Are We There Yet? The Start And Finish Of An Oil And Gas Lease

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SUMMARY OF CONTENTS

I. COMMENCEMENT OF AN OIL AND GAS LEASE ... 1

A. Introduction ... 1

B. The Interest Conveyed by an Oil and Gas Lease ... 2

1. The Fee Simple Determinable Estate ... 2

2. The Rule in Texas ... 3

C. The Creation of the Oil and Gas Lease... 3

1. Statute of Frauds ... 3

2. Bonus ... 3

3. Delivery and Acceptance... 4

a. Actual and Constructive Delivery ... 4

b. Conditional Delivery... 5

c. Acceptance ... 7

4. Offer Sheets and Letter Agreements... 7

D. The End of the Beginning ... 9

II. TERMINATION OF AN OIL & GAS LEASE ... 9

A. Understanding Lease Termination Issues... 9

B. Termination During the Primary Term... 10

1. Commencement of Drilling Operations ... 10

a. Payment of Delay Rentals ... 11

C. Termination at the End of the Primary Term or During the Secondary Term ... 11

1. Lack of Production in Paying Quantities ... 12

2. Permanent Cessation of Production... 13

D. Savings Clauses ... 14

1. Dry Hole, Cessation of Production and Drilling Operations Provisions ... 14

a. Dry Hole Clause... 15

b. Cessation of Production Clause ... 16

c. Drilling Operations Clause... 16

2. Shut-in Royalty Provisions ... 18

3. Force Majeure Provisions...19

E. Termination Resulting From an Express Condition... 19

F. Equitable Defenses to Termination Claims ... 20

1. Waiver ... 20

2. Ratification... 21

3. Quasi-Estoppel & Equitable Estoppel... 21

4. Statute of Limitations ... 22

5. Revivor ... 22

III. CONCLUSION... 22

TABLE OF AUTHORITIES ... 23

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jackson Walker | Attorney Advertising

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