12 06b LANDOWNER'S OIL & GAS LEASE

• Jurisdiction: Arkansas
• Library: Arkansas Form Book - Complete (2023 Ed.)

12-06B LANDOWNER'S OIL & GAS LEASE

LANDOWNER'S OIL & GAS LEASE

THIS AGREEMENT, made in duplicate effective the [day] day of [month, year] by and between [lessor name], whose mailing address is [lessor address] (the "Lessor"), and [lessee name], whose mailing address is [lessee address] (the "Lessee").

WITNESSETH:

1. Lands Covered: Lessor, in consideration of Ten Dollars ($10.00) cash in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby leases and lets unto Lessee, the right of geophysical exploration and the right of the exploration for, and production of, oil, gas and other liquid and gaseous hydrocarbon minerals (hereinafter referred to collectively as oil and gas) together with the use of the surface of the land to the extent necessary for the exploration for and production, storage and transportation of same, and including the right to construct, maintain and use roads and pipe lines thereon for operations hereunder; the land to which this lease applies, together with any reversionary rights therein, is situated in the state of Arkansas, and described as follows:

[County] [Section] [Township] [Range]

[LEGAL DESCRIPTION]

For the purpose of calculating any bonus, shut-in royalties, or other payments which may be due hereunder on the basis of acreage, the above-described land is estimated to be comprised of [lease acreage] acres, whether it actually comprises more or less.

2. Primary Term: Subject to the other provisions herein contained, it is agreed that this lease shall remain in force and effect for a primary term of [primary term] years from this date, and as long thereafter as oil and gas, or either of them, is produced from the land by the Lessee, its successors or assigns, unless otherwise maintained by drilling or reworking operations or shut-in provisions hereinafter contained.

3. Royalties Payable to Lessor: The royalties to be paid by Lessee in all instances provided for below in this paragraph and upon all substances herein leased are [royalty fraction] of the substances (the stated fraction), subject to the following provisions:

a. Upon oil and other hydrocarbons which are produced at the well in liquid form, the stated fraction of that produced and saved from the land, same to be delivered at the well in tanks provided by Lessee, or to the credit of Lessor into the pipe line to which wells may be connected. Lessee shall from time to time sell to others or purchase for its own account any royalty oil or other liquid hydrocarbons in its possession, obtaining for Lessor, if sold, or paying to Lessor, if purchased, the market value thereof prevailing for the field where produced, on the date of each sale or purchase, which value shall not be less than the amount received by Lessee for its share of the production. Notwithstanding the foregoing, Lessor may from time to time by written notice elect to take such products in kind at the well or at the tanks provided by Lessee.

b. on gas, including casing-head gas and other vaporous or gaseous substances produced and saved from the land as follows:

i. As a royalty on any gas (including flared gas), which is defined as all hydrocarbons and gaseous substances not defined as oil, expressly including casinghead gas and all gaseous substances produced from the leased premises, the "stated fraction" of the market value thereof, such value to be determined when and as the gas is produced, or the gross price paid to the Lessee, whichever is greater. For purposes of this paragraph, the gross price paid to the Lessee under a contract for the sale of gas to an unaffiliated purchaser, negotiated at arms length and in good faith, shall be deemed "market value." Lessee shall provide Lessor written notice of all the terms, provisions, covenants and conditions contained in any spot market sale of gas by Lessee, such notice to be provided at least two full days prior to the execution of such contract by Lessee, and with respect to any sale of gas by Lessee having a duration of six months or longer, Lessee shall provide Lessor the same notice at least 10 full days prior to the execution of such contract by Lessee. Prior to the expiration of such notice period, Lessor shall notify Lessee whether Lessee is authorized to deliver Lessor's royalty share of gas under the terms of such contract or whether Lessor shall elect to take and market Lessor's royalty share of gas in accordance with the next succeeding paragraph.

ii. Provided Lessor's share of gas has not been committed to prior sale as described above, Lessor, at its option, at any time and/or from time to time, may take at the well all or a portion of its "stated fraction" of the gross production of the gas in kind, in lieu of the royalty on gas provided for above. Upon the exercise of such option, which shall be communicated in writing to Lessee, Lessee shall deliver such gas to Lessor at the wellhead, or the discharge side of Lessee's field separator, if any, or such mutually agreeable point of delivery. Lessor shall, at its own risk and expense, provide all necessary equipment and facilities for taking gas in kind and using or marketing separately its royalty share of the gas.

iii. In the event the subject gas is processed in a plant for the recovery of gasoline or other liquid hydrocarbons by Lessee or for Lessee's account, Lessor may elect to be paid as a royalty (in lieu of the royalty provided above in this paragraph) the "stated fraction" of the residue gas and the liquid hydrocarbon which is attributable to the gas produced hereunder.

iv. As used in this lease, the term "market value" on gas shall mean the average of the three highest prices paid by competitive pipeline purchasers in the field where such gas is produced for gas of like quality and quantity. The average price shall be determined annually on the anniversary date of this lease.

c. Within 120 days after commencement of any production under this lease, Lessee shall commence the actual payment of the royalties herein provided for, failing in which Lessee shall be presumed automatically to be in default under this lease without the necessity of separate notice, demand or protest by Lessor. In the event Lessee is in default in payment of royalty, Lessor shall be entitled to (i) double the amount of royalty due, (ii) interest on that sum from the due date at the maximum rate of interest permitted under Arkansas law as of such date, and (iii) reasonable attorney's fees; provided, however, that this right to recover double royalties, interest and attorney's fees shall not exist where a bona fide dispute exists as to the manner of calculating Lessor's royalty. Provided further that Lessee shall have the right to rebut such presumption of default upon showing, and only upon showing, that more time is needed for the commencement of royalty payments because of delays unavoidable on the part of Lessee as to title examination and curative work or survey. Delays due to the preparation and execution of division orders shall not justify further delays in the payment of the royalties provided for herein. Furthermore, whether or not there should be grounds for rebutting the presumption set forth above, if royalties are not paid within the time specified, Lessee shall pay Lessor interest on the amount of royalties due at the maximum rate of interest permitted under Arkansas law from the date of commencement of production until paid.

d. All royalties, shut-in royalties, or other sums which may become payable to Lessor under the terms of this lease may be paid or tendered by cash, check, draft, electronic funds transfer, or any other commercially-reasonable method which Lessee may elect from time to time. Lessee shall give any notices required hereunder and shall pay any rents, royalties or other monies due Lessor pursuant to this agreement to the Lessor at the address first noted above.

4. Reserved Rights of Lessor: In the event Lessee during the term hereof releases from this lease any depths, sands, zones or formations, or in the event Lessor reserves any rights from this lease, or in the event this lease terminates as to any depths under the described lands while being retained as to other depths under the term hereof, Lessor as to such rights, reserves and retains for Lessor, its successors and assigns, the right to use the surface of the described land for drilling locations, and the right to drill to, explore, test and produce from any deeper rights, including the right to drill through the depths and rights held by Lessee hereunder. Lessor shall not make any tests or completion in the formations held by Lessee hereunder while drilling to, testing and producing from such deeper rights.

5. Shut-in Royalty: If a well capable of producing gas or gas condensate in paying quantities located on the leased premises (or on acreage pooled or consolidated with all or a part of the leased premises into a unit for the drilling or operation of such well) is at any time shut-in and no gas or gas condensate therefrom is sold or used off the premises or for the manufacture of gasoline or other...