The Lima Arizona Option Agreement to Acquire Oil and Gas Lease is a legally binding document that outlines the terms and conditions for acquiring oil and gas leases in the Lima, Arizona region. This agreement provides the option holder with the exclusive right to lease the specified lands for exploration and production purposes. Under this agreement, the option holder has the opportunity to evaluate the potential of the oil and gas reserves in the designated area before committing to a long-term lease. The agreement typically includes a predetermined time period during which the option holder can conduct surveys, tests, and assessments to determine the viability of oil and gas exploration in the area. The Lima Arizona Option Agreement to Acquire Oil and Gas Lease encompasses various types based on specific criteria or conditions. Some notable types include: 1. Standard Option Agreement: This is the most common type of agreement where the option holder has the exclusive right to lease the designated lands for the agreed-upon time frame. The terms and conditions, such as payment structure, obligations, and specific lease terms, are detailed in this agreement. 2. Preferential Option Agreement: This type of agreement provides the option holder with a priority status, giving them the first opportunity to lease the lands before anyone else. It offers a competitive advantage and increases the likelihood of securing the lease rights. 3. Area-Specific Option Agreement: In certain cases, the option agreement may pertain to a specific area or block of land within Lima, Arizona, rather than the entire region. This type allows for targeted exploration and specializes in a particular area of interest. 4. Renewal Option Agreement: A renewal option agreement can be included to provide the option holder with the opportunity to extend the lease term beyond the initial agreed-upon period, subject to mutually agreed-upon terms and conditions. The Lima Arizona Option Agreement to Acquire Oil and Gas Lease is a crucial instrument for both the option holder and the lease owner. It allows the option holder to thoroughly assess the potential of oil and gas reserves before committing to a long-term lease, while simultaneously providing the lease owner with an upfront payment for the exclusive right to explore the lands.
Pima Arizona Option Agreement to Acquire Oil and Gas Lease
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FAQ
Traditionally, royalty can be 1/8 of production or 12.8 percent of production; however, it can be any fraction of production, depending on the royalty clause in a lease. The landowner should negotiate for as high a royalty as can be arranged. Previously, landowners bargained for an overriding royalty.
The primary term of a federal oil and gas lease is 10 years. The term is extended as long as the lease has at least one well capable of production. Leases do not authorize ground disturbance.
The horizontal Pugh clause operates to release all lands not included in a pooled unit, typically at the end of the primary term or after cessation of continuous drilling operations, if the lease provides for same. The horizontal Pugh clause releases land at the surface as to all depths.
The primary term is the initial period during which a well may be drilled. If a successful well is drilled within the primary term, the lease will extend for as long as the well remains productive. If a well is not drilled within the primary term, the lease will usually expire.
Pugh, who first used such a clause in 1947 to prevent the holding of non-pooled acreage in his client's lease while only certain portions of the lease acreage were being held under pooling agreements.
If a lease is a "paid-up" lease, then the lease will remain in effect during the entire primary term with no further payments to the Lessor unless and until actual production of oil or gas is established. Page 3. 3. Shut-in royalty. After the primary term, a lease will expire unless oil or gas is being produced.
In general terms, the Pugh Clause provides that production from a unitized or pooled area located on or including a portion of the leased lands will not be sufficient to extend the primary term for the entire leasehold.
A Pugh Clause is meant to prevent a lessee from declaring all lands under an oil and gas lease as being held by production, even if production only occurs on a fraction of the property.
Generally, a pooling clause will allow the leased premises to be combined with other lands to form a drilling unit, wherein proceeds from production anywhere on the drilling unit are allocated according to the percentage of the acreage of each tract divided by the total acreage of the drilling unit.
(a) (1) Any lease of oil or natural gas rights or any other conveyance of any kind separating such rights from the freehold estate of land shall expire at the end of ten (10) years from the date executed, unless, at the end of such ten (10) years, natural gas or oil is being produced from such land for commercial