EXHIBIT 10.11
OIL, GAS & MINERAL LEASE
THIS LEASE AGREEMENT is made effective the 6th day of April, 1995
between XXXXXX XXXX XX 1976 TRUST, XXXXXX XXXX, TRUSTEE as Lessor (whether
one or more), whose address is 000 Xxxxxx Xxxx, Xxxxx, Xxxxx 00000 and UNION
PACIFIC RESOURCES COMPANY, as Lessee, whose address is X.X. Xxx 0, Xxxx
Xxxxx, Xxxxx 00000. All printed portions of this lease were prepared by
Lessee, but all other provisions (including the completion of blank spaces)
were prepared jointly by Lessor and Lessee.
1. DESCRIPTION. Lessor, in consideration of Ten dollars and other good
and valuable consideration Dollars ($10.00), in hand paid, of the royalties
herein provided and the covenants herein contained, hereby grants, leases and
lets exclusively to Lessee, for the purpose of exploring for, developing,
producing and marketing oil and gas, along with all hydrocarbon and
nonhydrocarbon substances produced in association therewith including helium,
carbon dioxide and other commercial gases as well as hydrocarbon gases
(referred to herein as "covered minerals"), the following described land (the
"leased premises") in Washington County, Texas, to-wit:
24.527 acres of land, more or less, out of the X. XXXXXX SURVEY, A-49,
Washington County, Texas, and being the same land described as Tract One of
15.032 acres, more or less and Tract Two of 9.495 acres, more or less, in a
Deed dated March 24, 1995, from D.N.T.X., Inc. formerly: Denitex
International Corporation to Xxxxxx Xxxx, XX 1976 Trust, recorded in Volume
776, page 540 of the Official Records of Washington County, Texas.
This lease also covers accretions and any small strips or parcels of
land now or hereafter owned or claimed by Lessor which are contiguous or
adjacent to the leased premises whether or not such parcels are known to
exist by Lessor or Lessee, and for the aforementioned consideration, Lessor
agrees to execute at Lessee's request any additional or supplemental
instruments for a more complete or accurate description of the land so
covered. For the purpose of determining the amount of any rentals and shut-in
royalties hereunder, said land shall be deemed to be comprised of 24.527
acres, whether it actually comprises more or less.
2. TERM OF LEASE. This lease shall be in force for a primary term of
three (3) years from the effective date hereof, and for as long thereafter as
a covered mineral is produced in paying quantities from the leased premises
or this lease is otherwise maintained in effect pursuant to the provisions
hereof.
3. ROYALTY. Royalties on covered minerals produced and saved hereunder
shall be paid by Lessee to Lessor as follows: (a) For oil and other liquid
hydrocarbons separated at Lessee's field separator facilities, the royalty
shall be one-sixth (1/6) of such production, to be delivered at Lessee's
option to Lessor at the wellhead or to Lessor's credit at the oil purchaser's
transportation facilities, provided that Lessee shall have the continuing
right to purchase such production at the wellhead posted price then
prevailing in the same field (or if there is no such price then prevailing
in the same field, then in the nearest field in which there is such a
prevailing price) for production of similar grade and gravity less a
proportionate part of ad valorem taxes and production, severance, or other
excise taxes, (b) for gas (including casinghead gas) and all other covered
minerals, the royalty shall be one-sixth (1/6) of the net proceeds realized
by Lessee from the sale thereof, less a proportionate part of ad valorem
taxes and production, severance, or other excise taxes, provided that Lessee
shall have the continuing right to purchase such production at the prevailing
wellhead market price paid for production of similar quality in the same
field (or if there is no such price then prevailing in the same field, then
in the nearest field in which there is such a prevailing price) less a
proportionate part of ad valorem taxes and production, severance, or other
excise taxes and (c) if during or after the primary term one or more xxxxx on
the leased premises or lands pooled therewith are capable of producing oil or
gas or other substances covered hereby in paying quantities, but such well or
xxxxx are either shut-in or production therefrom is not being sold by Lessee
for a period of 90 consecutive days, then Lessee may pay shut-in royalty of
one dollar per acre of land then covered by this lease, such payment to be
made to Lessor on or before the end of said 90-day period and thereafter on or
before each anniversary of the end of said 90-day period while the well or
xxxxx are shut-in and it shall be considered that such well is producing in
paying quantities for all purposes hereof during any period for which such
shut-in royalty is tendered; provided that if this lease is otherwise being
maintained by the payment of rentals or by operations, or if a well or xxxxx
on the leased premises is producing in paying quantities, no shut-in royalty
shall be due until the end of the 90-day period next following the end of the
rental period or the cessation of such operations or production, as the case
may be. Lessee shall have free use of oil, gas, water, and other substances
produced from said land, except water from Lessor's xxxxx or ponds, for all
operations hereunder, and Lessor's royalty shall be computed after deducting
any so used.
4. OPERATIONS. If, after expiration of the primary term, Lessee drills
a dry hole on the leased premises or if all production of covered minerals
should permanently cease from any cause either voluntary or involuntary (and
if this lease is not otherwise being maintained), this lease shall remain in
effect if Lessee commences drilling, reworking or other operations on the
leased premises within 90 days thereafter. If, at or after expiration of the
primary term, this lease is not otherwise being maintained but Lessee is then
engaged in drilling, reworking or other operations calculated to obtain or
restore production from the leased premises, this lease shall remain in
effect so long as such operations are conducted with no cessation of more
than 90 consecutive days and, if such operations result in the production of
a covered mineral, as long thereafter as there is production from the leased
premises. After production has been established on the leased premises,
Lessee shall drill such additional xxxxx as a reasonably prudent operator
would drill under the same or similar circumstances to (a) develop the leased
premises as to formations then capable of producing in paying quantities on
the leased premises or (b) protect the leased premises from uncompensated
drainage by a well producing a covered mineral in paying quantities located
within 330 feet of and draining the leased premises. There shall be no
covenant to drill exploratory xxxxx or any additional xxxxx except as
expressly provided herein.
5. POOLING. Lessee shall have the continuing and recurring right, but
not the obligation, to pool all or any part of the leased premises or
interest therein with any other lands, leases or interests, as to any or all
depths or zones, and as to any or all covered minerals, either before or
after the commencement of production, whenever Lessee deems it necessary or
proper to do so in order to prudently explore, develop or operate the leased
premises, whether or not similar pooling authority exists with respect to
such other lands, leases or interests. A unit formed by such pooling for an
oil well which is not a horizontal completion shall not exceed 80 acres plus
a maximum acreage tolerance of 10%, and for an oil well which is a horizontal
completion or a gas well shall not exceed 640 acres plus a maximum acreage
tolerance of 10%; provided that larger units may be formed for an oil well or
a gas well, whether or not horizontally completed, in order to conform to any
well spacing or density pattern permitted by any governmental authority
having jurisdiction over such matters. The terms "oil well" and "gas well"
shall have the meanings prescribed by applicable law or by regulations of the
governmental authority which has jurisdiction over such matters. The term
"horizontal completion" shall mean an oil well or a gas well in which the
horizontal component of the gross completion interval exceeds 100 feet in
length. Lessee may pool or combine land covered by this lease or any
portions thereof, as above provided as to oil in any one or more strata and
as to gas in any one or more strata. Units formed by pooling as to any
stratum or strata need not conform in size or area with units formed as to
any other stratum or strata, and oil units need not conform as to area with
gas units. To exercise its pooling rights hereunder, Lessee shall file of
record a written declaration describing the unit, and the effective date of
pooling shall be the date of filing unless provided otherwise in such
declaration. Lessee wholly at its option may exercise its authority to pool
either before or after commencing operations for or completing an oil or gas
well on lands lying within a unit and any unit may include, but is not
required to include, lands or leases upon which a well producing or capable of
producing oil or gas in paying quantities has theretofore been completed, or
upon which operations have theretofore been commenced. Production, drilling
or reworking operations anywhere on a unit which includes all or any part of
the leased premises, regardless of whether such production was secured or
such drilling or reworking operations were commenced before or after the
execution of this lease or the instrument designating the pooled unit, shall
be treated for all purposes (except the payment of royalties on production
from the pooled unit) as if they were production, drilling or reworking
operations on the leased premises and references herein to production from or
operations on the leased premises shall be deemed to include production from
or operations on any portion of such pooled unit; provided that if after
creation of a pooled unit a well is drilled on land within the unit area
(other than the leased premises) which well is not classified as the type of
well for which the unit was created (oil, gas or other minerals as the case
may be), such well shall be considered a dry hole for purposes of applying
the additional drilling and reworking provisions hereof. If a gas well on a
gas unit, which includes all or a portion of the leased premises, is
reclassified as an oil well, with respect to all lands which are included
within the unit (other than the lands on which the well is located), the date
of such reclassification shall be considered as the date of cessation of
production for purposes of applying the provisions of this lease covering
additional drilling and reworking. The production on which Lessor's royalty
is calculated shall be that proportion of the total unit production which the
net acreage covered by this lease and included in the unit bears to the
total gross acreage in the unit, but only to the extent that such proportion
of unit production is sold by Lessee. Pooling in one or more instances shall
not exhaust Lessee's pooling rights hereunder, and Lessee shall, without the
joinder of Lessor, have the recurring right but not the obligation to revise
any unit formed hereunder by expansion or contraction or both, either before
or after commencement of production, in order to conform to the well spacing
or density pattern permitted by the governmental authority having
jurisdiction, or to conform to any productive acreage determination made by
such governmental authority, or court order, or when to do so would, in the
judgment of Lessee, promote the conservation of covered minerals in and under
and that
may be produced from the leased premises. In making such a revision, Lessee
shall file of record a written declaration describing the revised unit and
the effective date of revision shall be the date of filing unless provided
otherwise in such declaration. To the extent any portion of the leased
premises is included in or excluded from the unit by virtue of such revision,
the proportion of unit production on which royalties are payable hereunder
shall thereafter be adjusted accordingly, and such adjustment shall be made
effective as of the effective date of the revision. Lessee may at any time
dissolve any unit formed hereunder by filing a written declaration describing
the unit, and the effective date of dissolution shall be the date of filing
unless provided otherwise in such declaration. If this lease now or
hereafter covers separate tracts, no pooling or unitization or royalty
interests as between any such separate tracts is intended or shall be implied
or result merely from the inclusion of such separate tracts within this lease
but Lessee shall nevertheless have the right to pool or unitize as provided in
this paragraph with consequent allocation of production as herein provided.
As used herein the words "separate tract" mean any tract with royalty
ownership differing, now or hereafter, either as to parties or amounts, from
that as to any other part of the leased premises. Pooling hereunder shall not
constitute a cross-conveyance of interests.
6. ANCILLARY RIGHTS. In exploring for, developing, producing and
marketing oil, gas and other substances covered hereby on the leased
premises, in primary or enhanced recovery, Lessor hereby grants and conveys
to Lessee the right of ingress and egress along with the right to conduct such
operations on the leased premises as may be reasonably necessary for such
purposes, including but not limited to geophysical operations, the drilling of
xxxxx, and the construction and use of roads, canals, pipelines, tanks, water
xxxxx, disposal xxxxx, injection xxxxx, pits, electric and telephone lines,
power stations, and other facilities deemed necessary by Lessee to discover,
produce, store, tread and transport production. In exploring, developing,
producing or marketing from the leased premises, the ancillary rights granted
herein shall apply (a) to the entire leased premises described in Paragraph 1
above, notwithstanding any partial release or other partial termination of
this lease; and (b) to any other lands in which Lessor now or hereafter has
authority to grant such rights in the vicinity of the leased premises. No
surface location for a well shall be located less than 200 feet from any
house or barn now on the leased premises or other lands used by Lessee
hereunder without Lessor's consent, and Lessee shall pay for actual damage
caused by its operations to buildings and other improvements now on the
leased premises, or such other lands, and to commercial timber and growing
crops thereon. Lessee shall have the right at any time to remove its
fixtures, equipment and materials, including well casing, from the leased
premises or such other lands during the term of this lease or within 180 days
following the expiration thereof.
7. OWNERSHIP CHANGES. The interest of either Lessor or Lessee
hereunder may be assigned, devised or otherwise transferred in whole or in
part, by area or by depth or zone, and the rights and obligations of the
parties hereunder shall extend to their respective heirs, devisees, executors,
administrators, successors and assigns. No change in Lessor's ownership
shall have the effect of reducing the rights or enlarging the obligations of
Lessee hereunder, and no change in ownership shall be binding on Lessee until
60 days after Lessee has been furnished the original or certified or duly
authenticated copies of the documents establishing such change of ownership
to the satisfaction of Lessee. In the event of the death of any person
entitled to shut-in royalties hereunder, Lessee may pay or tender such
shut-in royalties to the credit of decedent or decedent's estate. If at any
time two or more persons are entitled to shut-in royalties hereunder, Lessee
may pay or tender such shut-in royalties to such persons, either jointly or
separately, in proportion to the interest which each owns. If Lessee
transfers its interest hereunder in whole or in part, Lessee shall be relieved
of all obligations thereafter arising with respect to the transferred
interest, and failure of the transferee to satisfy such obligations with
respect to the transferred interest shall not affect the rights of Lessee
with respect to any interest not so transferred. If Lessee transfers a full
or undivided interest in all or any portion of the area covered by this
lease, the obligation to pay or tender shut-in royalties hereunder shall be
divided between Lessee and the transferee in proportion to the net acreage
interest in this lease then held by each.
8. WARRANTY OF TITLE. Lessor hereby warrants and agrees to defend
title to the interest conveyed to Lessee hereunder. Lessee, at its option,
may pay or discharge any tax, mortgage or lien existing against the leased
premises and, in the event that it does so, Lessee shall be subrogated to the
rights of the party to whom payment is made and, in addition to its other
rights, may reimburse itself out of any royalties or shut-in royalties
otherwise payable to Lessor hereunder. If Lessor owns less than the full
mineral estate in all or any part of the leased premises, payment of
royalties and shut-in royalties hereunder shall be reduced proportionately to
the amount that Lessor's interest in the leased premises bears to the entire
mineral estate in the leased premises.
9. RELEASE OF LEASE. Lessee may, at any time and from time to time,
deliver to Lessor or file of record a written release of this Lease as to a
full or undivided interest in all or any portion of the leased premises or
any depths or zones thereunder, and shall thereupon be relieved of all
obligations thereafter arising with respect to the interest so released. If
Lessee releases all or an undivided interest in less than all of the area
covered hereby, Lessee's obligation to pay or tender shut-in royalties shall
be proportionately reduced in accordance with the net acreage interest
retained hereunder.
10. REGULATION AND DELAY. Lessee's obligations under the lease,
whether express or implied, shall be subject to all applicable laws, rules,
regulations and orders of any governmental authority having jurisdiction
including restrictions on the drilling and production of xxxxx.
Notwithstanding the provisions of paragraph 2 above, when drilling,
reworking, production or other operations are prevented or delayed by such
laws, rules, regulations or orders, or by inability to obtain necessary
permits, equipment, services, material, water, electricity, fuel, access or
easements, or by fire, flood, adverse weather conditions, war, sabotage,
rebellion, insurrection, riot, strike or labor disputes, or by inability to
obtain a satisfactory market for production or failure of purchasers or
carriers to take or transport such production, or by any other cause not
reasonably within Lessee's control (commonly referred to as "force majeure"),
this lease shall not terminate because of such prevention or delay and, at
Lessee's option, the period of such prevention or delay shall be added to the
term hereof. Lessee shall not be liable for breach of any express or implied
covenants of this lease when drilling, production or other operations are so
prevented, delayed or interrupted.
11. BREACH OR DEFAULT. An alleged breach or default by Lessee of any
obligation hereunder or the failure of Lessee to satisfy any condition or
limitation contained herein shall not work a forfeiture or termination of
this lease nor cause a termination or reversion of the estate created hereby
nor be grounds for cancellation hereof in whole or in part, and no litigation
shall be initiated by Lessor with respect to any alleged breach or default by
Lessee hereunder, for a period of at least ninety (90) days after Lessor has
given Lessee written notice fully describing the breach or default, and then
only if Lessee fails to remedy or commence to remedy the breach or default
within such period. In the event the matter is litigated and there is a
final judicial determination that a breach or default has occurred, this
lease shall not be forfeited or cancelled in whole or in part unless Lessee is
given a reasonable time after said judicial determination to remedy the
breach or default and Lessee fails to do so. Nothing in this instrument or
in the relationship created hereby shall be construed to establish a
fiduciary relationship, a relationship of trust or confidence or a principal
- agent relationship between Lessor and Lessee for any purpose.
IN WITNESS WHEREOF, this lease is executed effective the date first
written above, and upon execution shall be binding upon the signatory whether
or not the lease has been executed by all parties named herein as Lessor.
SS # AND/OR TAX ID# X LESSOR:
00-0000000 Xxxxxx Xxxx XX 1976 Trust
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BY: /s/ Xxxxxx Xxxx
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Xxxxxx Xxxx, Trustee
STATE OF Texas )
------------------- ) ss.
COUNTY OF Xxxxxx )
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This instrument as acknowledged before me this 10th day of April,
1995, by Xxxxxx Xxxx,
/s/ Xxxxxxx X. Xxxxxx
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Notary Public
My Commission Expires: [SEAL]
12/19/95
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STATE OF )
------------------- ) ss.
COUNTY OF )
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This instrument as acknowledged before me this ___day of ____________,
19___, by ________________________________.
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My Commission Expires: Notary Public
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