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EXHIBIT 10.10
OIL AND GAS LEASE
THE STATE OF TEXAS )
)
COUNTY OF XXXX )
This agreement made effective this, the first day of January, 1998, between
Mobil Producing Texas & New Mexico Inc., herein called "Lessor", whose address
is 00000 Xxxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000-0000 and Xxxxxxx Petroleum
Corporation, as "Lessee", whose address is 00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000.
WITNESSETH:
DEFINITIONS: The parties hereto agree that for purposes of this lease,
the following definitions shall be applicable:
a. "Oil and/or gas" is defined as oil, gas, casinghead gas, other
gaseous substances and associated hydrocarbons in either a liquid or
gaseous phase or state and such minerals as may be produced in
association with the production of oil, gas, casinghead gas, other
gaseous substances and associated hydrocarbons; provided, however, that
nothing in this Lease shall be deemed to authorize the gas gasification
or in situ combustion of coal or lignite, and this Lease shall not be
deemed to cover either coal or lignite. The classification of a well as
either a gas well or oil well by the Railroad Commission of Texas shall
be conclusive in respect of its classification under the terms of this
Lease.
b. "Operations for drilling", "drilling operations", "commencement of
operations", "commence drilling operations", "commences drilling
operations", "commencement of a well" and "actual drilling operations"
shall have the same meaning being (i) the actual entry of the drillbit
of a drilling rig, capable of achieving the total depth permitted and
approved by the Railroad Commission of Texas, into the soil of leased
premises and the timely prosecution of such actual drilling operations
with reasonable diligence to the completion of same as a dry hole or
commercial well, or (ii) the actual reentry into an existing wellbore
with a drilling or workover rig capable of re-entering such well for
the purpose of completing or recompleting such well in previously
uncompleted and unproduced zones and the timely prosecution of such
actual re-entry operations, with reasonable diligence, toward the
completion of such previously uncompleted and unproduced zone or zones
encountered in such wellbore as either producing or dry zones.
c. "Operations for reworking", "reworking operations", "commencement of
reworking operations", "commence reworkinq operations" and "actual
reworking operations" shall have the same meaning, being the actual
re-entry into an existing wellbore with a drilling or workover rig
capable of reentering and reworking such well and the timely
prosecution of such actual reworking operations with reasonable
diligence toward the re-establishment or enhancement of production of
commercial oil or gas from such previously producing zone or zones.
d. "Operations" shall be defined as all other lease operations which
may be conducted by Lessee under this lease except those defined in b
and c above. "Operations" as defined in this subparagraph d shall
never be the basis for perpetuation of this lease.
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e. "Completed", or "completion" shall have the same meaning and the
date a well is completed shall be on (i) the date of the potential
test conducted for Railroad Commission purposes; (ii) sixty (60)
days after the drilling rig is released from such well; or (iii)
the date a well is abandoned as a dry hole, whichever happens sooner.
f. A well shall be considered and defined as "shut-in" on the earlier
of the following dates: (1) the date of the potential test conducted
for Railroad Commission purposes; (2) sixty (60) days after the
drilling rig is released; or (3) the day that gas ceases to be sold
from a gas well capable of producing in paying quantities.
g. "Excluded Xxxxx" shall be those South Xxxxxxxxx Ranch Xxxxx listed
on Exhibit "B" attached hereto.
1. GRANTING CLAUSE: LESSOR, in consideration (i) of Ten Dollars
($10.00) in hand paid, (ii) of the agreements of Lessee herein contained, and
(iii) of the forbearance by Lessee from drilling any well with a bottom-hole
location closer than 1,200 feet from any Excluded Well (except with respect to
Program Xxxxx, this distance shall be 1,250 feet) without mutual agreement from
Lessor, hereby GRANTS, LEASES and LETS exclusively unto Lessee, for the purpose
of investigating, exploring, prospecting, and drilling for and producing oil,
gas and all other hydrocarbons and sulphur necessarily produced with such oil
and gas, conducting exploration, geologic and geophysical surveys by
seismograph, core test and magnetic methods, injecting and re-injecting gas,
fresh water and other fluids and air into subsurface strata for secondary or
tertiary recovery purposes only, laying, maintaining and replacing pipelines,
building roads, tanks, power stations, telephone lines and other structures
thereon and to produce, save, take care of, treat, transport and own said
products, the following described land situated in Xxxx County, Texas, to wit:
2. PROPERTY DESCRIPTION: See attached Exhibit "A".
For the purpose of determining the amount of any payments hereunder,
said land shall be deemed to contain 38,176.56 acres, whether actually
containing more or less.
3. RESERVATIONS: There is EXCEPTED from this lease and Lessor RESERVES
unto himself, his heirs, successors, administrators and assigns:
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(a) all minerals except oil, gas and all other liquid, solid and
gaseous hydrocarbons and sulphur that is necessarily produced with such oil or
gas;
(b) equal and concurrent rights of occupancy, use and possession of
the surface estate by Lessor, surface owners or Lessor's or surface owner's
other mineral, surface, grazing and recreational lessees or assignees, together
with the right of ingress to and egress from the above described lands and other
lands owned by Lessor for the purpose of exploring (including the granting of
geophysical and seismic permits), developing and operating said lands for oil,
gas and other minerals of whatever nature which may hereafter be released from
this lease, and equal and concurrent rights to complete water source xxxxx on
the leased premises and in any reservoir not productive of oil or gas for the
purposes of obtaining water for the exploration, development and operation of
Lessor's reserved rights, subject to the provisions of paragraph 15.(n) and 18.
Further, Lessor or surface owner reserves surface use for grazing, farming and
recreational lessees, which surface use rights shall be concurrent with the
surface rights herein granted to Lessee.
(c) All depths below 100' beneath the stratigraphic equivalent of
the base of the Lobo 6 Sand, which is seen at a measured depth of 8,775 feet on
the electric log run in the South Xxxxxxxxx Ranch # 1 64 Well (API 4247936793),
in Xxxxxxxxx Xxxxxxx Xxxxxx XX 00, Xxxxxxxx 0000,
(x) All xxxxx currently existing on the leased premises, including
but not limited to the Excluded Xxxxx.
4. HABENDUM CLAUSE: Subject to the other provisions herein contained,
this lease shall be for a term of seven (7) years from January 1, 1998 (called
"Primary Term") and as long thereafter as oil, gas or other leased substance is
produced from said land in paying quantities or as long as this lease is
continued in effect as otherwise provided herein.
5. ROYALTIES: Lessor is not retaining or reserving any royalties or
royalty interests under the terms of this Lease and no royalties are payable to
Lessor under the terms of this Lease. However, Lessor and Lessee recognize and
acknowledge that there are certain outstanding perpetual non-participating
royalty interests of record as of the effective date of this Lease burdening
Lessor's mineral estate leased hereunder (the "NPRI Interests") and that Lessee
is acquiring the leasehold estate granted hereunder subject to and burdened by
the NPRI Interests. Lessee shall, as of the effective date of his Lease, assume
and be responsible for the payment of the NPRI Interests in accordance with the
terms of the instruments creating such
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interests and shall defend, indemnify and hold Lessor harmless from and against
any and all claims arising out of or relating to the payment of royalties to
the holders of the NPRI Interests insofar as they relate to periods of time
from and after the effective date of this Lease.
6. SHUT-IN ROYALTY CLAUSE: (a) If after the expiration of the primary
term there is a gas well on this lease capable of producing gas in paying
quantities and classified as a gas well by the Railroad Commission of the State
of Texas, but gas is not being sold for ninety (90) consecutive days, Lessee may
pay or tender as royalty, to the owner or owners of the NPRI Interests, on or
before ninety (90) days after the date on which said well is shut in, or the
lease ceases to be otherwise maintained, (whichever date Lessee elects to
utilize) and thereafter at annual intervals, a sum equal to the amount of FIVE
AND NO/100 ($5.00) DOLLARS per acre for each such net acre then subject to the
shut-in provisions of this lease at the time such payment is made; and if such
payment is made or tendered, this lease shall not terminate but this lease shall
continue and it will be considered that gas is being produced from this lease in
paying quantities, for a twelve (12) month period commencing from date such
payment is made whether or not sporadic production occurs during such twelve
(12) month period. Each subsequent shut-in payment shall be in like amounts of
FIVE AND NO/100 ($5.00) DOLLARS per acre for each such net acre then subject to
the shut-in provisions of this lease and payable on or before the annual
anniversary date the first payment is made; and, upon each timely and proper
payment, this lease shall not terminate for twelve (12) months (each payment
shall be due by and each annual shut-in royalty period shall commence from the
date established as the first payment date, and subsequent 12-month payments
shall be payable on or before the same day of the twelfth month following the
month of the prior payment); however, if a well capable of producing gas in
commercial or paying quantities is completed during the primary term of this
lease, then Lessee may, at its election, pay or tender the first or initial
shut-in royalty payment within ninety (90) days after such well is shut-in or on
or before the next ensuing anniversary date of this lease whichever happens
later.
(b) This lease may not be continued in force and effect by the
payment of shut-in gas royalty alone for more than a period of two (2) years
after the expiration of the primary term; however, in the event that, after such
two (2) year period and after the actual production and marketing of the gas has
once been obtained, the Lessee is thereafter required to shut in said well(s)
due to its inability to (1) obtain a reasonable market for the gas, or (2) where
its purchaser of gas is unwilling or unable to purchase and take such gas from
no fault of Lessee, the Lessee may pay or tender to the owners of the NPRI
Interests, as royalty, on or before ninety (90) days after the date on which
said well(s) is shut in, a sum equal to FIVE AND NO/100 ($5.00) DOLLARS per acre
of land for each such net acre then subject to the shut-in provisions of this
lease, and it will be considered that gas is being produced from this lease in
paying quantities for a period of twelve (12) months.
(c) In the event Lessee tenders a timely and proper shut-in royalty
payment, no additional shut-in royalty payments shall be required to be made by
Lessee to the owners of the NPRI Interests during the twelve (12) month period
earned by such payment (if payment
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is tendered for periods covered up to two (2) years after the expiration of the
primary term) or the 12-month period earned by such payment (if made after two
(2) years after the expiration of the primary term when Lessee is unable to
obtain a gas contract or Lessee's purchaser is unwilling or unable to take gas,
as the case may be), in order to perpetuate this lease for such 12-month
shut-in period.
(d) In the event Lessee utilizes paragraph 6 to continue this lease
in force and effect as to all or any portion of said lands by the payment of
shut-in royalty, Lessee shall, upon the written request of Lessor by certified
mail and at Lessee's cost and expense, conduct appropriate and adequate tests of
each shut-in gas well designated by Lessor in such request to determine whether
each such designated gas well is actually capable of producing gas in paying
quantities. Such tests shall be made at times selected by Lessee within thirty
(30) days after Lessee's receipt of Lessor's written request but not less than
thirty (30) days prior to the expiration of any annual period for which a
shut-in royalty payment has been made by Lessee on each particular well
designated by the Lessor, if notice is timely received. Lessee shall give Lessor
reasonable notice prior to conducting such well tests, and Lessor or Lessor's
duly appointed representative shall have the right to be present at the testing
of each well and shall be entitled to receive full information in connection
with such testing. In the event any such test discloses that such well is not
capable of producing gas in paying quantities, it shall be considered that such
well has ceased to produce gas in paying quantities on the last date of testing
of such well. Likewise, Lessor shall have the same privileges, and Lessee shall
have the same requirements, as above outlined to test any oil well on said
lands, and if such tests determine such oil well or xxxxx are not producing or
capable of producing in paying quantities, then such well or xxxxx shall be
considered as having ceased to produce oil in paying quantities as of the date
of such test. Furthermore, if it is considered that any well is not capable of
producing oil and/or gas in paying quantities after such tests, Lessee shall
nevertheless have the opportunity to work-over or recomplete such well or
commence actual drilling operations on a new well within ninety (90) days after
it has been tested as non-commercial in accordance with paragraph 9 below.
7. LESSEE'S USE OF WATER/MINERALS: Subject to the provisions of
paragraphs 15(n) and 18, Lessee shall have use of oil, gas and non-potable water
from said lands except water from surface owner's tanks and xxxxx, for all
operations hereunder. However, Lessee's use of such water shall be limited to
primary drilling operations only on the leased premises and may not be used for
water flooding, secondary or tertiary operations. No royalty shall be owed on
oil or gas used by Lessee for operations on the leased premises.
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Notwithstanding the above, Lessee may recycle gas for gas lift purposes
or for injection into any oil or gas producing formation underlying the leased
premises, and no royalties shall be payable on the gas so recycled until such
time as the same may thereafter be produced and sold or used by Lessee in such
manner as to entitle the royalty owners to a royalty under the provisions of
this lease.
Lessee shall not have the use of fresh water or surface owner's surface
waters without written consent and agreed compensation, and nothing herein shall
be construed to limit the application of paragraphs 15(n) or 18. Lessee shall
have the free use of fresh water from water xxxxx drilled by Lessee as herein
provided for drilling purposes only. Lessee shall not have the right to dispose
of salt or waste water produced or obtained from off of the leased premises.
Lessee shall have the privilege of injecting salt water produced or obtained
from the leased premises back into subsurface strata, conditioned upon such
reinjection not contaminating or contacting fresh water bearing sands and so
long as such reinjection does not damage the production of water or gas and oil
reservoirs or strata payments or conduct drilling or reworking operations in
order to perpetuate this lease to the end of the primary term. Further,
irrespective of whether drilling operations, reworking operations and/or actual
production has commenced and/or ceased during the primary term, this lease shall
be perpetuated to the end of the primary term.
8. PAID UP LEASE: This lease is a "Paid Up Lease" meaning that delay
rentals ordinarily required to be paid to perpetuate a lease from year to year
in lieu of drilling operations have been paid in advance. Therefore, Lessee
shall not be required to make any annual delay rental payments or conduct
drilling or reworking operations in order to perpetuate this lease to the end of
the primary term. Further, irrespective of whether drilling operations,
reworking operations and/or actual production has commenced and/or ceased during
the primary term, this lease shall be perpetuated to the end of the primary
term.
9. DRILLING. CONTINUOUS DEVELOPMENT AND CESSATION OF PRODUCTION
CLAUSES:
(a) DRILLING AND CONTINUOUS DEVELOPMENT OPERATIONS: If, at the
expiration of the primary term, oil and/or gas is not being produced from said
land, but Lessee is then engaged in actual drilling operations thereon, this
lease shall remain in force as long as such actual drilling operations are
prosecuted with no cessation of more than one hundred twenty (120) consecutive
days until completion of such operations and if they result in production of oil
and/or gas and subject to the provisions of Paragraph 10 below, so long
thereafter as oil or gas or either of them is produced from said land in paying
or commercial quantities. If this lease is extended beyond the primary term by
virtue of production or actual drilling operations, then Lessee agrees to
commence a continuous development program without allowing a period of more than
120 days to elapse between the completion of one well and the commencement of
actual drilling operations on the next succeeding well. Commencement of
operations on the first such continuous development well shall occur not later
than 120 days after the end of the primary term, or 10 days after the completion
of a well which is being drilled at the end of the primary term, whichever is
the later date and this lease shall continue in full force and effect during
such continuous development program. Upon cessation of such continuous
development program, this lease shall terminate (either in whole or in part) as
provided in paragraph 10 hereinbelow. The sole liability or penalty, if any, for
the failure of Lessee to drill or complete any well or xxxxx required or
permitted hereunder shall be termination (either in whole or in part) of this
lease as more fully described in paragraph 10 below.
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(b) CESSATION OF PRODUCTION: If, within ninety (90) days prior to
the expiration of the primary term or at any time thereafter and after discovery
of oil and/or gas, production of oil and/or gas should cease from any cause,
this lease shall not terminate if (i) Lessee commences actual drilling
operations within ninety (90) days thereafter and continuously conducts actual
drilling operations without cessation thereof for more than ninety (90) days and
such actual drilling operations result in production of oil and/or gas, so long
thereafter as oil, gas or either of them is produced from said land in paying or
commercial quantities; or (ii) within such ninety (90) day period after
cessation, Lessee commences actual reworking operations, as opposed to drilling
operations as defined in DEFINITIONS above and so long as Lessee continuously
conducts such actual reworking operations on such well or xxxxx without
cessation of more than ninety (90) days and such actual reworking operations on
such well result in re-establishment of production in paying quantities. If such
actual reworking operations do not result in re-establishing production, Lessee
shall have ninety (90) days after the termination of such reworking operations
within which to commence the drilling of a new well, or recompleting in a
previously uncompleted or unproduced zone, or further reworking operations in a
previously producing zone.
(c) DILIGENT, GOOD FAITH OPERATIONS: Each well drilled under this
lease shall be drilled with reasonable diligence and in good faith and in a good
and workmanlike manner in a bona fide attempt to produce oil or gas therefrom.
10. RELEASE CLAUSE: At the expiration of the primary term, or upon
cessation of the continuous development program, if applicable, this lease shall
ipso facto terminate as to all lands covered hereby, SAVE AND EXCEPT one hundred
sixty (160) acres surrounding each oil and gas covered lease shall continue in
force and effect as to the proration unit surrounding each well required to
obtain such full allowable. Lessee shall, within thirty (30) days after the
expiration of this lease or parts hereof, file of record in the office of the
County Clerk of Xxxx County, Texas, an instrument releasing this lease insofar
as said lease has terminated, specifically describing by metes and bounds or
other proper legal description the retained unit for each producing well and the
depth which may be retained by Lessee thereunder. In the event Lessee shall fail
to either designate a unit or units or fail to release acreage and/or horizons
of record within sixty (60) days after the expiration of this lease by Lessee
filing such designation or release in the Office of the County Clerk of Xxxx
County, Texas, then Lessors shall notify the Lessee of its failure and if within
thirty (30) days of the date of such written notice by certified mail to Lessee,
Lessee does not designate unit or units or release the acreage or horizons by
filing a proper instrument in the Office of the County Clerk of Xxxx County,
Texas, then Lessor shall make the designation of unit or units or release of
acreage and/or horizons by filing the instrument designating the unit or units
or release of acreage and/or horizons in the Office of the County Clerk of Xxxx
County, Texas, and such designation and/or release by Lessors shall be binding
upon the Lessees.
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At such time as a partial termination of this lease occurs under the
provisions of this paragraph, each such retained unit as to which said lease has
not terminated shall be considered as a separately leased tract, in the same
manner as if Lessor had executed separate and distinct leases covering each such
retained unit. Lessee shall not be obligated to protect against drainage, if
any, between and among "separately leased tracts". Notwithstanding a partial
termination of this lease under the above provisions, it is agreed that Lessee
shall have and retain such easements of ingress and egress over those lands
originally covered hereby as shall be necessary to enable Lessee to develop and
operate the portion or portions of this lease then in effect for the production
of oil or gas therefrom; and, it is further agreed that it shall not be
necessary for Lessee to remove or relocate any pipelines, tank batteries or
other surface equipment or installations from any portions of this lease which
have terminated for so long as same continue to be used for the development of
and operations on such portions of this lease as continued in force and effect.
The drilling of xxxxx in accordance with spacing provisions of
Paragraph 10 shall not be construed as an agreement or consent on the part of
Lessor that such drilling constitutes reasonable development of the leased
premises, but Lessee agrees to drill all such additional well or xxxxx on the
leased premises, or such portion or portions thereof as may be in force and
effect from time to time, as would a reasonably prudent operator under the same
or similar circumstances in order to reasonably develop the same for the
production of oil and/or gas.
11. OFFSET CLAUSE: If any well or xxxxx producing oil or gas in paying
quantities should be brought in on adjacent land and draining a portion of the
leased premises to which this lease is then in force and effect, Lessee agrees
within a reasonably prudent time after such offset well commences actual
production to drill such offset well or xxxxx as a reasonably prudent operator
would drill under the same or similar circumstances, or to rework or recomplete
a well on that portion of the leased premises being drained, in a zone or
horizon being the stratigraphic equivalent of that zone or horizon producing in
such offset well. In lieu of drilling, reworking or recompleting an offset well,
Lessee shall have the option of releasing this lease as to an eighty acre tract
of land adjacent to such draining well.
12. ASSIGNMENT CLAUSE: The rights of Lessor may be assigned in whole or
in part but no change or division of ownership of the land, or royalties,
however accomplished, shall operate to enlarge the obligations or diminish the
rights of Lessee; and no change or division in such ownership shall be binding
on Lessee until thirty (30) days after Lessee shall have been furnished by
certified U.S. mail at the address specified herein, with a certified or
photocopy of the recorded instrument or instruments evidencing same. The rights
of Lessee may not be assigned in whole or in part without the prior written
consent of Lessor, which consent shall not be unreasonably withheld only if
Lessee can demonstrate that its proposed assignee possesses (i) a proven
ability to operate the kind of xxxxx located on the South Xxxxxxxxx Ranch Lands
and (ii) a level of financial responsibility and corporate capitalization
substantially similar to that of Lessee.
All requests by Lessee for consent to assign must be in writing. Any
request for consent for a proposed assignment must be objected to in writing by
Lessor within thirty (30) days after receipt of such written request, failing in
which such request shall be deemed to be approved. No assignment of an
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interest in this Lease shall be effective until a recorded copy of such
assignment has been received by Lessor. Notwithstanding anything herein to the
contrary, no assignment by either party shall operate to relieve the
transferring from direct responsibility and liability to the other party hereto
for the performance of all of the transferring party's obligations hereunder.
In the event of the death of any person entitled to royalties or other payments
hereunder, Lessee shall suspend such royalties or other payments until such
time as Lessee is furnished with proper evidence of the appointment and
qualification of an executor or administrator of the estate or if there be
none, then until Lessee is furnished with evidence satisfactory to it as to the
heirs or devisees of the deceased or the successors in interest to such
deceased owner and that all debts of the estate have been paid.
13. FORCE MAJEURE CLAUSE: Should Lessee be prevented from complying
with any express or implied covenant of this lease, from conducting drilling or
reworking operations thereon or from producing oil or gas therefrom by reason of
or by operation of force majeure, any federal or state law or any order, rule or
regulation of governmental authority, then while so prevented, Lessee's
obligations to comply with such covenants shall be suspended and Lessee shall
not be liable in damages for failure to comply therewith and this lease shall be
extended while and so long as Lessee is prevented by any such cause from
conducting drilling or reworking operations on or from producing oil and gas
from the leased premises, and the time while Lessee is so prevented shall not be
counted against Lessee, anything in this lease to the contrary notwithstanding.
In the event Lessee intends to claim any rights under this paragraph, Lessee
shall advise Lessor or Lessor's Agent in writing within a period of thirty (30)
days after the date Lessee claims any obligation hereunder is suspended, setting
forth in reasonable detail such facts as Lessee relies upon to make the
provisions of this paragraph applicable. Notwithstanding anything above stated
to the contrary, if Lessee is prevented from complying with this lease or
resorts to force majeure because of Lessee's intentional acts or omissions, then
this provision shall not be available to Lessee to perpetuate this lease or
suspend Lessee's obligations. This provision shall not suspend nor delay the
time for the payment of royalties, shut-in gas royalties, or any other monetary
payments due and payable to Lessor under the Lease.
14. WELL/DRILLING INFORMATION CLAUSE: If requested by Lessor in
writing, Lessee agrees to give Lessor and affected surface owners written
notice, prior to the commencement of any operations which are critical to the
enforcement of the terms and provisions of this lease. Said notice(s) shall
advise Lessor and the affected surface owner of the approximate date that
commencement of operations is intended and the approximate location of the same
and the objective depths of any proposed well, such notice to be given within a
reasonable time prior to the commencement of such operations. Lessor shall have
the optional right to either (i) request Lessee to furnish Lessor at the address
provided herein promptly upon Lessor's written request, free of charge, copies,
or (ii) have reasonable access during regular business hours to Lessee's records
and all information concerning the drilling, deepening, plugging back, coring,
testing and completing or recompleting of any and all xxxxx, including the
driller's log, all electrical logs, and surveys, production charts and records
and information concerning the production and marketing of oil and gas from said
lands, with copies of all forms filed with the Railroad Commission of Texas or
any other governmental authority having jurisdiction over Lessee's operations
and pertaining to Lessee's operations under this lease; and, including seismic
data only as to shot point maps and reproducible film copies of seismic data
shot by Lessee over the lands covered in this lease with a half-mile flare, if
available, provided Lessor agrees to keep confidential all information acquired
by it under the terms of this paragraph. The confidentiality agreement shall not
apply to (a) any information of
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15. SURFACE/SUBSURFACE PROTECTION CLAUSES: As a part of the
consideration for this lease:
(a) Prior to commencing any operations under this lease, when
acting as operator of the leased premises, Lessee shall consult surface owner
and provide information as to the form of operations, the proposed date of
commencement and the location of said operations.
(b) Lessee agrees to use existing gates and roadways to enter and
leave the premises, where available.
(c) Lessee and all persons entering or leaving said lands in
connection with Lessee's operations hereunder shall keep all outside and
interior gates along the route or routes designated for such use securely closed
except immediately before and immediately after each such separate use. Lessee
agrees that it will promptly repair any gate, fence or other improvement that
may suffer damage or injury by reason of Lessee's operations hereunder. Lessee
may, during the term of this lease place separate locks on any perimeter access
gate. If Lessee leaves a perimeter gate open during drilling or reworking
operations, surface owner may, at his option, require Lessee to place a guard at
the entrance to the leased premises during drilling and completion operations.
(d) When acting as operator of the leased premises, Lessee will
maintain approaches, gates, cattle guards and roadways designated and used in
connection with its operations in a good state of repair and will promptly cause
to be repaired and restored any damage thereto occasioned by or resulting from
Lessee's operations. In regard to maintenance of roads used by Lessee or its
employees, contractors and invitees, Lessee shall repair damaged or
deteriorating portions of roads within a reasonable time not to exceed thirty
(30) days after notice by surface owner of need for such repair. Materials used
to repair road damage shall be either caliche, gravel or other materials except
dirt fill. Lessee agrees to work with the surface owner to keep the roads used
by Lessee in continuous state of good repair.
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In connection with any roads built by Lessee, Lessee agrees to consult
with the surface owner as to the location of such roads and will construct such
division terraces as may be reasonably necessary to reduce soil erosion. Lessee
shall be required to install cattle guards or, at surface owner's option, pipe
gates to the side of such cattle guards at each fence crossing.
(e) Each drill site on said lands, including slush pits, tanks,
separators, treaters and any and all other pertinent well and lease equipment
above the surface, will be enclosed and kept enclosed with a wire mesh or
bullwire fence capable of turning livestock, promptly after completion of any
drilling operations and such fence shall be maintained by Lessee for so long as
such equipment remains on leased premises or during the period of production
resulting from such operations. No drilling operations, pipeline constructed,
seismic lines or operations of any nature shall be conducted within 300 feet of
any houses, barns, water xxxxx or permanent improvements, without surface
owner's notice and consent.
(f) Within ninety (90) days after completion or abandonment of any
well drilled on said lands, Lessee or its designated operator will clean up the
well site and remove from said lands any and all oil spills, junk materials,
pieces of iron, pipes, steel and other debris and foreign materials and will
level all mounds, fill all pits, and other excavations upon being notified by
Lessor and will remove all deleterious materials and substances that might cause
injury to person or livestock. Any such clean up shall be conducted in
compliance with all applicable rules and regulations of the State of Texas
Railroad Commission or other regulatory authority and any subsurface fresh water
stratum, but will be contained and dispose of same in keeping with applicable
governmental rules and regulations, including without limitation, Environmental
Laws, as hereinafter defined.
(g) Lessee or its designated operator will use its best efforts to
prevent the escape of salt or other noxious waters and will not permit the same
to run into any surface water tank, water well, creek, ravine, or upon or over
the premises, not to penetrate, seep or flow or be injected into any subsurface
fresh water stratum, but will be contained and dispose of same in keeping with
applicable governmental rules and regulations, including without limitation,
Environmental Laws, as hereinafter defined.
(h) Lessee or its designated operator will use its best efforts to
prevent fires on said lands and will use its best efforts to prevent papers,
boxes, sacks and containers and waste materials of any kind from coming on said
lands and littering the premises.
(i) Prior to erecting any storage tanks, pipelines, compressor
stations or other usual lease facilities required by Lessee for producing oil
and gas and operating this lease,
12
Lessee, when acting as operator, shall advise surface owner of Lessee's
intentions. Surface owner and Lessee will then mutually select the site or
sites for locating such equipment and pipelines, taking into consideration the
operations of surface owner and Lessee's needs in conducting its operations
under the terms of this lease in a reasonable manner.
(j) Lessee or its designated operator is prohibited from
constructing an oil or gas refinery or a plant for cleaning up gas and removing
H2S on the leased premises. The location of separators, dehydrators and
compressors shall not be considered as plants.
(k) No employee, representative or contractor of Lessee or any
other person allowed to come upon said land by Lessee shall be permitted to
hunt, fish, swim, camp or picnic on said land, and no dog, gun, firearm, fishing
equipment or other sporting paraphernalia of this type will be permitted on the
premises. If any of Lessee's representatives or employees violate this
provisions, surface owner may give notice thereof to Lessee and, if Lessee does
not voluntarily remove or exclude any such party, surface owner shall have the
right to eject such party from said lands and thereafter prohibit such party
from entering upon said lands.
(l) Except as otherwise provided for herein, Lessee shall have the
right, at any time within ninety (90) days after abandonment or cessation of
use, but not thereafter, to remove any property and fixtures placed on said
lands and if Lessee fails to remove such property and fixtures within said
ninety (90) days, such property and fixtures shall be deemed to have been
abandoned by Lessee, and Lessor may take possession thereof and dispose of the
same as Lessor sees fit; provided, however, Lessee shall not be relieved of its
liability to plug any well so abandoned. Lessee shall bury all pipelines a
minimum of thirty-six (36") inches or more beneath ground level unless surface
owner deems otherwise.
(m) Lessee or its designated operator will restore the surface of
said lands used by Lessee or its agents, contractors and employees, to as near
its original condition as is reasonably practicable after the completion of each
operation conducted hereunder and root plow such areas and seed such areas with
4 to 6 pounds per acre of grass of surface owner's choice.
(n) Each water well drilled on the leased premises by Lessee
together with all equipment in or on said well shall become the property of
surface owner upon the full release of this lease; provided, however, the
surface owner shall have the right to use water therefrom during the term of
this lease, so long as such use does not interfere with Lessee's operations.
13
Provided, further, that if Lessor so elects, Lessee shall, at Lessee's sole
cost and expense, plug and abandon each water well which surface owner elects
not to take over.
(o) Lessee or its designated operator agrees to pay to the surface
owner the actual damages, if any, resulting to the surface of said lands, ranch
roadways used and/or constructed by Lessee, fences, gates, cattle guards,
houses, barns, windmills, tanks and other structures, trees, grass, crops,
cattle and livestock caused by Lessee's operations or occasioned by reason of
such operations or such damages as surface owner may incur by reason of
Lessee's failure to comply with the terms of this lease.
(p) If Lessee or its designated operator conducts seismic
operations or should Lessee lay gathering pipelines across the leased premises,
then Lessee shall be required to compensate the surface owner for damages based
on the prevailing rate being paid in the area at the time for pipeline
right-of-way and/or seismic lines. Further, Lessee shall be obligated to pay
surface owner for each surface site, such as drillsites, separator, dehydrator
and compressor sites based on the usual going rate being paid for such surface
sites and usage in the area at the time. Nothing herein shall restrict Lessee's
right to lay gathering pipelines for transportation of lease gas or conduct
seismic operations on leased premises.
(q) Lessee or its designated operator shall be required to
compensate surface owner for each new road based on the prevailing price being
paid for new roads in the area at the time of construction of same. Lessee shall
not be allowed more surface for roads and/or drillsites than is necessary,
taking into consideration the nature and depth of drilling contemplated. As to
any other actual damage to the surface, surface owner shall be compensated based
on the rate prevailing for similar damages in the area at the time.
(r) Regarding drillsites, Lessee or its designated operator shall,
no later than twelve (12) months after completion of a well, fill all pits,
level all dumps, remove debris and restore the surface to substantially its
original condition including root plowing the area used and seeding same with 4
to 6 pounds per acre of grass of surface owner's choice.
16. NOTICE CLAUSE. This lease and all of Lessee's operations
hereunder shall be in keeping with the standard of conduct of a reasonably
prudent operator and shall be done in good faith and in compliance with all
valid and applicable laws, rules and regulations, both Federal and State, and
any agency thereof. Lessee agrees to designate in writing, or give notice in
person to Lessor and surface owner, the name of the person or persons to be
present from time to time on said premises as current operations are being
conducted and with whom surface owner may handle directly any claim of injury
and damage to livestock, surface area or improvements on said premises as
current operations are being conducted. All notices required to be given under
the terms of this lease shall be given to the following persons who are
designated Lessor's,
14
Lessee's and surface owner's respective agents for notice only:
TO LESSOR:
Mobil Producing Texas & New Mexico
00000 Xxxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: South Texas Producing Manager
Fax: (000) 000-0000
TO LESSEE:
Xxxxxxx Petroleum Corporation
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Land Manager
Fax: (000) 000-0000
TO SURFACE OWNERS:
(According to record title determination)
Any party hereto may from time to time designate in writing a different address
or agent for the giving of any notice hereunder.
17. WARRANTY OF TITLE: Lessor warrants title to the property being
herein leased by, through and under Lessor but not otherwise. It is agreed
that if a Lessor owns an interest in the oil, gas or leased substances on, in
or under said land less than the entire fee simple estate, then the royalties
and shut-in royalties to be paid to the owners of the NPRI Interests shall be
reduced in the proportion that said Lessor's interest bears to the whole and
undivided fee in accordance with the nature of the estate of which Lessor is
seized.
18. CORRELATIVE AND CONCURRENT SURFACE RIGHTS: Lessor (as each Lessor's
interest may appear) and Lessee recognize (i) the rights herein granted to
Lessee to reasonable use and access over, across and upon the surface estate to
explore for, develop, store, market, transport and produce the leased minerals;
and (ii) the concurrent and correlative rights of the surface owner(s) to the
use, enjoyment and benefits of the surface estate that the Lessee, in exercising
the rights herein granted, is limited thereby to such use or usage as is
reasonably necessary and which is conducted with due regard for the rights of
the surface owners(s) and which does not unduly interfere with the surface
owner's use of surface.
15
In the event that surface owner desires to cultivate, subdivide, and/or
develop all or a portion of the surface estate subject to this lease, then in
such event, Lessee and surface owner agree to enter into such agreement or
agreements that will facilitate the intended cultivation, sale or development of
such tract to and by the surface owner, as the case may be, but which will also
allow Lessee reasonable access to and use of the surface to such surface tracts
to be sold, subdivided, developed or cultivated.
19. FORFEITURE CLAUSE: In the event Lessor considers that obligations
of Lessee or implied covenants of this lease are not being complied with, Lessor
shall notify Lessee in writing by certified mail of the facts relied upon as
constituting a breach of any expressed or implied covenants or obligations of
Lessee hereunder and Lessee, if in default, shall have sixty (60) days after
receipt of such notice in which to commence compliance with its obligations
hereunder. If such breach is not timely cured and Lessor obtains a final
non-appealable judgment finding that Lessee has breached any covenant hereof,
expressed or implied, then it is agreed that Lessor shall be entitled to a
decree providing for cancellation or forfeiture of the lease in the event such
breach is not rectified or commenced in good faith to be rectified by Lessee
within sixty (60) days from the date such decree becomes final; provided,
however, that failure on the part of the Lessee to cure any alleged default of
any expressed or implied covenant of this lease shall not result in Lessee
forfeiting any producing oil or gas well or xxxxx or shut-in gas well or xxxxx
and acreage allocated thereto for production, not then subject to breach or
default. Failure of Lessee to (i) produce oil, gas or other leased substances in
paying or commercial quantities; (ii) to timely and properly pay shut-in
royalties; (iii) to timely commence drilling or reworking operations as provided
in provisions of this lease, and/or (iv) failure to pay royalty in accordance
with Paragraph 50) above, and other special limitations shall not constitute an
obligation for purposes of this paragraph, as failure of Lessee to timely
comply with such provisions shall result in termination of this lease.
20. ABSTRACTS: Any abstracts in Lessor's possession or control shall,
upon written request of Lessee or its assignee, be delivered to Lessee or its
assignee for examination; but Lessee or its assignee shall be liable for the
safekeeping and return of same. If Lessee or its assignee shall obtain an
abstract, such abstract or a copy thereof along with copies of any and all title
opinions covering this land shall be delivered to Lessor along with Lessor's
abstracts as soon as Lessee or its assignee has completed its title examination.
21. CHECK METERS CLAUSE: In those instances where Lessee is acting as
operator of the leased premises, Lessor shall be entitled at Lessor's own cost-
and expense to install and maintain a check meter on any gas well upon such
leased premises in order to satisfy Lessor of the amount of production from any
such well, so long as same is installed under supervision of an engineer and
after due written notice to Lessee. In this connection, Lessee shall have the
right to make such installation itself of Lessor's check meter in order that
such installation does not interfere with Lessee's operations, provided such
installation is performed by Lessee within a reasonable time, not exceeding
thirty (30) days following written request of Lessor. Calibration of such meter,
its
16
give the other sufficient written notice in advance of such tests so that each
party may, at its election, be present in person or by its representative to
observe adjustments, if any, which are made. If upon any test the metering
equipment in the aggregate is found to be inaccurate by two percent (2%) or
more, then following the test any metering equipment found to be inaccurate to
any degree shall be adjusted immediately to measure accurately. If for any
reason any meter is out of service or out of repair so that the quantity of gas
delivered through such meter cannot be ascertained or computed from the readings
thereof, the quantity of gas so delivered during such period same is out of
service or out of repair shall be estimated and agreed upon by the parties
hereto upon the basis of the best available data.
22. AD VALOREM TAXES: Each party having an interest in the minerals
under the subject lands shall be responsible for rendering, adjusting,
protesting, and defending values on his interest in minerals and for the payment
of his proper share of ad valorem taxes. After production, all ad valorem taxes
shall be paid by the parties entitled to participate in revenue from production
proportionate to each party's percentage interest in revenue. Lessee and Lessor
agree to work together to obtain adjustments to which the parties may be
entitled as a result of mineral rights or depths not presently covered by this
lease or which may hereafter be released from the lease.
23. ADMINISTRATIVE RELIEF: Lessee and Lessor agree that Lessor or
Lessor's representative shall have the concurrent rights and privileges with
Lessee to pursue and/or defend against proceedings before any administrative
agency without the joinder or consent of Lessee, and Lessee agrees that Lessor
shall have standing to pursue or defend any matter before any administrative
agency. Nothing herein shall in any way be construed as diminishing Lessee's
implied duties and obligations to protect and preserve Lessor's rights before
administrative agencies, but shall be supplemental of any such implied duties.
24. INDEMNITY AGREEMENT: Lessee hereby indemnifies and agrees to hold
harmless Lessor, surface owner and their respective heirs and assigns, from and
against any and all liability, liens, demands, penalties, fines, remedial costs,
costs, response, restoration costs, judgments, suits and claims of any kind or
character caused or arising out of, in connection with, or relating to Lessee's
(including Lessee's servants, employees or its independent contractors)
operations in connection with and under the terms of this Lease, express and
implied, including, but not limited to, claims for injury or death of any
persons, or damage, loss or destruction of any property, real or personal, under
any theory of tort, contract or strict liability or violation of any
Environmental Law (as hereinafter defined) based upon a real or alleged act or
omission of Lessee, its agents, servants or employees or independent
contractors. Further, neither Lessor nor surface owner shall ever be liable for,
and Lessee indemnifies and agrees to hold harmless Lessor, surface owner, and
their respective successors, heirs and assigns from, any claims, demands, costs,
expenses, damages, loses, causes of action or suits for damages because of
injury to persons or property arising out of acts or omissions of Lessee, its
agents, employees, servants, contractors or any person acting under its
direction and control
17
on said lands. Lessee further covenants and agrees to defend any suits or
actions brought against Lessor on account of said claims and to pay any
judgments, penalties, fines, remedial costs, and other obligations assessed
against Lessor resulting from any such claims, actions, suit or suits together
with all costs and expense relative to any such claims, actions or suits,
including attorney's fees, costs incurred in connection in defense of same,
including court costs. It is nevertheless understood, however, that Lessor, if
it so elects, shall have the right to participate in the defense of any such
claims, actions, suit or suits in which it may be a party without relieving
Lessee of the obligation to defend the same. In the event Lessor and/or any
surface owner under the above tract shall resort to a court of law or to
arbitration to enforce or interpret any provision, covenant, condition, duty,
obligation or commitment, whether expressed or implied, arising out of this
agreement, then Lessee shall reimburse Lessor or surface owner for reasonable
attorney's and expert witness fees incurred in such suit or arbitration, in the
event Lessor or surface owner should prevail in such cause of action or
arbitration.
"Environmental Laws" mean any and all laws, statutes, regulations,
rules, orders, ordinances, permits or determinations of any governmental
authority pertaining to health or the environment in effect in any and all
jurisdictions in which the leased premises are located, including without
limitation, the Clean Air Act, as amended, the Federal Water Pollution Control
Act, as amended, the Rivers and Harbors Act of 1899, as amended, the Safe
Drinking Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, the Superfund Amendments
and Reauthorization Act of 1986 ("XXXX"), as amended, the Resource Conservation
and Recovery Act ("RCRA"), as amended, the Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act, as amended, the Hazardous
Materials Transportation Act, as amended, and other federal, state and local
laws whose purpose is to conserve or protect health, the environment, wildlife
or natural resources. The terms "hazardous substance," "release" and "threatened
release" shall have the meanings specified in CERCLA, and the terms "solid
waste," "hazardous waste," and "disposal" (or "disposed") shall have the meaning
specified in RCRA, provided, however, that to the extent the laws of any state
in which the leased premises are located are applicable and have established a
meaning for the terms "hazardous substance," "release," "threatened release,"
"solid waste," "hazardous waste," and "disposal" (or "disposed") that is broader
than specified in CERCLA or RCRA, such broader meaning shall apply with respect
to the matters covered by such laws, and (the term "solid waste" shall include
all oil and gas exploration, development and production wastes, even if such
wastes are specifically exempt from classification as hazardous substances or
hazardous wastes pursuant to CERCLA or RCRA, or the state analogues to those
statutes. Lessee shall comply with all Environmental Laws in the conduct of all
drilling and producing operations on the leased premises and agrees that Lessee
shall not store nor dispose of solid waste or hazardous waste on the leased
premises.
25. NO POOLING: Lessee is expressly denied the right to utilize any
rights granted herein to pool or unitize any part of the leased premises without
the prior written consent of Lessor.
26. RECORDING: In lieu of filing this agreement for record in the
office of the County Clerk in which the acreage covered hereby is located,
Lessor and Lessee agree that a memorandum
18
of this lease, making appropriate reference hereto, shall be filed for record in
said county. The provisions of this lease are binding upon the parties hereto,
their respective heirs, successors and assigns. Lessee, by its acceptance of
this lease, agrees and obligates itself to all terms and provisions of this
lease.
27. OPERATING AGREEMENT: The leasehold interest granted to Lessee
hereunder is expressly made subject to the terms of that certain Operating
Agreement dated May 1, 1998, between Lessee, as Operator, and Lessor, as
Non-Operator, covering the leased premises.
28. AFTER ACQUIRED TITLE: This lease is intended to grant, lease and
let unto Lessee all of Lessor's interest in the oil, gas or leased substances
on, in or under the leased premises which Lessor owned in the leased premises on
January 1, 1998, and is not intended to cover any additional mineral interests
which Lessor may acquire in the leased premises after January 1, 1998. In the
event Lessor acquires additional interests in the oil, gas or leased substances
on, in or under the leased premises after January 1, 1998, it is expressly
understood and agreed that such additional acquired interests shall not be
subject to or covered by the terms of this Lease and that Lessor shall own and
hold such additional after acquired interests free and clear from the terms of
this Lease.
29. COUNTERPART EXECUTION: This lease may be executed in multiple
counterparts, each of which shall, for all purposes, be deemed an original but
which together shall constitute one and the same instrument. This Lease shall be
binding on any Lessor party which has executed a counterpart original hereof,
whether or not all parties Lessor have executed counterpart originals hereof. In
making proof of this Lease, it shall only be necessary to produce a counterpart
hereof, executed by the party sought to be charged, and it shall not be
necessary to produce nor to account for any other counterpart hereof.
19
EXECUTED as of the respective acknowledgment dates of the signatory
parties hereto, but effective as of January 1, 1998.
ATTEST:
By: /s/ X. X. XXXXXXX
----------------------------------------
Assistant Secretary
LESSOR:
MOBIL PRODUCING TEXAS & NEW MEXICO INC.
By: /s/ X. X. XXXXXXXXXX
---------------------------------
X. X. Xxxxxxxxxx
Attorney-in-Fact
By: /s/ X. X. XXXXXXXXXX
---------------------------------
X. X. Xxxxxxxxxx
Attorney-in-Fact
LESSEE:
XXXXXXX PETROLEUM CORPORATION
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Xxxxxxx X. Xxxxxx
President
STATE OF TEXAS )
)
COUNTY OF Xxxxxx )
This instrument was acknowledged before me on this the 20th day of
April, 1998, by X.X. Xxxxxxxxxx, Attorney-in-Fact for Mobil Producing Texas &
New Mexico Inc., a Delaware corporation, on behalf of Mobil Exploration &
Producing U.S. Inc. as such Agent.
(PERSONALIZED SEAL)
/s/ XXXXXXX X. XXXXXXXXX, XX.
-------------------------------------------
Notary Public in and for the State of Texas
STATE OF TEXAS )
)
COUNTY OF XXXXXX )
00
XXXXX XX XXXXX )
)
COUNTY OF XXXXXX )
This instrument was acknowledged before me on this the 20th day of
April, 1998, by Xxxxxxx X. Xxxxxx, President of Xxxxxxx Petroleum Corporation.,
a Texas corporation, on behalf of said corporation.
(PERSONALIZED SEAL)
/s/ XXXXXXX X. XXXXXXXXX, XX.
--------------------------------------------
Notary Public in and for the State of Texas
