Good afternoon,
I have an 80 acre lease in Texas in the Permian and it has been producing about 3 barrels a day.
The lease says if it does not produce in 60 days and no action has been taken to
work it over and no new wells are being drilled it can terminate. It has not produced for
60 days. There is a new lateral that is on the edge of the lease and has 19.5 acres
designated to it.
If the original well holding the lease does not pump will the 19.5 acre lateral hold the 80
acre lease?
The general answer is probably and is dependent on the OGL terms. If you believe the OGL has expired due to the terms of the Lease, then inform the Operator and the current Lessee. The Operator and Lessee may not be the same party.
James,
My question is, would the 19.5 allocation acres hold the 80 acre lease?
If the current OGL does not contain a type of Pugh clause, then it would most likely be HBP from the new well. There are several caveats to this response since you have a possible issue of non-production.
What does this mean? The lease was written in 1980.
p. Notwithstanding any other provisions contained herein, it is agreed by and between the parties hereto that at the expiration of two (2) ycars from the end of the primary term of this lease, any wells then producing on said leased land shall 'validate and perpetuate only the spacing unit upon which such producing well or wells are located as provided by the spacing regulations then in force of the Railroad Commission of Texas (or other regulatory body having jurisdiction thereof) and that all acreage not so validated shall be released to the Lessor unless at the end of two (2) years from the end of the primary term a. well is being drilled or reworked on the leased premises or on lands pooled therewith for the production of either oil or gas, in which event this lease will remain in force and effect so long as such operations are commenced and prosecúted with no cessation of more than sixty (60) consecutive days between wells.
Thank you
This is a modified and limited version of a Pugh Clause. At the end of the 2 year period, all acreage and zones not within the spacing should be released with a continuous operations provision. The wording is general and not as clear as it could be, but it is acceptable.