I have a lease offer from Stonebriar Energy on 120 NMA in Section 13, Township 5N, Range 61W in Weld County, CO. They are offering $1,000 per acre bonus and 1/5th royalty on a 3 year lease with a 2 year option to extend at 150% of lease bonus. After reading many posts on this site, I have some concerns about some of the clauses in the lease. I have looked at all of the recent leases I could find on the Weld County Clerk and Recorder website for the same section, township and range as mine. Most of these leases were the same as the lease I’ve been offered…PPC deducted from royalties and no time limit on shut-in. I did find 3 leases for the adjacent quarter section to the south that had the exhibit below added to their lease.
Post-Production Costs: Notwithstanding anything to the contrary herein, other than the paragraph below entitled Conditionally Allowed Costs for Processed Gas; Lessee, his successors and assigns, hereby agree that, for the purpose of calculating royalty payments hereunder on all production from the leased premises, such calculations shall be made at the point of sale and shall be free of any and all delivery costs and shall not be burdened by any costs of production, including but not limited to, transportation expenses or any expenses associated with or attributable to processing, gathering, treating, compressing, dehydrating transporting and marketing or otherwise making such gas or other substances ready for sale or use.
Conditionally Allowed Costs for Processed Gas: Lessor acknowledges that Lessor’s royalty for gas may increase is the gas is processed. Notwithstanding anything herein to the contrary, Lessee shall be allowed to deduct any costs for processing gas, including but not limited to storing, separating, treating, dehydrating, compressing, products extraction, and fractionation, in each case, that occur between the inlet and tailgate of a gas processing plant, on the express condition that the combined value of the residue gas and the liquid hydrocarbons extracted therefrom after all such processing costs have been deducted is higher than the value Lessor would have received if such gas had not been processed.
Pugh Clause: Notwithstanding the provisions of this lease to the contrary, this lease shall terminate at the end o the primary term as to the leased land except those lands within a production or drilling spacing unit prescribed by law or administrative authority on which is located a well producing or capable of producing oil and/or gas or on which Lessee is engaged in drilling or reworking operations.
Indemnity: Lessee agrees it will protect and save and keep Lessor harmless and indemnified against and from any penalty or damage or charges imposed for violation of any laws or ordinances whether occasioned by the neglect of Lessee or those holding under Lessee, and Lessee will at all times protect, indemnify and save and keep harmless the Lessor against and from any and all loss, damage or expense, including any injury to any person or property whomsoever or whatsoever arising out of or caused by any negligence of the Lessee, its subcontractors, agents, or successors or assigns.
Shut-In Royalty: Notwithstanding anything to the contrary herein, it is understood and agreed that this lease may not be maintained in for any on continuous period of time longer than two (2) consecutive years after the expiration of the primary term hereto solely by the provisions of the shut-in royalty clause.
Depth Clause: At the end of the expiration of the primary term hereof, this lease shall terminate as to all depths below 150 feet below the stratigraphic equivalent of the deepest formation penetrated on the leased premises or lands pooled therewith, unless however, if within one-hundred and twenty (120) days after the expiration of the primary term, Lessee or Lessee’s successors or assigns are engaged in drilling or deepening of an oil and gas well on the described land, Lessee or Lessee’s successor or assigns shall be allowed to drill or deepen said well to total depth prior to the terms of the paragraph becoming effective. However, it is expressly agreed and understood that this lease will cover the entirety of the Niobrara formations without exception.
Warranty: This lease is made be Lessor without warranty o title, either express or implied, except as to conveyance or encumbrances by, through or under Lessor, but not otherwise. Lessor agrees that Lessee shall have the right at any time to redeem for Lessor by payment any mortgages, taxes or other liens on the above-described lands in the event of default of payment by Lessor, and be subrogated to the rights of the holder thereof.
Is $1000 per acre bonus on par with the current bonus rates for this area? Should I be asking for all of the clauses in the exhibit above? Anything else I should be asking for? Thanks