Can anyone give me guidance under this provision on a lease? I was told it was put in die to a new law protection the Company leasing the land in case it’s sold to someone else?
- Upon commencement of the Primary Term, any production of oil or gas from the leased premises, or from other lands pooled therewith or otherwise combined with the leased premises within a proration unit allocated for production allowable purposes under the rules and regulations of the Railroad Commission of the State of Texas, shall constitute production of oil and gas under the terms of this lease, whether or not caused by Lessee. By way of illustration (and not limitation), it is agreed that if one of Lessee’s co-tenants, if any, were producing oil and gas from a well on the leased premises, or on lands pooled therewith, which Lessee had not drilled, contributed drilling costs thereto, or otherwise participated in the drilling thereof, production from such well would constitute production by Lessee under the terms of this lease, and would satisfy Lessee’s obligation to cause production of oil and/or gas from the leased premises so as to perpetuate or maintain this lease in its secondary term. Lessee shall be permitted to delay payment of any and all royalties due under the terms of the Lease if such royalties are due to Lessor as a result of a producing well in which Lessee did not participate in drilling. Said royalty payments may be delayed until such time as Lessee receives, as a result of the interest covered by the Lease, its proportionate share of the revenues from such well and such revenues equal an amount sufficient to pay Lessor all of its royalties accrued to that date, or two years, whichever is shorter. Notwithstanding the delay, in no event shall Lessor receive less than the full amount of royalties accrued under the terms of the Lease.