Lease states rig capable of production has to be on site to hold lease...
My lease was set to expire 6-03-2016. Most data services stated spud date was 6-24-2016... obviously well past my primary term date. Then I found out a smaller rig was moved on location 5-21-2016 and drilled and set surface casing. 33 days later a bigger rig to drill horizontal well was moved in. I'm in discussion with a party that believes the smaller rig didn't hold the lease. I disagree. Co. started operations prior to lease expiration and moved 2nd rig on within 90 day cessation clause and continued operations with a rig capable of obtaining production. It is a proposed horizontal well... obviously the smaller rig is not capable of drilling to the space ordered Meramac formation. I would even argue that one could consider the first rig setting surface casing could be considered a dry hole and then the company still commenced operations within 90 days by moving the bigger 2nd rig in.
Here is the lease language: Operations. If Lessee drills a well which is incapable of producing in paying quantities (hereinafter called “dry hole”) on the leased premises or lands pooled therewith, or if all production (whether or not in paying quantities) permanently ceases from any cause, including a revision of unit boundaries pursuant to the provisions of Paragraph 6 or the action of any governmental authority, then in the event this lease is not otherwise being maintained in force it shall nevertheless remain in force if Lessee commences operations for reworking an existing well or for drilling an additional well or for otherwise obtaining or restoring production on the leased premises or lands pooled therewith within 90 days after completion of operations on such dry hole or within 90 days after such cessation of all production. If at the end of the primary term, or at any time thereafter, this lease is not otherwise being maintained in force but Lessee is then engaged in drilling, reworking or any other operations reasonably calculated to obtain or restore production therefrom, this lease shall remain in force so long as any one or more of such operations are prosecuted with no cessation of more than 90 consecutive days, and if any such operations result in the production of oil or gas or other substances covered hereby, as long thereafter as there is production in paying quantities from the leased premises or lands pooled therewith.