Valuation Of Mineral And Leasehold Rights

An oil and gas lease is a legally binding contract for both parties involved. For most cases, a lease is set for a duration of 2-5 years should the energy company does not drill. Once a well is drilled and found economically viable, the lease continues in perpetuity so long as the wells inside the lease are economically viable. If the well is just not viable, the lease expires after 2-5 years based on the lease terms.

Terms of an oil and gas lease can be hard to understand. There are many clauses and stipulations that has to be addressed.

Entering into a contract with a sizable oil company can be challenging especially when a binding contract is involved. For a smoother facilitation of establishing a contract, energy companies usually assign a landman to the initial negotiations between a mineral owner and their company. The landman can also be responsible for performing the fundamental groundwork of determining the correct mineral right owners.

It really is imperative that the mineral owner review the oil and gas lease in detail to make sure that the terms set forth are agreeable. If you'll find items in the contract that will be unsatisfactory to the mineral owner, it is crucial to negotiate terms with the landman that can be acceptable. Sometimes these terms are simply adjusted while other times the items are altered completely. You will find even occasions when an agreement can not be reached by either party.

Mineral owners are highly encouraged to seek legal counsel when entering an oil and gas lease. Energy companies have entered into many oil and gas leases and also are very experienced with the process. Alternatively, a mineral owner might be completely unfamiliar with a lease and the negotiations necessary to create a lease that is mutually beneficial. It is important to remember that at times a mineral owner may feel distrust or hostility after reviewing the lease or throughout the negotiation process. Again, It is highly encouraged for the mineral owner to retain a professional oil and gas lawyer to review the lease in order for the negotiation process to run more smoothly.

At the top, usually the right hand corner there is a date. This date is known as the date clause. It establishes the commencement date of the lease.
The names Valuation of Mineral and Leasehold Rights both parties which are legally bound to the lease will be in the very first paragraph. The lessor, who is the mineral rights owner, as well as the lessee, which is the energy company.

A legal description of the land is outlined. In order that both parties may establish the exact plot of land that will be bound by this agreement.

The duration of the primary term is mentioned in months. A clause which allows for a secondary term also can be added to a lease.

The royalty clause can be a prolonged paragraph. This clause states the percentage or share of production proceeds the leasor receives. How the royalty is received is additionally mentioned inside this paragraph as well.

A granting clause is included in all leases. The granting clause outlines the rights of the lessee as well as the property that's binding to the lease. The lessee's rights include drilling, delay rental, pooling, shut-in royalty, unitization and additional drilling clauses.

The lease also outlines the strategy that can be taken by the lessee if any such problems arise through the term of the lease like what happens whenever a dry hole is drilled in the primary terms. A damage clause is additionally included in the lease also.

Another significant clause in an oil and gas lease is definitely an assignment clause. Throughout the term of the lease if either party should choose to transfer ownership, the assignment clause outlines the stipulations that has to be met. This really is crucial that you the energy company, as many energy companies transfer ownership of their leases.

The force majeure clause touches upon the region and national laws which it is essential for any drilling rig to adhere to. They may be clearly outlined and give the Lessee freedom from non-performance that could possibly be implicated in the lease.

Like many standard contracts there is a warranty clause. A warranty clause explains that the mineral owner guarantees their legal right to the land to the Lessee if she or he should later be discovered to not be the true legal mineral right owners.