EXHIBIT 10.1
OIL AND GAS LEASE
STATE OF TEXAS ss.
ss.
COUNTY OP XXXXXXX xx.
THIS OIL AND GAS LEASE is made this 24th day of October, 2001, between
Xxxxx Xxxxx, whose address is 000 X. Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxx 00000,
hereinafter "Lessor," and Xxxxx X. Xxxxx, whose address is 0000 Xxxxxxxx Xxxxx
Xxxxx, Xxxxxx, Xxxxx 00000, hereinafter "Lessee."
WITNESSETH
1. That Lessor, in consideration of Ten Dollars ($10.00) and other
valuable consideration, the receipt of which is hereby acknowledged, and of the
covenants and agreements of Lessee hereinafter contained, do hereby grant, lease
and let unto Lessee the land covered hereby for the purposes hereinafter
described and with the exclusive right of exploring, drilling, mining and
operating for, producing and owning oil, gas and sulphur, together with right to
make surveys on said land, lay pipe lines, establish and utilize facilities for
surface or subsurface disposal of salt water, construct roads and bridges, build
tanks, power stations, telephone lines, employee houses and other structures on
said land, necessary or useful in Lessee's operations in exploring, drilling
for, producing, treating, storing and transporting minerals produced from the
land covered hereby or adjacent thereto. The land covered hereby and herein
referred to as the "land" or "said land" is located in the County of Xxxxxxx,
State of Texas, and is described as follows:
TRACT ONE: Being all of the XXXXX X. XXXXX SURVEY No. 15, Abstract No.
56, Xxxxxxx County, Texas, containing approximately 801.26 acres, more
or less, and being a part of that certain land described in a Deed
dated July 15, 0000, Xxxxx Xxxxx, Xx., et al to Xxxxxx Xxxx Xxxxx, as
recorded in Volume 70, Page 209, Deed Records of Xxxxxxx County, Texas.
TRACT TWO: Being all of the XXXXX X. XXXXX SURVEY No. 16, Abstract No.
57, Xxxxxxx County, Texas, containing approximately 770.24 acres, more
or less, and being the same land described in that certain Deed dated
July 15, 0000, Xxxxx Xxxxx, Xx., et al to Xxxxxx Xxxx Xxxxx, as
recorded in Volume 70, Page 211, Deed Records of Xxxxxxx County, Texas.
OIL AND GAS LEASE, PAGE -1- OF 10 PAGES
For the purposes of determining the amount of any bonus, delay rental
or other payment hereunder, said land shall be deemed to contain 1,571.5 acres,
whether actually containing more or less, and the above recital of acreage in
any tract shall be deemed to be the true acreage thereof. Lessor accepts the
bonus and agrees to accept the delay rentals as lump sum consideration for this
lease and all rights and options hereunder.
2. Unless sooner terminated or longer kept in force under other
provision hereof, this lease shall remain in force for a term of three (3) years
from the effective date hereof, hereinafter called "primary term", and as long
thereafter as oil, gas and/or sulphur is produced from the land or other land
pooled therewith in commercial quantities or operations, as hereinafter defined,
are conducted upon said land with no cessation for more than ninety (90)
consecutive days.
3. As royalty, Lessee covenants and agrees:
(a) To deliver to the credit of Lessor, in the pipe line to which
Lessee may connect its xxxxx, the equal l/5th part of all oil
produced and saved by Lessee from said land, or from time to time,
at the option of Lessee, to pay Lessor the average posted market
price of such l/5th part of such oil at the xxxxx as of the day it
is run to the pipe line or storage tanks, Lessor's interest, in
either case, to bear l/5th of the cost of treating oil to render it
marketable pipe line-oil;
(b) To pay Lessor on gas and casinghead gas produced from said land
(1) when sold by Lessee, l/5th of the amount realized by Lessee,
computed at the mouth of the well, of (2) when used by Lessee off
said land or in the manufacture of gasoline or other products, the
market value, at the mouth of the well, of l/5th of such gas and
casinghead gas;
(c) To pay Lessor on all other minerals mined or marketed or
utilized by Lessee from said land, one-tenth either in kind or value
at the well or mine at Lessee's election, except that on sulphur
mined and marketed the royalty shall be $2.50 per long ton. If at
the expiration of the primary term or at any time or times
thereafter, there is any well on said land or on lands with which
said land or any portion thereof has been pooled, capable of
producing oil and gas, and all such xxxxx are shut-in, this lease
shall, nevertheless, continue in force as though operations were
being conducted on said land for so long as said xxxxx are shut-in,
and thereafter this lease may be continued in force as if no shut-in
had occurred. Lessee covenants and agrees to use reasonable
diligence to produce, utilize, or market the minerals capable of
OIL AND GAS LEASE, PAGE -2- OF 10 PAGES
being produced from said xxxxx, but in the exercise OF such
diligence, Lessee shall not be obligated to install or furnish
facilities other than well facilities and ordinary lease facilities
of flow lines, separator, and lease tank, and shall not be required
to settle labor trouble or to market gas upon terms unacceptable to
Lessee. If at any time or times after the expiration of the primary
term, all such xxxxx are shut-in for a period of ninety consecutive
days, and during such time there are no operations on said land,
then at or before the expiration of said ninety day period, Lessee
shall pay or tender by check or draft of Lessee, as royalty, a sum
equal to the amount of annual delay rental provided for in this
lease. Upon making said payment, it will be considered that each
such well is producing gas in paying quantities within the meaning
of this lease for a period of one (1) year after the expiration of
said ninety (90) day period. In like manner and upon like payment
being made annually on or before the expiration of the last
preceding year for which such payment or tender has been made, it
will be considered that said well or xxxxx are producing gas in
commercial quantities for successive periods of one (1) year each.
Each such payment or tender shall be made to the parties who at the
time of payment would be entitled to receive the royalties which
would be paid under this lease if the xxxxx were producing, and may
be deposited in the depository bank provided for below. Nothing
herein shall impair Lessee's right to release as provided in
paragraph 4 hereof. In event of assignment of this lease in whole or
in part, liability for payment hereunder shall rest exclusively on
the then owner or owners of this lease, severally as to acreage
owned by each.
4. If operations are not conducted on said land on or before the first
anniversary of the effective date of this lease, then this lease shall terminate
as to both parties, unless Lessee on or before said date shall, subject to the
further provisions hereof, pay or tender to Lessor or to Lessor's credit the sum
of $7,857.50, which shall operate as delay rental and cover the privilege of
deferring operations for one year from said date. The portion of delay rental
due to Lessor shall be sent to Lessor's address as shown above. In like manner
and upon like payments or tenders, operations may be further deferred for a like
period of one year during the primary term. If at any time that Lessee pays or
tenders delay rental, royalties, or other moneys, two or more parties are, or
claim to be, entitled to receive same, Lessee may, in lieu of any other method
of payment herein provided, pay or tender such rental, royalties, or other
moneys, in the manner herein specified, either jointly to such parties or
separately to each in accordance with their respective ownership thereof, as
Lessee may elect. Any payment hereunder may be made by check or draft of Lessee
deposited in the mail or delivered to Lessor or to a depository bank on or
before the last date for payment. Said
OIL AND GAS LEASE, PAGE -3- OF 10 PAGES
delay rental shall be apportion able as to said land on an acreage basis, and
failure to make proper payment or tender of delay rental as to any portion of
said land or as to any interest therein shall not affect this lease as to any
portion of said land or as to any interest therein as to which proper payment or
tender is made. Lessee may at any time and from time to time execute and deliver
to Lessor or file for record a release or releases of this lease as to any part
or all of said land or of any mineral or horizon hereunder, and thereby be
relieved of all obligations as to the released acreage or interest. If this
lease is so released as to all minerals and horizons under a portion of said
land, the delay rental and other payments computed in accordance therewith shall
thereupon be reduced HA the proportion that the acreage released bears to the
acreage which was covered by this lease immediately prior to such release.
5. If at any time or times during the primary terra operations are
conducted on said land and if all operations are discontinued, this lease shall
thereafter terminate on its anniversary date next following the ninetieth day
after such discontinuance unless on or before such anniversary date Lessee
either (1) conducts operations or (2) commences or resumes the payment or tender
of delay rental; provided, however, if such anniversary date is at the end of
the primary term, or if there is no further anniversary date of the primary
term, this lease shall terminate at the end of such term or on the ninetieth day
after discontinuance of all operations, whichever is the later date, unless on
such later date either (1) Lessee is conducting operations or (2) the shut-in
well provisions of paragraph 3 or the provisions of paragraph 11 are applicable.
Whenever used in this lease the word "operations" shall mean operations for and
any of the following: drilling, testing, completing, reworking, recompleting,
deepening, plugging back or repairing of a well in search for or in an endeavor
to obtain production of oil, gas or sulphur, whether or not in paying
quantities.
6. Lessee shall have the use, free from royalty, of water, other than
from Lessor's water xxxxx and of oil and gas produced from said land in all
operations hereunder. Lessee shall have the right at any time to remove all
machinery and fixtures placed on said land, including the right to draw and
remove casing. No well shall be drilled nearer than 200 feet to the house or
barn now on said land without the consent of the Lessor. Lessee shall pay for
damages caused by its operations to growing crops and timber on said land. 7.
The rights and estate of any party hereto may be assigned from time to time in
whole or in part and as to any minerals or horizon. All of the covenants,
obligations, and considerations of this lease shall extend to and be binding
upon the parties hereto, their heirs, successors, assigns, and successive
assigns. No change or division in the ownership of said land, royalties, delay
rentals, or other moneys, or any part thereof, howsoever effected, shall
increase the obligations or diminish the rights of Lessee, including, but not
limited to, the location and drilling of xxxxx and the
OIL AND GAS LEASE, PAGE -4- OF 10 PAGES
measurement of production. Notwithstanding any other- actual or constructive
knowledge or notice hereof or to Lessee, its successors or assigns, no change or
division in the ownership of said lands of the royalties, delay rental, or other
moneys, or the right to receive the same, howsoever effected, shall be binding
upon the then record owner of this lease until thirty (30) days after there has
been furnished to such record owner at his or its principal place of business by
Lessor or Lessor's heirs, successors, or assigns, notice of such change or
division, supported by either originals or duly certified copies of the
instruments which have been properly filed for record and which evidence such
change or division, and of such court records and proceedings, transcripts, or
other documents as shall be necessary in the opinion of such record owner to
establish the validity of such change or division. If any such change in
ownership occurs by reason of death of the owner, Lessee may nevertheless pay or
tender such royalties, delay rental, or other moneys, or part thereof, to the
credit of the decedent in a depository bank provided for above. In the event of
assignment of this lease as to any part (whether divided or undivided) of said
land the delay rental payable hereunder shall be apportionable as between the
several leaseholder owners, ratably according to the surface area or undivided
interests of each, and default in delay rental payment by one shall not effect
the right of other leasehold owners hereunder.
8. In the event Lessor considers that Lessee has not complied with all
its obligations hereunder, both express and implied, Lessor shall notify Lessee
in writing, setting out specifically in what respects Lessee has breached this
contract. Lessee shall then have sixty (60) days after the receipt of said
notice within which to meet or commence to meet all or any part of the breaches
alleged by Lessor. The service of said notice shall be precedent to the bringing
of any action by Lessor on said lease for any cause, and no such action shall be
brought until the lapse of sixty (60) days after service of such notice on
Lessee. Neither the service of said notice nor the doing of any acts by Lessee
aimed to meet all or any of the alleged breaches shall be deemed an admission or
presumption that Lessee has failed to perform all its obligations hereunder. If
this lease is cancelled for any cause, it shall nevertheless remain in force and
effect as to (1) sufficient acreage around each well as to which there are
operations to constitute a drilling or maximum allowable unit under applicable
governmental regulations, (but in no event less than forty acres), such acreage
to be designated by Lessee as nearly as practicable in the form of a square
centered at the well, or in such shape as then existing spacing rules require;
and (2) any part of said land included in a pooled unit on which there are
operations. Lessee shall also have such easements on said land as are necessary
to operations on the acreage so retained.
9. Lessor hereby warrants and agrees to defend title to said land
against the claims of all persons whosoever. Lessor's rights and interests
hereunder shall be charged primarily with any mortgages, taxes or other liens,
OIL AND GAS LEASE, PAGE -5- OF 10 PAGES
or interest and other charges on said land, but Lessor agrees that Lessee shall
have the right at any time to pay or reduce same for Lessor, either before, or
after maturity, and be subrogated to the rights of the holder thereof and to
deduct amounts so paid from royalties or other payments payable or which may
become payable to Lessor and/or assigns under this lease. If this lease covers a
less interest in the oil, gas and sulphur in all or any part of said land than
the entire and undivided fee simple estate (whether Lessor's interest is herein
specified or not), or no interest therein, then the royalties, delay rental, and
other moneys accruing from any part as to which this lease covers less than such
full interest, shall be paid only in the proportion which the interest therein,
if any, covered by this lease, bears to the whole and undivided fee simple
estate therein. All royalty interest covered by this lease (whether or not owned
by Lessor) shall be paid out of the royalty herein provided. This lease shall be
binding upon each party who executes it without regard to whether it is executed
by all those named herein as Lessor.
10. If, while this lease is in force, at, or after the expiration of
the primary term hereof, it is not being continued in force by reason of
production or the shut-in well provisions of paragraph 3 hereof, and Lessee is
not conducting operations on said land by reason of (1) any law, order, rule or
regulation, (whether or not subsequently determined to be invalid) or (2) any
other cause, whether similar or dissimilar, (except financial) beyond the
reasonable control of Lessee, the primary term and the delay rental provisions
hereof shall be extended until the first anniversary date hereof occurring one
hundred and eighty (180) days following the removal of such delaying cause, and
this lease may be extended thereafter by operations as if such delay had not
occurred.
11. Notwithstanding anything hereinabove to the contrary, there is
expected herefrom and reserved to the Lessor herein all uranium, fissionable
materials and all bentonite, fullers earth and other clay like substances, it is
specifically understood and agreed that this lease covers only oil, gas,
sulphur, and associated liquid or liquefiable hydrocarbons or the constituent
elements of any of the elements named, but this lease does not cover or include
any other minerals with all other such minerals, being reserved to the Lessor
herein. Accordingly, the words "oil, gas" when used herein, shall mean, oil,
gas, sulphur and associated liquid or liquefiable hydrocarbons and their
constituent elements and the words "all other minerals", whenever used herein
shall be stricken from this lease, so that such "all other minerals", as defined
herein are reserved to the Lessor.
12. Lessee's employees and others entitled to admission upon said land
shall confine themselves to their business and duties in the performance of this
lease, and no hunting, fishing or other trespassing shall be permitted by them;
and Lessee shall not permit its employees or any other person to bring any guns
of any kind upon the lease premises.
OIL AND GAS LEASE, PAGE -6~ OF 10 PAGES
13. In the event production be established, Lessee agrees to construct
roads sufficient to carry Lessee's equipment and vehicles to all drillsites on
said premises, and such roads shall be maintained by Lessee in good condition so
long as this lease remains in force on the land on which said roads are
situated.
14. Lessee binds Lessee to hold Lessor harmless against and to protect
Lessor from any and all claims of whatsoever kind or character growing out of
the use, occupation and operation of the herein leased premises by Lessee, its
successors or assigns.
15. Upon the completion or abandonment of any well drilled upon the
leased premises by Lessee, the surface of the ground appurtenant to such well
shall be smoothed, all excavations and slush pits shall be forthwith filled in,
and the surface of the land restored to substantially the same condition as it
was before the commencement of operations by Lessee, all cost and expense
thereof to be borne by the Lessee, and the surface rights of Lessor in the
leased premises shall be impaired as little as reasonably possible. Promptly
after the completion of drilling operations of any well or xxxxx drilled
hereunder. Lessee shall erect a fence around the pits and excavations caused by
Lessee in such operations, until such time as the ground is in condition that
the pits may be satisfactorily covered (not to exceed in any event 90 days after
the completion of such operations), at which time Lessee shall remove from the
land of Lessor all dumps made by Lessee in such operations, and shall remove
from the land of Lessor all foundations and construction work and debris placed
by Lessee on the leased premises, and shall restore the surface of the land to
substantially the same condition as it was before the commencement of such
operations.
16. Lessee shall have the right to pool and combine the lands covered
by this lease, or a portion thereof, with other lands, lease or leases in the
immediate vicinity thereof so as to form a unit or units for the development and
production of oil, gas and gas distillate, provided that no such unit for gas or
gas distillate shall exceed three hundred twenty (320) surface acres plus a ten
percent (10%) tolerance, and for oil, and shall not exceed forty (40) surface
acres plus a ten per cent (10%) tolerance. If Lessee creates any such unit, then
all of the lands constituting the block shall be included in such unit. Lessee
shall execute in writing an instrument identifying and describing the pooled
acreage and each unit thereof, and same shall be filed for record in the County
Clerk's Records in the County in which said land is located. Drilling operations
and production from any part of the pooled acreage shall be treated as if such
drilling operations were upon or such production was from the part of the land
covered by this lease which is within such pool or unit, whether the well or
xxxxx be located on land covered by this lease or not. In lieu of the royalties
on oil, gas and gas distillate elsewhere herein specified. Lessor shall receive
on such production from a
OIL AND GAS LEASE, PAGE -7- OF 10 PAGES
unit pooled only such portion of the royalty stipulated herein as the amount of
the acreage placed in the unit or their royalty interest therein on an acreage
basis bears to the total acreage so pooled in the particular unit involved,
provided, however, that this proportionate reduction of the Lessor's royalty
shall not apply to shut-in royalty.
17. Notwithstanding anything in paragraph numbers three (3) and four
(4) contained to the contrary, this lease shall not be kept in force by paying
of shut-in gas royalties as provided in paragraph Nos. 3 and 4 of this lease for
a period of more than three (3) years beyond the expiration of the primary term
of this lease.
18. In the event a portion or portions of the land described in this
lease are pooled or unitized with other land, lease or leases so as to form a
pooled unit or units, operations for drilling, drilling, or reworking operations
on such unit or units, or production of oil or gas from such unit or units, or
payment of shut-in gas royalties on a well or xxxxx drilled on such unit or
units shall maintain this lease in effect only as to the portion or portions of
the land described in this lease which is included in such unit or units. As to
any portion or portions of the land not included in a pooled unit or units, this
lease may be maintained in force and effect in any manner elsewhere provided in
this lease including, but not limited to, the payment of delay rentals during
the primary term.
19. In the event of termination of this lease as to a portion or
portions hereof, Lessee shall promptly execute and file for record in the Office
of the County Clerk of said county, a written release and surrender of all such
portion or portions of this lease as shall have terminated under the provisions
hereof and shall at said time mail to Lessor an executed copy of such release.
20. Unless Lessee, in its discretion, elects to rework or reenter oil
or gas well in existence on the effective date of this lease, Lessee shall have
no obligation to plug and abandon or conduct clean up operations on any such
well(s) so as to comply with any governmental regulations or requirements.
21. If during the primary term of this lease Lessee commences the
actual drilling of a well in search of oil or gas on the lease premises, then
said drilling operations shall be prosecuted with reasonable diligence and the
well completed as a producing well or plugged and abandoned as a dry hole within
one hundred and twenty (120) days after spudding. Thereafter, Lessee shall
continue drilling operations on the lease premises with not more than three
hundred and sixty-five (365) days elapsing between completion or plugging of a
well and spudding of the next well; completion date shall be deemed the date of
filing the initial potential test with the Railroad Commission of Texas, but in
any event not more than thirty (30) days after reaching total depth in such
OIL AND GAS LEASE, PAGE -8- OF 10 PAGES
well and plugging date shall be the date of actual plugging or thirty (30) days
after reaching total depth, whichever first occurs. If in the drilling of any of
said xxxxx, Lessee encounters mechanical difficulties rendering further drilling
impractical in the good faith judgment of Lessee, Lessee may plug and abandon
said well and commence another well within sixty (60) days after such plugging
and abandoning and thereafter drill said well in the same manner and within the
same time as provided for the well having mechanical difficulties. In such event
such well shall be considered a substitute well and shall be deemed in
compliance with the terms hereof.
Upon cessation of such continuous development program, this lease shall
ipso facto terminate and all lands covered by this lease shall revert to Lessor
free of any lease or burden of whatsoever nature, save and except each producing
well and the tract upon which it is situated as specified and designated by
Lessee. If production of oil or gas from the lease premises should cease from
any cause, this lease shall nevertheless continue in force as long as additional
drilling operation or reworking operations are conducted on this lease with no
cessation of more than ninety (90) days between the abandonment of operations on
one well and the actual spudding of another well and if production is obtained,
this lease shall thereafter continue as long as oil and gas are produced from
said land.
22. Lessee may by written assignment assign this Lease and its rights
and interests arising hereunder either in whole or in part. In the event of such
assignment, Lessee shall notify Lessor of such assignment and provide Lessor
with the identity and address of the party in whose favor the assignment has
been made.
23. In the event of any conflict between the terms and provisions of
this Lease and division orders that may be issued in connection with production
from the lease premises, the terms and provisions of this Lease shall be
controlling.
IN WITNESS WHEREOF, this instrument is executed on the date first above
written. If this lease is executed in counterparts, then each is to be
considered an original.
LESSOR:
/s/ XXXXX XXXXX
-------------------
Xxxxx Xxxxx
OIL AND GAS LEASE, PAGE -9- OF 10 PAGES
STATE OF TEXAS ss.
ss.
COUNTY OF FAYETTE ss.
This instrument was acknowledge before me this 24TH day of October,
2001, by Xxxxx Xxxxx.
[NOTARY SEAL GOES HERE] /s/ XXXXXXX XXXXX
--------------------------------
Notary Public, State of Texas
My Commission Expires: August 19, 2005
After recording return to:
Xxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
OIL AND GAS LEASE, PAGE -10- OP 10 PAGES
