The Arizona Amendment to Oil and Gas Lease to Add Shut-In Provision for Oil Wells is a crucial document that facilitates the smooth operation of oil and gas lease agreements in the state. This amendment specifically addresses provisions related to shut-in provisions for oil wells, ensuring the flexibility and economic viability of oil production activities. The shut-in provision allows the lessee to temporarily halt production activities in circumstances where it is not economically feasible to continue production due to low oil prices, market fluctuations, or unforeseen operational challenges. This provision provides a safeguard for leaseholders, allowing them to suspend operations while preserving the long-term value of the leased assets. There are different types of the Arizona Amendment to Oil and Gas Lease to Add Shut-In Provision For Oil Wells, each targeting specific aspects of lease agreements. These types include: 1. Standard Shut-In Provision: This amendment enables the lessee to shut-in production operations when the market conditions are unfavorable or when it becomes uneconomical to continue active production. It may outline specific criteria for invoking the shut-in provision, such as a minimum duration or allowable frequency of shut-ins. 2. Force Mature Shut-In Provision: This type of amendment addresses the scenario where production activities need to be temporarily suspended due to circumstances beyond the lessee's control, such as natural disasters, civil unrest, or government-imposed restrictions. The force majeure shut-in provision protects the lessee from potential breaches of contract during unavoidable disruptions. 3. Market-Based Shut-In Provision: This amendment is primarily concerned with shutting-in production when the market price of oil drops below a predetermined threshold. It ensures that the lessee can temporarily halt operations to avoid incurring losses when oil prices are significantly lower than the breakeven point. The market-based shut-in provision is designed to protect the lessee's financial interests and prevent unnecessary depletion of resources during unfavorable market conditions. 4. Temporary Shut-In Provision: This type of amendment allows the lessee to temporarily suspend production for a specific period, typically for maintenance, repairs, or technical upgrades of the oil well. The temporary shut-in provision ensures that the lessee can undertake necessary operational activities without breaching the lease agreement. Overall, the Arizona Amendment to Oil and Gas Lease to Add Shut-In Provision For Oil Wells is a crucial component of lease agreements in the state, providing leaseholders with the flexibility and protection needed to navigate changing market conditions and unforeseen challenges in the oil and gas industry.
Arizona Amendment to Oil and Gas Lease to Add Shut-In Provision For Oil Wells
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FAQ
In the petroleum industry, shutting-in is the implementation of a production cap set lower than the available output of a specific site. This may be part of an attempt to constrict the oil supply or a necessary precaution when crews are evacuated ahead of a natural disaster.
By way of background, a ?free use? clause is a provision in an oil/gas lease which gives the lessee the right to use gas produced from the leasehold.
What is the granting clause? The granting clause is the clause under which the owner of the oil and gas rights leases the oil and gas rights to the oil and gas company along with the right to develop the oil and gas on a specifically described piece of real estate.
Surrender Clause A clause commonly found in an oil and gas lease authorizing a lessee to release its rights to all or any portion of the leased premises at any time and be relieved of further obligations relating to the acreage surrendered.
Royalty Payment Clauses A royalty is agreed upon as a percentage of the lease, minus what was reasonably used in the lessee's production costs. This is stipulated in a Royalty Clause. The royalty is paid by the lessee to the owner of the mineral rights, the lessor in the lease.
A savings clause in an oil & gas lease that keeps the lease in effect after a once-productive well stops producing oil or gas if certain conditions are met. The lessee must either begin reworking the well to restore production or start drilling a new well within a specified time.
in clause (or shutin royalty clause) traditionally allows the lessee to maintain the lease by making shutin payments on a well capable of producing oil or gas in paying quantities where the oil or gas cannot be marketed, whether due to a lack of pipeline connection or otherwise.