacing Unit. The production so allocated shall be deemed considered for all purposes purposes, including the payment of royalty, to be the entire production of the Leased Substances from the portion of the Lands included in the pooling in the same manner as though produced from the Lands under the terms of this Lease. The Lessee may terminate any pooling pursuant to subclause a. hereof by giving written notice to the Lessor. If the Spacing Unit pooled under this clause is varied or terminated by any statute, regulation, order or directive of any government or governmental agency, or if the pooling is terminated or invalidated by reason of the termination or expiration of a lease covering any lands, other than the Lands, within the Spacing Unit, or any other cause beyond the Lessee's reasonable control, and this Lease to be spacing units from which production would otherwise terminate as a result of such variation or termination of the Spacing Unit or such termination or invalidation of the pooling, this Lease shall nonetheless continue in paying quantities is being obtained and the provisions force for a period of subclause 8(a) will apply, with the ninety (90) day period provided for therein commencing as at days after the date of receipt by Spacing Unit has been varied or terminated or the Lessee pooling has been terminated or invalidated and the term of the Lease may be extended further pursuant to other provisions of this Lease. The Lessee, upon obtaining Lessor's notice. (c) written agreement, is given the right and power at any time and from time to time to include the Lands or any portion thereof or any zone or formation underlying the Lands or any portion thereof, or any of the Leased Substances therein, in a Unit Agreement for the unitized development or operation thereof with any other lands, or airy zone or formation underlying such other lands, or any of the Leased Substances therein, if such becomes necessary or desirable in the opinion of the Lessee. In addition to the offset obligation provided for in subclause 8(a)event of unitization, the Lesseeproduction of Leased Substances which are unitized shall be allocated to that portion of the Lands included in the unit in accordance with the terms of the Unit Agreement. The production so allocated shall be considered for all purposes, including the payment of royalty, to be the extent it is consistent with good oilfield practice, shall use its best efforts to drill entire production of the Leased Substances from the portion of the Lands included in a timely manner sufficient xxxxx on the said lands to provide unit in the same density manner as though produced from the Lands under the terms of xxxxx as are producing on the laterally or diagonally adjoining lands. (d) If the drilling of xxxxx pursuant to subclause 8(c) requires a reduction in the size of spacing unit on the said lands, or, subject to this Lease. Upon notice from the Lessor's approval, if the Lessee otherwise desires a reduction in the size of the spacing unit, the Lessee shall, at its cost, make application for such reduction in shall provide the size Lessor with a copy of spacing unit the Unit Agreement within a reasonable lime alter the right and power granted hereunder has been exercised. Any Operations conducted on the said lands. Notwithstanding Pooled Lands or Unitized Lands, whether conducted before, after or during the granting of such reduction in the size exercise of the spacing unitrights and powers granted under this clause, or the presence of a shut-in or suspended well on the Pooled Lands or Unitized Lands, shall have the same effect in continuing this Lease will continue in full force with respect to and effect during the demised estate contained within term hereby granted or any renewal or extension thereof as if such Operations were upon the original spacing unitLands, or as if the reduction said shut-in or suspended well were located on the size of the spacing unit had not been granted, for a period of one (1) year following the date of the granting of the reduction in the size of the spacing unit, after which time this Lease will continue in force, in accordance with its terms, having regard to the reduction in the size of the spacing unitLands.

OFFSET XXXXX. (a) a. In the event of production Production in paying quantities Paying Quantities being obtained from a geological formation which is also within the demised estate Demised Estate from any well drilled, prior to drilled on or after the date hereof, into any spacing unit Spacing Unit which laterally or diagonally adjoining adjoins the said lands Said Lands or Pooled Lands and which is not owned by the Lessor, Lessor or, if owned by the Lessor, not under lease to the Lessee, then, with respect to each spacing unit Spacing Unit of the said lands Said Lands or Pooled Lands which laterally or diagonally adjoining adjoins the spacing unit Spacing Unit from which production is being so obtained, unless obtained and on or into which a well has not been drilled, tested and completed or is not being drilled, tested or completed in the spacing unit and drilled to the horizon in the formation in from which production is being so obtained, the Lessee shall, within ninety (90) days from the date of said well being placed on production or the date of this Leaseproduction, whichever is later, either:either:- (i) Commence commence or cause to be commenced within the aforesaid ninety (90) day period operations for the drilling of an offset well on or into the spacing unit each such Spacing Unit and thereafter diligently and continuously drill, test and complete drill the same to the horizon in the formation from which production is being obtained from the said adjoining spacing unitSpacing Unit; or (ii) Surrender surrender all those portions or any portion of the demised estate Said Lands provided that the lands surrendered shall include that portion of the Said Lands comprising each such Spacing Unit and leased substances further provided that, where production is capable of being obtained in Paying Quantities from that portion of the Said Lands comprising any such Spacing Unit from a formation within the spacing unit; or (iii) Where production Demised Estate other than the formation from which Production in Paying Quantities is being obtained from the spacing unit from a formation Spacing Unit which laterally or diagonally adjoins the Said Lands or Pooled Lands, the Lessee shall only be required to surrender those formations of such Spacing Unit other than the formation from which production is so capable of being obtained from the spacing unit laterally or diagonally adjoining the said lands, surrender all formations which lie within the spacing unit except that formation within the spacing unit from which the Lessee is obtaining production; orin Paying Quantities; (iviii) Extend extend the time for spudding commencing operations for the drilling of an offset well under subclause sub- clause a. (a)(ii) or surrendering under subclause sub-clause a. (a)(ii) or (a)(iiiii), of this clause 8, by paying to the Lessor a compensatory royalty, calculated and paid in accordance with the provisions of this Lease relating to the payment of royalty, equal to the royalty that would be payable to the Lessor hereunder if the leased substances Leased Substances produced from the adjoining producing well from a formation or formations which are also within the Demised Estate were being produced from a well on the said landsSaid Lands or Pooled Lands; provided that, in the event that there is more than one spacing unit Spacing Unit containing a producing well adjoining a spacing unit Spacing Unit of the said lands Said Lands or Pooled Lands which are producing from the same formations, such compensatory royalty shall be paid on the basis of the production from the adjoining producing well having the highest production in each month. In the event there is a well or xxxxx in the spacing unit Spacing Unit or units adjoining a spacing unit Spacing Unit of the said lands Said Lands or Pooled Lands which is, or are, producing from more than one formation, the compensatory royalty shall be paid on the basis of the aggregate production in each month from all formations which are also within the demised estateDemised Estate. The compensatory royalty shall commence automatically without the requirement of notice by the Lessor to the Lessee, on the last day of the aforesaid ninety (90) day period and shall terminate upon the first day of the month following spudding commencement of operations pursuant to subclause sub-clause a. (a)(ii) or surrender under subclause sub- clause a. (a)(ii) or (a)(iiiii), of this clause 8. If the Lessee requires production data from publically available sources for calculation of the compensatory royalty, and such information is not yet available on the last day of the ninety (90) day period, the month the production data becomes available will be deemed to be the month in which Lessee markets the leased substances in subclause 5(b). For greater certainty, although this may result in a delay in commencing payment, the compensatory royalty shall still be calculated and payable on production occurring on and after the last day of the ninety (90) day period. (b) b. If any part of the said lands Said Lands or Pooled Lands is laterally or diagonally adjoined by lands that are unitized under a plan of unitization (including, without limitation, a formal unit agreement, a production allocation unit agreement or any other unit or pooling agreement whereby it is agreed to share production from an area greater than a single spacing unitSpacing Unit) the Lessor may give written notice to the Lessee at any time after sixty (60) days from the date that production commences or is deemed to commence from the lands subject to the unit (or other agreement) that the unitized lands (or the lands which are subject to such other agreement) shall be deemed for all purposes under this Lease to be spacing units Spacing Units laterally or diagonally adjoining the Said Lands or Pooled Lands from which production Production in paying quantities Paying Quantities is being obtained and the provisions of subclause 8(a) sub-clause a. of this clause 8 will apply, with the ninety (90) day period provided for therein commencing as at the date of receipt by the Lessee of the Lessor's notice. notice and with the compensatory royalty payable under sub- clause a. (ciii) In addition to the offset obligation provided for in subclause 8(a), the Lessee, to the extent it is consistent with good oilfield practice, shall use its best efforts to drill in a timely manner sufficient xxxxx of this clause 8 being paid on the said lands to provide basis of production from the same density of xxxxx as are producing on the laterally unit well (or diagonally adjoining lands. (d) If the drilling of xxxxx pursuant to subclause 8(c) requires a reduction in the size of spacing unit on the said lands, or, well subject to such other agreement) having the Lessor's approval, if the Lessee otherwise desires a reduction highest production in the size of the spacing unit, the Lessee shall, at its cost, make application for such reduction in the size of spacing unit on the said lands. Notwithstanding the granting of such reduction in the size of the spacing unit, this Lease will continue in force with respect to the demised estate contained within the original spacing unit, as if the reduction in the size of the spacing unit had not been granted, for a period of one (1) year following the date of the granting of the reduction in the size of the spacing unit, after which time this Lease will continue in force, in accordance with its terms, having regard to the reduction in the size of the spacing uniteach month.

OFFSET XXXXX. (a) In the event of commercial production in paying quantities being obtained from a geological formation which is also within the demised estate from any well drilled, prior to or after the date hereof, into drilled on any spacing unit laterally or diagonally adjoining the said lands and not owned by the Lessor, or, if owned by the Lessor, not under lease to the Lessee, then, with respect to each then unless a well has been or is being drilled on the spacing unit of the said lands laterally or diagonally adjoining the said spacing unit from on which commercial production is being so obtained, unless a well has been drilled, tested and completed or is being drilled, tested or completed in the spacing unit and obtained to the horizon in the formation in from which commercial production is being so obtained, the Lessee shall, within ninety twelve (9012) days months from the date of the said well being has been placed on production or the date of this Lease, whichever is later, eitherregular commercial production: (ia) Commence or cause to be commenced within the twelve (12) .month period aforesaid, operations for the drilling of an offset well into on the spacing unit of the said lands laterally adjoining the said spacing unit on which commercial production is being so obtained, and thereafter diligently and continuously drill, test and complete drill the same to the horizon in the formation from which commercial production is being obtained from the said adjoining spacing unit; orunit;or (iib) Surrender all those portions Pay to the Lessor, commencing on the last day of the demised estate aforesaid twelve (12) month period and leased substances comprising the spacing unit; or (iii) Where production is being obtained from the spacing unit from thereafter at such times as a formation other than the formation from which production is being obtained from the spacing unit laterally or diagonally adjoining the said lands, surrender all formations which lie within the spacing unit except that formation within the spacing unit from which the Lessee is obtaining production; or (iv) Extend the time for spudding an offset well under subclause (a)(i) or surrendering under subclause (a)(ii) or (a)(iii), of this clause 8, by paying royalty would be payable pursuant to the Lessor a compensatory royalty, calculated and paid in accordance with the provisions of this Lease relating Clause 2 hereof, a royalty which shall be equivalent to the payment of royalty, equal to the such royalty that as would be have been payable to the Lessor hereunder if the leased substances produced from the adjoining producing such offsetting well were actually being produced from a well on the said lands; provided that, in the event provided, however, that there is more than one spacing unit containing a producing well adjoining a should any spacing unit of the said lands be laterally adjoining more than one spacing unit upon which are is located a producing from well, the same formations, such compensatory royalty which the Lessee may elect to pay to the Lessor pursuant to Clause 2 shall be paid payable based on the basis of the production from that well which is located closest to the adjoining producing said lands; or (c) Provided that if at any time during such aforementioned twelve (12) month period less the last day thereof such offsetting well having shall cease to be capable of regular commercial production, then the highest production in each month. In obligation imposed by this clause shall be deemed not to have accrued; or (d) Surrender, pursuant to the event there is a well or xxxxx in the spacing unit or units adjoining a spacing unit provisions of Clause 31 hereof, that portion of the said lands comprised in the said spacing unit laterally adjoining the said spacing unit on which isproduction is being so obtained; provided that if any well located on the said spacing unit to be surrendered is capable of production in commercial quantities, or are, producing then the zone from more than one formation, the compensatory royalty which such commercial production is being obtained shall be paid excepted from the lands so surrendered; (e) Clause 7 contained herein shall not apply where a producing xxxxx) or a xxxxx) capable of commercial production presently exists on the basis of the aggregate production in each month from all formations which are also within the demised estate. The compensatory royalty shall commence automatically without the requirement of notice by the Lessor spacing unit adjacent to the Lesseesaid lands; PROVIDED, that if such well drilled on the last day of the aforesaid ninety (90) day period and shall terminate upon the first day of the month following spudding pursuant to subclause (a)(i) or surrender under subclause (a)(ii) or (a)(iii), of this clause 8. If the Lessee requires production data from publically available sources for calculation of the compensatory royalty, and such information is not yet available on the last day of the ninety (90) day period, the month the production data becomes available will be deemed to be the month in which Lessee markets the leased substances in subclause 5(b). For greater certainty, although this may result in a delay in commencing payment, the compensatory royalty shall still be calculated and payable on production occurring on and after the last day of the ninety (90) day period. (b) If any part of lands laterally adjoining the said lands is laterally productive primarily or diagonally adjoined by lands that are unitized under a plan only of unitization (includingnatural gas, without limitation, a formal unit agreement, a production allocation unit agreement the Lessee shall not be obligated either to drill an offset well or any other unit or pooling agreement whereby it is agreed to share production from an area greater than a single surrender said spacing unit) the Lessor may give written notice to the Lessee that the unitized lands (, or the lands portion thereof as hereinbefore provided unless and until an adequate and commercially profitable market for natural gas which are subject to such other agreement) shall might be deemed for all purposes under this Lease to be spacing units produced from which production in paying quantities is being obtained and the provisions of subclause 8(a) will apply, with the ninety (90) day period provided for therein commencing as at the date of receipt by the Lessee of the Lessor's notice. (c) In addition to the offset obligation well can be previously arranged and provided for in subclause 8(a), the Lessee, to the extent it is consistent with good oilfield practice, shall use its best efforts to drill in a timely manner sufficient xxxxx on and unless the said lands to provide the same density of xxxxx as are producing on the laterally or diagonally adjoining lands. (d) If the drilling of xxxxx pursuant to subclause 8(c) requires comprise a reduction in the size of spacing unit on the said lands, or, subject to the Lessor's approval, if the Lessee otherwise desires a reduction in the size of the spacing unit, the Lessee shall, at its cost, make application for such reduction in the size of spacing unit on the said lands. Notwithstanding the granting of such reduction in the size of the spacing unit, this Lease will continue in force with respect to the demised estate contained within the original spacing unit, as if the reduction in the size of the spacing unit had not been granted, for a period of one (1) year following the date of the granting of the reduction in the size of the spacing unit, after which time this Lease will continue in force, in accordance with its terms, having regard to the reduction in the size of the spacing unitnatural gas.

OFFSET XXXXX. (a) In the event of If commercial production in paying quantities being is obtained from a geological formation which is also within the demised estate from any well drilled, prior to or after the date hereofof this Lease from an offset well, into any spacing unit laterally then unless (i) a well has been or diagonally adjoining is being drilled on the said lands and not owned by the Lessor, or, if owned by the Lessor, not under lease to the Lessee, then, with respect to each spacing unit of the said lands laterally or diagonally adjoining the spacing unit of the offset well and into the zone or formation from which commercial production is being obtained from the offset well, or (ii) all or part of the spacing unit of the said lands laterally adjoining the spacing unit of the offset well has been pooled or included in a unit in which the pooled or unitized substances include production from the same zone or formation from which production is being so obtained, unless a well has been drilled, tested and completed or is being drilled, tested or completed in obtained from the spacing unit and to the horizon in the formation in which production is being so obtainedoffset well, the Lessee shall, shall within ninety (90) days 6 months from the later of the date of said the offset well being placed on commercial production or, if information with respect to the amount of production from the offset well is restricted pursuant to any statute, regulation, order or directive of any government or governmental agency and such information is unknown to the date of this LeaseLessee, whichever until one month after such information is later, eithermade public: (ia) Commence commence or cause to be commenced operations for the drilling of an offset a well into on the spacing unit of that portion of the said lands which comprises or is included in the spacing unit laterally adjoining the spacing unit of the offset well and thereafter diligently and continuously drill, test and complete or cause to be drilled the same to the horizon in the zone or formation from which production is being obtained from the adjoining spacing unit; oroffset well; (iib) Surrender all those portions pool or unitize that portion of the demised estate and leased substances comprising the spacing unit; or (iii) Where production said lands which comprises or is being obtained from included in the spacing unit laterally adjoining the spacing unit of the offset well, such pooling or unitization to include production from a the same zone or formation other than from which the offset well is being produced; (c) surrender all or any portion of the said lands pursuant to the provisions hereof, provided that the surrender shall include but may be limited to the zone or formation from which production is being obtained from the offset well underlying that portion of the said lands which comprises or is included in the spacing unit laterally or diagonally adjoining the said lands, surrender all formations which lie within the spacing unit except that formation within of the spacing unit from which the Lessee is obtaining productionoffset well; or (ivd) Extend the time for spudding an offset well under subclause (a)(i) or surrendering under subclause (a)(ii) or (a)(iii), of this clause 8, by paying pay to the Lessor a compensatory royalty, calculated and paid in accordance with at such times as royalty would be payable pursuant to the provisions of this Lease relating Lease, until the provisions of paragraphs (a), (b) or (c) of this clause are met, a royalty which shall be proportionately equivalent on an acreage basis to the payment of royalty, equal to the such royalty that as would be have been payable to the Lessor hereunder if the leased substances produced from the adjoining producing offset well were actually being produced from a well on the said landslands which commenced production on the last day of the said 6-month period; provided thathowever, in the event that there is more than one spacing unit containing a producing well adjoining a should any spacing unit of the said lands laterally adjoin more than one spacing unit upon which are producing is located an offset well from which commercial production is being obtained, the same formations, such compensatory royalty which the Lessee may elect to pay to the Lessor pursuant to this subclause shall be paid calculated on the basis average of the production from the adjoining producing well having said offset xxxxx, such average to be calculated by dividing the highest total production in each month. In the event there is a well or xxxxx in the spacing unit or units adjoining a spacing unit from all of the said lands which isoffset xxxxx by the number of all of the said offset xxxxx. Notwithstanding anything herein contained, the obligations imposed by this clause shall be deemed not to have arisen if (a) the offset well shall cease to be capable of or ceases commercial production during the said 6-month period, or are, producing from more than one formation, the compensatory royalty shall be paid on the basis of the aggregate production in each month from all formations which are also within the demised estate. The compensatory royalty shall commence automatically without the requirement of notice by the Lessor to the Lessee, on the last day of the aforesaid ninety (90) day period and shall terminate upon the first day of the month following spudding pursuant to subclause (a)(i) or surrender under subclause (a)(ii) or (a)(iii), of this clause 8. If the Lessee requires production data from publically available sources for calculation of the compensatory royalty, and such information is not yet available on the last day of the ninety (90) day period, the month the production data becomes available will be deemed to be the month in which Lessee markets the leased substances in subclause 5(b). For greater certainty, although this may result in a delay in commencing payment, the compensatory royalty shall still be calculated and payable on production occurring on and after the last day of the ninety (90) day period. (b) If any part the offset well is productive primarily or only of the said lands is laterally or diagonally adjoined by lands that are unitized under a plan of unitization (including, without limitation, a formal unit agreement, a production allocation unit agreement or any other unit or pooling agreement whereby it is agreed to share production from an area greater than a single spacing unit) the Lessor may give written notice to natural gas and the Lessee that has not previously arranged an adequate and commercial market for the unitized lands (or the lands natural gas which are subject to such other agreement) shall might be deemed for all purposes under this Lease produced from any well to be spacing units from which production in paying quantities is being obtained and the provisions of subclause 8(a) will apply, with the ninety (90) day period provided for therein commencing as at the date of receipt by the Lessee of the Lessor's notice. (c) In addition to the offset obligation provided for in subclause 8(a), the Lessee, to the extent it is consistent with good oilfield practice, shall use its best efforts to drill in a timely manner sufficient xxxxx on the said lands to provide the same density of xxxxx as are producing on the laterally or diagonally adjoining lands. (d) If the drilling of xxxxx drilled pursuant to subclause 8(c) requires a reduction in the size of spacing unit on the said lands, or, subject to the Lessor's approval, if the Lessee otherwise desires a reduction in the size of the spacing unit, the Lessee shall, at its cost, make application for such reduction in the size of spacing unit on the said lands. Notwithstanding the granting of such reduction in the size of the spacing unit, this Lease will continue in force with respect to the demised estate contained within the original spacing unit, as if the reduction in the size of the spacing unit had not been granted, for a period of one (1) year following the date of the granting of the reduction in the size of the spacing unit, after which time this Lease will continue in force, in accordance with its terms, having regard to the reduction in the size of the spacing unitclause.

OFFSET XXXXX. (a) a. In the event of production Production in paying quantities Paying Quantities being obtained from a geological formation which is also within the demised estate Demised Estate from any well drilled, prior to drilled on or after the date hereof, into any spacing unit Spacing Unit which laterally or diagonally adjoining adjoins the said lands and Said Lands or Pooled Lands which is not owned by the Lessor, Lessor or, if owned by the Lessor, not under lease to the Lessee, then, with respect to each spacing unit Spacing Unit of the said lands Said Lands or Pooled Lands which laterally or diagonally adjoining adjoins the spacing unit Spacing Unit from which production is being so obtained, unless obtained and on or into which a well has not been drilled, tested and completed or is not being drilled, tested or completed in the spacing unit and drilled to the horizon in the formation in from which production is being so obtained, the Lessee shall, within ninety (90) days from the date of said well being placed on production or the date of this Leaseproduction, whichever is later, either:either:- (i) Commence commence or cause to be commenced within the aforesaid ninety (90) day period operations for the drilling of an offset well on or into the spacing unit each such Spacing Unit and thereafter diligently and continuously drill, test and complete drill the same to the horizon in the formation from which production is being obtained from the said adjoining spacing unitSpacing Unit; or (ii) Surrender surrender all those portions or any portion of the demised estate Said Lands provided that the lands surrendered shall include that portion of the Said Lands comprising each such Spacing Unit and leased substances further provided that, where production is capable of being obtained in Paying Quantities from that portion of the Said Lands comprising any such Spacing Unit from a formation within the spacing unit; or (iii) Where production Demised Estate other than the formation from which Production in Paying Quantities is being obtained from the spacing unit from a formation Spacing Unit which laterally or diagonally adjoins the Said Lands or Pooled Lands, the Lessee shall only be required to surrender those formations of such Spacing Unit other than the formation from which production is so capable of being obtained from the spacing unit laterally or diagonally adjoining the said lands, surrender all formations which lie within the spacing unit except that formation within the spacing unit from which the Lessee is obtaining production; orin Paying Quantities; (iviii) Extend extend the time for spudding commencing operations for the drilling of an offset well under subclause sub- clause a. (a)(ii) or surrendering under subclause sub-clause a. (a)(ii) or (a)(iiiii), of this clause 8, by paying to the Lessor a compensatory royalty, calculated and paid in accordance with the provisions of this Lease relating to the payment of royalty, equal to the royalty that would be payable to the Lessor hereunder if the leased substances Leased Substances produced from the adjoining producing well from a formation or formations which are also within the Demised Estate were being produced from a well on the said landsSaid Lands or Pooled Lands; provided that, in the event that there is more than one spacing unit Spacing Unit containing a producing well adjoining a spacing unit Spacing Unit of the said lands Said Lands or Pooled Lands which are producing from the same formations, such compensatory royalty shall be paid on the basis of the production from the adjoining producing well having the highest production in each month. In the event there is a well or xxxxx in the spacing unit Spacing Unit or units adjoining a spacing unit Spacing Unit of the said lands Said Lands or Pooled Lands which is, or are, producing from more than one formation, the compensatory royalty shall be paid on the basis of the aggregate production in each month from all formations which are also within the demised estateDemised Estate. The compensatory royalty shall commence automatically without the requirement of notice by the Lessor to the Lessee, on the last day of the aforesaid ninety (90) day period and shall terminate upon the first day of the month following spudding commencement of operations pursuant to subclause sub-clause a. (a)(ii) or surrender under subclause sub- clause a. (a)(ii) or (a)(iiiii), of this clause 8. If the Lessee requires production data from publically available sources for calculation of the compensatory royalty, and such information is not yet available on the last day of the ninety (90) day period, the month the production data becomes available will be deemed to be the month in which Lessee markets the leased substances in subclause 5(b). For greater certainty, although this may result in a delay in commencing payment, the compensatory royalty shall still be calculated and payable on production occurring on and after the last day of the ninety (90) day period. (b) b. If any part of the said lands Said Lands or Pooled Lands is laterally or diagonally adjoined by lands that are unitized under a plan of unitization (including, without limitation, a formal unit agreement, a production allocation unit agreement or any other unit or pooling agreement whereby it is agreed to share production from an area greater than a single spacing unitSpacing Unit) the Lessor may give written notice to the Lessee at any time after sixty (60) days from the date that production commences or is deemed to commence from the lands subject to the unit (or other agreement) that the unitized lands (or the lands which are subject to such other agreement) shall be deemed for all purposes under this Lease to be spacing units Spacing Units laterally or diagonally adjoining the Said Lands or Pooled Lands from which production Production in paying quantities Paying Quantities is being obtained and the provisions of subclause 8(a) sub-clause a. of this clause 8 will apply, with the ninety (90) day period provided for therein commencing as at the date of receipt by the Lessee of the Lessor's notice. notice and with the compensatory royalty payable under sub- clause a. (ciii) In addition to the offset obligation provided for in subclause 8(a), the Lessee, to the extent it is consistent with good oilfield practice, shall use its best efforts to drill in a timely manner sufficient xxxxx of this clause 8 being paid on the said lands to provide basis of production from the same density of xxxxx as are producing on the laterally unit well (or diagonally adjoining lands. (d) If the drilling of xxxxx pursuant to subclause 8(c) requires a reduction in the size of spacing unit on the said lands, or, well subject to such other agreement) having the Lessor's approval, if the Lessee otherwise desires a reduction highest production in the size of the spacing unit, the Lessee shall, at its cost, make application for such reduction in the size of spacing unit on the said lands. Notwithstanding the granting of such reduction in the size of the spacing unit, this Lease will continue in force with respect to the demised estate contained within the original spacing unit, as if the reduction in the size of the spacing unit had not been granted, for a period of one (1) year following the date of the granting of the reduction in the size of the spacing unit, after which time this Lease will continue in force, in accordance with its terms, having regard to the reduction in the size of the spacing uniteach month.